COMMERCE and Employment has been forced to take out an overdraft for the Dairy as £500,000 in cash reserves have been spent. There are clear signs that the price of milk will have to go up again next year because of the operation’s financial predicament.
A letter sent to all States members by Treasury and Resources minister Lyndon Trott revealed considerable disquiet about the situation and why it was not disclosed during debate this year.
Commerce and Employment minister Stuart Falla said he was ‘amused’ by Treasury’s apparent surprise, saying they had all the information.
‘The simple situation is that if your costs continue to rise, but income does not, then gradually you eat into your reserves,’ said Deputy Falla.
‘We were discouraged from lifting the price of milk because of the Scrutiny Committee review. We followed the Scrutiny recommendations, then the States resolutions, both of those resulted in us eating into our reserves.’
He added that the price of milk had not been put up soon enough.
‘The consumer has benefited, so taxpayers’ money has been used to support the consumer,’ he said.
‘One would prefer to have reserves, but you can only build up a reserve from what can loosely be described as profit. You make that from the consumer. If those reserves go back to the consumer, they effectively get their money back. Where is the problem other than you no longer have the reserves?’
There had been no mismanagement and the information had been available to Treasury and given to the milk price review panel, he added.
Milk went up to 88p a litre on Monday, the first rise since the price was set at 70p in May 2004.
On top of the overdraft, Treasury has also made a £500,000 loan facility available to the Dairy so that essential capital investment can be made in 2007 and 2008.
‘Members of the Treasury and Resources Department wish to reiterate their considerable disappointment that the poor financial situation of the Dairy, including the increase in the price of milk required to return Guernsey Dairy to a break-even position, was not specifically drawn to the States’ attention when your department’s States report entitled Review of Support for Island Dairy Farming was debated by the States earlier this year,’ said Deputy Trott in a letter to Deputy Falla, which was copied to all States members and passed to the Guernsey Press.
‘It is regrettable that this situation has developed in the way it has and that your department did not clearly spell out to the States what the inevitable consequences to the Dairy’s financial situation would be of the decisions taken in April 2007.’
The overdraft and loan were made available because ‘the States has an overriding responsibility to its staff and suppliers’.
‘Once the financial situation of Guernsey Dairy has fully stabilised (i.e. following the anticipated price rise in the retail price of milk during the latter part of 2008), we will consider making available loans for capital investment in 2009 and future years.’
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