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Jersey's Financial Forecasting Process Requires Improvement

By Robert Lee,, London

08 December 2008

The Scrutiny Panel has published the findings of its review into the thoroughness of financial forecasting undertaken by the States of Jersey’s following fears that forecasts were in fact damaging confidence.

Over the last couple of years the Treasury has been in the fortunate position of announcing improved revenues compared to previous forecasts as income receipts have been higher than expected. This has led to a perception among States members that the Treasury might have been under-estimating income in their original forecasts in order to restrain States' expenditure.

The Panel appointed Michael Oliver as independent adviser in June to assist in investigating current forecasting processes and outcomes to identify potential improvements in the presentation and accuracy of economic data produced.

Patrick Ryan, Panel Chairman, said:

“Financial forecasts are an essential element in the overall picture that is used by politicians from all sides of the States Assembly as well as independent experts such as the Fiscal Policy Panel to inform decision making on taxation and longer term general economic policy. However, by their very nature, income forecasts are subject to changing economic and financial circumstances which are outside States' control.”

He also emphasised that States members would need to be educated into the usefulness and limitations of forecasts and realise their limitations so information could be passed more effectively to the general public.

Extensive improvements have been underlined in a recent report released by the Scrutiny Panel. Emphasized heavily in the report was the need for the timing of forecasts to undergo revision. At present forecasts are prepared three times a year, the panel, however, recommends that there should be a single annual forecast supplemented with regular internal adjustments.

Above all the panel believes that the financial forecasting procedures should remain open to independent scrutiny and recommends that the future Corporate Services Panel and the Comptroller and Auditor General should regularly review the assumptions underlying the forecasting figures.

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