Financial sector continues to fill government coffers
(CNS): At the end of June, the Cayman Islands Government, including all its public authorities, was running a massive surplus of over CI$216 million, according to the unaudited accounts at this year’s halfway point. This has been fuelled largely by much higher revenue than forecast from the financial sector. The surplus is expected to decline before the year-end, but since it exceeds budget predictions by more than $55.3 million (34%), unless something catastrophic occurs, the UPM government appears more than able to fund its ambitious spending projects.
The bumper public sector surplus has given the government a significant buffer in an unpredictable world and will be considered a positive for the government.
However, finance officials’ continuous failure to predict what they expect to collect each year on such a scale has some worrying implications. The auditor general has raised the problem of poor budget forecasting on a number of occasions, and this latest report highlights the need for the budget reform that the independent office has recommended.
The latest report also shows that public spending was less than budget expectations. Expenses for the first six months were $511.6 million, which was $13.7 million lower than budgeted. However, total core government expenses rose by $21.4 million compared to the first six months of last year.
The CIG saved $22 million in personnel costs because many posts remained vacant across central government. But these vacancies will be filled at some point and inflation is still biting, so even with a lower headcount than the budget had anticipated, these savings could easily be lost as the year goes on, finance ministry officials have warned.
“Costs will continue to increase as more… vacancies are filled, and projects come online over the remaining two quarters of 2024,” officials said in the report. “These costs will have to be diligently monitored to ensure spending is not incurred unnecessarily. Should planned increases in activity (in both Operating and Capital) materialise during the remaining months of 2024, the current surplus (to 30 June 2024) will be significantly reduced.”
The unaudited report also shows a different picture than had been forecast in relation to the performance of the statutory authorities and government companies. The money flowing into the public purse from the SAGCs was $8.4 million more than the anticipated year-to-date budget of $89.5 million, even after taking into account the money the CIG has already fed into the Health Services Authority.
The HSA exceeded the budget predictions by almost $30 million, which was spent on direct healthcare for indigents, tertiary care for the under- or uninsured, and increased funding to CINICO.
The surplus is being fuelled by the financial services sector, which accounts for well over half of the additional revenue the government has collected this year so far. In the first six months of 2024, the government collected a record $673.1 million in coercive revenue, almost $52 million more than last year. Over $23 million more than expected came in from fees for exempt companies, partnerships and private funds.
This bumper revenue from the offshore sector could have been more than $6 million, but a new coercive revenue stream of fees from international tax cooperation slated to start this year has been deferred to 2025.
The continued increase in property values has also helped with the current surplus position. After another six months of high-priced property transactions, stamp duty on land transfers was significantly higher than budgeted. Stamp duty so far this year stands at $45.7 million, which is $9.2 million more than was collected in the first half of last year and almost $12 million more than expected.
Officials have said that this second quarter performance has given the government reason to be optimistic, but as noted earlier, there are warning signs on the horizon that costs could increase during the second half of the year when the financial sector brings in less revenue.
“Costs will have to be diligently monitored to ensure spending is not incurred unnecessarily,” officials said, to avoid wiping out the current surplus.
There are also other issues to consider. With around $584 million in the bank, the balance sheet looks favourable, but the government is carrying a debt of just under $430 million.
It is also still not placing its future healthcare liability of $2.2 billion on the books. The CIG does not include this liability on its balance sheet because this would wipe out all of its assets, and it could, as a result, lose control of its finances to the UK.
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Category: Government Finance, Politics
I agree that the government must continue to increase its coffer to ensure monies for the different areas of public spending such as health care, education, and infrastructure to name a few areas but why the frivolous spending? I can’t think of another fitting quote than “Waste Not, Want Not”.
Furthermore, if the government is serious about increasing their coffer then why not start thinking outside of the box? Traditional means are one thing but there are other ways that the government can earn money that will not add more stress for Caymanians and the average resident. For example:
1. Create a system for Bank Wire Transfers in which the Banks have to implement a tier-tax on the amount(s) that are transferred out of the Cayman Islands. (As far as I am aware the banks have a charge on such transactions but the government does not earn a penny from these transactions).
2. Implement Annual Property Tax on Land, Apartments, Homes/Condos owned by foreign persons WHO DO NOT LIVE HERE. (Such persons are already used to paying their property tax elsewhere and even if one such person decided not to buy or invest their monies in real estate because of this tax, rest assured, I do believe there will be at least 3 more who are willing to do so).
3. Increase the percentage tax that is currently in place for remittances. In turn, this will help decrease the amount of economic leakage because foreign workers might keep some of their earners here instead of sending the vast majority of it home. Then the government gets a bigger chunk of this outflowing money.
4. Create a Law that states an elected official can only serve a maximum of TWO TERMS (8 Years). Cayman can be the first DEMOCRATIC country to do so in the 21st Century. In doing so, maybe then politicians like our ‘lifetimers’ will not have the chance to spend foolishly the monies in the coffer and maybe we will have elected persons who care about the voters, the environment, family, education, and other areas and thus will spend money wisely and always get value for the money.
5. Create a Law that puts Cayman Politicians’ salaries in line with the earnings of politicians in other Democratic Countries. In turn (a) a load of money will be saved and (b) we might get the right quality of persons who contest seats to serve the people of the Cayman Islands and not their bank account(s). Country First People! Country First People!
Time to alter stamp duty. 3% for caymanian personal property. Same same for expat and property owned by a company.
What if the company is owned by a Caymanian? Many people hold property in a company name, not just ex-pats.
Lots to consider. Companies generally used for development or wealth protection. No need to advantage anyone protecting wealth. Penalizing development too much just makes housing less affordable. Might have a dizzying number of regulations with the aim of making housing more affordable and disincentivizing foreign owned rentier extraction from the local economy.
Hmmm? How can there be a real surplus when $14 million has been wasted on the ReGen “deal”? That’s only one financial hole amongst many!!
How about: “50 years after being established by the Cayman people, our thriving, reputable Financial Services continues to offer premium global multi-faceted services..to the benefit of the people in a British Territory with no taxes on incomes, property, sales or capital gains.”
We appreciate you.
So we could have afforded Regen? But better to have a new school in the brac and a swimming pool instead.
Give it all to the Dishonourable Bush and he can gamble it away. He’s good with Gov money in that respect.
and the school in the Brac, including builders housing.
The frightening thing is with the exception of a tiny number of MPs like Andre, they think FS is a magic money tree and don’t know or care about the damage CIMA are doing to the jurisdiction. Our FS will go into decline ‘slowly, slowly then all of a sudden’.
Need the money to replace JohnJohn’s SUV, and maybe a spare SUV for when the next one gets written off
Maybe reinvest some of the surplus generated by the financial industry in the government services that undergird the industry! Fees continue to grow but the government infrastucture underpinning it all is creaking; services are getting slower and more painful for clients and firms alike. Government departments are under-resourced and using outdated technology.
Cayman desperately needs a financial expert to run the countrys finances . We cannot continue to put people in positions without the necessary qualifications and experience
dont worry…the immigration morality force soon make money out of disrupting legitimate sham marriages! lol
Our illustrious leaders will no doubt spend all this and more without a second thought for the future, just like a small child in a candy store who knows no better.
Rather than invest in an understanding as to why and how this accounting error has occurred they will rub their hands together, pat each other on the back for a job well done and spend spend spend. Our elected officials are an embarrassment. We have ourselves to blame for electing them, some of them time and time again. Shame on us.
“unless something catastrophic occurs, the UPM government appears more than able to fund its ambitious spending projects”: where appearances, in this case, do not constitute a full and complete bankable reporting. We ought to know that $50mln extra can only be deployed once, not 5 times. Any smaller budget surpluses need to be prioritized for paying down a growing mountain of issued and outstanding debt, plus the suffocating unfunded pension and healthcare debt that will cripple the territory if/when the Finance sector relocates. Cayman’s financial situation is running a quantum beyond sound practice and without a plan or action to square the account. Additionally, that the civil service still fails to achieve a passing grade from the Auditor General’s office on their mystery spending/accounting, should deeply worry all Caymanians. This is not a house of cards to be proud of.
And the whole house of cards will come tumbling down if our Jamaican MP’s and ministers keep pushing their Jamaicanisation agendas.
That is wonderful because we have politicians and civil servants who spend it faster than it can be brought in. All you dummies need to keep paying those fees to government as they need to keep the lifestyles of the rich and famous going!
more money to waste….. and no thoughts about what happens if finacial service sector ever gets shut down…
scary stuff
Yet we are going to spend $1.2M on a referendum to decide if we need to spend millions to collect insignificant fees from cruise tourism. Do a deep dive and find out how we can help Caymanians not WP holders be successful in the tourism industry.
Yeah! Let’s use this to fund the port referendum! Take the money from the talent we import and squander it on things that destroy the environment and our children’s future for a few chonky cruise tourists that can’t afford a mudslide (and I mean diabetes).
All the more reason to dump tourism and especially cruise ships. The island does not need these minimum wage jobs filled by non Caymanians.
they better try increase govt wages…remember elections coming up! civil servants are in terrible financial state i hear…ZZZZZ
CIG: “How about we take all that money and subsidize some tourism stuff…”
Rainy day fund?
“The CIG saved $22 million in personnel costs because many posts remained vacant across central government.”
This makes a lot of sense! No wonder I just keep waiting and waiting and waiting for them to advertise a position I’ve known about for the best part of a year.
It is unfortunate that our politicians are aware of this. More stories of massive waste, profligacy and wote buying by our illustrious leaders soon come.
The money they spent on “emancipation day” would have paid for at least 3 affordable homes…The foolish gifts to Jamaica another 4..and many more like the fireworks for the Port authority party.
Homeless…? Thank your UPD in UPM clothes.
Despite their best efforts, Julie and her UPM team of bandits have not been able to drain the coffers dry – not because of their lack of trying. Eighty thousand people filling the CIG bucket and a dozen of them draining it with their pet projects, adding 18% to the number of civil servants, spending $650K on emancipation celebration that no-one attended and $1.5 million producing a film on emancipation that no-one has seen, presumably because it isn’t an accurate depiction and they don’t want to face the critics after that enormous spend.
I don’t know about others, however i am sick of watching these idiots waste this ‘our’ money
Since the start of this year, the CIG has already gone over budget for actual costs for the care of indigents by CI$7.3 million. Meanwhile, the 2024 budget for tertiary care at local and overseas institutions, where the government picks up the tab for inadequate coverage for Caymanians in need of serious healthcare, is over budget at the half-year mark by $17.2 million.
The government has also spent more than $9 million more than budgeted for the first six months of the year, injecting cash into the hospital and its own insurance company, CINICO.
A phantom surplus 🤪🤪🤪
All that money maybe a one time stimulus direct bank deposit to all of the hard working Caymanians would provide the greatest benefit to the economy instead of Government projects like cruise ship ports 🤔 from the surplus revenue that exceeded Government expectations. Maybe do the direct deposit right before Christmas 🎄. This is coming from an expat
8.53am Problem is anything anyone tries to do for Caymanians mainly Jamaicans benefit. There needs to be a criteria of supplying a Caymanian Birth certificate showing at least one parent and grandparent born here in addition to recipient.
Most of them don’t know who their parents are…we’re talking Jamaica here.
Government continues to harass financial sector with anti-competitive and counter-productive compliance regulations …
That’s why it continues to grow YoY, I suppose?
To be fair that’s CIMA’s dim witted and ignorant interpretation of the legislation.
At least Maples did us all a favour by humiliating the morons at CIMA in the Judicial Review. Hopefully CIMA will recognise the reality, to adapt the old phrase:
“Those who can, serve clients in the private sector; those who can’t, regulate in the public sector”.
And government continues to waste it on foolishness!!
They’ve now got to buy another massive gas guzzling SUV now..!
what would be great, with all this newfound funds in the tank for CIG would be if they could reduce some of the duties and fees so that the cost of living for everyone goes down a little bit. We’re all still breaking the bank while CIG is living high on the hog.
8.32am Exactly. People cussing CUC should realize Govt duty could be lowered on Diesel like PPM did. Made a big difference in hottest months.
People cussing CUC because they are the worst thing for Cayman. Expensive monopoly, don’t invest in infrastructure, and don’t allow solar.