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The Government must end its “historic tendency to submit overly ambitious timetables for capital projects”, its economic advisers have warned.
The Fiscal Policy Panel (FPP) has told ministers and civil servants to take extra care when planning major one-off projects, in order not to overheat an already overheating economy.
In a recent report, which will influence the drafting of the next Government Plan of spending, the FPP says: “Looking historically, it has been particularly challenging for the Government to deliver capital projects where forecasts from a year prior have consistently overestimated the amount of capital expenditure.
“While this appears to have improved somewhat in recent years, this is predominately due to older projects being delayed which can cause issues for scheduling and future project delivery.
“The pressure on delivering capital projects is unlikely to abate over the short-term. There are new pressures arising due to large increases in materials and other costs, and contractors only committing to shorter-term quotes for projects.”
The FPP stress that Government capital expenditure can be useful in downturns as it allows under-utilised resources to be used to invest in infrastructure that can increase productive capacity of the economy or support delivery of public services.
But it adds there are challenges in delivering capital projects in a timely manner.
“Using major capital projects to contribute to cyclical management of the economy appears unlikely to succeed fully due to long lead times and unpredictability around timing of delivery.
“Managing capital projects going forward is likely to be even more crucial with a major capital programme, some more progressed than others, such as the Our Hospital project, new Andium homes and Waterfront development.
“These are likely to cause pressures on existing resources and supply chains in Jersey and therefore will require careful management.
“It will be increasingly important to ensure projects are carefully scheduled and so the historic tendency to submit overly-ambitious timetables for capital projects should be eliminated if possible.
“The panel understands that the current process for approving and delivering capital expenditure is being reformed to improve ability to judge delivery timing, which is sensible to ensure the most efficient use of existing and constrained resources.”
The Government Plan 2022-25 sets aside £95.5m of capital spending this year, rising to £194m next year, £294m in 2024 and £174m in 2025.
The vast majority of that spend is earmarked for the Our Hospital project: £85m this year, £182m next year, £287m in 2024 and £169m in 2025.
However, the future of that project is uncertain, with new Chief Minister Kristina Moore tasking Infrastructure Minister Tom Binet will reviewing the current plans, with a view to coming back with a better and cheaper option.
He will report back to the States before 20 October.
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