Strategic Reserve Fund: funding for Independent Jersey Care Inquiry and transfers from and to the Consolidated Fund.

STATES OF JERSEY

STRATEGIC RESERVE FUND: FUNDING FOR INDEPENDENT JERSEY CARE INQUIRY AND TRANSFERS FROM AND TO THE CONSOLIDATED FUND

Lodged au Greffe on 14th July 2015

by the Minister for Treasury and Resources

STATES GREFFE

2015   Price code: B  P.76

PROPOSITION

THE STATES are asked to decide whether they are of opinion

1. to refer to their Act dated 23rd September 2014 in which they agreed to note  the  future  operation  of  the  Strategic  Reserve  Fund ("The Fund"), as set out in Appendix D of the Budget Statement 2015 and  agreed  that  the  Fund  balance  of  £651,216,000  as  at 31st December 2012 should be defined as the capital value of the Fund and that, for future years, the capital value be maintained in real terms  by  increasing  the  capital  value  in line  with  increases  in Jersey RPI(Y); and to their Act dated 25th March 2015 in which they agreed that up to a further £14,000,000 should be made available in order to provide additional funding in relation to the Committee of Inquiry into Historical Child Abuse (now known as the Independent Jersey Care Inquiry') and requested the Minister for Treasury and Resources, if there were insufficient funds from existing sources that could  be  re-allocated  by  the  Minister  for  this  purpose,  to  bring forward for approval a proposition asking the States to agree to use of the Fund and to make available up to a total £14,000,000 (in 2015 and 2016) from the Fund to meet the costs of the inquiry; and

1. to agree the use of income, over and above that required to maintain the capital value of the Strategic Reserve Fund in real terms (based on the Fund's balance at 31st December 2012 uprated in line with Jersey RPI(Y) increases), to be used for  the  purposes  of  funding  the  Independent  Jersey  Care Inquiry; and
2. to approve, in accordance with the provisions of Article 4(3) of  the  Public  Finances  (Jersey)  Law  2005,  the transfer  of £10 million  from  the  Strategic  Reserve  Fund  to the Consolidated Fund in 2015 so as to provide for this purpose;

2. to refer  to the  debate  on  the  Medium  Term  Financial  Plan 2016 – 2019 in which the Minister for Treasury and Resources was requested to bring forward proposals for the use of income earned on the Strategic Reserve Fund, over and above that required to maintain the capital value of the Fund and that withdrawals should be made from the Consolidated Fund to replenish the Strategic Reserve Fund; and

1. to agree the use of income, over and above that required to maintain the capital value of the Strategic Reserve Fund in real terms (based on the Fund's balance at 31st December 2012 uprated in line with Jersey RPI(Y) increases), to meet the measures identified in Table 2 of the attached Report; and

2. to approve, in accordance with the provisions of Article 4(3) of the Public Finances (Jersey) Law 2005 the transfer of up to the following amounts in the year indicated from the Strategic Reserve  Fund  to the  Consolidated  Fund  for  the  measures identified in paragraph (b)(i) above –

£'000  

2016  50,691  2017  80,273  ;

3. to approve, in accordance with the provisions of Article 4(2) of  the  Public  Finances  (Jersey)  Law  2005  the  following transfers from the Consolidated Fund to the Strategic Reserve Fund in the years indicated –

£'000  

2017  20,000  2019  50,000  .

MINISTER FOR TREASURY AND RESOURCES

REPORT

This report has been split into 2 areas, dealing with 2 issues, which are both the result of previous States decisions about the use of the return achieved on the Strategic Reserve Fund over and above that required to maintain the value at 31st December 2012 values uplifted for Jersey RPI(Y).

Proposed funding for the Independent Jersey Care Inquiry (paragraph (a)) Background

At its Sitting commencing on 24th March 2015, the States approved (on 25th March 2015)  P.20/2015,  which  proposed that  the  States be  asked  whether they  were  of opinion –

"(a)  to agree that up to a further £14,000,000 should be made available in

order to provide additional funding in relation to the Committee of Inquiry into Historical Child Abuse (now known as the Independent Jersey Care Inquiry') and to request the Minister for Treasury and Resources, if there are insufficient funds from existing sources that could  be  re-allocated  by  the  Minister  for  this  purpose,  to  bring forward for approval a proposition asking the States to agree to amend the policy for the use of the Strategic Reserve Fund and to make available up to £14,000,000 from the Strategic Reserve Fund to fund the inquiry".

This proposition and report implements part (a) of the States' approval of 25th March 2015  and  requests  the approval  of the  Assembly  to  enable  the  use  of  additional income,  over  and  above  that  required,  to  retain  the  real  value  of  the  Fund  at 31st December 2012  levels  (uprated  in  line  with  Jersey  RPI(Y)  figures),  of  the Strategic Reserve Fund and to withdraw £14 million from that Fund in order to ensure that the Independent Jersey Care Inquiry can complete its work.

The  Council  of  Ministers  has  lodged  a  proposition  to  approve  the  additional expenditure  of  £10 million  required  in  2015.  The  remaining  £4 million  has  been included in the funding request to use the income from the Strategic Reserve Fund included in the Medium Term Financial Plan 2016 – 2019 and will be allocated to Contingency.

Availability of alternative sources of funding

P.20/2015 outlined other funding sources which could be considered as an alternative to  using  real  investment  returns  on  the  Strategic  Reserve.  This  section  has  been reproduced  below,  and  updated  where  appropriate  based  on  the  latest  available information –

• Consolidated Fund – significant measures have been required to maintain a positive unallocated balance. There remains a risk that some of the proposed measures will not be achieved, which could result in insufficient funds at the end of 2015, which would give rise to further measures being required. In addition  to  this  the  revised  income  forecasts  have  necessitated  further measures and these are currently being identified.

• Central Contingencies – there is currently a balance of £800,000 forecast at the end of 2015 after all existing commitments have been funded. Further funding pressures exceeding the forecast remaining balance by £1.5 million have already been identified. Existing commitments and estimates are under review.
• Criminal Offences Confiscation Fund – the remaining balance is being used to fund the  Police  Relocation  Project  (subsequent transfer  of  £6.4 million  to Consolidated  Fund  and  £3 million  to  Contingencies  for  the  Inquiry). £2 million will be left in the Fund to cover the risk of exceptional Court and Case costs.
• Other Funds – available funds have already been identified to transfer into the Consolidated Fund as part of the Budget 2015 Measures.
• Unspent capital allocations – a total of £8.8 million has been identified in the Budget 2015 Proposed Measures' to be returned to the Consolidated Fund from projects which do not require the funding in the current year. This will be reallocated for the same projects over future years to realign approvals with the latest proposed timescales for the projects. Any additional opportunities to rephase capital expenditure approvals may be required to address the wider financial position in 2015.

Rules for the operation of the Strategic Reserve Fund

The States revised the Rules for use of the Strategic Reserve Fund (included with the draft Budget Statement 2015 (P.129/2014)).

This proposition and report proposes that the Rules are updated to allow real income returns (based on the value of the Fund being retained at 31st December 2012 levels uprated by Jersey RPI(Y)) to be used to fund the additional costs of the Independent Jersey Care Inquiry.

Table 1 – Latest financial position for the Independent Jersey Care Inquiry The latest position for the Inquiry and States Departments is summarised below:

Full details on updated costs will be made available prior to the States debate.

Current available funding is £9 million. Forecast expenditure to the end of 2015 is £18,132,562.

Funding for measures identified in the Medium Term Financial Plan 2016 – 2019 (2016 – 2019 MTFP) (paragraph (b))

Background

The second issue in this proposition and report relates to part (f) of the proposition for the 2016 – 2019 MTFP, and this part is being lodged now so that the debate on this matter can proceed quickly if part (f) of the MTFP proposition is approved by the States. Part (f) states –

"to agree, in principle, that the use of the Strategic Reserve Fund income, over and above that required to maintain the real value of the Fund (namely, in accordance  with  their  Act  dated  23rd  September  2014,  its  value  at  31st December,  2012  uprated  in  line  with  increases  in  Jersey  RPI(Y)),  to  be available to transfer to the Consolidated Fund and to be allocated for the measures identified in Summary Table J, and that withdrawals should be made from  the  Consolidated  Fund  in  2017  and  2019  to  replenish  the  Strategic Reserve Fund and to request the Minister for Treasury and Resources to bring forward for approval the necessary report and proposition to enable the use of the  aforesaid  additional  income  of  the  Strategic  Reserve  Fund  and  the intended funds transfers.".

The Minister for Treasury and Resources is proposing that –

1. Additional income over and above that required to maintain the value of the Fund at 31st December 2012 levels plus RPI(Y) be used for the purposes included  within  the  Table  shown  below  (which  are  those  identified  in Section 13 of the 2016 – 2019 MTFP – Summary Table J); and
2. The amounts detailed in the Table below will be allocated from the Strategic Reserve Fund to the Consolidated Fund in the years identified (these are also the same figures approved, in principle, in the 2016 – 2019 MTFP).
3. The amounts  detailed  in the  Table  below  will  be  transferred  from  the Consolidated  Fund  to the  Strategic  Reserve  Fund  in 2017  and  2019  to replenish the Fund.

Full details on this matter are included in Section 13 of the draft 2016 – 2019 MTFP.

Table 2 –  items  requiring  funding  from  the  Strategic  Reserve  income  2015 onwards

Financial and manpower implications

A net transfer of £70.964 million will be made from the Strategic Reserve Fund (from additional income over and above that required to retain the real value of the Fund at 31st December 2012  as  increased  by  Jersey  RPI(Y))  to  the  Consolidated  Fund between 2015 and 2019, and be used for the purposes identified in this proposition and report.

Part of this allocation (£20 million) will initially be used to meet the costs of the redundancy provision and the restructuring of the States of Jersey which will involve, as of yet, unspecified manpower savings across the whole spectrum of the States services.

Any balance from the amounts not required for the purposes highlighted will be returned to the Strategic Reserve Fund.