Page 1556 - Week 06 - Tuesday, 18 May 1993
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The Chief Minister tabled a belated second explanatory note the other day in an attempt to cover these gaps, but that does not do it either. The need for an investment management strategy is glaringly obvious. We do not have one. It is proposed that government trust funds be put in the hands of people not subject to the Audit Act or to the direct control of the Assembly, and indeed not subject to the direct control of the Executive.
The Treasury has admitted that it wants to pursue this activity because there are bigger profits to be made than are currently being earned, and they have admitted that they do not have the expertise or manpower to become involved in these investments themselves. If they do not have the expertise to make the investment themselves, how are they going to have the expertise to control what somebody else is doing on their behalf? They cannot. Already there is an admission that, in the absence of a legislatively required, Assembly endorsed management framework, the Treasury is operating with a reduced technical capacity and to some extent on faith. I suggest that in this business faith is too risky a basis for investment.
That is particularly true when the performance of private investment experts - even the best of them - has been questionable over the long term. Most of them can produce good results in the short term, but let us have a look at their results over a 20- or 30-year term. They are not very good. It is the long term that is being discussed here. We are not talking about the short term. Moreover, we should remember that the experts we might employ do not have the same level of personal responsibility as do, for example, the members of this Assembly or the Treasury officials. Essentially, they provide expertise for a fee, and it is commonly one per cent. If they err in their judgment, our money could be gone. In that case, what will the Minister say to our retirees or prospective retirees? Will the Minister say, "Sorry, your retirement benefits have gone; we have had a bad day on the market"? That is no consolation to people retiring from the public service.
Madam Speaker, I see enormous risks and not too many benefits in this Bill. If we must, of economic necessity, become money and market oriented in some sort of an aggressive way, then the Government should come back to the Assembly with a Bill that incorporates a proper structure for managing such investments. It must also establish some strong prohibitions enshrined in legislation - for example, that investment should not be speculative. We are told in the second explanatory note that we are not going to get into the business of speculation, but that is no guarantee. It has to be set in legislation or set in operating procedures.
Another shortcoming in this Bill is that it does not satisfy me that there will be any requirement to spread the risk. There is no legislative requirement to specify, in advance, investment guidelines that ensure spread of risk and diversity of investment. There is no mention of a requirement for range in asset allocation in the portfolio. There is no recognition of the need to require some security from dealers or some form of other insurance.
The Government has an obligation, Madam Speaker, to inform the Assembly of, and obtain its approval for, the selection criteria for funds managers. How are they going to go about this process - just call tenders and take the first one that turns up? I do not think so. Operational guidelines containing oversight
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