A recent exchange of letters between the Leader of Government Business, Hon. McKeeva Bush, and Foreign and Commonwealth Office minister Chris Bryant has produced an interesting insight into the apparently varying perceptions of the current economic situation and the proposed solutions.

Not only has Mr Bryant taken exception to local media reports that the British government has already approved the additional $229 million in borrowing sought by the Cayman Islands government, but he expressed some misgivings that Mr Bush has accepted the “tenor” of an earlier letter summarising the various borrowing requests and the conditions under which they would be approved by Britain.

We have already commented on the local perception of the conditional agreement by Britain to permit additional borrowing resulting from last week’s public meeting, and the additional $229 million for which conditional approval has been given by Britain is hardly the victory of sorts that it was portrayed locally.

The fact is that Britain’s approval for the proposed additional $229 million borrowing is not unconditional but is still predicated upon the serious and genuine consideration, at the very least, of direct taxation and ultimately its possible adoption.

Mr Bush has publicly rejected any form of direct taxation, notwithstanding Britain’s insistence that it be considered as part of an effort to broaden our revenue base.

Despite this opposition, it would seem, as we have also pointed out just recently, that the issue has already been removed from our government’s control by virtue of the agreement to set up and adopt the recommendations of an independent committee on direct taxation.

If this new committee recommends the imposition of property and/or payroll taxes, it is not going to go down too well with Britain if we renege on our agreement to abide by its recommendations, no matter what the government of the day may want.

Furthermore, Mr Bryant made it quite clear in his letter of October 1, 2009, that notwithstanding Mr Bush’s wish for economic independence, Britain intends to take a somewhat more hands-on approach to the long-term solution to our current economic troubles than might have been expected from the mother country based upon its somewhat laissez faire attitude in recent years.

“…under the current arrangements the UK Government has a responsibility with regard to the public finances of the Cayman Islands that requires us to work together. You will note that the new Constitution also requires this,” Mr Bryant said in his letter.

Of course, the financial situation of the British government itself is nothing to be proud of, with its borrowing ratios exceeding that of the Cayman Islands, whether actual or proposed.

But the question is, will Britain go so far as to impose direct taxation whether our government likes it or not, especially if any such action of this nature is fortified by a favourable recommendation of the new taxation committee.

One might hope, in such circumstances, that the British government might produce a more equitable system of taxation in place of the fee and tax increases announced in last week’s budget that fall squarely on the shoulders of the less well off and struggling businesses.

Perhaps some of the Labour government’s historic propensity to tax the rich could conveniently rub off on our own government instead of last week’s scrupulous avoidance of upsetting those that could most afford to contribute more.

Our initial observations that the two new revenue measures in particular: the new money transfer tax and business premises levy will fall on the lower paid foreign worker and smaller businesses respectively, while allowing financial sector clients and property owners to escape entirely has caught the notice of other local commentators and we look forward to a constructive debate in this respect.

Equally, the increase in import duties has a far greater impact on lower-income residents than on the wealthy, who will hardly notice the additional two percent, if at all.

Opposition members of the Legislative Assembly, who did not exactly cover themselves in economic glory whilst in office, have nevertheless been perceptive enough to realise the inequitable impact of the budget increases, although without offering much in the way of an alternative.

Yes, the situation is a difficult one but one thing is certain – it is not going to get any better by subjecting to an even greater burden those already struggling to cope.