FCO Response

Minister Chris Bryant has responded.  Over the past six months we have been looking at our Government’s response to the international financial crisis that we find ourselves embroiled in.  Common sense dictates that we should be doing two things. 

One, Government should be seriously reducing expenses, not increasing them.  

Second, Government should be enabling and enforcing its tax collection. 

The first is a given.  The second is the problem.  Most taxes in Anguilla are treated by politicians, business persons and the general citizenry as optional or voluntary.  Smuggling is rife.  Payment of tax is generally considered a favour to government, not an obligation.  Avoidance and outright evasion is not just a citizen’s right, but a national sport. 

The question has frequently been asked why is the government so hesitant to prosecute delinquent tax payers and enforce the law.  The answer has always been that the government has no desire to ‘criminalise’ citizens for such activities.  In the case of water bills, it has been publicly stated that up to 70% of the water is either being lost through breaks in the pipes or it is being stolen through illegal connections.  Up to this date, never in the history of Anguilla has any water thief ever been prosecuted.  There are a score of other examples that could be given of our lax attitude to tax collection. 

In conclusion, tax collection in Anguilla is inconceivably lax.

Over the past year, government has used up all of its credit balances at the banks.  The public accounts now stand overdrawn and over spent to an extent that exceeds our borrowing guidelines agreed with the Foreign and Commonwealth Office some years ago. 

During that time, Government has repeatedly applied to the FCO for a relaxing of the guidelines to permit us to borrow and spend our way out of the crisis.  The FCO has been digging in its heels.  They have responded to Government that they cannot give an open-ended consent to permit us to increase borrowing in three or four different specific loan amounts to an aggregate of nearly $100 million.  One of the proposed loans has been for an amount of $49 million.  Another is for an amount of about $10 million to extend the airport. 

The British have responded that they will agree to relax the borrowing guidelines only if the Government of Anguilla meets two conditions: 

One, Government must present a plan for reducing expenditure to meet revenue. 

Two, Government must indicate how it proposes to increase revenue to meet the increased proposed borrowing. 

From what I understand, Government has been pretending not to understand these two conditions.  In each renewed application it has merely repeated its request with more and more reasons why it needs the money. 

Then, two weeks ago, Government made gave the FCO an ultimatum, either let us borrow or else!  We have not been shown the contents of this letter.  We have been waiting with baited breath to see what the FCO response will be.  Now, a correspondent has sent me a transcript of yesterday’s letter from the Foreign and Commonwealth Office to the Government of Anguilla in response to our request to relax the borrowing guidelines.  It reads [I don’t guarantee the accuracy of the re-typing]:

Foreign and Commonwealth Office

Hon Chief Minister
Anguilla

ANGUILLA: PUBLIC FINANCES

Thank you for your letters of 14 September and 21 September which followed up your telephone conversation with Colin Roberts.

I appreciate the efforts your government is making to address the issues I outlined in my letter of 27 July. I assure you that I consider each Territory's requests very much on an individual and case by case basis. However, I must act prudently when considering your request for additional borrowing at this time when Anguilla is already in breach of the agreed UK/Anguilla borrowing guidelines.

I welcome the commitment you have made towards cutting public expenditure, including a Public Service pay cut. However, there has been less progress in plans to broaden Anguilla's revenue base. Is the absence of such plans, including details on how existing and any further debt will be paid back over the next 3-5 years and your planned changes to Anguilla's taxation policy, I cannot agree to your entire borrowing request.

I am however, prepared to agree, exceptionally, to the government of Anguilla borrowing EC$20m to cover the recurrent deficit over the next six months, providing that you commit now to the introduction of new revenue measures, no later than the beginning of FY 2010-2011, to broaden your revenue base as identified by an independent study to analyse the impact on public finances of a range of new taxes and/or initiatives. This study will be funded by the FCO with the Terms of Reference agreed jointly by the Government of Anguilla and the FCO with a view to having consultants in Anguilla as soon as possible.

I am ready to consider further borrowing requests once we have discussed the findings of this study.

However, given the particular circumstances of your requests to include provision to finance a proposed runway extension at Wallblake Airport I would be happy to consider that separately, once I have received a comprehensive business case which makes clear the impact of the reduction in the declared runway length and any consequent loss of revenue to Anguilla.

I look forward to your confirmation that these conditions are acceptable to your Government.

Yours sincerely

Chris Bryant

What do we take away from a reading of this letter? 

One, the application to borrow the full amount of $49 million is turned down. 

Two, only an amount of $20 million will be permitted, and only if we can meet the condition imposed.  That condition is that the government commit now to new revenue measures to be imposed on the Anguillian taxpayer no later than in the upcoming financial year.  That is, starting in January, three months from now.  That is, three months before the constitutionally due general elections.  Further, these new tax measures will not be decided on by the Anguilla government or House of Assembly. They will be decided on by an independent consultant who has the unlimited power to identify the new revenue measures. 

Three, even the application to borrow a sum of money to extend the airport is refused for the time being.  We will remember that we are required to have the airport extended by some 500 feet.  This has been laid down by new safety regulations imposed by the new regulatory body headquartered in Tortola.  Many private jets land in Anguilla during the Christmas season.  The movie stars arrive for their vacations.  Without this extension, jets will be prevented from landing, thus delivering a blow to Anguilla’s tourism industry.  The letter says that the proposed borrowing will be permitted only if Government presents a comprehensive business case making clear the impact of the reduction in the airport length and the consequent loss of revenue to Anguilla.

One would have thought that the need to include such basic information in the application to borrow would have been apparent to Government from the beginning.  Can you imagine going to your bank with an application to borrow millions of dollars without presenting the bank with your business plan showing the state of the business and how you propose to use the additional money?

Somebody calling himself “Anguilla Express” claims this is a major victory for the Government Ministers.

In my humble opinion, all these fellows are jokers.