It has written a letter of comment in advance of next week’s scheduled States debate, saying that the committee is not persuaded that the framework, if it is intended to guide the long-term management of public finances, provides ‘the clarity, discipline or accountability required of a fiscal framework of this importance.’
Scrutiny held a hearing on the framework with the Policy & Resources Committee last week, where politicians and officials struggled to convince the panel of value of the framework or its resilience and purpose. The committee has now gone further and said that the framework is ‘not sufficiently clear, coherent or robust to operate as an effective constraint on fiscal decision-making’.
It said that the committee could not outline whether the new framework was anchored in the principle of long-term permanent balance or long-term financial stability, and whether it was fulfilling its role as a stable reference point for decision-making and scrutiny.
‘The committee considers that a fiscal framework without a clear and stable organising principle cannot provide a reliable basis for long-term fiscal management,’ said Scrutiny president Andy Sloan.
He described the new approach as ‘substituting discretion for discipline’.
The committee has told political colleagues that the framework offers no effective ‘guardrails’ on levels of public debt and does not provide scope for additional borrowing, and claims it is ‘ambiguous’ over short-term borrowing for cash flow management, which could lead to repeated use of expensive short-term borrowing against running deficits in public finances.
Deputy Sloan has also said that his committee lacks confidence in P&R’s intentions to build up reserves and described governance of the framework as ‘a material weakness’.
If P&R intends to use its independent Fiscal Policy Panel – of which Deputy Sloan was at one time a member before he was controversially removed – to any greater extent, he has proposed that Scrutiny should take over the commissioning of the panel in a move to ‘improve independence and enhance accountability’.
The Scrutiny letter urges deputies to reject the proposal and direct P&R to return with a revised framework focusing on clarity of its core fiscal principle, with clearer conditions over borrowing, treatment of reserves and strengthened oversight.
