Civil service: Too big to cut?

Just about every government in office over the past decade has known that the size of the Cayman Islands Civil Service and its continued growth is unsustainable.  

The Miller Report’s primary conclusion two years ago was that the Cayman Islands Government’s fiscal difficulties relate almost exclusively to the rapid and uncontrolled growth of it’s expenditure; not due to a lack of revenues. Staff expenses contribute just over half of that expenditure.  

There are two main perspectives on the growth of the civil service: the first argument says that it’s simply too big, taxpayers cannot afford that and we should reduce it asap. The second argument says that the growth of the civil service relates primarily to the increased demand for public services or pressures stemming from new government policies and initiatives,so the growth is more or less necessary. 

Discussions about the growth of the civil service get very emotive: Civil servants bemoan that its unfair that “everyone is always talking about the lazy and unproductive civil service” and that this is unfair to the vast majority of workers in the public sector.  

Proponents for cuts, many who tend to work in the private sector, argue that they should not be burdened financially with the cost of successive government’s unwillingness to deal with the growth of the civil service head on and despise the blatant politicisation of its growth. 

The emotions are understandable, but its also important to reflect on some of the key issues contributing to the current situation and these issues are likely to get worse as the civil service grows. 

Few would argue with the observation that the reasons for the rapid growth of the civil service relates primarily to: a) the decentralisation of certain key functions resulting in finance, human resources and other roles that were duplicated across various departments, b) the tendency for the civil service to serve as an employer of last resort especially in bad economic times or during election years and c) a genuine increase in demand for public services by the business and wider community. 

In my opinion, those that argue that the civil service’s growth stems primarily (and somewhat innocently) from genuine demand for public services have seriously underestimated the impact of the first two reasons.  

In a country, which nearly everyone now agrees has under-invested in preparation of its citizens for the workplace, it is easy to see the great temptation by the government of the day to “assist” when dozens of unemployed Caymanians find it difficult to get a job in the private sector. This is not meant to imply that the majority of civil servants are unemployable; that’s clearly not the case. But at the same time the employer of last resort factor still holds up even if only 10 per cent of civil servants have been artificially helped in this manner. Hypothetically, this could represent about 400 employees. 

There are no formal estimates of the impact of the decentralisation of the public sector but reports carried out by professionals have confirmed what many civil servants have known all along: that there is significant over employment as a direct result of both the decentralisation and the governments new financial management system based on the Public Finance Management Law. 

If we add the impact on the recruitment of civil servants for political reasons during election time, it would not be unreasonable and on a strictly hypothetical and unscientific manner, to estimate that the civil service has hired anywhere between 400 and 600 employees more than it really needs. 

To a certain extent, overhiring in the public sector in any small country or city is not unexpected. There is a certain amount of required public services, whether this is in healthcare, the fire service, public schooling and other areas that should be considered essential. We can see clear evidence of this on a small scale in the Sister Islands where that Islands’ employment is estimated to comprise over 50 per cent civil servants. 

But the situation in Grand Cayman can and should demonstrate more private sector opportunities for Caymanians. In my opinion its not so much that the private sector is not hiring as many Caymanians as it could (though I would agree it could probably do a better job of providing apprenticeships and training to Caymanians to improve their employment opportunities). The real issue, in my opinion, is that the private sector is kept artificially small due to the unwillingness of the public sector to engage in any meaningful efforts to privatise certain services.  

It is the one issue that civil servants, politicians and the wider community agrees can and should be done. Ironically it may yet take us an additional government department, filled with newly employed staff to get any meaningful progress on either privatisation or cuts.  

The reason is that as the civil service has grown so too have the opportunities for last resort employment, politicisation and complacency on privatisation. This is all the more reason to deal with the issue head on. Otherwise in a very warped sense the sheer size of the civil service and its continued growth makes it that much harder to overcome some of the obstacles. 

 

Paul Byles is CEO and partner of First Regents Bank & Trust, which provides private banking, investment advisory and consulting services. He is an experienced economist and finance professional having worked in the financial services industry for 20 years. He formerly served as an external consultant to the Ministry of Finance from 2009 to 2010. He is former director of a big four consulting firm and a former financial services regulator.  

GOAP

The Government building where many civil servants work.

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