I spoke as Chair of the Public Accounts Committee in relation to the 2014 budget.
Sir, I will be speaking firstly on behalf of the Public Accounts Committee and subsequently as an individual Deputy. I should just advise that the Committee have identified a number of areas within the budget that may be worthy of review and will be considered as part of its forward work programme. The comments that I make now focus on a few points that the Committee believe should be brought to the attention of Members at this stage.
The Committee recognises that the budget is set within the parameters of the Fiscal and Economic Plan and acknowledges the current review of Guernsey’s personal pax, Social Insurance, old-age pension and benefits systems and that this is the explanation for whythis Budget contains no significant short-term changes.
We note that the Treasury and Resources Department have taken into account the forecasts in the Guernsey Economic Overview issued by the Policy Council in September and which predicts growth during the second half of 2013 and into 2014 Based on the projected increase in confidence within the market. However, the Committee would question whether an anticipated RPIX of 3.3% for the whole of 2014 is overly optimistic especially bearing in mind that RPIX has not reached this figure in the last 4 years and that it would require a significant jump in a very short period of time from the current 2% to enable the average to maintained at 3.3% for the next year. Therefore, whilst not wishing to be pessimistic, the Committee would like to express a certain amount of caution.
In addition, there appears to be no explanation as to why an estimated figure has been used when referencing increases in taxes and duties for next year at the same time that the Social Services Department have used the RPIX figure of June 2013 and indeed the Treasury & Resources Department have used that figure for personal income tax allowances. Whilst this may be consistent with previous years, the Committee is concerned that the disparity between the 2 rates – an increase of 57% from the June 2013 to the estimate, highlights the shortcomings of the current system of determining taxes, pensions and benefits.
Turning to the income forecasts within the budget, the Committee is concerned that the forecasted increase in revenue through income tax may be overly optimistic. The fact that our overall position is £10 million worse than predicted can primarily be explained by the drop in income, much of which is attributed to the fact that the extension of the zero-10 band to fiduciaries has failed to reach the level expected. However, there is no explanation given as to why this is the case. Is it due to the flaw in the modelling or because the Tax office is too busy to send out assessments, or a bit of both?
The Committee is not convinced that the Treasury & Resources Department is focussed on the income stream. Bearing in mind that the whole underlying purpose of the FTP is to remove the structural deficit, and presumably this will be the case for any future transformational programme, and Departments are making difficult decisions because they are being told that expenditure must be contained to match income, the Committee believes that the Department must live up to its side of the bargain and do what it can to both improve its forecasting and modelling and its income collection procedures.
Turning to the Future Organisational Transformation, or ‘son of FTP’, the Committee acknowledges that it is important that the lessons learnt and knowledge and skills gained from the FTP process should not be lost. However, it needs to be convinced as to the merits of retaining the central office and the costs that this is entails
The Committee is pleased to see that the Treasury and Resources Department believes that a review of Grants, subsidies and loans is required. This has been an area of concern already identified by PAC within its future work programme and would welcome the opportunity to discuss the scope of this review with the Department.
On a related matter, the Committee would like to acknowledge and thank the T&R Minister for the commitment to amend section 8 of the States Trading Companies Ordinnace 2001 to enable the accounts of Guernsey Post and Guernsey Electricity to be debated, rather than placed as an appendix to the Billet.
Both a review of the terms by which grants, loans and subisdies are provided, and the need to ensure the accounts of states trading entities can be fully debatedare necessary to ensure that there is an appropriate level of oversight to all those parties – including the 3rd sector – who receive funds from the public sector.
Finally, it was evident to the Committee that, beyond the headline changes to taxes and duties, this report is at best difficult to navigate and at worst completely impenetrable. Incentivisation is considered within the section on expenditure proposals, whereas future transformation is considered under a heading of financial position. There are various headings relating to reserves with budget reserve and capital reserve considered in one section and contingency reserve and strategic development fund, effectively a reserve, in another.
The Committee therefore requests that the Treasury & Resources Department consider the need to make future reports more accessible to the general user to ensure greater transparency and help taxpayers better to understand how the States of Guernsey uses their money.