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Actual savings or accounting trick?
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From Darius Pearce.
I READ with interest the Treasury Minister’s plan for £23 million of public expenditure savings (JEP, 18 July), however having taken the trouble to review the report of the Fiscal Policy Panel released this month, there are a few issues which the Minister has failed to address.
Firstly, the report clearly states that government expenditure is actually due to increase over the next two years.
Therefore I would ask the Minister to clarify whether these are actual savings or just an accounting trick in that they are savings on the budgeted expenditure which is due to increase by £30 million pounds, meaning that expenditure will actually only increase by £7 million.
Secondly, I am concerned about some of the projections upon which the report, and one would assume decisions, are made. The report calls for prudence,
something one would expect from a Treasury function, and yet makes forecasts of gross value added to the Jersey economy at a rate 6% higher than that achieved in 2010.
With a strategic reserve of less than 8% of our annual government expenditure it will not take long to eat through this reserve if these forecasts prove incorrect.
Thirdly, the forecasts are based on a flawed assumption that net interest
revenue will increase. It is patently obvious that both the US and UK are painted into a 0% interest corner by the sheer burden of debt that they would face if the interest on that debt were to increase by even 0.25%, how is Jersey to meet the forecasts if the interest rate is not increased? And this is a matter which is beyond our control.
Finally, I am perplexed by the personal failure of the Treasury Minister to follow the most basic rule of asset protection and hold 10% of our strategic reserve in the form of precious metals. Had this been done for the three years which the department has been his responsibility then we would have enjoyed a return of at least 100% on that part of the reserve, a failure which has cost Jersey at least £22 million. More than enough to avoid a GST increase.
Prudence would dictate far deeper cuts in public expenditure with no rise in taxation lest it damage our economy further. It may also be wise to review the latest data from the US which demonstrates that the greatest economic value ($1.73 per $1.00 spent) is derived through the issuance of benefits to those persons who will spend it immediately and not in commissioning overseas companies to undertake works projects when deciding how to spend the balance of the fiscal stimulus money.
To conclude, if I were Deputy Pitman it would be the failure of the fiscal policy of the current regime that would have led me to bring a motion of censure against the Chief Minister. On that basis the current regime has failed.
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