The original unbalanced 2010 Budget to finance the public services of Anguilla, based on revenue amounting to 172.7 million dollars, and was approved in the House of Assembly in April, but rejected by the previous British Government, has been substantially revised. In its place, a new budget, but with a greater deficit, was presented on Monday, June 21, by Chief Minister and Minister of Finance, Economic Development and Tourism, the Hon. Hubert Hughes.

Chief Minister and Minister of Finance Hon. Hubert Hughes presenting Revised Budget with colleagues

Mr. Hughes told the House in his budget address, which he described as “an annex or appendix” to his previous delivery, (“Operation Recovery”), that after the Government had taken a number of fiscal measures, the revised budget could be summarized as follows: Recurrent Revenue - $151,799,891; Recurrent Expenditure - $196, 660, 850; and Capital Expenditure - $8,500,000. He pointed out, however, that notwithstanding the fiscal measures, there would be a recurrent deficit of $44,860,959. He blamed the refusal of the former UK Government to approve the April budget for causing the Anguilla Government to lose two valuable months during which measures that were included in that budget could not be implemented.

“It was unrealistic to present a balanced budget in April and, again, it is unrealistic to present a balanced budget in this revised process,” Mr. Hughes stated. “My Government, Madam Speaker, would not produce a budget which does not address the reality of the current financial situation and hence, contrary to popular opinion, the formulation of a balanced budget was never an option.” He noted that “the 2009 recurrent deficit under the watch of the previous AUF administration was in the region of $60 million.”

Mr. Hughes said it was a time for sacrifice and that he had compromised his principles about levying taxes on a depressed economy, to some extent, for the greater good. He pointed out that the Government had presented its position to officials from the Foreign and Commonwealth Office during their recent visit to address the budget situation and fiscal stabilization measures over the next three years, as well as an economic review. He reported that the Anguilla Government was happy with the commitment of the new UK Government to give the island three years to balance its recurrent budget.
Salary Cuts and Taxes
Speaking about the talks with the UK team in Anguilla, he went on: “The discussions were very fruitful when once the UK representatives understood my position that cutting the civil service staff and drastic cuts were not an option. The idea of a partnership then became a common theme in the discussions.

“The agreed approach involved the implementation of the fiscal measures as an integral part of the 2010 budget cycle. In addition to the measures in the budget presented to the House are: Communication Tax of 5% (on telephone calls) which we are targeting to come into effect no later than October 1, 2010; and a varied reduction in Public Servants’ salary averaging 5% effective July 2010.” He explained that the salary reduction would be implemented in three tiers: 7.5% at the top, 5% in the middle and 2.5 % at the bottom (with the highest salary grades bearing the highest cuts). He said the “hard-working Public Servants are being asked once again to make sacrifices for the greater good of Anguilla” and promised that the measure was temporary, pending a rejuvenation of the island’s economic and financial situation.

Mr. Hughes charged that the previous Ministers of the AUF Government had decided in Executive Council that on leaving office they would receive all the monies lost by them, in cuts, in one big lump sum. He stated that such a provision “forms part of the deficit that each person in Anguilla now has to pay for.”

The Anguillian leader spoke in greater detail about his Government’s measures for fiscal year 2011 (in addition to other measures previously announced in the original 2010 budget) as follows:

“Increase of Customs surcharge from 1% to 3% - a temporary measure which will be revoked in its entirety once we are again on an assured financial footing as a country; implementation of a new ‘Stabilisation levy’ against payroll – again a temporary measure which will be revisited once we are again on sound financial footing as a country; freeze on increments for all public servants effective January 2011; increase of Property Tax from .0015% to .00375% on the value of the property, not including land. We will never tax our people on their lands!”

Mr. Hughes continued his budget address as follows: “Madam Speaker, [the] UK Government’s approval of the 2010 budget will pave the way for approval of the Policy Based Loan from the CDB. As everyone should be aware, this new government inherited a horrendous situation as it pertained to the number of loans and debt government carried. Our loan indebtedness and debts when we came into office was in excess of $200 million. We sought to obtain a low-interest loan in order to consolidate all our outstanding loans and debt which are the basis for this CDB Policy Based Loan.

“The new UK government has given written assurance that it not only supports the Policy Based Loan to refinance existing debt, but also to provide a short-term financing facility to cover recurrent shortfall of up to EC$50 million for 2010. Negotiations are taking place with the Caribbean Development Bank in order to obtain financing at favourable rates to take care of the financing gap. Borrowing for recurrent purposes is high on my list of dislikes and this government will continue its pursuit of getting the economy back in a robust position as free of debt as possible.”

Opposition Members: Evans Rogers, Othlyn Vanterpool and Jerome Roberts

During his address, the Chief Minister read a letter from the new Minister for the Overseas Territories, Henry Bellingham, in which he said that, if the Executive Council agreed to a credible three-year fiscal plan, he would be prepared to authorise new borrowing of up to EC$50 million this year. He also promised to support Anguilla’s application to the Caribbean Development Bank for a Policy Based Loan of US75 million.

New Projects For Anguilla

The Chief Minister, noting the absence of public sector development, revealed that the Government had entered into discussions with developers on a number of new projects for Anguilla. His address continued as follows:

“It is obvious, Madam Speaker, that our Public Sector Investment Programme is at a virtual standstill and the implications of this reality on the economy cannot be overlooked. The stagnation of the economy is a continuing hurdle which must be climbed so that Operation Recovery cannot be a piecemeal process which operates in an uncoordinated manner. It must be a holistic process which includes, no pun intended, the recovery of ANY revenues which are legitimately owed to the government and people of Anguilla. My government will be taking serious action in that regard in the immediate future.

“To this end, we have entered into serious discussions with the owner of Cap Juluca to renegotiate certain portions of the MOA, that was signed on July 7, 2009, with a view that the property can bring full benefits to the people, the government of Anguilla and, indeed, investment partners.

“We have been in serious discussions with the receivers of Flag Properties and, to that end, we are optimistic about the information we have obtained that there are some 72 potential developers for the project; and that we ought to have the right developer in place this year with construction anticipated to begin in early 2011. We have negotiated to ensure that all our local suppliers of goods and services, who are owed, will be paid in full and this will put money in the hands of our people immediately.

“We are on the verge of signing a MOU, ‘Memorandum of Understanding’, and NOT ‘Memorandum of Agreement’, which was the practice of the former government, for a unique condominium project for Anguilla. It is green technology that will lessen the carbon imprint. The project is called ‘Solaire’ and will be developed in the Lockrum area, thus creating many meaningful jobs in the construction phase; and then jobs in relation to services provided in the finished product. This project was in concept stage only.

“We have started meaningful discussions with the developers for Leeward Investments for the development project on Rendezvous Bay. You will recall that this project had a ground-breaking ceremony less than two weeks before the February 15 general elections. Therefore we anticipated, on assuming office, that there were viable plans in place for this project. As it turns out, there were no imminent plans.

“It does appear, from all accounts, including our talks with developers, that they were urged by the former Minister of Finance to give the impression to the people of Anguilla, just before elections, that a project was imminent. We have met with the developers, gained their confidence and trust, and begun what appears to be a fruitful discussion as to how plans can commence on this project.

“Madam Speaker, we have recently started discussions with a Canadian developer for a beautiful project for the Meads Bay area. This project will have the style of a small boutique hotel and in light of my view, that our best beaches should be prudently managed, the number of rooms will be fully maximized on this small footprint of land. Again, our emphasis is to ensure that, through job creation both in construction and service industry, our people are benefiting from these tourism projects.

“Madam Speaker, I have also just signed the letter of intent to move forward on a 5-star caliber hotel, condominium and marina project for the Cinnamon Reef Bay. This will add diversity to our tourism offerings, while developing that area and producing many jobs in construction and the finished product…There is no doubting we are on the move and we believe, Operation Recovery is well on its way. We will do our best to ensure that despite [the] tough economic times currently facing Anguilla we can work with the developer to ensure that the project becomes a reality. We cannot afford failed projects on Anguilla.

“What I observed on my last trip to New York was that investor confidence in Anguilla, and indeed in this government, is high…Madam Speaker, the road we have embarked on is tough, but it will not be long. We will rise again. I am confident Anguilla will rise again. We will go through some unavoidable temporary pains... for permanent gains. There is much to be done and we will succeed especially if all of us put Anguilla first.”

The Anguilla House of Assembly will meet again on Monday, June 28, commencing at 10 a.m. when the budget debate will begin with the reply from the Opposition.

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