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. 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.
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.