Financial secretary clears up ‘row’ over government deficit

Neither administration’s estimate is correct

Financial Secretary Kenneth Jefferson speaking in Public Accounts Committee on 20 July.

Financial Secretary Kenneth Jefferson clarified the $50 million gap between the 2020 budget deficit estimates of the former and the new government, in Public Accounts Committee on Tuesday.

Based on a pre-election economic and financial update, former finance minister Roy McTaggart announced in March that core government booked only a $38 million deficit last year.

Three months later in June, new Finance Minister Chris Saunders said that the 2020 deficit was in fact almost $50 million higher at $87 million. Saunders added that the previous government’s budget deficit forecast for 2021 was also too low by $35 million, because it had not figured in the stipend payments to displaced tourism workers.

This drew an angry response from McTaggart who said in a video message that some of the “curious comments” made by Saunders were either “simply wrong” or designed “to create doubt in the minds of the public regarding my stewardship as finance minister”.

McTaggart said he, like the public, relied on the as-yet-unaudited financial statements prepared by the finance ministry and signed off by both the financial secretary and the accountant general.

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Responding as a witness in Public Accounts Committee to questions about the origins of the different estimates, Jefferson said both deficit figures were based on calculations made by the finance ministry.

The financial secretary acknowledged the projections had caused a certain “friction” and confirmed neither the old nor the new finance minister had “fabricated” or “invented” any of the figures but simply reported what was given to them.

“In reality,” Jefferson said, “the likely deficit for 2020 is going to be somewhere in the middle of those two numbers. It’s not going to be $38 million and it’s not going to be $88 million.”

Deficit estimate subject to further adjustments

He explained that the finance ministry, which consolidates the financial statements for the entire government, is frequently at odds with other ministries and government entities about their reported figures.

“We do fight, and we do try to […] dissuade unrealistic projections,” he said.

But, he added, it was typical for financial officers to be reluctant to give up their budget appropriations, even if they do not require them, because they are concerned that if they do not spend the allocated funds in one year, they will face a reduced budget the following year.

As a result, some spending projections are higher than the actual expenditure.

Some spending areas, for example personnel costs and capital projects, are lower than projected in the budget year after year.

That may be because certain positions are not filled, or the hiring process is delayed, Jefferson said, adding that capital projects may not start on time or are deferred because of supply issues.

This means that financial statements are constantly subject to change.

One significant change that occurred after the $38 million deficit was calculated in March was a $10 million write-off in relation to the discontinued cruise berthing facility.

While the finance ministry believed this transaction should have been reflected in the 2019 financial figures, Jefferson said the administrator decided to write it off against 2020.

With the stroke of a pen, the $38 million became a $48 million deficit.

“And there were other adjustments that kept pushing the number higher and it is likely that there will be further adjustments again,” Jefferson said.

He noted that the audit office has not yet started its audit of the 2020 financial statement and that process will give rise to further changes that will affect the full-year deficit figure.

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