As you all know… during the period of 2005 to 2009, the then government overspent to the point where our laws were breached and now permits the UK to control our budget. In other words, the UK tells us what we can and cannot spend.

On 15 June, I made a Statement that outlined the process of preparing an Annual Budget for the Government and where we had reached in the current budget preparations.

I stated that a Budget Circular was issued on 18 January 2012, requiring that Operating Expenses of the Government for the Government’s 2012/13 fiscal year –  which  starts  on  1  July  –  should  not  exceed  $498  million  and  Capital Expenditures and Investments in Public Entities should not exceed $59 million.

When Ministers reviewed the submissions made by the Service, Operating Expenditures exceeded the Budget Circular specification by approximately $130 million. In respect of Capital Expenditures and Investments in Public Entities, the submissions exceeded the limit specified in the Budget Circular by $21 million.

Clearly, both areas exceeded the Budget Circular limits set in January and thereby presented a significant challenge to Ministers in their review of the submissions to have these amounts reduced.

Significant progress has been made in reducing these areas of expenditure. Operating Expenditures have been cut to $549 million but this still exceeds the Budget Circular sent out in January of $498 million.  We have been working since to bring the budget within a sustainable amount. We submitted a budget with a small surplus – but with borrowing of 59 million dollars for capital expenditure and an increased overdraft.

Significant progress had been made to reduce costs further.

The position taken by the Foreign and Commonwealth Office is that this is unsustainable expenditure. The FCO has made it clear that they require further reductions to Operating Costs. This will take us more time to achieve.

The Government has taken the mature and responsible outlook that whilst further expenditure reductions are required by the FCO, such decisions must be made in a careful and measured way.

Accordingly, as permitted by Section 11, sub-sections 1 to 3 of the Public Management and Finance Law, the Government will produce and present to the Legislative Assembly for its approval on Wednesday, 28 June, a Resolution – being in the form of a Government Motion – that seeks Appropriations for a 2-3 month period in respect of the Government’s fiscal year that starts on 1 July. This approach is sensible, mature and responsible; it will allow the Government additional time to make further cost-cutting decisions required by the FCO in a measured and fully-considered way. This approach is also endorsed by the Foreign and Commonwealth Office.

The approach that I have just stated is consistent with the Government’s position that the responsible management of the Country’s finances is its utmost priority.

Since 2005 the costs of the Government has kept increasing. Much more staff cost has  been  added  despite  efforts  to  reduce  it. Health  insurance costs increased significantly and so has the cost of consumables.

Since the world financial difficulties started and our reduced economy – the Government has had to render much more social assistance to individuals and families in such areas as rent… financial assistance and scholarships.  The cost to fight crime also escalated.  The cumulative effect was much more financial pressure on the Government.

I want to assure the country that by taking the measures of a 2 to 3 month temporary budget the operations of the Government will continue seamlessly beyond June 30th.

In the meantime, expenditures will be re-examined and the objective is undoubtedly to bring expenditure to a more sustainable level.

As a government we cannot allow our expenditures to rise as they have done in the past, we must cut the expenditures. Because the last government put us in this intolerant situation we must reduce expenditure if we are ever going to control our finances again.

Also on Wednesday the Speech from the Throne will be read by His Excellency the Governor.

May God continue to bless the Cayman Islands, all our people that exist here.