News from the Cayman Islands for
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Editorial: Will Britain 'Foot' the bill?
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| Published on Thursday, September 17, 2009 | Email To Friend Print Version
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According to a weekend report in Britain’s Guardian newspaper, the report on offshore tax havens currently being prepared by Michael Foot, Leader of the Opposition in the British Parliament from 1980 - 1983 may conclude that the UK could be forced to bail out its overseas territories as a result of the economic crisis.
The Guardian reports that British government officials are concerned that some overseas territories are facing serious problems, which could get worse. In the event of further economic deterioration, they could become failed states.
In recent days, the Guardian has focused on the Cayman Islands in particular, described as the capital of the world’s hedge fund industry and the fifth biggest banking centre, but reported to be “so cash-strapped it may not be able to pay its own civil servants.”
Regrettably, despite the positive rhetoric from the Cayman government, we have yet to see much in the way of any concrete improvements – real or potential – in our financial situation. Furthermore, it is doubtful that we have even reached the nadir of the current economic decline, lagging, as we do, some 12 to 24 months behind the United States.
It is therefore difficult to deny the validity of the concerns apparently being expressed by British government officials and the various negative media reports.
Our economic situation is indisputably dire and it is equally clear that there are some things going on that do not meet the eye. If London is so concerned about the UK’s financial liability should the Cayman Islands indeed become a “failed state”, why is the Foreign and Commonwealth Office (FCO) withholding the permission we need to borrow the necessary funds to bail ourselves out of the current mess?
Conspiracy theorists will maintain that Britain wants us to fail as a financial centre, possibly to protect the commercial interests of the City of London. A more pragmatic reason may be that the FCO doesn’t want us incurring yet more debt that Britain will eventually have to underwrite.
Regardless of the underlying reasons, we suggest that the people of the Cayman Islands deserve an explanation as to why we are being denied a short-term solution by Britain and certainly more than just an unhelpful and snippy letter from a Parliamentary Under Secretary telling us that we need to impose direct taxation as a “sustainable” long-term remedy.
In the meantime, the country will just have to muddle on as best we can, without the luxury enjoyed by our offshore competitor Jersey of having the equivalent of CI$672 million in the bank, set aside as a reserve by its clearly more enlightened and competent government for just such a rainy day.
Our politicians are busy trying to blame each other for the current situation but the very fact that this country finds itself in such a position – apparently insolvent and with little prospect of raising the required revenue or other financing – is an indictment of them all.
It is therefore hardly surprising that British politicians are already baulking at the prospect of a UK bailout of offshore financial centres that would reward what is perceived to be financial mismanagement.
The Foot Report is apparently likely to conclude that we do not have the expertise or staff to weather the economic crisis and, again, given the current circumstances, it will be hard to deny the truth of this.
Mr Foot is also thought to be concerned at the accuracy of some islands’ economic analysis and modeling, which will thus raise further questions about the validity of our own business model – something we have been saying for years needs to evolve.
As the Guardian points out, any suggestion that Britain will have to rescue offshore financial centres would be extremely controversial, as tax havens drain the UK economy of an estimated US$40 billion annually through their role in aggressive tax avoidance and evasion.
Any notion that the British government will throw hundreds of millions of dollars into bailing out the Cayman Islands’ economy – which it apparently views as fundamentally flawed anyway – is just wishful thinking, especially when, as noted, the FCO won’t even let us bail ourselves out.
Which brings us back to something we have been saying for almost a year: what our economy desperately needs is liquidity now. The major infrastructural projects currently being talked about will have no impact whatsoever for at least a year or two and, again, rely on the ineffective “trickle down” economic theory of the previous government.
Other proposals, such as the pension contribution holiday, designed to put more money in the hands of consumers and businesses, seem to have fallen by the wayside or become bogged down in controversy.
With the government seemingly unable to sustain itself, let alone pump money into the economy, it is sad to say – but the outlook is bleak indeed. | | | | Reads : 645 |
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Angus Macdonald:
King George promised tax-free status to Cayman in perpetuity. A 220 year-old promise is still a promise. In addition; Cayman footed the bill through debt incurrence and sheer persistence for the devastation of Hurricane Ivan. Ivan was a bigger disaster as a percentage of GNP than was WW II to Britain. Britain had lend-lease from America to get them through their disaster. Yet; do we hear any whining from Caymanians about having to pay all of their way out of Ivan? No. This current world financial malaise has more than just a little to do with regulators asleep at the switch in New York and London. A little forbearance is the least one should expect from Britain! |
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