fp Turks and Caicos

All government employees’ salaries will be slashed by 10 percent because leaked details of a pending government consolidation loan caused lenders to shy away from the interim government’s plans, His Excellency the Gov. Gordon Wetherell announced Tuesday, March 9.

The announcement, read to a surprised Consultative Forum on Grand Turk by Chief Executive Officer Mark Capes, did not say who leaked information about the loan, but PDM leader Doug Parnell revealed details of the loan at length during a press conference last month.

Capes also read a letter he has sent to government employees explaining the pay cuts:

“To achieve some of the savings required to help bridge the deficit, public service salaries and wages for all staff, plus certain allowances, excluding housing, will be cut by 10 percent. It will take effect, for wage earners on 16 April and, for salaried staff at the end of the month.

“By providing over five and seven weeks’ notice respectively, I hope this will give you time to adjust your personal finances as necessary. Please note, too, that overtime will be allowed only in life threatening or other strictly essential circumstances.”

“It is the government’s aim to restore salaries and wages as soon as the fiscal position has improved to a sustainable level,” Capes said.
In an interview with the fp, the governor said that because of the cuts already made, the scope for further cuts is minimal because “there is little fat left.”

A day after the announcement, Consultative Forum Chairman Carlos Simons questioned the governor’s decision on behalf of the members, saying they did not believe this was the only choice.

“We reiterate that this step has been taken without reference to the forum,” Simons said in a statement released March 10. “We are not convinced that there are no other options.

“Neither are we convinced that a 10 percent across the board reduction is the most equitable way of going about the matter even if it was the only option. A 10 percent reduction on a salary of $1,200 per month is bound to hurt much more than a 10 percent reduction on a salary of $4,000 per month.”

The governor said in his statement that the only other option would have been cutting jobs, which he made a mindful effort not to do. “We are also conscious of the difficulties which early redundancies would cause individual families in the current employment climate.”

The governor said in his interview that without the pay cut, there would be little money for other important areas like the police. “We have got to do something for the police,” the governor said. “If we do not do anything, crime will increase, and that is not a favourable option.”

The Loan

The governor explained that the $85 million loan would not have created new debt for the country, but rather consolidate already outstanding high interest overdrafts and outstanding bills to creditors both locally and overseas into significantly lower interest rate loans that could be paid over a reasonable period of time.

“The debt has its origins in the mess we inherited in the accumulated pile of unpaid bills and the debt that came with it,” the governor said.

“What has happened as a result of not being able to conclude this deal now is that the cash flow crunch is on us now, rather than in six or seven months’ time. We have no alternatives but to take measures now,” the governor said.

The governor said the loan was only an interim solution until other options could be explored, “We have been in touch with the Caribbean Development Bank, the European Union, the British government and others to see where we could get additional resources to tide us over until such time we reached a position our monthly income once again caught up with expenditure that we have.”

Now the breach of confidentiality with lenders also has increased government debts because creditors have withdrawn discounts they were prepared to offer, he said.

“The Bankers Association is looking into the source of the leak,” CEO Mark Capes said. “As a professional body representing the banks, they have concerns about the reputation that would have for the industry, so they are carrying out their own investigations in each bank to see how it might have happened.”

“Even if we can get back to the $85 million, we won’t get back to the same breathing space because we had worked out a payment scheme which would involve discounts and in some cases pretty significant discounts, but that was predicated on paying by the end of February," the governor said."Some are also threatening to take us to court or adding on punitive interest.”

In any case, the governor said the $85 million loan would not have solved all the government’s problems because revenue is down 47 percent from last year, which is why he says the cuts were the only option.

Due to a significant slow down in construction, customs revenues are down, and as a result of the flat real estate market, stamp duty — which has been the second largest source of revenue for the country — has also dropped off significantly.

“Instead of getting $44 million (annually in stamp duty) as a few years ago, we are now down to between $8-10 million. These have been big drops, and that has meant that the costs of public service costs which used to be about a third of public spending (between 35-40 percent maximum, when we were getting $20-22 million a month) are now 65 percent, and that is unsustainable,” the governor explained.

Read the governor's statement

Read the CEO's letter

Read Forum Chairman Carlos Simons' statement

Read PDM leader Galmo Williams' statement