Strategic Plan 2006 to 2011 (P.40-2006) - 11th amendments (P.40-2006. Amd.(11)) – comments

STATES OF JERSEY

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STRATEGIC PLAN 2006 TO 2011 (P.40/2006): ELEVENTH AMENDMENTS (P.40/2006.  AMD.(11)) – COMMENTS

Presented to the States on 19th June 2006 by the Council of Ministers

STATES GREFFE

COMMENTS

The Scrutiny Panel's amendment seeks to reduce the funding available to deliver the Strategic Plan by £74 million, which would require either –

tax increases,

service reductions or

a mixture of the two.

(The third option of running ongoing deficits is unsustainable.)

This strikes at the heart of the Plan. The Council of Ministers' plan is based upon maintaining Jersey's position of pre-eminence in the world. We believe that in the face of growing international competition we have to maintain and improve our services and our investment in social, environmental and economic initiatives. We are committed to  driving  out  waste,  improving  efficiency  and  improving  services,  but  when  judged  against  other  similar governments our performance shows that there is limited scope for delivering further major efficiency savings over the £20  million to which we have committed.

The Council of Ministers believes that it is time for the States to decide whether it agrees with their vision of protecting what makes Jersey special and putting right those problems of which we are all aware, or whether we are willing to accept the gradual levelling down to average standards for a developed economy that would result from continued service and cost-cutting.

The Council of Ministers has presented a very cautious resource forecast in the plan. It shows that the States income and expenditure are in balance over the period of the plan. The Council believes it is likely that financial performance will exceed the estimates and has committed itself to ensuring that by the end of the period there is no structural deficit. Thus there is no justification for further reductions in the level of resources that will be available to deliver the States programmes.

The Council of Ministers believes that this amendment will result in cuts to services and/or raising taxes. Neither of these is acceptable and the Council of Ministers asks the States to reject the amendment.

Analysis of the effect of the Amendment

The Panel correctly identifies that each of the amendments to paragraph 1.2.3 will worsen the financial position of the States if no other action is taken.

The cumulative impact of the amendment will be to reduce funding available to support the Strategic Plan by allocating a total of £74  million to a Stabilisation Fund over the period 2007 – 2011, as follows –

Should the amendment be supported with no corrective action, the Consolidated Fund is likely to become overdrawn in 2007. This forecast position would be contrary to the Public Finances (Jersey) Law 2005.

The Council of Ministers is committed to achieving all possible efficiencies, but considers that these reductions cannot be made good by further efficiency savings.  Therefore to ensure that a balanced budget position can be maintained  over  the  next  five  years  the  States  will  either  have  to  significantly  increase  taxation  or  make reductions in services.

It is worth noting that the efficiencies will result in real cash savings which will be utilised to fund increased spending on high priorities identified in the plan.

The efficiencies will release £20 million by 2009 from the following areas –

Human resource management £0.7m Finance functions £1.1m Information technology functions £0.9m Corporate procurement £1.9m Property £5.5m Cross departmental and other initiatives £1.2m Departmental efficiencies £8.7m

The highest priorities for increased spending are –

• healthcare;

• rising costs of welfare and introduction of the low income support scheme;

• investment in economic growth;

• vocational training;

• refurbishment of social rented housing;

• road maintenance; and

• bringing the Teachers pension scheme into balance.

Efficiencies

Improvements in efficiency result in delivering the same or an improved level and standard of performance at a reduced cost.

The Council of Ministers is determined to deliver the already challenging programme of efficiencies built into the Strategic Plan financial forecast. It will therefore deliver the cash efficiency savings of £20  million and will endeavour to improve on this if possible. However it considers that applying significantly higher efficiency targets to address the savings required by this amendment would be unachievable and result in a degrading of services.

• This position is supported by the Benchmarking Report, published in 2004, which showed that the States' services in general perform well when compared with other jurisdictions;

• The report contained 119 "green traffic lights" (indicating they are in the highest quartile of their comparators) and only 20 "red traffic lights" (i.e. in the lowest quartile);

• The report also showed that the size of the States workforce as a percentage of the working population was lower than Guernsey, the Isle of Man and Gibraltar;

• Whilst the cost of services compared to the U.K. was higher in some instances usually accompanied by higher service standards (e.g. cost per pupil,  police costs per head of population), in others it was lower

(cost per prisoner care, cost per police officer, cost of cleaning roads and footpaths, cost per planning application);

• The report also showed that total cost of the public service per head of population, whilst being higher

than Guernsey or Bermuda, was lower than the Cayman Islands, Gibraltar and the Isle of Man. This mainly

resulted from higher employment costs which reflected the pay rates across the economy.

Since that report the Change Programme has ensured that efficiency savings of £20  million per annum will be delivered by 2009. Departments are indicating that, in the light of the efficiencies that have already been made, there is limited scope for further efficiencies at the present time without serious impacts on service levels and customers. We will, however, continue to seek to identify efficiency savings on an ongoing basis beyond 2009.

Tax Increases

The States have agreed a Fiscal Strategy, including a comprehensive restructuring of the Island's taxation system. The Strategy is being implemented. To introduce the sort of modifications required to deliver additional income to replace that withdrawn by this amendment at such a late stage is inconceivable.

Services Reductions

If the proposed reduction in resources is to be made good the States would need to reduce the Council of Ministers proposal as set out in the Resources Statement by £74  million over the next 5 years.

There is a significant inconsistency between this proposal and other amendments, including from members of the Corporate Services Scrutiny Panel, which are proposing increased expenditure on the Prison or social benefits.

The annual reductions that would be required are –

2008 2009 2010 2011 Total £m £m £m £m £m 15.0 17.0 17.0 17.0 74.0

Such reductions could be either revenue or capital expenditure. The capital programme has already been severely constrained in previous years and there is no expectation of an easing of that approach. Therefore it is almost certain that the proposed increase in capital spending of £3  million a year from 2008 to fund refurbishment of States Housing, the roads and the Town Park would have to be deleted.

This would not be sufficient to meet the reduced resources available and therefore the States would need to consider serious service reductions of a scale that has not been seen before in Jersey. Whilst it may be easy to suggest that there are high levels of bureaucracy that could be cut the comparative figures do not support that, so there would have to be cuts in direct service delivery.

After deleting the increased spending on capital the ongoing cost of services would have to be reduced by some £12.4  million per annum. This could not be achieved without diminishing Income Support benefits and standards in services across the board.

It should be noted that the Council of Ministers supports proposals to update the current inflation strategy, particularly in light of the success that strategy has had in achieving an inflation rate at or around the target that was set and will present their updated proposals for discussion. However, this should not be constrained by decisions on the Stabilisation Fund.

Summary

The Council of Ministers rejects all parts of this amendment. The financial forecast on which the Strategic Plan is based is a robust, workable and sustainable platform for delivering high quality public services over the next five years. The amendment, if approved, would see a reduction in the level of services that is consider to be wholly unacceptable.