Tourism Development Fund: Assistance to the Private Sector (S.R. 3/2012): Response of the Minister for Treasury and Resources

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A decision made 3 September 2012:

Decision Reference: MD-TR-2012-0077
Decision Summary Title:	Ministerial Response: S.R. 3/2012 - Tourism Development Fund: Assistance to the Private Sector		Date of Decision Summary:	29 August 2012
Decision Summary Author:	Treasurer of the States		Decision Summary: Public or Exempt?	Public
Type of Report: Oral or Written?	Written		Person Giving Oral Report:	N/A
Written Report Title:	Ministerial Response: S.R. 3/2012 - Tourism Development Fund: Assistance to the Private Sector		Date of Written Report:	29 August 2012
Written Report Author:	Treasurer of the States		Written Report : Public or Exempt?	Public
Subject: Response from the Ministers for Treasury and Resources and Economic Development on the review of the Tourism Development Fund: Assistance to the Private Sector by the Corporate Services Scrutiny Panel.
Decision(s): The Minister decided to present to the States a response from the Minister for Treasury and Resources and the Minister for Economic Development into the review of the Tourism Development Fund: Assistance to the Private Sector by the Corporate Services Scrutiny Panel.
Reason(s) for Decision: The Corporate Services Scrutiny Panel undertook a review of the Tourism Development Fund: Assistance to the Private Sector (P.26/2012). A commentary in response is found in the attached Written Report.
Resource Implications: None.
Action required: The Greffier of the States to be requested to arrange for the attached response to be presented to the States for their information at the earliest opportunity.
Signature:		Position: Senator P F C Ozouf, Minister for Treasury and Resources
Date Signed:		Date of Decision:

Tourism Development Fund: Assistance to the Private Sector (S.R. 3/2012): Response of the Minister for Treasury and Resources

Ministerial Response: S.R.3 /2012 Ministerial response required by: 7th August 2012

Review title: Tourism Development Fund: Assistance to the Private Sector

Scrutiny Panel: Corporate Services

Introduction

We welcome the Corporate Services Scrutiny Panel report into P.26/2012, regarding the Tourism Development Fund: assistance to the private sector. This is an important piece of work which provided an informed debate on the proposition and contributed to its approval on 10th July 2012. We are grateful to the Panel’s support of the central aim of the proposition – to allow private sector entities to apply to the fund for the sole purpose of increasing the potential value-added to the Tourism Industry.

Findings

	Findings	Comments

1	A vast majority of applications to the scheme have been refused due to their inability to meet the clearly-defined criteria set by the TDF Panel.	Agreed.
2	Only a small percentage of the £10 million, which was originally agreed to be set aside for the TDF in P.70/2001, has been awarded to the Fund since 2001.	It is accepted that the full £10million originally agreed to be set aside in 2001 has not been allocated to the TDF. This funding was agreed in principle without funding being identified – such procedures are no longer practised. In total, £5.5 million has been allocated to the TDF. Of this, £1.8million was transferred from the Tourism Investment Fund and £2.85m from Treasury and Resources and Economic Development Budgets; the remainder is derived from accrued interest.
3	A wide variety of schemes have benefited from grant assistance since the TDF was established in 2001.	Agreed
4	States Departments have benefited from over half of the £5.5 million that has been approved for allocation by the TDF Panel since 2001.	Agreed - it should be noted that in the majority of cases the States Department was partnering external organisations to deliver a specific product – for example, for Air Route Development.
5	Unless it can be clearly demonstrated that projects are going to add a considerable value to tourism, States Departments should not receive TDF Funding.	Agreed.
6	The TDF would leverage additional investment in tourism and increase visitor numbers if grant assistance was extended to private organisations.	Agreed.
7	The Sub-Panel fully support the Proposition to grant assistance to private sector entities.	The Sub-Panel’s support is welcomed.
8	The Proposition should not have been brought to the States until future funding had been identified.	£500,000 in each of the years 2013-2015 has been identified within the MTFP. In addition £5 million has been identified for the new Innovation Fund. Tourism-based business could apply for funding from this source. As referred to in the Comments presented on 9th July, whilst approval of funding in advance would have been preferred, it was not felt appropriate to postpone the decision until after the States debate on the MTFP as this would delay changes that will improve the tourism sector. The appropriate approach is for all spending decisions to be taken as part of the Medium Term Financial Plan debate, with in-principle policy decisions only taken at other times of the year.
9	The Minister for Economic Development has requested £500,000 annually over a three year period in the MTFP for TDF Funding.	Agreed.
10	The TDF Panel may well dissolve unless funds are made available	It is agreed that without funding to allocate there would be no need for a TDF Panel; but is not envisaged that this scenario will materialise unless there was an express decision to close the scheme.
11	The Minister for Treasury and Resources is of the opinion that a higher bid should have been made for TDF Funding in the MTFP.	The Treasury Minister made clear that this was a personal view, rather than one of the Minister. He also made clear that it was a matter for the Economic Development Minister how much funding was bid for in the MTFP.
12	The TDF must have significant funds in order for the private sector to benefit from grant assistance.	Agreed.
13	There is high possibility that the proposed amount of £500,000 a year for a 3 year term will be insufficient if the private sector is given access to the TDF.	This is untested and the TDF Chairman himself stated that until we open the scheme we will not be aware of the level of demand. On the basis of the last two rounds, there are sufficient funds available to support additional bids.
14	Applications received from both private organisations and non-profit organisations should be assessed on their merit only.	Agreed.
15	Great care must be given when awarding grants to private sector organisations to ensure that projects do not displace existing operations.	Agreed.
16	Any States assisted funding scheme should have mechanisms in place to ensure funds are allocated fairly and appropriately.	Agreed.
17	If the bid for TDF Funding is not included in the MTFP it will have a detrimental effect on the future of the Fund.	Agreed, but the MTFP has now been published and includes £500,000 per annum to the TDF.
18	The Economic Development Minister should ensure that, in seeking £10 million for the Innovation Fund, attention is not diverted away from TDF funding.	Agreed. These are two separate funds which have distinct and separate aims, objectives eligibility criteria and assessment processes.
19	If the Innovation Fund was to be used to support larger projects from the tourism sector, clarity would need to be provided as to how the new Fund and the TDF would operate in conjunction with one another.	Agreed. As stated above, the two funds are distinct and the specific nature of the Innovation Fund will be further clarified in the Fund’s guidelines once established.
20	Consideration should be given to a possible loan scheme for the TDF in the future.	Agreed.
21	A repayable scheme would not be appropriate for all types of applications.	Agreed.
22	Improved lines of communication, co-operation and understanding between the Planning Function at the Environment Department and the Economic Development Department could help leverage additional investment in tourism whilst allowing TDF funds to be set aside for other projects.	Agreed.

Recommendations

	Recommendations	To	Accept/ Reject	Comments	Target date of action/ completion

1	If the MTFP bid is accepted for TDF Funding then the amount allocated should be re-visited by the Minister for Economic Development after the three-year period in order to evaluate its appropriateness.		Accept		In time for the 2016-19 MTFP.
2	The Economic Development Minister should ensure that a new and strong compliance model is established and governance arrangements are put in place if the Proposition is agreed in the States.		Accept that a strong compliance model is required.	The strong compliance and governance arrangements for the TDF that are currently in place are being adapted to ensure that these are effective in dealing with private sector applications. Treasury is supporting Economic Development in delivering this work	October 2012
3	The Proposition should not be debated unless the Economic Development Minister can clearly demonstrate how the TDF will be funded.		Already debated.	N/A	N/A

Conclusion

We take on board the findings and recommendations of this report:

we will be adapting our processes to ensure that we continue to have a strong compliance model that will be effective in detailing with private, public and voluntary sector entities, as referenced in the recommendations;
investigations into the possibility of a loan scheme will be conducted and reviewed following the first round of applications which involve the private sector, which will take place in autumn 2012;
we will ensure that the distinct and separate aims, objectives and criteria related to the TDF and the Innovation Fund are clearly identified and explained in the respective fund’s guidelines; and
as recommended by the Panel, we will ensure that the level of funding will be reassessed for the next MTFP in light of the demand and allocations that occur over the next three years.

We anticipate that the change brought about by this proposition will have a tangible and beneficial impact on the Tourism industry for years to come.