11 August 2009
The contract for the Energy from Waste Plant was signed in November 2008, and work commenced shortly thereafter. As a result of perceived shortcomings in the management of the currency aspects of that contract, a comprehensive, independent and professional review was carried out by the Comptroller and Auditor General, who published his report in March 2009. The States Employment Board has also carried out independent disciplinary hearings into the handling of the euro procurement by the relevant Treasury staff, and that process has also been concluded.
The Treasury has accepted responsibility for errors made over the currency aspects of the EfW contract. Those mistakes occurred for a combination of reasons, and the States Treasurer has accepted the findings of the Comptroller and Auditor General, who points out in his report that the shortcomings may have been in part a result of the department’s limited resources.
Action has already been taken to prevent any recurrence: the Treasury Investments Sub Committee has responsibility for foreign exchange policies; a policy on foreign exchange management has been approved and extra staff have been recruited for the investments team. Steps have been taken to mitigate any loss from a fluctuating exchange rate. The policy has been successful and is under regular review.
It is therefore questionable what additional benefit can be derived, at this late stage, from the present review, which appears to mix already known facts with the Committee’s opinions.
The Treasurer’s brief is extremely wide, and in the last ten years his department has successfully developed and implemented the fiscal strategy of zero/ten, ITIS, 20 means 20 and GST, all of which have been essential to protect our economy and provide the tax revenues to fund our essential public services.
During this period the Treasurer has also advised Committee Presidents, and subsequently Ministers, to reduce expenditure growth. Ten years ago, public expenditure was rising at a rate of 10% a year. The Treasurer’s advice to reduce this rate of growth has led to a continuing downward trend in States spending, until 2007 saw the lowest rise for decades of 3.3%.
We have entered the current downturn with robust public finances and a healthy Stabilisation fund, and that is in no small part, thanks to the prudent approach of the Treasurer and his team. The inflation target of 2.5% has been met, and surpluses generated when the economy was growing have been invested in the Stabilisation Fund. These funds are now supporting islanders through the downturn.
In terms of financial management, Jersey is ahead of comparable jurisdictions through, for example, the introduction of GAAP accounting. We must continue to improve though, and the proposals set out in the Treasury Minister’s restructuring plan will strengthen the Treasury, put in place the right level of expertise and resources and significantly strengthen financial management across the States.
This is not to deny that mistakes were made, and have already been acknowledged, over the handling of the euro aspects of the EfW contract. Appropriate corrective action has already been taken, as well as the wider review of Treasury activities initiated more recently.
Finally, I would like to put the magnitude of the currency losses into context. Various figures have been mentioned, but as t he pound has strengthened steadily against the euro since last December the Treasury has been purchasing euros in advance of contract payments. These actions have significantly reduced the net loss. The Treasury Minister acknowledges however, that there is a need to protect the gains made to date and minimise the risk on future euro purchases. He will look at options to minimise that risk, including those proposed by the Public Accounts Committee.
A formal response to the Public Accounts Committee’s review will be produced by the Treasury Minister in due course.
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