OPINION: Here's why you can't trust the States with your money

If government doesn’t know how much of your money it has, how can it make sensible decisions about how to spend it? Richard Digard looks at the implications of a disturbing report from local think tank GPEG

STRIP it back to basics and I guess there are just two absolutes we require from those governing us: to keep us safe and to know what’s happening to the money they force us to give them in ever-increasing amounts.

On the first, French raiding parties stopped torching St Peter Port centuries ago and, thanks to that kicking donkey statue, we know we’re no longer controlled from Berlin so that’s sorted.

On the second front, however, the States’ track record is pretty lamentable. In other words, we taxpayers have sustained serious casualties over the last few years and the other shocking thing to record is that States members as a cadre really haven’t cared.

I’m not referring here to the inability of anyone in government to explain why public sector pay is at the quarter of a billion pounds level it is – 138 staff each costing £100,000 to £200,000 a year is lavish even by finance sector standards – or how salary levels fit into a recruitment and retention policy. Nor am I highlighting the total absence of formal scrutiny on something that makes up more than half of all States expenditure, disturbing though that is.

Instead, this is about something entirely more fundamental: whether you can trust the financial figures Policy & Resources releases to explain what’s happened to your cash. Unfortunately, it is that serious. Let me demonstrate:

‘The States follow a financial reporting system that is really quite odd and provides ample opportunity for people to be confused and for misleading numbers to be generated or used.’ That’s the verdict from Lord Digby Jones and Jon Moulton in the latest publication from GPEG, their think tank the Guernsey Policy and Economic Group.

Lord Digby Jones, left, and Jon Moulton the authors of the third paper by the Guernsey think-tank, GPEG, which looked at the unusual accounting habits of the States and calls for the implementation of internationally recognised accounting standards. Funding for this implementation was committed some eight years ago.

Yes, it’s fashionable in some quarters to try to devalue their views as rapacious capitalists debasing the noble work of government by pretending it’s some sort of business, but the point is this. Both are successful because they understand the significance of numbers that are accurate, understandable and believable. Without that you can’t run anything successfully. Just look at Patisserie Valerie or, more recently, Wirecard.

The problem for we taxpayers is compounded because not even those paid to ensure States figures add up – their independent auditors – are entirely certain that they do. At least, if so, they nevertheless refrain from certifying that the States accounts are ‘true and fair’, the more usual audit declaration.

This, too, is significant because such a sign-off would mean the financial statements are free from material misstatements and faithfully represent the financial performance and position of the entity. Without it, does the opposite become true?

To be clear, I’m not saying there’s anything underhand here but the absence of clarity is serious. So much so, says GPEG, that the surplus declared by the last States was, by any normal accounting standard, a substantial deficit. Now that is worrying.

Put simply, it is not possible to read the accounts and know with certainty what cash government has or its assets and liabilities, with GPEG highlighting a sleight of hand – repeated elsewhere – in which a subsidy for the airport (i.e. money spent propping it up) somehow became a valuable asset created.

Yes, this stuff is confusing but it matters because if no one understands the States’ finances then they can’t be managed properly or, more importantly, future spending decisions taken safely.

This situation has been around for a long time, which is why States members said eight years ago it should be rectified. But that still hasn’t happened. ‘Quite why, remains to be discovered,’ say Messrs Moulton and Jones.

I’d put it down to two things.

Firstly, 30 years ago when finance was booming and money pouring in, unclear financial reporting was a way of hiding from States members how much money government had and therefore stopping them spending it. Possibly good.

Secondly, inventing your own set of accounting standards makes it much easier to disguise inefficiencies and, say, pretending multimillion-pound bailouts for Aurigny are an investment with a bookable asset value saves a lot of unwelcome attention and questioning. Definitely bad.

Ultimately, a clear set of figures enables us to see how well or poorly an organisation is looking after the money coming its way. So instead of the harbour being worth £136m. as claimed, it’s probably nearer £25m., according to GPEG. What’s a discrepancy of £111m. between friends, eh? Or a £1bn deficit in the public sector pension scheme, come to that?

These things are heavy going, even though I’ve tried to simplify it. And if we don’t get it, how many States members do? Or even make the effort to do so?

GPEG has shone a welcome light on a critical area of government that is not just unnecessarily opaque but potentially misleadingly so.

Yet there have been few voices raised in the last eight years about the delay in achieving accounting transparency, which is why we can conclude previous deputies either didn’t care or rather liked it that way.

The lack of official reaction to GPEG’s paper, entitled Good, Consistent Information, Consistently Good Decisions, is revealing.

What happens next will be even more so.

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