Anguilla: Sustainable Recovery
and Resilient Development Post Irma – Part 2
We
looked last week at the first 9 of the 22-paragraphs letter bearing the above
title from Mr Ben Merrick. It was
addressed to Anguilla’s Chief Minister (the CM) and was dated 23 December 2017. Together, these 22 paragraphs set out the
conditions of integrity, transparency and accountability that the Government of
Anguilla (the GoA) must meet in order to be able to access the £60 million
offered to us as a grant to rebuild after Hurricane Irma.
Let us look briefly at the remaining 13
paragraphs. We need to understand what
this letter says about the task facing our government before they can receive
the offered funding.
It appears the CM optimistically told the
Foreign and Commonwealth Office (the FCO) that he would take a draft budget to
the House of Assembly in early January. He
anticipated a shortfall in revenue for 2018:
GoA would need to borrow money from the Caribbean Development Bank (the
CDB) to meet its recurrent expenses. Mr
Merrick explains that if GoA does have a shortfall, the British Government will
not be able to provide funding to cover it.
Given, he writes, that the first CDB meeting at which a loan for
Anguilla could be agreed would be in May 2018, he wanted to know how the CM
would meet our immediate cash requirements for the first part of the year. Indeed, Mr Merrick explains, the FCO will not
even look at our draft budget unless they can be assured how GoA will meet its
immediate cash requirements. I pause to
comment that, hopefully, the CM successfully accomplished this challenge, as we
have not heard anything to date.
Mr Merrick next wants the CM to explain how Anguilla
will meet its debt servicing and amortisation costs in the fiscal projections he
made up to the year 2025. Whatever
fiscal projections the CM made, this requirement is going to be particularly
challenging. The grace period associated
with the previous CDB loan the CM took out to assist him with the Banking
Resolution crisis of 2016 is about to run out.
The full cost of our borrowing is about to hit us, leaving precious
little to cover new borrowing.
He wants the CM to send a revised and updated
Medium Term Economic and Fiscal Reform Programme (the MTEFRP) for the FCO to
consider and approve. The CM must
satisfy the FCO that concerted efforts are being made to implement the FTEFRP. In other words, we must now move from
promises to action.
Mr Merrick refers to “the most recent
quarterly progress report”. Since his
letter is written in December 2017, we can assume he is referring to the
quarter ending September 2017. It would
have been good if the CM shared this progress report with the people of
Anguilla. We have a real interest in it. But, we don’t know what is in it.
He also refers to a letter from the CM dated
27 October 2017 in which the CM identified the issues facing Anguilla. I assume this letter accompanied the
quarterly report and gave certain assurances.
But we have not had the privilege of seeing the letter and knowing what
promises or predictions our CM made on our behalf. Mr Merrick responds to this 27 October letter
from the CM by stating that the FCO needs his revised programme to be more
ambitious. In other words, he is not
satisfied with the predictions made in the CM’s 27 October letter.
In particular, the CM must explain the steps he
will take to improve the easing of foreign direct investment into Anguilla, and
to privatise key utilities including electricity. Foreign direct investment is presently
discouraged under our xenophobic economic system. Anguilla was famously described by the late
Martin Crowley of Pyrate Rum as “the cemetery for American capital.” Clearly, this discouragement has to change.
Water and electricity can already be said to
be privatised in that they are owned by companies and are no longer government
departments. But, they are not really
private since GoA is the sole shareholder in the Water Corporation of Anguilla
and a major shareholder in the Anguilla Electricity Company. We need to sell these assets to the public to
raise much needed cash.
Mr Merrick demands that the CM set out
sufficient details so that progress in implementing the economic reform package
can be monitored. He wants the CM to go
beyond merely identifying policy leads, completion dates and priority ratings. He wants the CM to provide a clear work plan for
each measure he proposes to take. The CM
must set out in detail the actions that need to be taken. He must set targets for each quarter. These are some of the ways in which the CM’s unseen
letter of 27 October appears to have failed.
Mr Merrick insists that the CM must identify
the Senior Accounting Officer responsible for each measure. This procedure of making Department Heads
responsible for the management of his or her Department’s funding is set out in
the Act, but in recent years it does not seem to have been followed. Senior civil servants who waste government
resources are no longer held accountable.
To take advantage of this grant, GoA will have to reinstitute this
safeguard. There must be somebody to
take responsibility and answer from his or her pocket for any shortcoming.
Mr Merrick acknowledges that there are
multiple barriers to growth in the Anguilla economy. The CM must set out a clear timetable and
process for reporting on a quarterly basis to ensure that the momentum on
reform efforts is maintained.
Mr Merrick asks the CM to identify the
priority reforms that will deliver the greatest impact. He does not identify the reforms that he
claims the FCO have been discussing with GoA.
I think we already know what some of the areas for economic reform in
Anguilla are. They have appeared in
previous publications. As I recall,
these include, without claiming any order of priority,
(a) removing the Aliens Landholding Licence
restrictions that prevent foreigners from investing in Anguilla unless they
submit to going through hoops and jumping over procedural barriers, and months
of bureaucratic delay. We can already
adequately control them through our immigration procedures once we carry out
adequate due diligence on them;
(b) revising the work permit regulations to
allow us to grant multiple-year work permits to major investors and their
senior staff so they can manage their investments to their satisfaction without
the current level of uncertainty. The
present procedure is based on government policy and can shift from government
to government and from minister to minister.
There needs to be the certainty of a law;
(c) providing by law a certain and consistent
mechanism for granting permanent residence to investors who invest a minimum amount
of foreign currency in our economy, as the Americans and the British themselves
do (except they grant citizenship, which we can’t). The present procedures rely on constantly
shifting and uncertain government policies; and
(d) eliminating the impractical security of a
“charge” under our Registered Land Act, which makes it almost impossible
for a lender to recover the proceeds of a loan from a defaulting borrower. We need to make it easier for a lender to
recover against the security provided by a borrower who then fails to meet his
commitment under the loan agreement. It
was this hindrance or obstacle, more than any other, which in my opinion led to
the 2008-2013 failure of our two indigenous banks. Unless the law is changed to bring back
mortgage remedies, which involve, eg, title shifting to the lender at the time
of the mortgage, a right of foreclosure, and the right to sell by private
contract if the loan falls into arrears, only a very foolish bank is likely to continue
to lend money secured by a charge on real estate in Anguilla.
GoA will need to agree a Memorandum of
Understanding (an MOU) with the FCO on any project that will be supported by
the UK grant. The MOU must set out a
“robust business case” consistent with the UK’s Green Book framework.[1] The Green Book and its supplementary guidance
sets out the framework for the appraisal and evaluation of all governmental
policies, programmes and projects. So,
where, for example, GoA has to choose between repairing existing buildings and
constructing new ones, it must set out in detail the proportionate economic
appraisals of these project options. GoA
has to satisfy the FCO that its proposed choices will guarantee maximum value
for money.
This £60 million grant, if we can ever
qualify to receive any of it, is not going to come in one lump sum, or even in
one year. It will be disbursed in
tranches, tied to annual budgets, over several years. The funding must be based on an agreed dispersal
plan, with an agreed list of projects for which this money may be used. This requires a costed work plan, clearly
setting out our priority projects.
This framework is a great advantage to
us. It means that we don’t have to
prepare in advance detailed plans for every project we have in mind and for the
spending of every penny of the aid. We must
break up the work load by priorities. It
seems to me we need only do the detailed planning and reporting on the most
immediate ones. We can leave those of lower
priority to be costed and planned in detail at a later date.
The grant funding will be disbursed under
something called the Conflict, Stability & Security Fund. This means that disbursements will, additionally
to the Green Book framework, be subject to the reporting and governance
requirements of that fund. We don’t have
to become expert in any of these reporting requirements. Repeatedly, throughout his letter, Mr Merrick
offers to provide GoA with the expertise needed to meet the requirements for the
disbursement of this grant.
One final condition is that if any of the
grant is to be spent in the UK, both the Financial Adviser and the FCO must
approve. Any expenditure in Anguilla
must be approved by the Financial Adviser.
Overall, the Governor’s Office will work with the FCO in applying the
most appropriate mechanisms for managing the funding programme.
Some of the reasons for these strict
oversight provisions are well known to us.
We need only look at the first 5 pages of the Chief Auditor’s last Audit
of Accounts for the year 2013 published in 2016 and available on the GoA
website, to understand the reluctance of the British to believe we can handle
the funds responsibly if left on our own.[2]
The Chief Auditor has refused (for the past
42 years that Anguilla has been essentially self-governing) to give our public
accounts a clean Certificate for four main reasons. The first one is that when the Minister wants
to shift money voted by the House of Assembly from one department to another,
the Financial Administration and Audit Act 2010 (the Act) states that
the Minister of Finance may do so by a Reallocation or Virement Warrant and with
the approval of the House of Assembly.
But, all these Warrants for 2013 were authorised by the Permanent
Secretary or the Deputy Permanent Secretary instead of by the Minister of
Finance. And none of them had the
approval of the House of Assembly. This
was clearly illegal.
He further qualified his report because GoA
has not developed or operated adequate processes to show that all payments due
for Property Tax, Interim Stabilisation Levy, customs duties, and other taxes
on goods and services, were identified for collection in accordance with the
relevant legislation. Certain persons
seem to be permitted to get away with not paying their Property Tax, Interim
Stabilisation Levy, or Hotel Accommodation Tax, while the rest of us dutifully
comply. This is patently unjust and an
abuse.
He yet further qualified his opinion on the
regularity of our accounts because, though the Act states that the Minister of
Finance may, by Advance Warrant signed by him, authorise the Accountant General
to make advances from the Consolidated Fund, advances made during the year 2013
were not authorised by the Minister. In
other words, the 2013 advances were unlawful.
Finally, he further qualified his opinion
because where a law gives Executive Council power to remit any tax, fee or
other amount, the Act provides that such remission may not exceed EC$1,000 “or
such greater amount as may be prescribed by Regulation” made by Executive
Council, and with the approval of the House of Assembly. While remissions during 2013 were approved by
Executive Council, the GoA does not appear to have bothered to seek approval
from the House of Assembly. Clearly, if
the House of Assembly has made a law saying that a certain transaction must be
taxed at a certain level, it must be illegal for anyone to authorise a
reduction in the amount due, without the approval of the House of Assembly.
I think we can all agree that if the
monitoring and management provisions set out in Mr Merrick’s letter are adhered
to, this will be the best-managed economic reform and infrastructure
development programme ever enjoyed in Anguilla.
