Medium Term Financial Plan 2013 – 2015

MEDIUM TERM  FINANCIAL PLAN 2013-2015

Council of Ministers

I.J. Gorst  Senator  Chief Minister

B.I. Le Marquand  Senator  Home Affairs and Deputy Chief Minister P.F.C. Ozouf  Senator  Treasury and Resources

A.J.H. Maclean  Senator  Economic Development

P.J.D. Ryan   Deputy  Education, Sport and Culture

A.E. Pryke   Deputy  Health and Social Services

A.K.F. Green M.B.E.   Deputy  Housing

R.C. Duhamel   Deputy  Planning and Environment F. du H. Le Gresley  Senator  Social Security K.C. Lewis   Deputy  Transport and Technical Services

J.D. Richardson  Chief Executive

L.J. Rowley  Treasurer of the States

Draft Medium Term Financial Plan 2013 – 2015

Proposition

The States are asked to decide whether they are of opinion: to receive the draft Medium Term Financial Plan 2013-2015 and, in accordance with the provisions of Article 8 of the Public Finances (Jersey) Law 2005

1. to approve the intended total amount of States income for each of the financial years 2013 to 2015 as set out in Summary Table A.
2. to approve the total amount of States net expenditure for each of the financial years 2013 to 2015 as set out in Summary Table A.
3. to approve the following amounts (not exceeding in the aggregate the total amount set out in paragraph (b) above)

1. the appropriation of an amount to a revenue head of expenditure for each States funded body (other than the States trading operations) being the body s total revenue expenditure less its estimated income for each of the financial years 2013 to 2015 as set out in Summary Table B, with, in relation to the head of expenditure of the Health and Social Services Department, the approval of £2,000,000 in 2013, £6,000,000 in 2014 and £6,000,000 in 2015 dependent, in accordance with the provisions of Article 16(4) of the Public Finances (Jersey) Law 2005, on the approval by the States of the transfer of these sums from the Health Insurance Fund to the Health and Social Services Department.
2. the amount to be allocated for Contingency expenditure for each of the years 2013 to 2015 as set out in Summary Table C.
3. the total amount, as set out in Summary Table D, that, in the Budget for the financial years 2013 to 2015, may be appropriated to capital heads of expenditure, being an amount that is net of any proposed capital receipts and other funding to be used

for capital projects to which the amount may be appropriated, with £8,500,000 of

the 2013 allocation, £4,743,000 of the 2014 allocation and £1,757,000 of the 2015 allocation dependent upon the approval by the States of the redemption of the States 9% Preference Shares in the JT Group Ltd. as set out in paragraph (f).

4. to approve the following, as set out in Summary Table F, in respect of each States trading operation for the financial years 2013 to 2015

1. its estimated income.
2. its estimated expenditure.
3. its estimated minimum contribution to be made to the Consolidated Fund.

5. to approve, in respect of each States trading operation, the total cost of the capital projects that each is scheduled to start during the financial years 2013 to 2015 as set out in Summary Table G.

DRAFT MEDIUM TERM FINANCIAL PLAN 2013 2015

6. to approve, in accordance with Article 32(5)(a) of the Telecommunications (Jersey) Law 2002, the disposal by way of redemption of the States 9% Preference Shares in the JT Group Ltd with the redemption value of £20 million being applied, £15 million to the Capital Programme for 2013 to 2015 and the balance of £5 million for Economic Development Department to provide funding for the proposed Innovation Fund.

Note 1: The Medium Term Financial Plan seeks approval for the amount of capital expenditure in 2013, 2014 and 2015 for each year in total. The approval for the allocation of the capital to individual capital schemes will be sought for each year in the Budget report to the States. The capital schemes for 2013, 2014 and 2015 are therefore indicative and may change according to the needs at the time.

Note 2: The Medium Term Financial Plan assumes that funding of substantial elements of the forward capital programme for both the Housing Department and the Airport and Harbours Trading Operations will be funded from capital receipts, borrowing and other funding sources. Some of these funding sources rely upon the Housing and Ports Authority Incorporations and if these were not successful, or were delayed, the States is likely to have to identify some alternative means of funding.

DRAFT MEDIUM TERM FINANCIAL PLAN 2013 2015

Contents

FOREWORD EXECUTIVE SUMMARY

INTRODUCTION TO MEDIUM TERM FINANCIAL PLAN 2013 – 2015

States Of Jersey

Inspiring Confidence In Jersey s Future

Medium Term Financial Plan 2013 to 2015  26 Introduction  26

Financial and Economic Background

to the Medium Term Financial Plan 2013  26

Three-Part Plan 2011 to 2013

Part One: Cutting spending through the CSR  27 Part Two: Economic Growth  28 Part Three: Raising taxes through the Fiscal Strategy Review (FSR)  29

Current Position on Delivering Against

the Three-Part Plan for 2011 to 2013  29

RESOURCE PRINCIPLES:

BALANCING TAXATION AND SPENDING

Spending  34 Resource Principles: Taxation  35

DEVELOPMENT OF THE MEDIUM TERM FINANCIAL PLAN 2013 - 2015

The Medium Term Financial Plan Process: December 2011 to July 2012  38

LOOKING AHEAD: THE FINANCIAL FORECAST FOR 2012 - 2015

Looking Ahead 2013-2015  42

LOOKING AHEAD:

CARRY FORWARD FUNDING

Carry forward funding for 2012  52

LOOKING AHEAD: GROWTH COMMITMENTS FROM 2012 BUSINESS PLAN

Commitments from 2012 Business Plan  60

LOOKING AHEAD:

NEW BIDS FOR GROWTH

Looking Ahead 2013-2015: New Bids for Growth  66

LOOKING AHEAD:

OTHER PRESSURES AFFECTING THE DEFICIT

Introduction  90 Back to Work and Employment Initiatives  90 Funding of the Education CSR Shortfall  92 Provision for Early Repayment of the PECRS Pre 1987 debt  92 Pay and Terms and Conditions  93

LOOKING AHEAD:

BALANCED BUDGET MEASURES AND APPROACHES TO MAKING BUDGET REDUCTIONS

Looking Ahead 2013-2015:

Measures to Balance Budgets and

Approaches to Making Budget Reductions  98 Budget Reductions: Approach One   99 Reducing revenue expenditure equally across all departments  99 Budget Reductions: Approach Two  102 Budget Reductions: Approach Three  105 Budget Reductions: Approach Four  105 Budget Reduction: Approach Five  106 Other Measures to balance the budget  107

LOOKING AHEAD:

MANAGING THE BALANCE SHEET

Looking Ahead:

Managing The Balance Sheet  112 Impact of Incorporation Projects on the Balance Sheet  113 Housing Department  113 Harbours and Airports  114 States Investment Strategy  115

LOOKING AHEAD:

CENTRAL BUDGETS, CONTINGENCIES AND GROWTH ALLOCATIONS

Looking Ahead:

Central budgets, contingencies

and growth allocations  122 Introduction  122 Central Pay Provision  123 Central Restructuring Provision  123 Central Contingencies  123

LOOKING AHEAD: CAPITAL PROGRAMME 2013-2015

Looking Ahead:

Capital Programme 2013-2015  128 Challenges  128

LOOKING AHEAD:

LONG TERM CAPITAL PLAN – INDICATIVE PLANS FOR 2012 - 2032

Looking Ahead:

Long Term Capital Plan

Indicative Plans for 2012 to 2032  140

SUMMARY TABLES: FOR PROPOSITION

APPENDICES AND SUPPLEMENTARY NOTES

Index to Supplementary Notes  156

APPENDIX ONE: STATES INCOME

Supplementary Note 1 Income Tax: Overview  160 What drives the level of Income Tax income?  160

Supplementary Note 2

Income Tax Forecast Note March 2012  166 Executive summary  166 Appendix 1: Background to income tax forecasting  178 Appendix 2: An explanation for the forecast change in yield  179 Appendix 3: Economic assumptions and an explanation  181 Appendix 4: Forecasts by schedule, £million  184 Appendix 5: Exemptions, allowances and reliefs part of the model  186 Appendix 6: Schedule C detail  195 Supplementary Note 3  196

Supplementary Note 4  199 Supplementary Note 5  203 Supplementary Note 6  209 Supplementary Note 7  210 Supplementary Note 8  216

APPENDIX TWO: DIVIDEND POLICY FOR STRATEGIC INVESTMENTS

Appendix Two -

Dividend Policy for Strategic Investments  222

APPENDIX THREE:

CARRY FORWARD REPORT 2011/2012

Appendix Three Carry Forward Report 2011/2012  228 Treasury and Resources Report  228 2011 year end carry forwards  228

APPENDIX FOUR: INDICATIVE LONG TERM

CAPITAL PLAN: 2012 - 2032

Appendix Four  248

APPENDIX FIVE:

OFFICE ESTATE RATIONALISATION

Appendix Five Office Estate Rationalisation  286

APPENDIX SIX:

HOUSING DEPARTMENT AND THE HOUSING TRANSFORMATION PROJECT

Appendix Six Housing Department

and the Housing Transformation Project  294

APPENDIX SEVEN:

PROPOSALS FOR PORTS INTEGRATION AND INCORPORATION

Appendix Seven: Proposals for

Ports Integration & Incorporation  300

APPENDIX EIGHT: MTFP ASSUMPTIONS

Appendix Eight Mtfp Assumptions  304

APPENDIX NINE:

STATES INVESTMENT STRATEGY

Appendix Nine:

Investment Strategies - Introduction  308 Introduction  308 Overarching Strategies  308 States Major Funds  309 Pension Funds  309 Special Funds  310 Trust And Bequest Funds  310 States Of Jersey Common Investment Fund  311 Types of Alternative Investments  311 Appendices Contents Page  314 Overarching Investment Policies  315 AP1: Ethical Investment Strategy  315 AP2: Governance Arrangements (relates to all except Pension Funds)  316 States Of Jersey Major Funds  318 AP3: Strategic Reserve Fund Investment Strategy  318 Ap4: Stabilisation Fund Investment Strategy  320

Ap5: Social Security (Reserve)

Fund Investment Strategy  321 AP6: Health Insurance Fund Investment Strategy  323 AP7: Consolidated Fund Investment Strategy  324

AP8: Currency Notes

And Coins Funds Investment Strategies  326 AP9: Pension Funds and Their Investment Strategies  327 Special Funds  329

AP10: Tourism Development Fund

(TDF) Investment Strategy  330 AP11: Channel Islands Lottery (Jersey) Fund Investment Strategy  333

AP12: Dwelling-Houses Loan Fund

Investment Strategy  336 Trust & Bequest Funds  339

AP13: Estate Of A A Rayner

Fund Investment Strategy  340 AP14: The Rivington Travelling Scholarship Investment Strategy  343 AP15: Estate Of H E Le Seelleur Investment Strategy  346 AP16: Estate Of E J Bailhache Investment Strategy  349

AP17: Le Don De Faye Trust Fund

Investment Strategy  352 AP18: Greville Bathe Fund Investment Strategy  356

AP19: Estate Of A H Ferguson

Bequest Investment Strategy  360

AP20: Ecology Fund Investment Strategy  363

AP21: The Lord Portsea

Gift Fund Investment Strategy  366 AP22: Other Funds and Their Investment Strategies  370

AP23: States Of Jersey

Common Investment Fund Strategies  371

APPENDIX TEN:

PROPOSED REDEMPTION OF ALL

JT GROUP LIMITED 9% CUMULATIVE PREFERENCE SHARES

Appendix Ten  380 Proposed redemption of all of JT Group limited s 9% cumulative preference shares and the

proposed use of these additional funds  380

APPENDIX ELEVEN:

LONG TERM TAX POLICY FOR JERSEY

Appendix Eleven -

Long Term Tax Policy for Jersey  390

Contents – Table of Figures

Figure 1A - States Actual Income v Budget  29 Figure 1B Comparison of States Income and Expenditure  30 Figure 1C Financial position 2002 2015  31 Figure 1D Stabilisation Fund movements 2009-2012  31 Figure 2 Summary of the MTFP forecast (JUly 2012)  42 Figure 3 Income Tax for the period 2002 to 2015  44 Figure 4 Income Tax forecast  44 Figure 5 Income Tax sensitivity Analysis Summary  45 Figure 6 MTFP FORECAST OF STATES INCOME  46 Figure 7 MTFP Proposals States Expenditure Limits  47 Figure 8 MTFP Proposals States Expenditure Limits by Department  49 Figure 9 Carry Forward Funding from 2011 to 2012: supporting strategic priorities  53 Figure 10 Commitments from 2012 Business Plan: Supporting strategic priorities  60 Figure 11 Original Bids for Growth for Departments  66 Figure 12 MTFP Proposals for funding of Growth Bids  67 Figure 13 MTFP Proposals for Funding of Growth Bids (For Departments)  68 Figure 14 Proposed Low Priority Bids Not Funded  83 Figure 15 Back To Work And Employment Initiatives  90 Figure 16 Summary of Revised Education CSR Savings shortfall  92 Figure 17 Additional Funding Required for July 2012 Employer Offer  94 Figure 19 - Net Revenue Expenditure An illustration of a 1.5% Target against Departments  100 Figure 20 Summary Of Budget Reduction Measures That Cut Cost Or Increase Income  102 Figure 21 - Income From Outside The Island  105 Figure 22 - full cost recovery for services provided to the private sector  105 Figure 23 - Planned Use Of Contingencies  108 Figure 24 - Use Of Carry Forwards  108 Figure 27 - Summary Of Housing Department Balance Sheet  114 Figure 28 - Summary Of Harbours And Airport Balance Sheet  115 Figure 29 States Major Funds: Summary of Investment Strategy  115 Figure 30 - Summary of Key Reserves  117 Figure 31 Forecast of Pre-1987 Debt Repayments  119 Figure 32 Base Assumptions and Medium Term Financial Plan proposals  122 Figure 33 Capital Programme 2013 2015 Summary Table  129 Figure 34 Capital Programme 2013 - 2015: Detail of Proposed Projects  130 Figure 35 Capital Expenditure Plans by Department: 2012 - 2032  140 Figure 36 Indicative Funding Sources for Capital Expenditure Plans 2012 2032  141

CONTENTS TABLE OF FIGURES PAGE 8

Contents – Summary Tables

Summary Table A Summary of States Income and Expenditure  144 Summary Table B States Net revenue Expenditure Allocations 2013-2015  145

Summary Table B1 - States Revenue Expenditure And Income

Allocations 2013 - 2015  146

Summary Table C Summary of Central Contingency

Allocations 2013-2015  147 Summary Table D Capital Expenditure Programme 2013-2015  148 Summary Table E Summary of Capital Projects for 2013-2015  149 Summary Table E (cont d) Summary of Capital Projects for 2013-2015  150

Summary Table F Income and Expenditure of States

Trading Operations 2013 to 2015  151 Summary Table G Proposed Capital Programme for States

Trading Operations 2013 to 2015  152 Summary Table H Consolidated Fund 2012 to 2015 for the

Medium Term Financial Plan  153

PAGE 9 CONTENTS SUMMARY TABLES

FOREWORD

Chief Ministers Foreword

Jersey, like many places, is facing challenging economic times in an increasingly competitive global environment.

In the past three years we have made a number of difficult decisions to keep the Island on a sound financial footing. Whilst our economy has been affected by the global downturn, we now have the security of strong foundations from which to navigate a prolonged recovery period.

The Strategic Plan Inspiring Confidence in Jersey s Future was approved by the States in May 2012, designed to steer the Island through these difficult times, ensuring every section of our community can play its part in building a successful future.

Our Strategic Plan highlighted the many of the issues Islanders told us are important to them and their families population, health, education, jobs and using taxpayers money wisely to support our economy. Our vision for Jersey s future was summed up in seven key priorities, which are:

1. Getting people into work.
2. Housing our community.
3. Promoting family and community values.
4. Reforming government and public service.
5. Managing population growth/immigration.
6. Reforming health and social services.
7. Introducing sustainable long-term planning.

This Medium Term Financial Plan is an important next step in Jersey s sustainable long-term planning and will provide a foundation for our future. Developing medium and long term financial plans to deal with taxation and funding strategies for long-term capital and revenue expenditure is vital in meeting the challenges of the economic downturn and the ageing population.

I wanted the Strategic Plan to form the basis of a partnership between government and

the people of Jersey for the benefit of everyone in our community. Now, this Medium Term Financial Plan will ensure that we have the financial ability to achieve the goals of the Strategic Plan over the next three years. It is a change in the way that we do things with a focus on longer-term decision making and planning more efficiently for the Island s future.

Jersey has traditionally provided a good quality of life for its residents and a competitive climate for its businesses. We will continue to face a number of challenges in the coming years and we need to maintain a careful balance between our economic, social and environmental policies as we deal with those challenges.

I am confident that this three-year plan puts us in a strong position to build a successful future.

FOREWORD PAGE 12

EXECUTIVE SUMMARY

Executive Summary

2011-2013

Over the last three years the world has faced one of the greatest periods of economic downturn and uncertainty experienced in modern times. In Jersey, on top of the original estimate of £100 million pounds tax loss as a result of moving to the zero/ten tax regime, the Island was facing up to a further £100 million pound deficit in its public finances by 2013 from the economic downturn. In addition, with a growing population of older people, the Island needed to prepare for unavoidable increases in demand for services, particularly health and social care.

To deal with this, Jersey s Council of Ministers put forward a three-part plan to tackle the projected deficit by:

1. Raising taxes by £35 million pounds to close the gap.
2. Boosting growth through a fiscal stimulus package.
3. Cutting spending by 10% within 3 years so as to generate savings of £65 million.

It is against this backdrop that the States is now developing a Medium Term Financial Plan for the three years 2013 to 2015.

Where Are We Now?

New tax measures have been implemented, significant progress has been made towards delivering savings targets of £65 million and the Council of Ministers remains committed to achieving a balanced budget by 2013. £44 million of fiscal stimulus funding has also been successfully applied to support the economy.

The fall in income from zero/ten has happened at the levels predicted and, thankfully, the effects of the economic downturn in Jersey have not been quite as bad as anticipated. Jersey now has a more typical mixture of funding sources from Income Tax, Company Tax, Consumption Tax and Duties which is much more sustainable for the future.

The States is making good progress with delivering CSR savings, there has been success in reducing police overtime, increased efficiency in tax administration, reducing fraud in social security and faster turn around times for vacant States housing amongst many others. We still have savings to deliver, Education have been given more time to deliver their share following the States decision not to proceed with reducing grants to fee paying schools. Looking ahead we plan to make further savings from the reform of government as well as pursuing a number of approaches for further budget reductions. This will not be easy to achieve and will take planning and preparation during the course of the next two years.

Expenditure was planned to be above our income for the three years between 2010 and 2013. The Stabilisation Fund, which was built up during years when there was budget surplus, has been vital in funding the deficit during this time to protect Islanders from the full effects of the downturn.

The Audited Accounts for 2011 show that the States of Jersey now has a strong balance sheet and that the funding gap has been closed faster than expected. Instead of a budgeted operating deficit of £72 million at the end of 2011, the actual was £12 million. This was largely because of higher revenue from Personal Tax of £19 million and Company Tax of £10 million. In addition, Departments carried forward £16 million and there were unapplied central contingencies of £14 million and funding for other spending pressures.

Most Governments currently have an inherited mountain of debt. In contrast to the indebtedness of most other nations the Island has assets in excess of £3 billion, rather than liabilities. Jersey has a strong balance sheet. Having used up the Stabilisation Fund, there is the need to strike the right balance between increasing public spending to meet the needs of Islanders and support the economy, whilst maintaining a competitive tax regime in the best economic interest of Jersey.

What Is Planned for the Next 3 Years?

The Council of Ministers Strategic Plan, which was approved by the States in May 2012, has set out the priorities for Jersey over the next three years. These priorities include developing a strong, sustainable economy, improving healthcare and housing, getting people back to work, supporting family and community values and reforming the public sector.

To achieve these aims an important change has been put in place, namely the move to a 3-year planning framework, or Medium Term Financial Planning. For the first time the States of Jersey is setting minimum Budgets for all Departments 3 years in advance and moving away from short-term decision making. This change is intended to provide flexibility, deliver efficiencies and move to longer-term thinking within a more certain financial framework that will ultimately benefit the Island. This Medium Term Financial Plan is one example of our move to longer term planning.

Key Features of the Medium Term Financial Plan States Income 2013 - 2015

It is against the backdrop of the actions that were taken to deal with the projected deficit that this Medium Term Financial Plan has been developed.

The tough decisions taken earlier are now paying off as this Plan does not contain any proposed changes to the current system of taxation.

The planning assumption is that Zero/ten will remain and GST will stay at 5%. No new taxes are planned during the period of this Plan However, in 2011 the States Assembly agreed proposals for Long Term Care Charges and associated benefits. These charges are planned to be implemented in 2014.

The projected increase in States income from £624 million in 2012 to £711 million in 2015 shown in the Table below is produced from the States Income Tax Forecasting Model, using the Economic Adviser s forecast of the economy and the Taxes Office latest assessment data.

The additional income will arise from existing tax policies with a tighter approach being taken to collection. Taxation will remain low, broadly based and levied in a sustainable and internationally competitive way.

 MTFP Proposals Budget Forecast

(July 2012)

2012 2012 2013 2014 2015 £'000 £'000 £'000 £'000 £'000

States Income

Income Tax  416,000 430,000  450,000  470,000  500,000

- Budget Measures Tightening Compliance on Tax Collection

7,600 7,600 7,600 and Reducing Avoidance

Goods and Services Tax 80,047 77,700 79,761 81,955 84,508 Impôts Duty 54,500 51,117 52,939 53,002 53,111 Stamp Duty 24,029 22,869 24,529 27,702 28,962 Other Income 26,582 31,585 20,545 21,926 24,764 Island Rate 11,185 11,330 11,670 12,032 12,453 States Income  612,343 624,601  647,044  674,217  711,398

States Expenditure

Departmental Net Revenue Expenditure (Revised)  596,034 596,034  626,224  643,510  654,738

Central Allocations (Revised) 19,811 22,085 7,547 26,089 36,419

Total Net Revenue Expenditure (excl: Depn)  615,845 618,119  633,771  669,599  691,157 Forecast Surplus/(Deficit) for the year (Revised) (3,502) 6,482 13,273 4,618 20,241

Net Capital Expenditure Allocation 15,910 13,636 12,566 4,559 20,043 Forecast Surplus/(Deficit) for the year after Capital (19,412) (7,154) 707 59 198

States Expenditure 2013 - 2015

The States Strategic Plan sets out bold and ambitious targets for service improvement. To reform health, social services and housing, get people into work, grow the economy and continue with an education service of a high quality, there has to be investment. This Plan provides the necessary resources to deliver those priorities.

Health and Social Services

The ways in which health care and social services are provided need to be re-designed so as to deliver the best care for Jersey s future.

A number of changes have been set out in the Health and Social Services White Paper

 Caring for each other, Caring for ourselves . The proposals in the White Paper aim towards

services, which wrap around the individual and are delivered in the community not just hospitals and institutions. Change of this magnitude will take time which is why a ten year Transition Plan is being developed covering not just the term of this Medium Term Financial Plan, but the two to follow.

This Plan provides the growth funding needed to implement the first 3 year phase of

the transition plan for health and social services. In addition a feasibility study is being undertaken to consider the best option for acute services, in particular whether a new

hospital should be built on a new site or the existing site substantially redeveloped. Whatever the outcome of the feasibility study, new sources of funding will need to be identified for investment in infrastructure. With regard to future revenue funding beyond this three year Plan, further work will be necessary in the next three years in the light of the economic conditions, the impact of the Long Term Care Charge and Benefit and the review of the Health Insurance Fund.

Housing

There is a pressing need to improve the quality and availability of both social and affordable housing in Jersey.

This Plan provides support for the proposals set out by the Housing Department in the White Paper Achieving Decent Homes .

Implementation of the White Paper would result in a new Housing Association being created from the current Housing Department. This change will enable the Association to borrow to invest in much needed repairs and maintenance in the current State housing stock, ensure it meets Decent Homes Standards and build new stock for local people to meet changing future needs.

In addition, a small Strategic Housing Unit will be needed to coordinate a cross-tenure Housing Strategy, set standards for social landlords and operate the Affordable Housing Gateway. There would also be the creation of an independent Affordable Housing Regulator, to ensure that social landlords meet Decent Homes Standards, are governed effectively and operate in the best interest of tenants.

Employment

The most immediate priority is to get people back to work, keep people in work and create new employment opportunities and jobs through sustainable economic growth. This Plan includes funding for a Back to Work policy, which uses the £7.4 million under spend in the Social Security Department from 2011 to develop a proactive programme to reduce unemployment.

A strong economy provides jobs. The Economic Growth Strategy, which has been designed by the Economic Development Department and informed by the same economic advice as the income tax forecast, is also designed to assist with job creation and better align inward migration with new high value employment opportunities for local people.

This Medium Term Financial Plan includes funding to deliver these aims, not least by creating an Innovation Fund, as well as by increasing the ongoing support for organisations such as Jersey Finance and Digital Jersey, to build Jersey s international profile.

The new economic growth and diversification strategy will ensure that Islanders continue to enjoy a good quality of life, job opportunities, efficient high quality public services and low tax rates. A summary of the growth is set out in the Table below.

2013 2014 2015 Growth by Strategic Priority

£'000 £'000 £'000 Get People Into Work - Commitments from 2012 Business Plan 1,950 1,950 1,950 Get People Into Work - MTFP Growth 5,285 7,115 7,370

Manage Population Growth/Migration

House our Community - MTFP Growth Promote Family and Community Values

Reform Health and Social Services - Commitments from 2012 Business Plan Reform Health and Social Services - MTFP Growth

Reform of Government and Public Service Sustainable Long Term Planning

Other Growth - Commitments from 2012 Business Plan Other Growth - MTFP Growth

TOTAL 21,818 37,819 46,004 Other Growth proposed - Not Permanent

Back to Work and Employment Initiatives 5,405 6,930 6,821

This growth funding is carefully targeted at delivering an ambitious programme of service improvement, reform and change led by the Council of Ministers, through Ministerial Oversight Groups that are working hard to include Scrutiny, States Members, representative organisations, voluntary and community groups in their policy and service development. Comments on this financial plan are welcomed in the same spirit.

Balancing The Budget

In order to target resources at these and other service priorities, and at the same time maintain our current system of taxation, steps need to be taken to balance the budget by cutting costs, raising income in other ways and making better use of existing resources. The Table below shows that after allowing for the growth described above, the States would be facing a budget deficit. It also shows the measures that can be taken to balance the budget that are proposed in this Plan.

At a time of change, when the economy is under pressure and local people are feeling the pinch, it is important that the States takes a hard look at its existing resources and ensures that they are being deployed to best effect.

MTFP Proposals (July 2012) Summary of Measures to Balance the Budget 2013 2014 2015

£'000 £'000 £'000

MTFP Potential Deficit (after Education CSR shortfall, Back to Work,

(28,909) (38,056) (35,016) Pensions, Growth Allocations and Shortfall in Terms and Conditions)

HIF Funding 2,000 6,000 6,000 Jersey to manage Guernsey Waste Disposal 0 0 1,500 Reduce Growth for Property Backlog repairs and maintenance 0 0 2,000 Additional fees as a result of Housing and Work Law 0 600 600 Additional income from shareholder returns 0 0 3,000 Over achievement of Social Security CSR savings targets 300 300 300 Social Security savings to be delivered by new measures in addition to CSR targets 0 3,000 3,000 Extend Social Security Supplementation Certainty Calculation for Period of MTFP 0 1,800 3,000 Remove Social Security Department Supplementation Contingency 0 600 600 Further savings in Social Security Department final cash limit 805 974 2,957 Planned Use of Uncommitted Contingencies 10,383 0 2,900 Planned Use of Improved Taxation Position 7,600 7,600 7,600 Planned Use of Forecast Carry Forwards 8,528 3,998 0 Other Measures 0 13,243 1,757 Total Measures To Balance The Budget 29,616 38,115 35,214 Revised Surplus  707 59 198

Managing the Balance Sheet

There must be plans to actively manage the Balance Sheet as well as the Budget. The Balance Sheet is a reflection of the financial position of the States and sets out the resources, both physical assets and financial assets, which are in the ownership of the States and being used to deliver services for Jersey. Jersey s balance sheet is strong but it does carry a significant liability to the employee pension funds (JTSF for teachers and PECRS for all other public sector workers).

Jersey is already in a stronger position than most jurisdictions with funded schemes, but there are issues that need to be dealt with.

Jersey needs to make best use of the physical assets that it owns, particularly land and buildings. In the period of this Plan, steps are being taken now to make the optimum use of buildings generally and to rationalise the office accommodation for the States of Jersey. The capital programme for the period will support investment in the Island s vital infrastructure: roads, sewers, sea defences, air and sea ports.

The States has liabilities on the balance sheet too. Of most significance is the historic issue of the pre-1987 debt. An agreement was reached to repay it over 82 years, but there are now plans to repay it faster and reduce the long term financing cost. In addition, the States

of Jersey needs to change the employee pension schemes so as to make the schemes affordable, fair and sustainable for the long term.

Finally, the States holds a controlling interest in the Island s utilities: Jersey Water, Jersey Electricity, JT and Jersey Post and wholly owns the States of Jersey Development Company. As an active shareholder, the States is working with these companies to develop their businesses, join in with employment initiatives and, where possible, generate off-island opportunities for economic growth and diversification.

Active management of the balance sheet as well as the budget can result in an overall improvement of the financial position for Jersey, as well as safeguarding the assets of the Island for future generations.

Summary

This Medium Term Financial Plan delivers growth in essential services, balanced revenue budgets in all three years and support for the economy whilst maintaining the current system of taxation. It does so by making careful use of existing resources, by seeing through the final stages of financial plans made in earlier years and by setting out an indicative capital programme that can provide both improved services and a fiscal stimulus.

In accordance with the strategic priorities, we are working on longer term service and financial planning that will prepare the Island for the challenges ahead.

INTRODUCTION TO MEDIUM TERM FINANCIAL PLAN 2013 – 2015

Financial and Economic Background Three Part Plan 2011 – 2013

Part One –  Cutting Spending through the

Comprehensive Spending Review (CSR)

Part Two –  Economic Growth

Part Three – Raising Taxes through the

Fiscal Strategy Review (FSR)

States Of Jersey

Inspiring Confidence In Jersey's Future Medium Term Financial Plan 2013 to 2015

Introduction

1. The Council of Ministers proposed a new Strategic Plan for the States of Jersey for the period 2013 to 2015 and has a vision: Inspiring Confidence in Jersey s Future. This Strategic Plan has been approved by the States and promotes seven key priorities:

• Getpeople into work

• Manage population growth/migration

• Houseour community

• Promotefamily and community values

• ReformHealth and Social Services

• Reformgovernment and the public service

• Sustainablelong-term planning

2. The Council of Ministers has consulted widely with local people and stakeholders in developing the Strategic Plan. Drawing on surveys, written submissions, face to face meetings as well as States Members knowledge of the specific concerns of local people, we will align our resources to deliver the priorities and meet our statutory obligations.
3. The Medium Term Financial Plan process is new for Jersey. This draft Medium Term Financial Plan describes how we will manage our resources (finance, infrastructure and property) efficiently over the next three years and direct those resources to meeting these key priorities.
4. The Medium Term Financial Plan will help deliver improved value for money from States spending because it gives Departments the ability to plan ahead for service development and improvement and to let longer term contracts with more certainty. Moving away from a one year planning horizon allows Departments more scope to review how they plan to deliver services and encourages them to look for ways to do things differently and more effectively.

Financial and Economic Background

to the Medium Term Financial Plan 2013

5. Jersey has a history of prudent planning and budgeting. The last Strategic Plan sought to reduce the impact of the global economic situation on Jersey s residents, communities and businesses and to develop a plan to secure the long-term future of the Island. This was against a background of estimates that indicated that Jersey would suffer a deficit.
6. In the last Assembly the Treasury and Resources Minister proposed and the States approved a three-part plan to ensure balanced budgets by 2013. As 2013 is the last year of this three-part financial plan and the first year of the new Strategic Plan it is important to recognise the need to deliver the financial targets set within it.

Three-Part Plan 2011 to 2013

Part One: Cutting spending through the CSR

7. Our monitoring in 2011 and 2012 clearly shows that departments are on track to achieve their savings, although challenges remain. Departments are actively engaged in delivering their share of the savings and there have been successes such as:

• Reducingpolice overtime.

• Redesignof the smoking cessation service.

• Re-structuringparks & gardens to drive efficiencies.

• Amore efficient bus service.

• Fasterturn around times for vacant States Housing.

• Employingstaff in Social Security to help with fraud prevention.

• Increasedefficiency in tax administration.

8. The Council remains committed to delivering our target of £65 million of CSR savings. Given the decision in the States to maintain the grants of fee paying schools at current levels, pending publication of the forthcoming Education White Paper, and subsequent amendment to include non fee paying schools this is a challenge within the agreed timescale and more time will be taken. Education, Sport and Culture will achieve savings of £7.6 million by 2016 against a target of £11.1 million. Further detail is set out later in the report.
9. In addition, a combined Home Affairs and Health and Social Services saving that was to be achieved by closer collaboration between the Fire and Ambulance Service cannot be delivered in this way. However, there are additional CSR savings in Social Security relating to changes in the adult component of Income Support for a second adult.
10. In addition to the departmental savings, steps are being taken across the States as a whole to reduce staffing and procurement costs. A thorough analysis of our options for delivering £14 million of the £65 million target is being undertaken from staff terms and conditions. It is clear that pay restraint will be an important feature of our plans for bringing States spending into line with States income. In addition a review of overtime, sick pay and other allowances is underway with a view to having a simplified and harmonised set of staff terms and conditions. At the time of drafting this Plan the pay award negotiations are still underway and a report will be made at a later stage on any shortfall in the planned savings on terms and conditions.
11. There is a great deal of hard work being done to change procurement practices, retendering to get better value for money and simply reducing our buying where we can, to deliver savings of £6.5 million by 2013. We will continue to report progress against this target.

Part Two: Economic Growth

12. The second part of the plan for 2011-2013 promotes economic growth. The Economic Growth Strategy sets out the Council of Ministers approach to promoting sustainable growth in the economy. The strategy will develop new high value opportunities in:

• exploitinge-commerce and intellectual property;

• pioneeringICT and broadband technology, and

13. Exploring opportunities for renewable energy. This growth strategy will ensure that Islanders continue to enjoy a good quality of life, job opportunities, efficient high quality public services and low tax rates.
14. Economic growth and diversification will go hand in hand, underpinned by the objectives of a flourishing and diverse financial sector, raising the productivity of existing sectors and identifying new growth sectors. To achieve this in 2012 Ministers will work with partners and make the most of joint resources. For example, work with Jersey Telecom will be undertaken to continue to develop a world leading telecommunications infrastructure for the whole Island in order to create the conditions for future success.
15. This approach to economic growth will be supported by a new financial services policy, new skills and enterprise strategies and updated processes for licensing housing and employment. The foundations for future growth will be laid to develop competition framework, investing in infrastructure, keeping the Island internationally competitive and maintaining economic and fiscal stability. The Council of Ministers is bringing forward a revised economic growth strategy in 2012. The draft Economic Growth

and Diversification Strategy contains the following key building blocks for promoting productivity let growth:-

- enterprise and innovation

- skills and labour market

- completion and consumer policy

- investment

- macroeconomic policy

- structural change and diversification

The Economic Growth and Diversification Strategy has four key priorities that are aligned to the objectives of getting people into work. These four priorities which are fully supported with resources set out in this Plan, are:-

- increase innovation

- grow and diversify financial services

- create new businesses and employment

- raise productivity of all sectors

Part Three: Raising taxes through the Fiscal Strategy Review (FSR)

16. The third part of the plan set targets for raising taxes by £35 million. GST was increased from 3% to 5% with effect from 1st June 2011. In addition, employers are now required to pay an extra 2% on employees earnings between the Standard Earnings Limit of £45,336 and the Upper Earnings Limit £150,000. This change also affects Class 2 contributions paid by the self employed and non-employed. Measures were also taken to increase revenues from high net worth individuals.

Current Position on Delivering Against the Three-Part Plan for 2011 to 2013

FIGURE 1A - STATES ACTUAL INCOME V BUDGET

FIGURE 1b

£m 750

700

650

600 Actual Income

Budget Income 550

500

450

400

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Note: Figure 1a, shows actual States Income for the period 2002 to 2011. It can be seen from the graph that the anticipated shortfall of £100 million associated with the introduction of the Zero/Ten tax regime did actually happen. Furthermore, it was made worse by the effects of a global recession.

FIGURE 1B – COMPARISON OF STATES INCOME AND EXPENDITURE

FIGURE 1c

£m 750

700

650

600 Actual Income

Actual Expenditure 550

500

450

400

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

17. The graphs show that the implementation of a new tax strategy supported by some economic growth, has delivered a recovery in States Income. The remaining part of the three part plan is to complete the delivery of the £65 million CSR savings.
18. Our three-part plan is working. Our financial forecast shows a return to balanced budgets by 2013. Nevertheless, there are challenges with achieving the £65 million CSR savings target, particularly in relation to significant areas of Education and terms and conditions of employment for staff. The initial planning assumptions set out in this draft Medium Term Financial Plan relied upon the delivery of the whole of the £65 million savings. The implications of not achieving those savings targets are considered later in the report but potential shortfalls in some areas have been accommodated within this Plan by making compensating budget reductions in other areas. In the years of planned budget deficit in 2010, 2011 and 2012, the Stabilisation Fund was used to balance the budget and support public spending.

FIGURE 1C – FINANCIAL POSITION 2002 – 2015

FIGURE 1d

£m 750

700 650 600 550 500 450 400

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

19. This graph shows that in the years 2006 to 2009 the States Budget was in surplus. During this period a Stabilisation Fund was built up and then applied in the years 2010 to 2012 to help the States manage the combined effect of £100 million loss in income associated with the introduction of zero/ten and a further reduction in income associated with the economic downturn.
20. (Figure 1D) shows how the Stabilisation Fund was applied in these years. The Fund has been used up and it is the intention of the Council of Ministers, when circumstances allow and the economic position improves, to rebuild the Stabilisation Fund.

FIGURE 1D – STABILISATION FUND MOVEMENTS 2009-2012

£m

140 Transfers In 120 Transfers Out

Y/E Balance 100

80

60

40

20

0

-20

-40

-60

-80

2009 2010 2011 2012

RESOURCE PRINCIPLES:

BALANCING TAXATION AND SPENDING

Resource Principles from the States Strategic Plan Specific Taxation Principles

Resource Principles:

Balancing Taxation and Spending

Spending

21. It is crucial to keep recurrent public sector spending under control so that the Island can remain competitive with relatively low levels of inflation. If the States are to provide sustainable services to the public it is fundamental that we take account of the economic outlook, be prudent in our spending plans, ensure that savings and efficiencies are implemented and not increase public spending unless it is matched by savings or additional income.
22. At the same time the local economy is under pressure. There is a need for more investment in policy priorities such as Health and Social Services, getting people into work and social housing. This Plan provides for a stimulus to the local economy through advancing capital schemes. This is both to the benefit of the local economy in a targeted and timely fashion and provide a temporary stimulus for Jersey business whilst the economy recovers. There is increasing recognition that we have to manage for the long term. Our capital investment decisions will look to the future so that we continue to invest in the right capital and infrastructure projects. This helps departments plan for service change and improvement, helps boost the economy and safeguards the Island for generations to come.
23. We manage our service delivery through the departmental structures so it is essential that our financial management framework provides departments with sufficient certainty of funding to allow them to manage within their cash limits. Departments can then provide the right levels of service for Jersey. The Medium Term Financial Plan allows for a longer planning horizon and gives greater empowerment and freedom to Departments to manage within their allocated resources. Departments can use their carry forward balances to help deliver strategic priorities and contribute to fiscal stimulus whilst the local economy is under pressure.
24. The last Council of Ministers introduced the following resource principles in the last Strategic Plan.

Existing Resource Principles

• Beprudent, taking account of the uncertain economic and financial outlook.

• Identifyand implement all possible savings and efficiencies. (For 2013 and beyond we will optimise methods of service delivery and provide value for money).

• Noadditional spend unless matched by savings or income.

• TheStabilisation Fund will only be used during an economic downturn, as advised by the Fiscal Policy Panel, to fund the effects of reductions in States revenues or increased demand for States services, and to provide appropriate stimulus to the economy.

25. These principles remain as relevant now as they were at the time. Given the overriding priority to balance the budget by 2013 it was essential for these resource principles to focus on managing States spending. For the period of the next Strategic Plan we will adopt a number of additional principles which are broader and look to the medium and longer term future for the Island.

RESOURCE PRINCIPLES: BALANCING TAXATION AND SPENDING PAGE 34

Medium Term Financial Plan 2013 - 2015

Additional Resource Principles

• Maintainbalanced budgets over the medium term for current expenditure and achieve an appropriate balance between taxation and spending over the course of the economic cycle.

• Activelymanage the Balance Sheet as well as the Budget by maximising investment returns within agreed levels of risk.

• Planour expenditure on capital and infrastructure over the long term and consider carefully the appropriate sources of funding for major projects, including borrowing.

26. The States also have a number of principles that underpin the system of taxation.

Resource Principles: Taxation

27. Jersey s tax regime has developed over many years and more recently with the following key principles in mind.

• Taxationmust be necessary, justifiable and sustainable.

• Taxesshould be low, broad and simple.

• Everyoneshould make an appropriate contribution to the cost of providing services, while those on the lowest incomes are protected.

• Taxesmust be internationally competitive.

• Taxation should support economic development and social policy, where possible.

28. These principles of taxation underpin our long term fiscal strategy which is set out in an appendix to this report.
29. Taken together, the resource principles and the tax principles have guided the thinking behind the development of the Medium Term Financial Plan.
30. The purpose of this Medium Term Financial Plan is to direct resources towards the delivery of the objectives set out in the States Strategic Plan.

PAGE 35 RESOURCE PRINCIPLES: BALANCING TAXATION AND SPENDING

DEVELOPMENT OF THE MEDIUM TERM FINANCIAL PLAN 2013 - 2015

Integration with the States Strategic Plan Developing Proposals with the Council of Ministers Working and Consulting with Scrutiny

Development of the Medium Term Financial Plan 2013 - 2015

The Medium Term Financial Plan Process: December 2011 to July 2012

31. The Medium Term Financial Plan has been developed in parallel with the States Strategic Plan. The Council of Ministers workshops were the starting point for discussions on Strategic Priorities. These took place in December 2011. Alongside the development of a Strategic Vision and Priorities, the Council of Ministers agreed the key resource principles that would be used as a basis for wider consultation.
32. The Council of Ministers led discussions with Assistant Ministers, undertook briefings and consultation with Scrutiny, and then briefed all States Members in January 2012. At this point the Resources Statement was drafted by Treasury and incorporated in the Strategic Plan White Paper.
33. After the publication of the White Paper, detailed work began with departments to identify the resources needed to deliver the Strategic Vision and Strategic Priorities. This work involved identifying the revenue and capital implications of meeting those priorities together with the associated legislative and staffing requirements.
34. The draft Resources Statement was refined and included in the draft Strategic Plan Inspiring Confidence in Jersey s Future which was lodged in March 2012 and later approved by the States Assembly.
35. Scrutiny Panels are actively involved in reviewing and commenting on the Medium Term Financial Plan. The Treasury has provided papers and briefings to the Corporate Services Scrutiny Panel and has provided briefings to departmental Scrutiny Panels on the draft proposals. Further briefing sessions, to which all States Members were invited, took place ahead of lodging. All Departments have been discussing the implications of the MTFP with their Scrutiny Panel so that the service implications could be explored in more detail.
36. The Council of Ministers held a series of meetings through May, June and July to consider options for funding service pressures and growth and also the options for finding budget reductions so as to achieve a balanced budget.
37. The Corporate Management Board and Financial Advisory Board carried out much of the detailed work in reviewing the proposals from departments and preparing recommendations to the Council of Ministers.
38. In June meetings were held between Departmental Ministers and the Treasury and Resources Minister to discuss and resolve any remaining issues. A further draft of the proposals was produced for further discussion at Council of Ministers of 21 June. Final proposals were incorporated into a report which was agreed by Council of Ministers in early July ahead of lodging.
39. A final briefing for all States Members, interest groups and the media was held on 20 July 2012 and the Plan was lodged in the States Assembly on 23 July 2012.

DEVELOPMENT OF THE MEDIUM TERM FINANCIAL PLAN 2013 - 2015  PAGE 38

LOOKING AHEAD: THE FINANCIAL FORECAST FOR 2012 - 2015

Summary of Medium Term Financial Plan Forecast Income Tax Forecast

Income Tax Forecast Sensitivity

Detailed Income Forecast

Detailed Expenditure Forecast

Looking Ahead:

The Financial Forecast for 2013 to 2015

 MTFP Proposals Budget Forecast

(July 2012)

2012 2012 2013 2014 2015 £'000 £'000 £'000 £'000 £'000

States Income

Income Tax  416,000 430,000  450,000  470,000  500,000

- Budget Measures Tightening Compliance on Tax Collection

7,600 7,600 7,600 and Reducing Avoidance

Goods and Services Tax 80,047 77,700 79,761 81,955 84,508 Impôts Duty 54,500 51,117 52,939 53,002 53,111 Stamp Duty 24,029 22,869 24,529 27,702 28,962 Other Income 26,582 31,585 20,545 21,926 24,764 Island Rate 11,185 11,330 11,670 12,032 12,453 States Income  612,343 624,601  647,044  674,217  711,398

States Expenditure

Departmental Net Revenue Expenditure (Revised)  596,034 596,034  626,224  643,510  654,738 Central Allocations (Revised) 19,811 22,085 7,547 26,089 36,419 Total Net Revenue Expenditure (excl: Depn)  615,845 618,119  633,771  669,599  691,157

Forecast Surplus/(Deficit) for the year (Revised) (3,502) 6,482 13,273 4,618 20,241 Net Capital Expenditure Allocation 15,910 13,636 12,566 4,559 20,043

Forecast Surplus/(Deficit) for the year after Capital (19,412) (7,154) 707 59 198

Medium Term Financial Plan 2013 - 2015

44. The revised financial forecast represents a summary of the Council of Minister s proposals which are:

• Nonew taxes during the period of the MTFP which means that the increase in the States income from £624 million in 2012 to £711 million in 2015 will arise from existing tax policies and is based on the current economic assumptions.

• Therevenue expenditure limits provide for:

– the growth proposals and funding of service pressures from departments.

– provision for increases in income support and initiatives to get people back to work.

– provision for pay and price increases based on the latest economic assumptions and the July 2012 employer pay offer.

– a reduced level of central contingencies after providing funding for growth proposals.

– the delivery of the £65 million CSR savings with the exception of the shortfall in Education, Sport and Culture.

– Further budget reductions and other measures to balance the budget over the Medium Term Financial Plan period

• Abalanced budget position is proposed over the period of the Medium Term Financial Plan and a balance of £9 million in the Consolidated Fund at the end of 2015

• ALong Term Care Charge has already been agreed by the States and is planned for January 2014.

Looking Ahead 2013-2015

45. Figure 2 summarises the Income Tax Forecast for 2013 to 2015. Supplementary Note 1 provides an overview of Income Tax. This year some detailed work has been undertaken jointly by Treasury and Resources and the Economics Unit to refine and improve the way in which the Income Tax Forecast is calculated. This work has concentrated on improving the forecast of tax yield for future years. A detailed note on the Income Tax Forecast is set out in Supplementary Note 2. Whilst the method of forecasting has improved it remains difficult to predict precisely the level of tax income. This is because the tax take is driven by the profitability of businesses, changes in levels of employment, changes in rates of pay and changing spending patterns
46. Figure 3 below shows Income Tax received for the period 2002-2011 and forecast for 2012 to 2015. It is understood that income tax is our most important source of revenue hence the full analysis including a risk assessment as set out in Supplementary Note

2. At the time of drafting this Plan the Tax in 2012 is already projected to improve by £7 million and we have made allowance for this in our projections. In so doing we have had regard to a number of factors including: known significant settlements due from tax payers, recent experience of low tax write-offs compared with budget, the outcomes of a telephone survey with our major tax payers and other similar matters. Whilst it is difficult to predict what the actual position will be, we have used the best information available to us.

FIGURE 3 – INCOME TAX FOR THE PERIOD 2002 TO 2015

550 500 450 400 350 300 250

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

47. The logical assumption in the time of an economic downturn is that tax levels will either decrease or at least rise more slowly. In 2011, our forecasts took account of the economic down turn and were down graded twice. With the benefit of hindsight the second down grade of the forecast has turned out to have been unnecessary. At the time of drafting this report the States Accounts for 2011 have been prepared and audited and show an actual level of tax income for the budget year of £409 million, an improvement of £19 million against the October 2011 forecast. Our forecast ranges for future years are set out Figure 4.

FIGURE 4 – INCOME TAX FORECAST

Income Tax forecast (rounded) - for MTFP

YOA 2010 2011 2012 2013 2014 Budget Year 2011 2012 2013 2014 2015 £m £m £m £m £m

Upper 0 450 470 495 525 Central 409 430 450 470 500 Lower 0 410 425 450 475

48. The detailed paper (Supplementary Note 2) includes a risk assessment and sensitivity analysis. The income tax forecast range has been set at +/- 5% of the central forecast to allow for the inherent uncertainties associated with forecasting total tax take. A summary of the key sensitivities and their potential impact on the income tax forecast is set out below:

FIGURE 5 – INCOME TAX SENSITIVITY ANALYSIS – SUMMARY

Income

Employment £2m to £3m -£2m to -£3m Average Earnings £2m to £3m -£2m to -£3m GVA £1m £1m

Exemptions, Reliefs and Allowances:

Budget Policy -£3m £3m

49. Figure 6 shows the forecast levels of tax for GST, Imp ts, Stamp Duty and Island Rates. The economic assumptions used to underpin these forecasts are the same as those as are used for income tax.
50. The key points from Figure 6 are highlighted below and these are explained in more detail in the Supplementary Notes of Appendix One:

• TotalStates income will rise from £624 million in 2012 to £711 million in 2015.

• Thatthe duty generated from Impôts will be broadly flat over the 3 years even though allowance has been made for increases above inflation.

• Thatthe increases, above inflation, in duty will support the Alcohol Strategy promoted by the Health and Social Services Department. This is because alcohol related health problems are a significant issue for the Island.

• Thatincome from parishes from island rate income will increase only by inflation.

• Thatincome from dividends will be remitted in line with the agreements reached with the Utilities based on their business plans and for JT reflect the reduced returns agreed as part of the Gigabyte Isles project.

• Thattotal other income will recover to a level of £25 million by 2015.

• TheMedium Term Financial Plan assumes that the proposals in the Housing White Paper are approved. At such time as this is approved the new Housing Association will make a return to States income. This is not reflected in the current forecasts

but provision will be made in the new Housing legislation such that if the housing proposals are approved the required amendments to the MTFP can be made. Further details are provided in Appendix Six.

FIGURE 6 – MTFP FORECAST OF STATES INCOME

Budget Forecast MTFP Proposals (July 2012)

2012 2012 2013 2014 2015 £'000 £'000 £'000 £'000 £'000

Income Tax

Personal Income Tax 344,000 360,000 377,000 394,000 420,000 Companies 76,000 74,000 77,000 80,000 84,000 Provision for Bad Debt (4,000) (4,000) (4,000) (4,000) (4,000)

416,000 430,000 450,000 470,000 500,000

Budget Measures Tightening Compliance on Tax

Collection and Reducing Avoidance 7,600 7,600 7,600 Goods and Services Tax (GST) 80,047 77,700 79,761 81,955 84,508

Impôts Duties

Impôts Duties Spirits 4,162 4,066 4,157 4,133 4,110 Impôts Duties Wine 6,923 6,809 7,248 7,504 7,769 Impôts Duties Cider 914 948 1,039 1,107 1,180 Impôts Duties Beer 5,530 5,549 5,732 5,758 5,784 Impôts Duties Tobacco 13,609 12,642 12,392 11,813 11,260 Impôts Duties Fuel 21,952 20,014 20,885 21,193 21,505 Removal of Impôts Fuel Duty Rebate in Bus Contract - - 336 344 353 Impôts Duties Goods (Customs) 150 150 150 150 150 Vehicle Emissions Duty (VED) 1,260 939 1,000 1,000 1,000 54,500 51,117 52,939 53,002 53,111

Stamp Duty

Stamp Duty 22,429 21,435 22,978 25,927 27,098 Stamp Duty on Share Transfer (LTT) 1,600 1,434 1,551 1,775 1,863 24,029 22,869 24,529 27,702 28,962

Other States Income

Net Investment Income 3,960 4,060 3,721 3,679 4,356 Dividends and Returns 13,417 19,075 8,319 11,186 10,287

Planned Addition to Shareholder Returns 3,000 Jersey Financial Services Commission Fees 3,700 3,700 3,700 3,700 3,700 Returns from States Trading Operations 2,511 1,652 1,691 1,731 1,771 EUSD Retention Tax 1,500 1,500 1,500 - - Income Tax Penalties 1,000 1,071 1,071 1,071 1,071 Fines and Other Income 494 527 543 559 579 26,582 31,585 20,545 21,926 24,764

Island Rate Income from Parishes 11,185 11,330 11,670 12,032 12,453 Total States Income 612,343 624,601 647,044 674,217 711,398

FIGURE 7 – MTFP PROPOSALS STATES EXPENDITURE LIMITS

Revised MTFP Proposals (July 2012)

2012 2013 2014 2015

£'000 £'000 £'000 £'000 Base Department Budget (excl: depn) 601,748 596,034 626,224 643,510

Price Inflation - Dept Expenditure 5,120 5,273 5,707 5,231 Price Inflation - Dept Income (1,920) (2,095) (2,203) (2,258) Price s - Housing Rents (979) (1,364) (1,460) (1,661) Income Support Model - latest economic assumptions (3,388) 10,342 2,618 2,788 Supplementation Formula - latest economic assumptions (4,244) 1,276 3,862 2,276

Commitments from Existing Policies

- CSR Growth and Growth 9,154 2,395 1,889 274

- Skills and Training Growth - 1,900 - -

- Health Growth @ 2% 3,320 3,469 3,451 3,627

- Replacement of HIF Funding - 6,283 157 161

- Overseas Aid Growth 423 444 466 490

- Revenue to Capital - 1,500 (500) -

Base Department Budget (Before Savings) 609,234 625,457 640,211 654,438

Department Savings (11,449) (17,125) - -

- Recognising CSR Shortfall - ESC - 6,303 (1,088) (597)

Department User Pays (1,751) (2,230) - - Department Procurement Savings (3,049) - -

MTFP Growth - Departments 12,763 11,862 4,706 MTFP Growth - Annually Managed Expenditure 5,405 1,525 (109) MTFP Growth - Reduce PECRS Repayment Term 1,000 1,000 1,000

MTFP Budget Reductions (2,300) (10,000) (4,700) Base Department Budget (excl: Depn) c/fwd 596,034 626,224 643,510 654,738 Base Department Budget (excl: Depn) c/fwd 596,034 626,224 643,510 654,738

Existing Base Pay Provision 7,000 14,372 23,059 32,351 Corporate Terms and Conditions Savings (7,000) (14,000) (14,000) (14,000) Net Existing Pay Provision - 372 9,059 18,351

July 2012 - Employer Pay Offer

- Non Consolidated Pay Offer 2012 and 2013 (July 2012) 2,600 2,600 - -

- Consolidated 1% Pay Offer 2013 (July 2012) - 3,300 3,300 3,300

- Consolidated 4% Pay Offer 2014 (July 2012) - - 13,300 13,300

- Consolidated 2.5% Pay Offer 2015 (July 2012) - - - 8,700 2,600 5,900 16,600 25,300

Estimated Pay Award - Doctors and Consultants - - 400 400 Less: Existing Base Pay Provision - 372 9,059 18,351 Additional Pay Provision Required 2,600 5,528 7,941 7,349

Restructuring Provision 10,000 5,098 6,540 7,170 Corporate Procurement savings (3,000) (3,451) (3,451) (3,451)

Allocation to Contingencies

- Central Contingencies - AME 2,000 - 2,000 2,000

- Central Contingencies - DEL 2,000 - - -

- Central Contingencies - One Off 4,485 - - 1,000

- Contingency for Emerging Items 4,000 - 4,000 4,000

Allocation to Growth

- Allocation to Growth for 2013 - - -

- Allocation to Growth for 2014 - -

- Allocation to Growth for 2015 -

Net Revenue Expenditure Allocation (excl:Dep'n) 618,119 633,771 669,599 691,157

51. Figure 7 shows how the Base Departmental Budgets are inflated using a number of assumptions for pay and price inflation and then developed to include commitments from existing policies and the new MTFP proposals.
52. The expenditure limits have been based on the following key assumptions:

• 2.5%provision for inflation in each year.

• Continuingconstraints on pay and terms and conditions in 2012 and 2013, and incorporating the Employers' pay offer of July 2012.

• Useof the latest economic assumptions and levels of unemployment for the

forward projection of Income Support and Supplementation – the proposals for supplementation include an extension of the certainty formula which will be brought to the States for approval by the Social Security Minister alongside the Medium Term Financial Plan.

• Provisionfor has been made to fund the commitments to growth made by the previous Council of Ministers in the 2012 Business Plan.

• Growthallocations in 2013-2015 have been wholly allocated in this Plan and additional resources have been identified to fund the delivery of the Strategic priorities.

• Initialallocations to contingency have been used in part to fund growth that the Council of Ministers considers essential in current economic circumstances. Nevertheless £6 million in 2013, being funded from earmarked carry forwards from 2012, £6 million in 2014 and £7 million in 2015 remain.

53. The expenditure limits also reflect these key points:

• Thefirst is that the Health expenditure of £6.1 million that is presently met from the Health Insurance Fund will continue beyond 2011 and 2012 which were the 2 years agreed by the States. In order to fund this expenditure, the States will be asked to consider a Proposition that a contribution from the Health Insurance Fund be made of £2 million in 2013, rising to £6 million in 2014 and £6 million in 2015.

• This plan incorporates the States' decision to accelerate Housing Capital schemes to the value of £27 million in 2012.

54. The Medium Term Financial Plan assumes that the proposals in the Housing White Paper are approved. As part of these proposals increases in housing rents are proposed to 90% of market rental which will in turn require an increase in income support housing component to protect those tenants. This will be funded by the increased return from

the new Housing Association but will cause an increase in States expenditure. Growth funding is proposed for the impact on private sector tenants on income support, otherwise the impact of Housing Incorporation is assumed to be neutral. Any other increases in expenditure and associated off-set in States income are not reflected in

the current forecasts but provision will be made in the new Housing legislation such that if the housing proposals are approved the required amendments to the MTFP can be made. Further details are provided in Appendix Six.

FIGURE 8 – MTFP PROPOSALS STATES EXPENDITURE LIMITS BY DEPARTMENT

Revised MTFP Proposals (July 2012)

2012 2013 2014 2015

£'000 £'000 £'000 £'000 Chief Minister 22,952 18,855.5 20,167 20,259 Economic Development 15,898 18,256 19,459 19,975 Education, Sport and Culture 101,655 96,131 99,063 100,243 Education, Sport and Culture - Skills & Training 1,900 1,900 1,900 Education, Sport and Culture - Savings Shortfall 6,303 5,215 4,618 Health and Social Services 171,212 179,979 190,181 197,380 Health and Social Services - Replacement of HIF Funding 4,283 440 601 Home Affairs 47,991 46,731 47,489 47,844 Housing  (24,558) (26,799) (27,972) (29,339) Department of the Environment 6,439 5,602 5,606 5,595 Social Security 166,835 183,354 186,957 191,036 Transport and Technical Services 26,938 25,599 26,792 26,439 Treasury and Resources 24,604 30,001 31,412 30,584

Non Ministerial States Funded Bodies

- Bailiff 's Chamber 1,589 1,595 1,611 1,627

- Law Officers' Department 7,817 7,651 7,722 7,795

- Judicial Greffe 6,787 6,640 6,738 6,837

- Viscount's Department 1,455 1,368 1,373 1,378

- Official Analyst 607 609 614 619

- Office of the Lieutenant Governor 688 689 692 695

- Office of the Dean of Jersey 26 26 26 26

- Data Protection Commission 223 223 224 224

- Probation Department 1,961 2,124 2,128 2,132

- Comptroller and Auditor General 754 751 769 787

States Assembly and its Services 5,280 5,027 5,114 5,203 Grant to the Overseas Aid Commission 8,881 9,324 9,790 10,280

Total Department Net Revenue Expenditure 596,034 626,224 643,510 654,738

55. Figure 8 illustrates the indicative spending limits for departments after the allocations for growth, procurement savings and future budget reductions that have been a proposed. The Social Security department spending limit has increased in line with the revised income support assumptions highlighted in Figure 7.
56. Appendix Eight provides a summary of all the Economic Assumptions relating to Expenditure.

LOOKING AHEAD:

CARRY FORWARD FUNDING

Carry Forward Funding 2011 to 2012 Details of Funding by Priority

Looking Ahead: Carry Forward Funding

57. Carry Forward Funding was agreed by the Treasury and Resources Minister on the recommendation of the Council of Ministers in a Ministerial Decision of 20th February 2012. In reaching his decision the Treasury and Resources Minister had regard to the extent to which the carry forward funding was to be directed towards achieving the priorities within the consultation draft of the Strategic Plan. A summary of the approved carry forward funding is set out below against each priority together with a reconciliation show the total carry forward funding. A full report on all carry forward funding is included in Appendix Three. Previous experience suggests that looking ahead there will be broadly similar levels of carry forward funding for Departments.

FIGURE 9 – CARRY FORWARD FUNDING FROM 2011 TO 2012: SUPPORTING STRATEGIC PRIORITIES

Carry forward funding for 2012

58. Get People into Work

1. Policy and Regulation – Digital Jersey – (EDD) - £300,000

Establish Digital Jersey - £300,000. The department will provide the balance of the funding from the income from Ofcom and Digital Switchover.

2. Jersey Finance Ltd – Restoration of Grant – (EDD) - £180,000

A delay in a film project has released this underspend. The budget can be used to increase the JFL grant in 2012 so as to allow continued operation of the JFL team in the GCC and India.

3. Back to Work - Proactive measures to reduce unemployment – (SSD) - £7.4 million The Social Security Department proposes to use the remainder of the 2011 revenue underspend to deliver the Back to Work programme. An element will be required to meet the increased costs in income support; the remainder will be allocated to the programme. This will provide a fiscal stimulus in 2012 as it is targeted at getting people back to work in a timely manner and if economic circumstances improve, this level of funding may not be necessary in the longer term.

59.  House Our Community

4. Backlog Maintenance – (HSG) - £1.4 million

The underspend will go towards projects such as installing or replacing heating installations, the Le Marais bin chutes, refurbishing Le Squez refurbishment, lift refurbishment and insulation works. These are all works required programme to address the backlog in housing repairs and maintenance.

60.  Reform Health and Social Services

5. Activity Increases – Secure Placement – (HSS) - £330,000

A number of high cost cases are placing significant pressure on the Department s budget. In particular, a single placement in a secure UK institution at the end of 2011 will create a cost pressure in the region of £330,000 in 2012.

6. Bowel Cancer Screening – (HSS) - £100,000

An average of 62 new cases occur amongst islanders annually. Most are not diagnosed until a late stage, leaving patients with a poor prognosis and requiring expensive off island treatment. Survival is strongly related to the stage of disease at diagnosis. The National Screening Committee approved a one-off Flexible Sigmoidoscopy at age 55 as a cost-effective bowel cancer screening intervention which is expected to reduce bowel cancer deaths by 40% over 10 years. Establishing this service has an initial set up cost of approximately £100,000. Utilisation of the 2011 underspend for this purpose will enable this development to progress promptly in 2012, with the recurring revenue cost being met from additional funds allocated to the department in the 2012 Business Plan.

7. Individual Care Packages – (HSS) - £150,000

There are a low, but increasing, number of patients and clients requiring high cost individual care arrangements. Additional funding of £150,000 from carry forward funds will help address this service pressure.

8. Medical Equipment – (HSS) - £160,000

Funding has been committed in 2011 but the equipment will not be delivered until 2012. This is simply a timing issue.

9. Reduced Delayed Discharges – (HSS) - £100,000

The continuing impact of the ageing demographic impacts on the number of patients in hospital waiting for discharge to the community and nursing homes. The allocation of £100,000 from carry forward funds together with a further allocation from 2012 Business Plan funding will allow this issue to be addressed, particularly over the winter months.

10. Long Term Care Scheme – (SSD) - £580,000

The set up costs associated with the Long Term Care Scheme are predicted to be £580,000. This includes costs for IT, staffing and transitional arrangements.

Reform of Government and Public Service

11. Planning and Building – (DoE) - £180,000

Required for Planning appeals which occur each year and are unbudgeted - £150,000 and for producing further masterplans for the Island which the Minister has committed the Department to - £30,000.

12. Future CSR Savings – (HA) - £990,000

Timing delays are predicted in the delivery of 2012 and 2013 CSR savings. Contingency plans are being developed to achieve the savings and funds carried forward will enable any initial shortfalls to be covered in 2012 and 2013, consisting of £799,200 within the States of Jersey Police and the remainder for non-Police projects.

13. Modern Managers Programme – (TSY) - £40,000

Developing people managers as part of the Modern Manager Programme which will now happen in 2012.

14. Pensions Project – (TSY) - £100,000

Substantial work is being undertaken in reviewing current pension arrangements and this project work is required in 2012. Additional actuarial advice is also required as part of the pensions review project and this will occur in 2012.

15. Tax Office Transformation Project – (TSY) - £380,000

The Taxes Transformation Programme is a major programme of work to deliver significant improvements to the States of Jersey tax-related functions (including achieving projected additional revenues of between £2million and £10 million

per year). The Programme was due to start in April 2011 but was delayed until November, resulting in an underspend of £338,000. This is a four year project and funding for the remaining three years has not yet been fully identified but will be

a priority for funding within the resources allocated to Treasury and Resources. This carry forward is being requested to meet a proportion of the funding for the remaining years.

Sustainable Long Term Planning

16. Assisting Developing Countries – (CMD) - £100,000

A second conference building on the success of the 2010 conference for developing countries to promote understanding of Jersey as a finance centre and counter arguments that Jersey s financial services may be harmful to developing countries.

17. Specialist Advice re WTO Membership – (CMD) - £100,000

External expert advice on specialist technical matters related to the extension of the UK membership of the World Trade Organisation. Since its establishment with non-recurring funding, International Affairs has needed to commission specialist technical advice, for example to meet the Chief Minister s obligation to investigate financial structures which may not be fully compliant with international sanctions. Currently technical expert advice from the London School of Economics Trade Policy Unit is required, for example, on the extension of the UK membership of the World Trade Organisation to include Jersey. £100,000 will buy on average 2 to 3 specialist reports.

18. Increased Unemployment – (SSD) - £2.0 million

The downturn in the economy has resulted in an increase in the number of people unemployed and those seeking assistance through Income Support.

19. Backlog Maintenance – (TSY) - £270,000

Jersey Property Holdings delay on Les Chnes Refurbishment. This is simply a timing issue.

20. Highway Maintenance – (T&TS) - £50,000

This will be used in 2012 for patching of roads which has fallen behind schedule.

21. Liquid Waste Strategy – (T&TS) - £540,000

The Liquid Waste Strategy deals with liquid waste in accordance with environmental standards and provides sustainable options for the Island. Initial technical investigations have commenced but the strategy will not be fully developed until 2012.

22. Solid Waste Asbestos Disposal – (T&TS) - £1.2 million

Asbestos is presently being temporarily stored in containers at La Collette but this is not a sustainable medium term solution. This money was allocated to cover the permanent disposal of this waste. Delays have occurred and the department is working with the Regulator to finalise details of its plans for the permanent disposal of asbestos and a planning application has been submitted and is awaiting determination by the Minister for Planning and Environment.

61. This section describes the £16.7 million of carry forward funding which has been approved and contributes towards the States new strategic priorities. Carry forward funding of £8.3 million was also approved for other departmental commitments and spending pressures and a further £16.4 million for contingency carry forwards including £2.8 million for the Court and Case costs Smoothing Reserve and £0.7 million for central restructuring costs. A full carry forward report is included at Appendix Three.

LOOKING AHEAD: GROWTH COMMITMENTS FROM 2012 BUSINESS PLAN

Growth Commitments by Priority Details of Funding by Priority

Looking Ahead:

Growth Commitments from 2012 Business Plan

62. In 2012 there were some key services that were facing financial pressures that were both evident and growing. These service areas included work related training schemes, nursing pay and conditions of employment, nursing staff increases and funding to facilitate CSR restructuring. These extraordinary financial pressures were identified

in the 2012 Business Plan and commitments were made by the previous Council of Ministers, and subsequently endorsed by the States, to make growth provision for these priority areas. In addition, a commitment to growth for Health and Social Services of 2% per annum was made. This growth is included within the planning assumption for the Total States Net Expenditure (Figure 7) and hence does not need to be funded from the new Allocation for Growth of £26 million by 2015. Figure 10 shows the growth commitments from the 2012 Business Plan which support the States Strategic Priorities.

FIGURE 10 – COMMITMENTS FROM 2012 BUSINESS PLAN: SUPPORTING STRATEGIC PRIORITIES

1. Advance Plus ESC 310 310 310
2. Advance to Work ESC 720 720 720
3. Careers Strengthening ESC 80 80 80
4. Highlands College - (From 740 to 890 @ £5590) ESC 840 840 840 Total 1,950 1,950 1,950

Reform Health and Social Services

5. Health Growth @ 2% HSS 3,470 6,920 10,550
6. Medical Staff Sub Specialisation HSS 300 610 920
7. Nursing Establishment HSS 1,000 2,030 2,080
8. Nursing Terms and Conditions HSS 600 620 630 Total 5,370 10,180 14,180 Total Growth Commitments Supporting Strategic Priorities 7,320 12,130 16,130

Other Growth Commitments 2012 Business Plan - not directly supporting

Strategic Priorities 1,447 744 223 Total Growth Commitments 2012 Business Plan 8,767 12,874 16,353

Other Commitments from 2012 Business Plan supporting Strategic Priorities

Reform of Government and Public Service

9. CSR Procurement Savings offset CORP (6,500) (6,500) (6,500)
10. Restructuring Provision CORP 8,100 8,100 8,100 Total Other Commitments from 2012 Business Plan 1,600 1,600 1,600

Medium Term Financial Plan 2013 - 2015

Commitments from 2012 Business Plan

63. Get People into Work

1-4  Education, Skills and Training Initiatives – (ESC) - £2.0 million

The initiatives which began as a result of the Fiscal Stimulus for Advance to Work, Advance Plus and Careers Strengthening were committed to in the 2012 Business Plan to continue beyond 2012. The provision also includes the continued funding of 150 extra places at Highlands College beyond 2012.

64. Reform Health and Social Services

5. Health Growth @ 2%p.a. – (HSS) - £3.4 million p.a.

The recurring consequences of existing commitments, drugs cost inflation and emerging pressures account for the majority of the 2% growth provision.

6. Medical Sub Specialisation – (HSS) - £920,000 (2015)

The projected retirement of existing consultant medical staff and their planned replacement accompanied with the difficulty in recruiting generalists (i.e. the continuing drive toward sub specialisation) and the need to manage single practitioner specialties will continue to be a major challenge financially and

was highlighted in the Green Paper. An initial Outline Business Case relating to sustainable acute services, commencing with renal and cancer services estimated the cost at approximately £2 million per annum. This is being treated as a

 Business As Usual issue and the specific funding identified in the 2013/14 cash limits together with the 2% growth funding will be used the progress this issue.

7. Nursing Establishment – (HSS) - £2.1 million (2015)

Recent studies indicate that there is a strong correlation between nursing staffing levels, patient safety and quality of care. Shorter length of stay is strongly correlated to higher staff levels. Following a nurse staffing review there has been investment in staffing levels across areas of HSSD, particularly within the General Hospital. However levels still remain below that recommended and require additional investment. On a day to day basis staffing is managed by moving staff around

the organisation and topping up staffing levels with temporary cover provided by nurses either employed on the nurse bank or agency. This is not a sustainable solution and in the long term is a relatively expensive solution.

The £2 million funding over 2013/14 will help address the unmet need in the inpatient/specialist areas across HSSD. Separate to this issue is the development of community nursing services to support patients 24/7. The current community nursing quota is insufficient to provide appropriate cover out of hours 7 days a week. Lack of nursing support in the community results in a number of patients admitted to the hospital who could be cared for at home with the right support. Work on the Outline Business Cases recommends an increase in community nurse staffing to deliver care to patients in the most appropriate care setting and is separate to addressing the unmet need that currently exists in the nursing settings provided by HSSD.

8. Nursing Terms and Conditions – (HSS) - £630,000 (2015)

It was identified that even after the Job Families Nursing Pay scales were introduced, recruitment and retention of appropriate qualified nursing staff

PAGE 61 LOOKING AHEAD: GROWTH COMMITMENTS FROM 2012 BUSINESS PLAN

remained problematic. Having a high number of staffing vacancies creates a significant risk for essential service delivery and patient safety. During 2011 and 2012, the following initiatives have been implanted to address the recruitment and retention of nursing staff: £3,000 Recruitment supplement effective from May 2011 Revisions to pay structure based on FTE in post May 2011 effective from 1st Jan 2012 Nurse staffing investment recruitment underway in EMI and Infection Control. In practice the growth bids for the nursing establishment and nursing terms and conditions will need to be considered together. There is limited value in recruiting more nurses if we cannot adequately reward and retain the nurses that we already have. HSSD colleagues are presently negotiating with trade unions to consider terms, conditions and equal pay for equal value. Further updates on progress

will be provided to the States Employment Board for consideration and action as appropriate.

65.  Reform of Government and Public Service

9. CSR Procurement Savings Offset – (Corporate) - £3 million from 2013

The target for Corporate Procurement savings was £6.5 million to be delivered

by 2013, with any shortfall in this to be funded through the Central Restructuring Provision. The profile and allocation of the savings has now been agreed with Departments and £3 million will be delivered by the end of 2012 and there are further plans in place to deliver the remaining £3.5 million as far as possible within 2013 but some more time may be needed.

10. Restructuring Provision – (Corporate) - £8.1 million p.a.

The initial Central Restructuring Provision of £10 million p.a. has been reduced to £8.1 million from 2013 to provide for £1.9 million for the Skills and Training initiatives, following on from the Fiscal Stimulus programme. At the end of 2015, the balance in the Central Restructuring Provision is £7.2 million being offset by £3.5 million procurement savings that are yet to be allocated to Departments. The balance can be released as further progress is made in delivering procurement savings.

LOOKING AHEAD:

NEW BIDS FOR GROWTH

Summary of Growth Bids by Priority Details of Growth Bids

Looking Ahead 2013-2015: New Bids for Growth

66. The base assumptions for the Medium Term Financial Plan included allocations for growth as follows:

• 2013- £6 million ongoing

• 2014– a further £10 million, making £16 million ongoing