The Budget: Key points at a glance

On the Turama programme on CITV on Sunday evening which was repeated on Monday evening, Finance Minister Hon Wilkie Rasmussen revealed some key details from the Budget process. The interview for the programme on CITV took place on Wednesday last week. Set out below are the key details from the Turama programme. (The full interview appears on page 11 of this issue).
Tabling of the Budget in Parliament
The Budget will be tabled on the 23rd of July. Several days before that, Minister required to return to the Ministry of Finance a fiscally responsible budget. Two weeks prior, the Budget must be presented to cabinet for approval. Cabinet has one week to return the Budget to the Minister. A week before tabling, the PM must notify the QR to call Parliament.
Time frame
The budget process began on February 8. Appointed Budget committee to take in submissions. Committee tabled their report last month, to Minister then Cabinet.
Balancing the Budget
Initial deficit thought to be $7 million to $8 million. That was based purely on the assessment of funds that the government had used that were not in appropriation. In other words, some of the reserves that were there got used for other purposes –unbudgeted expenditures got in the way. That’s the only reason why the deficit occurred. The Budget committee managed to bring that right down to $1.9 million.
Are asset sales being considered to balance the Budget?
Yes. For example, property in New Zealand. There’s one staff from Foreign Affairs in it and maybe two staff from Tourism in that building. It’s a free-hold building in the city area, perhaps not quite ideal to be a diplomatic type of place. Sold one building in Wellington a couple of years ago.
Capping loans to reduce impact of repayments on the Budget
Looking at working with NZ and the EU in relation to better exchange rates on the funds that we receive. The European Investment Bank has agreed for some funds to be lent to the Cook Islands, on a guarantee basis by the government. No guarantee given to that as do not want to take up the space on ‘the quota’. Borrowing sits at about 45 per cent of GDP and there’s five per cent to get up to 50 per cent. If you get up to 49 and 50 per cent, you’ll be spending a lot of money on repayments.
Pruning back Ministry allocations
2 per cent cut to outer islands budget recommended by Budget committee not agreed due to higher cost of living in outer islands, especially fuel costs.
Impact on Tourism and essential services
Tourism wanted about four times over their previous budget. Asked for $10 million in total: were given about $7.5 million. It’s not a reduction but it’s not meeting their expectations. We are not funding is the Nadi-to-Rarotonga subsidy that Tourism was planning. As far as Health and Education – all the essential social services –being kept as intact as possible. Including the activities of Internal Affairs. Internal Affairs had a shortfall of about half a million dollars and government had to meet the shortfall.
Payment of overdue taxes
Not intervening in repayment of taxes. The intervention is this: for many years, the tax department has been making deals with people who cannot pay their taxes. Never really get to the point of winding up (a business). A number of Cook Islanders, particularly Maori Cook Islanders, who get into business, have no training as such. They go into (a business) with eyes blind, really. And, in the end, they discover that they’ve mismanaged it. Intervention across the board, is an attempt to enable these people to have better management skills.
Cutting the size of the public service
Reduced the public service not supported at this point. View is, let people work, the people spend money and the money circulates. But, we’ve now come to realize that if we direct for the release of some of the funds that are tied up – for example, BCI has some money tied up into its own investments in the other two banks here – it’s possible for BCI to work in with the government, for example, to offset the loan at the Airport Authority (for the construction of the new departures terminal), so that it doesn’t impact on the budget. It’s that sort of juggling act that we’re doing.
Underwater mining
One area we’ve stayed away from. Although there is still some discussion about fast-tracking the process so that exploratory licences could be issued. We may need someone to go out and explore and bring that information back to the government and see the viability of this whole exercise. No particular funds provided for that, although there is a total of $20,000 that can be directly accessed by the Ministry involved for that specific purpose.
Support for Budget
The government of the day, the Democratic Party, is under obligation – under the anti-hopping legislation – to pass the budget. They cannot vote against it. The opposition party realizes it’s important for the nation to get a budget done. I had to convince the prime minister that the best thing would be to go through with the budget.
A stock-take Budget
Budget, is a “stock-taking budget”. Time to consolidate what we’ve got. It’s not a free-and-easy spending budget but it addresses the core services; and, two, stimulates economic growth. Those are the two clear things that we want to do. Tourism is our major industry so we’re not going to forgo some of their requests. But there are other areas that we are looking at, new initiatives for example. We’re going to set aside about $2.5 million for agriculture in the Outer Islands. The pearl industry in the North will get a fair amount of funding that the farmers themselves could have access to for the seeding process. It
Taxes
No raises in income tax; VAT stays the same. The only possible levy increase is the levy on heavy vehicles that are brought into the country, because of the wear and tear they incur on the roads. We’re also looking at alcohol and tobacco, some increases in levy.
Departure tax to be lowered
$19 does not necessarily go to the Airport Authority. $55 goes into a pool at MFEM. The Airport Authority gets about $2 million of those funds per year, on the basis that $19 of that $55 is calculated into that $2 million. View is to reduce the departure tax down to about $35 and hand that over to the Airport Authority as a revenue stream for it, in order for it to become a fully self-sufficient state-owned enterprise. We can attract people back to the Cook Islands without fearing that, when they leave, they’ve got to pay $55. Lowering the departure tax means revenue loss of about $2 million but the benefit of more people coming to the Cook Islands outweighs that.
Local investment of Super funds
We seek better investment of those funds. Eventually, we want to invest some of those funds in the banks here. To, for example, alleviate mortgage problems. With people who are struggling because of mortgages, there would be some kind of funds they could apply for to relieve them of certain difficulties they might have.

By Charles Pitt

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