The Framework for Fiscal Responsibility has received a lot of attention over the past three months, but very little of that attention has anything to do with the contents of the FFR itself. This is symptomatic of the country’s inability to get to grips with key policy issues as a direct result of the distractions of ‘political entertainment’.
For more than 18 months the FFR has existed. It is a key agreement between the UK and the Cayman Islands Government regarding how the latter manages its fiscal affairs and its procurement processes. It was signed more than a year ago and was recently incorporated into the law.
The document itself came about as a direct result of the country’s inability to maintain a stable fiscal situation, notwithstanding the fact that virtually no other country has been able to achieve this since the 2008 global crisis began.
It is not surprising that the political dynamics between the FCO and the Cayman Islands has resulted in a signed agreement that may or may not be good for the country. What is surprising is how little the actual content of the FFR has been debated by policymakers on both sides of the aisle in terms of whether the agreement is in fact good for the people of this country.
Instead what was the distractions of ‘political entertainment’ whereby the following has been more than adequately addressed:
Which government got us into this mess?
Did McKeeva Bush display ‘one upmanship’ against the FCO?
Did the FCO eventually ‘win’, thereby making McKeeva look ‘bad’?
How can the political opponents of the current government take advantage of the situation?
What did the premier do to make matters worse?
The agreement was already signed sometime ago, so shouldn’t it be made a matter of law because that is what was promised?
For certain, all of the above questions were discussed extensively and these issues were the driving force behind close to 18 months of ‘debate’ on a document, which I feel is one of the most important in this country’s economic history.
To be clear, its not that the above questions are not ‘interesting’ or valid in their own right. After all with general elections to be had in May of 2013, one would expect all of the above to exist in any modern democracy.
But where were the questions on whether the provisions contained in the FFR agreement are good for the people of this country? Where were the questions regarding whether certain aspects of the agreement were practical/implementable? Where were the questions on whether the agreement sets a precedent that may be unheard of in terms of the elected government’s ability to control key domestic affairs? Where were the questions regarding whether deadlines included in the agreement as a matter of law would simply guarantee that the government becomes foul of the law because they may not have been realistic deadlines in the first place? Where was the discussion for example, that when most other countries are predicting they will cut their deficits in half within say the next 10, 15 or even 20 years the Cayman Islands is ‘on track’ to apparently be back in surplus within less than four years?
These additional questions are not meant to imply that the FFR does not have good provisions. Generally the idea behind the FFR, in my opinion, is very positive. It contains certain key principles of responsible financial management that serve as a best practice to all future governments.
But this is not so much about whether the FFR places important limitations on how the Cayman Islands government behaves. It is more about whether those limitations impact the ability and manner in which the government manages the wider Cayman Islands economy and therefore how those limitations affect other matters such as revenue measures, and other domestic policies going forward.
At a minimum the FFR should have been discussed beyond the walls of the FCO/Cayman Islands government before it was finalised and agreed by both parties. Attempts to secure feedback after the agreement was signed were fruitless simply because the FCO had made it clear (publicly) that the agreement had to be put into law exactly as was agreed during certain budget negotiations.
Where do we go from here?
One argument put forward during the debate was that the Cayman Islands government should have simply honoured its commitment to the FFR as this was promised as part of the conditions to have a previous budget approved. But even that argument had its flaws if one sticks to the only test that should really matter: whether the agreement is good for the people of this country and the management of the local economy.
If one agrees to commit suicide by jumping off a cliff on Monday then it would seem reasonable on Tuesday for us to give that person the benefit of the doubt if he reconsiders his ‘agreement’ before taking the actual plunge.
And if that analogy is not sufficient, we must now consider that the FFR agreement is not about one person jumping off a cliff; it is really about people from all walks of life in this country being impacted by a commitment that has not been properly considered or was arrived at during a process (ie intense budget negotiations) which made such consideration challenging to say the least.
The relevant question was never the short term one relating to whether the existing administration won/loss or was bounded by an earlier commitment. And we are all now faced with the longer term question of whether future governments and aspiring politicians now have the courage to revisit the FFR in a more realistic and policy oriented setting for the benefit of the Cayman Islands economy, once the general elections/silly season has concluded.
Paul Byles is CEO and Partner of First Regents Bank & Trust, which provides private banking, investment advisory and consulting services.