RTC Director

Summary of 2011/12 Budget Statement

Today, the Permanent Secretary for Finance, Mr. Delton Jones & Caroline Gardiner from the Finance Ministry  met with RTC news as they discussed the published the 2011/12 Budget Statement he would have delivered to the Consultative Forum. This summary statement has been prepared to help update the public on the changes set out in the Budget.

The UK Government-backed financial support package buys the time needed to tackle the dire financial situation the Interim Government inherited from the previous administration, which failed to protect taxpayers, invest in the future, or pay its creditors, damaging local businesses and the reputation of the islands. With the support of the UK, we are working hard to help TCI recover from this terrible legacy, to rebuild international confidence in the islands, to stimulate growth, and ensure that TCIG is able to meet its obligations once again.

The UK has also funded the costs of the SIPT and the civil recovery process, as well as police costs incurred to combat the spike in violent crime in the last financial year, providing an extra $10.5 million to TCIG for this purpose. The UK has now also provided a further one-off $3.2 million grant to support public service reform.

We know that this has been a difficult time for many in the Turks and Caicos Islands. The Territory has, like many countries, struggled as a result of the global economic downturn. So, the Government has worked to ensure that the impact of its proposed budget measures is spread as fairly as possible and forms the basis of a sustainable future for everyone, by:

 protecting key services – such as police, criminal justice and immigration - so that people can live, visit and work in the Turks and Caicos Islands in safety. Our aim is to achieve a higher standard of public services for the future, through public sector reform and a focus on achieving better value for money for taxpayers.

 continuing to support growth. Our new investment in an extended Providenciales International Airport has already attracted new flight operators and offers the prospect of increased competition for airspace and lower fares. We will also put in place measures to stimulate economic activity in under-developed sectors such asagriculture and fishing.

 investing in achieving the milestones set out in last year’s Written Ministerial Statement so that a date for elections can be set.

But we cannot avoid the need to tackle the severe and structural fiscal problems we inherited from the previous administration. The UK support does not provide money to reverse previous spending cuts or fund significant new expenditure; instead it provides a one-off opportunity to take the fiscal measures needed to bring revenue and spending into line. We have no alternative other than to balance TCIG’s budget by raising revenues and cutting spending; like any household or business, the public sector cannot continue to live beyond its means. We know that this is a difficult message, but achieving this goal is not only essential to avoid the spectre of default; it will also have the benefit of providing a major boost to the economy by allowing payments to be made to local businesses and restoring confidence that the Turks and Caicos Islands are financially secure, and a good place for investment.

Raising revenue
The current revenue system does not work. We have consulted widely on new measures to modernise TCIG’s revenue system and close the budget gap. We have listened to public concerns, and we have ruled out introducing a property tax or an income tax. Instead, we will introduce Value Added Tax in 2013, such as has been successfully implemented by many of our Caribbean neighbours. A Turks and Caicos Islands VAT should deliver long-term improvements to the economy by removing current market distortions, increasing competitiveness, strengthening the investment climate, and increasing revenue.

In the meantime, we will raise revenue by:
 Applying a 4% Customs Processing Fee (CPF) to all imported goods and importers with immediate effect.
 Raising fees for business licenses by 35% from 1 April 2011. A new simplified structure will be introduced from 1 July 2011.
 Raising fees for vehicle licenses and driver’s licenses by 50% from 1 May 2011.
 Simplifying the work permit system and raising fees from 1 September 2011.
 Applying a new sales tax of 10% on water for commercial customers and the largest residential customers from 1 September 2011; this will not affect most households.
 In the case of electricity we will move to a carbon tax on electricity generators from 1 September 2011. This will encourage the generating companies to review their generating efficiency and mix of sources, including from renewable technologies, over time. This also has the advantage that it cannot be passed directly on to consumers.
A new bank tax of 10% will be levied on all non interest-bearing services provided by banks, and an insurance tax of 2.5% will be levied on premiums for general insurance, excluding life and health insurance. Both these will be introduced from 1 September 2011.

These new measures will broaden the tax base and will raise revenues to around $160 million in 2011/12, rising to $190 million by 2013/14. We will also need to modernise systems to collect all the money due to Government: it is not right that some people pay their fair share while others do not.

Controlling spending

The Interim Government needs to tackle the rapid growth in public expenditure of the last decade. Last year’s budget included a target to reduce the cost of the public service by 25% by 2013/14, and we need to continue to make progress towards that target if we are going to remove the spectre of default and keep the burden of taxation as low as practical. We aim to build a public service that is smaller and stronger, with high standards of public service and greater accountability to the people of TCI, with the right incentives for staff to do their jobs well and greater opportunities for fulfilling work
and career progression.

In the meantime we will apply employment rules properly so that all public servants are treated fairly, while generating savings to help reduce the need for cuts in the size of the public service. We recognize that some may have made plans based on past practice, so we will put in place transitional arrangements where possible so that public servants will have time to adjust. We are in discussion with the recently formed Civil Service
Association on a number of related issues as well as on the broader reform programme.
Key measures include:
 Halting pensions overpayments. People wrongly receiving both government and NIB pensions in full will have the government pension reduced in line with current legislation. People who retire from the government will no longer be able to draw both a pension and a salary on being re-employed by government.

 Subject to transitional protection for those nearing retirement age, who may have financial plans based on past practice, people employed by the government before 6 April 1992 will no longer be able to convert part of their government pension into a lump sum, and housing and other allowances will no longer be included in the calculation of government pensions, with some transitional arrangements.
 In order to close the gap between the government retirement age and the age at which NIB pensions are payable, the government retirement age will increase from 55 to 60, with transitional protection for those who are already aged over 50.
 The maximum allowed level of accumulated leave will be 30 days, with transitional arrangements for those affected. Contract workers will no longer be able to accumulate annual leave to be paid for upon completion of their contracts.
 The 10% reduction in allowances other than housing, agreed last year, will be properly applied, and the arrangements for housing, transport and other allowances will be tightened to ensure greater consistency and transparency.
 The government will not award salary increments in the new financial year.
 A fundamental review of statutory bodies will be carried out and immediate measures put in place to monitor and manage their finances, cutting their costs by 25%.
 Management of the scholarship program will be improved and erroneous payments to students will be stopped. We will replace the existing programme with a new scheme that will focus support on the brightest and best students who would otherwise be denied access to higher education.
 There will be spending reviews of both utilities and communications, to ensure that we achieve best value for these services.
 The Interim Government will undertake a wide-ranging review of procurement.
 Over seven million dollars will be available for essential capital spending.

The actions of the previous administration mean that there is no alternative to these measures, which will be difficult to achieve. But they can be achieved, allowing us to look forward to a surplus in 2012/13, and a stronger, more sustainable future.

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by RTC Director

Consulative Forum members responds with their side of the story

 

Some members of the TCI Consultative Forum did not take lightly to the way in which press releases were issued about their actions as it relates to the budget presentation which should have been tabled today.

RTC news received the following from some members of the forum as stated:

First of all, we wish to register our disappointment in the manner in which the request by some members to defer the Budget Session from April 5^th, 2011 until April 12, 2011 to allow more time to peruse the documents delivered between Friday, April 1^st, 2011 and April 4^th, 2011 was handled by Mrs Lillian Missick, Chairman of the Forum. Regrettably we have found ourselves placed in the unfortunate position of having to respond in the media. And though it is not our best position, we feel compelled to clarify a few points and to also avail ourselves of this opportunity to address a few issues raised by His Excellency the Governor in his response to Mrs Missick’s announcement of the cancellation of the Budget Debate.

 

For the benefit of the public, it is important to know that the Chair of the Forum is elected from among the members to chair Meetings of the Forum. Whilst Mrs Missick has been allowed to schedule meetings, we were not of the opinion that she was authorised to cancel meetings without first consulting the other members of the Forum. We were surprised at this Statement for that reason and also for the statements that we find to be misleading.

 

For your benefit we wish to present the time line and facts as it relates to the now cancelled Budget Debate. On Thursday 24^th March, 2011, we were informed that there would be a closed session of the Forum on Tuesday, 28^th March, 2011 to discuss the Budget. On the same day, two members inquired whether we would be able to obtain the Budget Booklet before, so that we may address any concerns during that meeting before Public Debate. We were advised the following day by the Forum’s Office that we would receive the Budget Booklets and all other documents during that meeting.

 

On Monday, 28^th March, 2011, the PS Finance, Mr Delton Jones accompanied by the Chief Financial Officer arrived at the meeting and we were advised by the PS Finance that he had sent an email that said he was not going to be bringing the Budget Booklets but was going to be presenting a Summary of the Budget. Members including the Chair at this point expressed their dissatisfaction but proceeded. And to date we have not received that email. The PS Finance, Mr Delton Jones after a brief Introduction handed the members three sheets of papers (A full sheet with a table and two others with quarter page use) and proceed to present the Budget. Discussions ensued on revenue measures but members were scheduled to leave before the PS Finance, Mr Jones reached the Expenditure sections and three members were beneficiaries of explanations on Expenditure. Briefly into this Meeting, the CFO, Mrs Caroline Gardiner and the CEO Mr Mark Capes left and Mr Jones, PS Finance alone entertained discussions from his Summary Budget.

 

It is important for the public to know that last year, the entire Budget Team was present in a Pre Budget Debate Meeting and we were allowed to raise concerns and ask questions directly from Booklets that were sent to us in advance of that Meeting.

 

Over the next few days members expressed their concerns to the Forum’s Office and made frequent checks as to when the Books would become available. On the morning of Friday, 1^st April, 2011, a member text messaged the Chair who was out of the country at the time. The member explained it was unfair for members to be asked to debate the Budget and at 10:33am was not in possession of the Booklets. The Chair’s response three minutes later stated that the meeting would be rescheduled.

 

The Government later that day sent out a Release and made reference to the Budget Address on Tuesday, April 5^th, 2011. A member then inquired whether the meeting was still on schedule and was told it was so by the PS Finance.

 

The Chair sent an email Saturday saying that the meeting would proceed and that the PS Finance and his staff will be available to assist over the weekend and Monday. It was over the next few hours on Saturday that a deferral request of one week (April 12^th, 2011) would be dismissed by the Chair on the basis that the PS Finance had made a Presentation on the Budget Summary and on his assurance that this is sufficient to proceed as this were the broad measures in the Budget.

 

We were of the opinion that the majority had agreed to proceed and were aware of colleagues who were ready and prepared to debate the Budget. Unfortunately for a few of us, we were not of the same mind. In fact an excerpt of an email from one of us read as follows – I agree that coming to the conclusion of the Budget process is an urgent matter, and it is not in the best interest of the country to prolong the process unnecessarily. The request to delay the Budget Presentation by a week does not seem to be unreasonable given the fact that we have an obligation to make educated, well informed decisions on what  we are required to participate in and agree to on behalf of the majority. It is true that we have been presented with snap shots of what the Budget is likely to focus on but based on my years of participation in the Budget process with others who are a part of the Forum, the experiences  were that many of the conflicts and inconsistencies were in the details rather than broad headings as presented by the  PS/Finance. The practice to scrutinize the details then and more so now, is an important step.  We  might not be regarded as  key decision making officials in the process of governance nonetheless we must endeavor at all times to do justice to the tasks that we are required to sanction. The time allotted to scrutinize the materials received by some just before noon on Friday the 1st. April and by others later, is not reasonable. If, however, the majority is comfortable to approve or disapprove the submissions by Tuesday, then the majority rules. Finance is not my forte and I am inclined to know the details for an exercise of this; moreover, what we do will impact the entire nation - legal and illegal. Should we proceed with a Tuesday meeting, I respectfully request that my absence be excused.

 

It was of that mind, that six members over the next two days will offer their apologies for not attending and as it would have required a majority to deny a postpone of the Meeting to April 12, 2011, we believe that the majority agreed to proceed. We are not convinced that there would not have been a quorum even though an additional member declined to attend as well having received his documents only 1 O’clock on Monday, yesterday, April 4^th, 2011. Surprised at the decision to proceed with the Meeting, we reconciled to the fact that there were sufficient other members who would carry the passage and who were prepared to proceed and debate the Budget.

 

We therefore refute the following that was included in Mrs Missick Statement:

 

1. We do not believe that about four hours of a discussion on a Summary Sheet with the PS Finance can be considered extensive. We can only assume that the other meeting mentioned by Mrs Missick was the one held on March 8^th, 2011 where the Forum met the CFO Mrs Gardiner for the first time and who presented a high level Summary of the Findings of the EU Revenue Consultants and who further advised on the tax initiatives to be implemented effective April 1^st, 2011 which we accepted as a foregone conclusion having already received extensive coverage in the media concerning its implementation. The Presentation was a Power Point Presentation and we did not receive a copy of this Presentation nor any documents.

2. That the Budget Session was already postponed for our benefit. We knew nothing of this until yesterday’s Release by Mrs Missick and His Excellency The Governor. And we say if in fact the Budget was postponed, it was because the Booklets were not ready and media houses have covered Advisory Council Press Briefings which until a few days ago, there was an admission of work still being carried out on the Budget.

 

We also refute the allegation that members evaded service so as to sabotage the Budget Meeting, a statement made by a Senior member of the Budget Team. We are committed to the process of moving these Islands forward and towards the accomplishment of the milestones set out.

 

We are disappointed that our decision, individually made, has now been cited as the reason to not debate the Budget publicly when other members were fully prepared to proceed. We are seriously concerned that the milestones to be accomplished are so tightly timetabled that an offset of a week can affect the election date and negatively impact its achievement.

 

Whilst we are not privy to the intimate running of the Government, we believe if the revenue measures were to be affected by one week, it should have been communicated to us (and not the media simultaneously with us) and we are also of the view that more aggressive steps should have been taken to settle the figures in time so as to meet the Forum’s Rules of Notice and reasonable service of documents. There was no dialogue with us in this regard and our first response after our emails was sent to what appeared in the Media.

 

Though unelected, we take our role seriously and felt it a disservice to the people of these Islands if we were to proceed unprepared. Our individual stance was based on our collective feeling to abandon actions of the past and to change the way the people’s business is being done. We have committed ourselves to openness and transparency and responsible and informed representation on the issues.

 

We have agreed this Press Release so that we can settle this issue collectively. We see this not as an “us” versus “them” and neither are we a renegade clique. We do believe that Rules are in place for a reason and that transparency, preparedness and openness must be the watch words and order of the day. We look forward to proceeding in the manner set out in the Forum’s Rules and in an open and transparent manner. We continue to be committed to serving in this Forum and keeping the people informed as soon as we are.

 

It is again regrettable that the PS Finance declined to make the Address for such an important life changing Budget and also that the Forum’s Chair once again has cancelled an important meeting without the input of all members. This has been an eye opening experience and causes us grave concern but we are prepared to carry on the work of the Forum as long as we can and are able.

 

Dr Linda Williams

Sharlene Cartwright Robinson

Karen Delancy

Ethlyn Gibbs – Williams

Drexwell Seymour

Pastor Courtney Missick

 

The order in which we decline to attend April 5, 2011 meeting as a result of it not being postponed to April 12^th 2011

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by RTC Director