Medium Term Financial Plan Addition for 2017 – 2019 AS ADOPTED AS AMENDED

MEDIUM TERM FINANCIAL PLAN ADDITION for 2017-2019

(as amended following debate

 at the States sitting 26-30 September 2016)

Council of Ministers

I.J. Gorst A.J.H. Maclean L.J. Farnham

R.G. Bryans

S.G. Luce

Sir P.M. Bailhache A.K.F. Green M.B.E.

K.L. Moore A.E. Pryke E.J. Noel S.J. Pinel

P.F.C. Ozouf

P.F. Routier M.B.E.

Senator Senator Senator

Deputy Deputy Senator Senator

Deputy Deputy Deputy Deputy

Senator Senator

Chief Minister

Treasury and Resources  Economic Development, Tourism, Sport and Culture Education

Environment

External Relations

Health and Social Services and Deputy Chief Minister

Home Affairs

Housing

Infrastructure

Social Security

Assistant Chief Minister  Assistant Chief Minister

J.D. Richardson  Chief Executive

R.W. Bell  Treasurer of the States

Proposition (as amended)

Medium Term Financial Plan Addition 2017 - 2019

The States are asked to decide whether they are of opinion:

following the States' approval of the Draft Strategic Plan 2015 – 2018, P.27/2015, as amended, adopted on 30th April 2015, and of the total income targets and total States' net expenditure limits for 2016 – 2019 in the Medium Term Financial Plan 2016 – 2019, P.72/2015, as amended, adopted on 8th October 2015, to receive the draft Medium Term Financial Plan Addition 2017 – 2019 and, in accordance with the provisions of Articles 8 and 8A of the Public Finances (Jersey) Law 2005 –

1. to approve the following amounts (not exceeding in aggregate the total amount of States' net expenditure for financial years 2017 to 2019 which were approved in P.72/2015 as amended) –

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,  including  the  in  principle  approval  of the  new  user  pays proposals, commercial liquid and solid waste charges, as set out in Appendix 1, for the financial years 2017 to 2019 set out in Summary Table B, [except that the revenue head of expenditure of the Department of Economic Development, Tourism, Sport and Culture shall be increased by £30,000 in 2017, 2018 and 2019 to support Jèrriais and the revenue head of expenditure of the Department of Education shall be reduced in each of those years by the same amount,][1] [save that, in relation to the Education Department's provision for user pays in Appendix 1 and Appendix 2, the introduction of Nursery Education Fund means- testing shall apply in respect of all providers of such education,][2] with in relation to the head of expenditure of the Health and Social Services Department, the approval of £5,000,000 in each of the financial years 2017 to 2019 dependent in accordance with 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 for the financial years 2017 to 2019 as set out in Summary Table C;
3. the amount to be appropriated to Growth expenditure for the financial years 2018 and 2019, as set out in Summary Table D;

2. to approve the following, as set out in Summary Table E, in respect of the Jersey Car Parking and Jersey Fleet Management States trading operations for the financial years 2017 to 2019 –

1. the estimated income;
2. the estimated expenditure;
3. the estimated minimum contribution to be made to the Consolidated Fund, if any;

[(c)  to withhold consent to the application of resources for work on the development of user pays'

charges in relation to domestic liquid waste and domestic solid waste, other than work necessarily connected to the development and implementation of commercial solid and liquid waste charges, any such consent requiring separate authorisation by the Assembly;][3]

(d)  to endorse the total estimated non-cash net revenue expenditure for depreciation for States funded bodies (other than the States trading operations) for the financial years 2017 to 2019 as set out in Summary Table B.

COUNCIL OF MINISTERS

Notes:

The Minister for Social Security lodged legislation changes (P.82/2016) to allow the Health Insurance Fund to make a contribution to Health expenditure of £5 million in each of the years 2017 to 2019. The transfers were to facilitate the phased introduction of the income-based Health charge. However, the States rejected the proposed Health charge and the Minister for Social Security subsequently withdrew P.82/2016, after the MTFP Addition debate, as the legislation introduced a dependency on the Health charge being in place for transfers to be made. The impact is a reduction of £5 million in the Health and Social Services Department expenditure and income in each of the years 2017 – 2019.

Notwithstanding the expenditure proposal for the States payment of rates from 1st January 2017, the Minister for Treasury and Resources will defer bringing forward details for a funding mechanism and legislation until the Budget 2018 to deliver £900,000 from 2018. This will maintain the Strategic Plan requirement to deliver an equivalent  funding  mechanism  and  importantly  allow  more  time  for  consideration  with  the  Comité  des Connétable s and Parish Officials.

The Council of Ministers has a preferred site for the future hospital provision for the Island and will be considering the options for funding such a project. A Proposition has been lodged for the approval of the preferred site (P.110/2016). Proposals for funding the future Hospital are due to be brought forward for debate early in the New Year.

As previously indicated in the Medium Term Financial Plan 2016 – 2019 (P.72/2015) as adopted (as amended) on 8th October 2015, the Council of Ministers and the Minister for Treasury and Resources will bring a separate proposition and relevant legislation forward to the Assembly to enable the Office Modernisation Project to progress and the relevant funding to be allocated.

The Minister for Social Security brought forward proposals for a targeted Christmas Bonus (P.84/2016 and P.85/2016) and to continue the provision of the Food Costs Bonus (P.83/2016), which were adopted by the States at their Sitting on 11th October 2016.

Following the States' unanimous adoption of P.140/2015 on 23rd February 2016, the Minister for Infrastructure signed Ministerial Decision MD-T-2016-0073 setting out the measures required for a concessionary travel pass scheme to be introduced for Jersey residents with long-term disabilities which prevent them from being able to drive. The MTFP Addition has been agreed, enabling these measures to be funded from the Car Parks Trading Fund, consistent with the remit of the Fund agreed by the States on 19th October 2004 with the adoption of the proposition:  Car  Parking  Charges:  allocation  of  additional  income  to  the  funding  of  transport  initiatives (P.147/2004).

It is envisaged that the concessionary travel pilot scheme will be introduced in early 2017 and will be valid until the end of 2019, to coincide with the end of the period covered by the current MTFP. In early 2019, there will be a review of the pass in order to assess the extent to which it is meeting the transport needs of Jersey residents with a disability. Continuation of the scheme will be dependent upon the States agreeing on the benefits of the scheme for 2020 and beyond.

The MTFP Addition also includes (as Appendix 13) estimates of the various Social Security Funds as recommended by the Comptroller and Auditor General in R.38/2015 "Review of Financial Management".

Contents  Page

PROPOSITION (AS AMENDED)   3 ADDENDUM  9

1. COUNCIL OF MINISTERS FOREWORD  11 Council of Ministers Foreword from the Chief Minister
2. EXECUTIVE SUMMARY 13 Our Plan

Headline Figures

Investing in Strategic Priorities

Improving Efficiency and Reducing Costs

Distributional Analysis

Conclusion

3. STRATEGIC AND LONG TERM VISION  25
4. DEVELOPMENT OF THE MEDIUM TERM FINANCIAL PLAN ADDITION  32
5. RESOURCE PRINCIPLES AND FISCAL FRAMEWORK 33 Sustainable Public Finances

Resource Principles

Jersey's Fiscal Framework

6. ECONOMIC BACKGROUND AND OUTLOOK 36 International Developments

Jersey Economy

Jersey's Fiscal Position (as amended and including P.68/2016 Add.(4)

Adjusted Fiscal Position (as amended and including P.68/2016 Add.(4)  

7. FINANCIAL FORECAST 2016-2019 47 Summary Financial Forecast (as amended and including P.68/2016 Add.(4)

States Income Forecasts 2016-2020 (as amended and including P.68/2016 Add.(4)

Economic Assumptions for the MTFP Addition (including P.68/2016 Add.(4)

States Revenue Expenditure Forecasts for 2017-2019 (as amended)

Indicative Department Expenditure Forecasts for 2017-2019 (as amended)

8. CENTRAL CONTINGENCY ALLOCATIONS 2017-2019 61 AME and DEL Contingency Allocations

Central Allocations for Restructuring and Redundancy Provision

Central Contingency for Pay, PECRS and Workforce Modernisation

Central Allocations for Economic and Productivity Growth Initiatives

Central Allocation earmarked for Child Protection and Child Policy improvement

Summary of Proposed Central Contingency Allocations

Rules of Operation

9. ADDITIONAL FUNDING FOR PRESSURES, DEMOGRAPHICS AND GROWTH 67 Background

Allocating Funding to Strategic Priorities

Types of Additional Funding

Management of Growth Funding and Allocations

Growth proposals for 2017-2019

Process for 2017-2019

Narrative of Individual Growth Projects

10. SUSTAINABILITY IN STATES FINANCES 84 Background

Funding the Shortfall

Funding Measures

Savings and Efficiencies

User Pays

Benefit Changes

Funding Mechanisms

11. PUBLIC SECTOR REFORM  92 The Need for Reform

The Aims of Reform

Update on Phase I

Looking Ahead

12. PROPOSALS FOR FISCAL MEASURES AND FUNDING MECHANISMS 103 Proposals for a Funding Mechanism for Health (as amended)

Proposals for a Funding Mechanism for Rates

Proposals for Waste Charges and Waste Transformation (as amended)  

13. UPDATE SHORT-TERM FUNDING MEASURES  115 Funding Options for Short-Term Measures

Summary of Short-Term Proposals to fund the Shortfall in 2016-2018

14. SUMMARY OF DISTRIBUTIONAL ANALYSIS OF MTFP PROPOSALS 120 Introduction

Impact of Expenditure Proposals

Impact of Benefit Changes

Impact of User Charges

Impact of Health Charge

Summary

15. CONTINGENCY PLANNING  127 Introduction

Proposed Options for Contingency Plans

Summary of Contingency Plans

16. UPDATE FOR CAPITAL PROGRAMME  131 Introduction and Process

How Capital Projects for 2017 – 2019 will be approved

Update on Major Capital Projects

• Sewage Treatment Works
• Future Hospital
• Office Modernisation Project
• Les Quennevais School
• Prison
• Progress on changes to capital allocation process

17. MANAGING THE BALANCE SHEET 140 Summary of 2015 Position
18. MANAGING MANPOWER   141 Introduction

Revising the 2016 Position

Ongoing Control of Budgeted FTE

Impact of 2017 - 2019 Proposals

Summary

19. PLANNING FOR AN AGEING POPULATION 145 Social Security Review and Consultation

Health Insurance Fund and Long Term Care Fund

SUMMARY TABLES FOR PROPOSITION   147 Summary Table A – Approved Total States Net Expenditure for 2017-2019 (as amended)

Summary Table B – Approved Net Revenue Expenditure for States Funded Bodies for 2016 – 2019 (as amended) Summary Table C – Summary of Approved Central Contingency Allocations for 2017 – 2019

Summary Table D – Summary of Proposed Growth Expenditure for 2018 and 2019

Summary Table E – Approved Income and Expenditure of each States' Trading Operation for 2017 - 2019 Summary Table F – Consolidated Fund Forecast for 2016-2019 (as amended and including P.68/2016 Add.(4)

APPENDICES  154 Appendix 1 – Summary of New User Pays Proposals 2017-2019 (as amended)

Appendix 2 – Savings, Efficiencies and User Pays 2017-2019 (as amended)

Appendix 3 – Detailed Department Expenditure Allocations for 2017-2019

Appendix 4 – Summary of Income Tax Forecasts 2016-2020 (including P.68/2016 Add.(4))

Appendix 5 – Current Year Basis Taxpayers – Recommendation for MTFP Addition Income Forecasts Appendix 6 – Summary of GST Forecasts for 2016-2020 (including P.68/2016 Add.(4))

Appendix 7 – Summary of Impôts Duty Forecasts for 2016-2020 (including P.68/2016 Add.(4))

Appendix 8 – Summary of Stamp Duty Forecasts for 2016-2020 (including P.68/2016 Add.(4))

Appendix 9 – Summary of Other Income Forecasts for 2016-2020 (including P.68/2016 Add.(4))

Appendix 10 – Social Security Contribution Forecasts 2016-2020

Appendix 11 – FPP Economic Assumptions 2016-2020 (March 2016) (including P.68/2016 Add.(4))

Appendix 12 – Financial Forecast – Additional Considerations (as amended and including P68/2016 Add.(4)) Appendix 13 – Social Security Funds Forecasts 2016-2020 (as amended)

REFERENCES

P.68/2016 Add – Department Annex to the MTFP Addition 2017-2019 (June 2016)

 P.68/2016 Add.(2) – Distributional Analysis of the MTFP Addition 2017-2019 (June 2016)

P.68/2016 Add.(3) – Detailed Income Tax Forecast Note for the IFG (May 2016)

P.68/2016 Add.(4) – Interim Update of Income Forecasts for the MTFP Addition (September 2016)

P.127/2015 – Budget 2016 (December 2015)

P.27/2015 – Strategic Plan 2015

P.27/2015(Add) – Resources Statement to the Strategic Plan – Update of Public Finances

R.107/2015 – Fiscal Framework for the Medium Term Financial Plan 2016-2019 and Beyond

R.133/2014 – Long Term Tax Policy

P.72/2015 - Medium Term Financial Plan 2016-2019

P.72/2015 Add - Medium Term Financial Plan - Department Annex for 2016

P.76/2015 – Strategic Reserve Transfers – COI and MTFP funding

FPP – Pre MTFP Report (January 2015)

FPP Annual Report for 2015 (September 2015)

FPP Annual Report for 2016 (August 2016)

R.96/2016 – Response of the Council of Ministers – FPP Annual Report 2016

SR.5/2016 - CSSP Scrutiny Report on the Draft MTFP Addition 2017-2019

SR.5/2016 Res – Response of the Minister for Treasury and Resources to the CSSP Scrutiny Report on the Draft MTFP Addition 2017-2019

Addendum – MTFP Addition 2017-2019

The States considered the  Draft Medium Term Financial Plan Addition for 2017 – 2019 ("the draft MTFP Addition") (P.68/2016) at the 5-day States Sitting commencing 26th September 2016, which included the update to  the  income  forecasts  following  BREXIT  and  the  Fiscal  Policy  Panel's  revised  economic  assumptions (August 2016). The update to the income forecasts is included in the main document of the draft MTFP Addition (as amended following debate).

At the conclusion of the States debate on the draft MTFP Addition on 30th September 2016, the States had considered 11 amendments to the original proposition of the Council of Ministers, with 2 amendments having been withdrawn.

The States approved 3 amendments, and the withdrawal of one of the amendments followed compensating proposals from the Chief Minister.

The changes required as a result of the agreed amendments are outlined in this Addendum. The relevant sections of the report within P.68/2016 and the Annex to the MTFP Addition (P.68/2016 Add.) have also been amended to reflect these agreed changes, and also to include the update to the States' income forecasts in P.68/2016 Add.(4).

The Addendum will be available on the States Assembly website. Amendments agreed:

P.68/2016 Amd.(4): the fourth amendment (lodged by Deputy J.A.N. Le Fondré of St. Lawrence ) – relating to the Nursery Education Fund ("NEF") means-testing for all service providers

The fourth amendment was adopted by the States, which agreed that the proposal for NEF means-testing should apply to all providers. This could marginally increase the savings, but may also require an additional member of staff. The Minister for Education will advise the Assembly of the new proposals in due course. The Amendment requires no change to Education Department expenditure limits.

P.68/2016 Amd.(5): paragraph 1 of the fifth amendment (lodged by Deputy J.A.N. Le Fondré of St. Lawrence and amended by the Council of Ministers) – relating to the definition of permissible work on the development of user pays' charges in relation to domestic liquid waste and domestic solid waste

Paragraph 1 of the amended fifth amendment was adopted by the States, which agreed to withhold consent to the application of resources for work on the development of user pays' charges in relation to domestic liquid waste and domestic solid waste, any such consent requiring separate authorisation by the Assembly; other than work necessarily connected to the development and implementation of commercial solid and liquid waste charges. The Amendment requires no change to Department for Infrastructure expenditure limits, and final proposals for commercial waste disposal charges will continue to be developed in the first half of 2017.

P.68/2016 Amd.(7): seventh amendment (lodged by Deputy M. Tadier of St. Brelade )

The seventh amendment was adopted by the States, along with proposals from the Chief Minister to commit to provide funding for 2 teachers who would be employed by the Education Department to teach Jrriais. No net change to total expenditure, but additional funding for the Department to be provided from within the Chief Minister's Department and Economic Development, Tourism, Sport and Culture Department ("EDTS&C"). It is now clear that the £30,000 transfer between Education and EDTS&C, agreed as part of the seventh amendment, was unnecessary and will be reversed during 2017 by Ministerial Decision.

Other changes:

P.68/2016 Amd.(2): second amendment (lodged by Deputy G.P. Southern of St. Helier ) relating to Statistics Unit savings

The second amendment was withdrawn following a proposal from the Chief Minister which would reduce the proposed saving in the Statistics Unit and deliver the remaining savings by efficiencies from the merger with the Health Intelligence Unit. This would enable the Business Tendency Survey and other highlighted studies to continue. The Amendment requires no change to Chief Minister's Department expenditure limits.

P.68/2016 Amd.(9): ninth amendment (lodged by Senator S.C. Ferguson) relating to a review of the tax system The ninth amendment was rejected. However, during the debate on the amendment, and as part of the Council of Ministers' formal Comments presented to the States, the Chief Minister committed to:

• a review of Jersey's personal income tax system,
• a Tax Gap Analysis, and
• a review of the model used to forecast personal income tax.

Paragraph (c) of P.68/2016 – the proposed Health charge for 2018 and 2019; and P.82/2016 (Draft Health Insurance Fund (Miscellaneous Provisions) (Amendment No. 2) (Jersey) Law 201-) relating to the proposed transfers from the Health Insurance Fund ("HIF") for 2017, 2018 and 2019

The States rejected paragraph (c) of P.68/2016, which sought to introduce an in principle income-based Health charge, with the effect of reducing States estimated income by £7.5 million in 2018 and £15 million in 2019. The Council of Ministers will consider future revenue-raising measures intended to replace the funding mechanism for Health in 2018 and 2019, with these measures to be brought forward in the States' Budget proposals for 2018. These measures are to be developed following the current tax review and subsequent engagement with States Members during the first half of 2017.

The draft MTFP Addition also approved the detailed net expenditure allocations for 2017 – 2019, which are included in the financial forecast update at Figure 20. The total States net expenditure limits for 2017 – 2020 are shown in Figure 25.

The Health and Social Services Department's net expenditure was dependent upon the approval of transfers from the HIF for 2017, 2018 and 2019. Furthermore, the proposed HIF transfers were dependent on the approval of the Health charge for 2018 and 2019. With the States' rejection of the Health charge, P.82/2016 from the Minister for Social Security has been withdrawn, which means that the Health and Social Services Department's gross expenditure and income are both reduced by £5 million in each of the years 2017 – 2019.

The Council of Ministers is proposing to earmark £5 million to replace the expenditure allocation for 2017 as a first call on 2016 underspends to be carried forward and applied to Health and Social Services. The Council of Ministers will explore sustainable expenditure measures with departments to identify £5 million on a recurring basis ahead of the Budget 2018. Alternatively, proposals for the allocation of Central Growth for 2018 and 2019  would  also  be  considered  as  part  of  the  Budget  2018,  which  currently  include  £9.7 million  and £17.5 million of Health growth in 2018 and 2019 respectively.

The draft MTFP Addition Department Annex for 2017 – 2019 was published as an Addendum (P.68/2016 Add.) and an amended version incorporating the changes agreed in the debate will be published on the States Assembly website.

1. Council of Ministers' Foreword

The States Strategic Plan set a clear direction for government: investment should be allocated to the agreed priority areas of health, education and St Helier, while also upgrading our essential infrastructure, supporting the economy and keeping spending under control.

The package of proposals in this Medium Term Financial Plan aims to keep Jersey successful by planning prudently for the future. Its strategy is to focus the available funds on priority areas and balance budgets by 2019, as advised by the Fiscal Policy Panel.

It concentrates on improving Islanders' lives by investing in key public services. It also recognises the need to boost economic growth and diversification, essential for creating the jobs and income we need to pay for services.

Last year we  published  proposals  for  total  annual income  and  spending  from  2016  - 2019  and  detailed departmental spending for 2016. Now we are proposing detailed departmental spending for 2017-2019. We said last year that a two stage plan would give us time to ensure our Public Sector Reform programme was changing the way we deliver services and that our savings and efficiencies proposals were making permanent reductions to base budgets.

Since becoming Chief Minister in November 2011, through the Comprehensive Spending Review, successive budgets and public sector reform - £85 million has been taken out of department budgets. £38 million of that was permanently removed from budgets in 2016.

In 2015 we saw a net reduction of 165 full time equivalent posts, and 114 people have left the organisation through voluntary redundancy since the scheme opened in 2015. This facilitates our continued focus on reducing headcount as we restructure the public sector.

Every department is doing its bit for Jersey by reprioritising, finding efficiencies, making sure our organisation is working as well as it can for our long term future. As part of our reform programme Lean techniques have been used to streamline services. We have been bringing our staff together to enable better cooperation between departments. We are turning around the long term underinvestment in our essential infrastructure and we have transformed an outdated social housing model so islanders can enjoy more secure, affordable housing. In 2015 Andium built 88 new homes and will be investing more than £200 million over the coming years, improving people's lives and transforming areas of St Helier.

Crime continues to fall and we are getting islanders back to work. Since last year we have seen the highest ever number of people in paid work. We have invested money into the economy, spending more on services and capital projects than we take out in tax. Anti-discrimination legislation has come into force, Freedom of Information is firmly established, we have been developing a new Mental Health Law, a Capacity and Self- Determination Law, and a new Mental Health Strategy for Jersey.

And latest indicators show the island is recovering from the global downturn. In 2014 our economy grew by nearly 5%, GDP per head went up 3% and average earnings were up by 0.9 percentage points more than inflation between June 2014 and 2015.

This financial plan moves funds into the agreed priority areas. Health and Social Services will be receiving additional annual funding of almost £40 million by 2019; education will be receiving £11 million of additional funding every year from 2019. £168 million has been allocated to capital projects over the four years of the plan, including £55m for school buildings, £43m for sewage works and £21m for IT systems. And we are investing in the economy through initiatives that will have a positive effect on economic growth or productivity.

The Fiscal Policy Panel has validated our approach - supporting the economy in the short-term, investing in the services and infrastructure that support growth in the medium-term, and balancing our books at the right time.

As a result of the vote by the people of the United Kingdom to end their membership of the European Union there is likely to be a period of some uncertainty across the UK and Europe, but Jersey is well placed to weather the effects of this change.

Jersey's Government and industry have been busy establishing the foundations for the Island's future prosperity by diversifying our economy into new service sectors such as digital, and growing and strengthening our links with dynamic markets around the world, in areas like the Middle East, Asia and Africa. This clear plan, together with substantial reserves and a prudent approach to our finances, means that Jersey is in a strong position to take action to stimulate its economy if needed, and to secure our long-term economic future. We have planned for many months for the outcome of this referendum and will continue to promote Jersey's interests and work to protect our position as the UK negotiates its exit from the EU.

This financial plan will embed the changes we have set in motion and put Jersey on a path to secure and sustainable finances. Targeted investment will help develop the skills our children need to achieve fulfilling careers and it will prepare our health service for the challenges ahead. We will continue to encourage innovation in island businesses and inward investment, so we can sustain a healthy job market, low unemployment, high quality public services and an island with strong public finances that islanders are proud to call home.

Senator I.J. Gorst Chief Minister

2. Council of Ministers' Executive Summary

Our Plan

Background

Jersey is one of the world's most successful small jurisdictions. It is a great place to live and work, and compares extremely well with other places in the OECD's Better Life Index for things like overall life satisfaction, personal safety and social support networks.

As we enter a period of increased uncertainty as a result of the UK's decision to leave the EU our economy is performing well and our public finances are in a much stronger position than most other places. We have considerable reserves, minimal debt and assets of nearly £6 billion.

Jersey is in this position because we have consistently looked ahead and prepared for the future, and we want to keep it that way. The States Strategic Plan and the Medium Term Financial Plan set out how Jersey can meet the challenges and opportunities of a changing world and maintain this success for future generations.

Priorities

This plan supports our priorities. It invests in the health and social care we need as our society ages, and it funds improvements in our education system so all our children can reach their potential and develop the skills they need to achieve fulfilling lives and careers. It will keep Jersey special by improving our town, preserving our outstanding natural environment, and investing in our infrastructure.

In order to achieve this we are creating the right environment for economic growth, increasing productivity and efficiency, reducing costs, reprioritising our spending and introducing some user pays charges. These measures will enable the investment we need, while also remaining within our agreed spending limits and balancing our books by 2019.

Two stage plan

We have presented this plan in two stages. Last year we agreed the total annual spending limits from 2016 - 2019 and departmental spending for 2016. This is the second stage, which proposes detailed departmental spending from 2017-2019. This process has allowed time to assess the impact of the proposals on Islanders, to ensure that the States' reform programme is changing the way services are delivered and that our savings measures  are  making  sustainable  reductions  in  budgets:  £38  million  has  already  been  removed  from departments' budgets in 2016.

This second part of the plan, the 'MTFP Addition', takes into account the impact of the measures implemented in the past year, the information contained in the States Accounts, the revised economic assumptions and recently updated income forecasts.

Headline figures

This plan maintains focus on the priorities agreed by the States Assembly and responds positively to the challenges we face.

• In order to invest in our priority areas of health, education, St Helier and economic growth we are bringing forward a package of measures to reprioritise spending and balance our budgets by 2019: we are finding staff and non-staff savings of £73 million; introducing user-pays charges of £4 million; containing benefit spending to save £10 million; raising £15 million per year by 2019 through a proposed new health charge; and introducing charges for the disposal of commercial refuse and liquid waste to raise £11 million per year by 2019.
• These figures differ from last year as the financial position has improved. Income in 2015 was higher than forecast, partly due to a change in accounting policy and this effect will continue into future years. This, and the 2016 budget measures, have enabled us to reduce the amount proposed to be raised through a health charge from £35 million in 2019 down to £15 million.
• In 2016 we invested an extra £26 million to deliver our priority services. This will increase to almost £70 million per year by 2019.
• As we are all living longer we want to stay healthy throughout our lives, so we are allocating almost £40 million of additional annual funding by 2019 to transform health and social care.
• Jersey  needs  to  remain  globally  competitive  with  a  highly  skilled  workforce.  We  are  preparing  for demographic changes by extending some of our schools, and ensuring our young people can reach their potential. We are providing almost £11 million of growth funding for education by 2019 – that's £2 million more than was allocated last year. This extra funding will be used to help more young people access higher education.
• The transformation of the public sector continues. To balance our budget over the life of this plan, and to ease the impact on Islanders, we are following the advice of our economic advisers to use some reserves to support the economy in the early stages of recovery. We will use the £70 million in 2015 and 2016 as agreed from the Strategic Reserve and a further £30 million over the period of the MTFP Addition to fund items like our capital spending programme. We also  proposed to transfer  £5 million per year from the Health Insurance Fund in 2017-2019 to fund primary health care delivered by Health and Social Services while the proposed health charge was being introduced.
• We are spending £168 million for capital projects from 2016-19, including more than £56 million for Les Quennevais, Grainville and St Mary's Schools.

Improving health and well-being

By 2035, there will be sixty-five per cent more people over the age of 65 than there are today, and twice as many people over 85. It's good news that people are living longer and it is our responsibility to care for islanders as they age, playing our part now and not expecting future generations to pick up the bill.

As the number of people in Jersey aged over 65 increases from 17,000 today to a projected 28,000 by 2035, our income will come from a smaller proportion of working age people. We will need to fund complex new health technology, and drugs and treatments to keep islanders healthy. We will need to spend more on helping people to stay well, and more on the early years of life which are so important to lifelong health and well-being. We are also investing more in mental health services as a person's quality of life is about more than their physical health.

We are allocating £40 million of additional annual funding for health and social care by 2019. This includes £19 million more each year to meet increased demand and to respond to changes in standards of care, £4.5 million to support vulnerable families, safeguard children and improve the first critical 1001 days of a child's life. This will involve improved antenatal preparation, perinatal mental health care and early literacy, as well as health promotion campaigns on breastfeeding and avoiding alcohol during pregnancy.

There will be £1.5 million more for mental health services, £4 million more to treat people at home and in community settings, and £8 million more each year to redesign services at the hospital so emergency patients can be treated safely on the same day, avoiding unnecessary admission to hospital and reducing the length of stay for those who do need to be admitted.

This spending was proposed to be supported by the introduction of a new health charge which would have been phased in, raising £15 million per year by 2019 (as explained in Section 12). The States has rejected these proposals and the Council of Ministers will consider the appropriate course of action as part of the Budget 2018.

We have identified a preferred site for a new hospital which has been presented to the States for approval and outline funding proposals will be presented for debate in the New Year.

We are proposing that funds from the Car Park Trading Fund be used to help with transport costs for people with disabilities with a pilot scheme being prepared by the Department for Infrastructure for introduction in early 2017.

Improving education

We are committed to helping all our children to reach their full potential. Over the last ten years Jersey's academic performance has plateaued, so we have refocussed our work on four priorities; raising standards, updating the curriculum, supporting families and giving head teachers more freedom. A key project is the Jersey Pupil Premium, which will help children who are at risk of under-achieving in their education. Alongside this we are ensuring we have sufficient places for pupils in our schools and we are building stronger links with businesses, so young people can leave school ready for the world of employment or their next steps in education.

We will allocate nearly £11 million of growth funding for education by 2019. As well as the Pupil Premium, that includes extra funding for IT education and £2 million to help more families with the cost of higher education. We are continuing to invest in our school infrastructure with more than £55 million for Les Quennevais, Grainville and St Mary's Schools. We have just built a new primary school for St Martin and six primary schools have been extended or improved to meet the need for places as numbers rise – d'Auvergne, Plat Douet, Springfield, Trinity , Bel Royal and Mont Nicolle.

Improving St Helier

We are regenerating our capital, St Helier, so it is a great place to live and work. We are making sure that quality public space is included in new town developments and we are working closely with the Parish to improve services. That includes paying rates on States properties from 2017.

Andium is investing more than £200 million in new and improved homes over the coming years, improving people's lives and transforming areas of St Helier. In 2015 Andium built 88 new homes and refurbished existing homes at developments like Hampshire Gardens to meet the Decent Homes Standard. In the coming years they will be building much needed new homes, for instance at Ann Court and Summerland, and refurbishing sites such as Convent and Caesarea Courts.

The States of Jersey Development Company plans to invest more than £150 million in St Helier over the period of the plan - building grade A office space to meet the demand of expanding businesses and to ensure that we can attract valuable inward investment business. These new office developments free up older office buildings to be transformed into homes, a process that has already begun in some areas of St Helier. The SOJDC is also providing 40 affordable one-bedroom shared equity apartments as part of the College Gardens development, currently being built on the site of the old Jersey College for Girls.

Improving infrastructure

We are continuing to invest in vital public infrastructure, much of it in St Helier. We are spending £168 million on capital projects in the four years of the plan. The largest expenditure over the period will be:

• £43.4 million for the Department for Infrastructure, much for a new sewage works
• £55.7 million for Les Quennevais, Grainville and St Mary's Schools;
• £21 million to replace essential IT systems and enable the modernisation of public services
• £14.3 million for replacement of equipment operated by the Department for Infrastructure
• £14 million for replacement of equipment operated by Health and Social Services
• £8.2  million  for  next  phase  of  prison  refurbishment  (when  available  through  Criminal  Offences Confiscation Fund)
• £5 million for minor capital requirements
• £3.5 million to extend Jersey Archive
• £1.2 million to replace fleet vehicles (such as ambulances)
• £1.7 million to complete refurbishment Sandybrook residential home

We are also planning for the impact of climate change, the biggest global threat to all aspects of life.

Supporting economic growth

We are following FPP advice to support the economy in the short term to sustain the economic recovery we have seen developing in the last two years. When capital expenditure is taken into account the net impact of States spending will be to add 4%-6% of GVA over the 2016-19 period. The plans to invest a significant amount in our infrastructure will also help to lay the foundations for future economic growth.

We are continuing to help create the right environment to boost our economy through diversification and productivity improvements, to provide extra revenue for our public services. We will sustain our programme of investment in infrastructure, in the Jersey International Finance Centre and Social Housing through arms-length, self-financing organisations. We are attracting new business through active inward investment and promotional activities supported by high standard regulatory regimes.

Last year we set aside £5 million for targeted measures in 2016 that could demonstrate that they would improve economic growth, productivity, skills and job opportunities. We have set aside a further £13.5 million for the period 2017-19.

£3 million of this has been used to protect the budgets of External Relations, financial services, digital, innovation and competition. Maintaining Jersey's reputation abroad and in key international organisations is vital to ensure the long term health of the financial services industry, particularly as the UK and EU enter a period of uncertainty created by the decision to leave the EU.

The remainder of this funding will be allocated to specific projects across all sectors of the economy that can contribute to economic growth and productivity improvements. Allocation will be subject to a strict governance structure.

The top priority of the first Medium Term Financial Plan 2013-15 was to get people into work. Funding of £7 million per year went on reducing unemployment, extra support for apprenticeships and increased student numbers at Highlands College. Funding was provided to organisations like Jersey Finance, Jersey Business and Digital Jersey to grow the economy, and to establish a London office to build Jersey's international profile.

The Back to Work programmes have been successful in getting islanders into employment, so we are proposing to maintain much of this funding despite falling unemployment. As the economy improves,  Back to Work services are being rolled out to additional groups, who may face extra barriers to work.

Economy

International developments

The global economy has entered a new period of heightened uncertainty and financial market turbulence following the decision of the UK to leave the European Union. The implications for the UK economy in both the short and long term remain unclear and the Bank of England has already stated that some "market and economic volatility can be expected" and that it "will not hesitate to take any additional measures required".

Even before these new developments, the OECD highlighted in their June Economic Outlook that "Eight years after the financial crisis, the recovery remains disappointingly weak" and that the global economy is expected to grow by 3% in 2016 (similar to that in 2015) and with only a slight improvement in 2017.

Global trade growth is also very subdued, with the emerging economies having lost momentum and a modest upturn in the advanced economies held back by slow wage growth and weak investment.

The OECD concludes that growth rates will be much weaker than anticipated and well below pre-crisis levels. They highlighted a number of risks to the global economy and these risks will have been compounded following the UK's decision on EU membership.

Jersey Economy

The Jersey economy goes into this period of heightened uncertainty in a stronger position than most jurisdictions and we are well placed to deal with many of the risks, including those that could emerge as a result of the decision of the UK to leave the EU.

Average earnings have exceeded inflation for three consecutive years. In 2014 Jersey's economy grew by nearly 5% and GDP per head went up 3%. From June 2014 to June 2015 average earnings were up by 0.9 percentage points more than inflation and housing market activity was up 11% in the first three months of 2016 compared to the same period a year earlier. The combination of real growth in earnings and strong growth in employment is a sign of real economic growth in the Jersey economy.

Early indicators of financial services performance in 2016 show positive trends, with increases in both regulated funds and banking deposits. Latest figures saw total employment up more than a thousand over the previous year, and seasonally adjusted figures saw 20 fewer people looking for work than a year earlier.

We are, to a large degree, maintaining existing budgets for tourism, agriculture and other business sectors, reflecting their important contribution to our economy and island life.

The Fiscal Policy Panel refreshed its 2015 analysis of the Jersey economy in March 2016. At that time they expected the economy to return to capacity between 2017 and 2019 and they reiterated their advice that the MTFP should address any structural imbalance in States finances by 2018/2019. We have followed advice to use a small proportion of our considerable reserves during the early years of the MTFP to minimise the risk to the economic recovery.

The FPP has also consistently highlighted concerns about Jersey productivity performance. The latest data shows that productivity increased in 2014 as a result of an increase in financial services productivity, with the non-finance sector seeing a slight fall in productivity. We aim to build on these improvements with the investment allocated to support productivity growth.

The decision by the UK to leave the EU and its implications for the UK and Jersey economies are still unclear but they place even greater emphasis on the FPP's advice to ensure that the plan is flexible enough to deal with changing economic circumstances. Accordingly the Treasury and Resources Minister has asked the FPP for updated advice by mid-July.

We are following FPP advice to support the economy in the short term and the proposals in the plan will see an extra 4-6% added to our GVA between 2016 and 2019. The Council of Ministers is ready to respond if the external economic environment starts to deteriorate and FPP advise a different approach.

There are a number of ways to support the local economy:

• Allow income tax and benefit spend to adjust automatically to help islanders and reduce any impact on the economy
• the Council of Ministers can place funding in the Stabilisation Fund if needed, from contingencies or reserves, to be used in a timely, targeted and temporary way to support the economy
• the Economic and Productivity Growth Drawdown Provision is in place to support policies that can help bolster economic growth. Proposals to use this funding to mitigate the economic impacts of the UK's withdrawal from the EU would potentially be in scope for this funding.

Income forecasts

The remit of the Income Forecasting Group was expanded in 2015 and its membership strengthened with two external advisers. It aims to provide balanced and prudent forecasts and this plan when lodged was based on the latest forecasts produced in June 2016.

The  original  forecasts  for  the  draft  MTFP  Addition  (June  2016)  took  into  account  the  latest  economic assumptions from the FPP as at March 2016, the encouraging financial results from 2015, the spending limits agreed in the MTFP 2016-2019 and the funding measures required to achieve balanced budgets by 2019.

The economic forecasts had fallen slightly since September 2015, and partly offset the improved income in 2015.

The main changes were increased revenue from personal income tax balanced against a small net reduction in forecast tax from companies and impots. Overall the impact of the June 2016 forecasts was to increase income by £7 million per year by 2019.

 However, as a result of the UK Referendum decision to leave the EU and the implied impact on the UK and Jersey's economic prospects the Minister for Treasury and Resources asked the FPP to provide an economic update as part of its Annual Report for 2016.

The IFG prepared an update to the income forecasts using the August 2016 economic assumptions and this was presented  to  the  States  by  the  Council  of  Ministers  as  the  4th  Addendum  to  the  draft  MTFP  Addition, P.68/2016 Add.(4), to ensure the States debated the MTFP Addition with the latest financial forecasts.

The update to the forecasts (September 2016) shows a small reduction in income by 2019 of £6 million p.a. compared to June 2016. The update to the income forecasts is included in the amended Section 7 of this report, and in the detailed Appendices for the various income areas.

The forecasts are provided as a range but the Income Forecasting Group stresses the risks are on the downside of the central scenario due to the uncertainties in the global economy and economic outlook. They endorse the views of the FPP that the plan must include appropriate flexibility. The response to any variations in income depends on the scale of change.

Improving efficiency and reducing costs

Reforming the public sector

Reform of the public sector is essential if we are to fund our priority areas while also balancing the books by 2019. Many governments are adopting new ways to provide services and we must demonstrate our own capacity to innovate, learn and adapt. We risk wasting resources if we maintain 20th Century ways of working while the world around us changes radically.

That is why we are re-thinking what we do and how we do it so that every pound counts towards securing Jersey's future. It means embracing innovation and new models of service delivery. It means examining how we use, deliver and interpret technology and data. It requires new ways of working with partners and the public to achieve our goals, so whoever can deliver outcomes most efficiently and effectively provides the services, whether that's the private, public or voluntary sector. Services will change, some may be delivered by other organisations, and some services will cease.

Savings and efficiencies

Departments have been asked to find efficiencies, which come from thinking creatively, using Lean techniques and providing services in a more efficient way, while also improving customer service.

Last year we set ourselves a target of £90 million in savings and efficiencies. It became clear that delivering such a target over this time frame would have a disproportionate impact on the community. We took these concerns into account, as well as the better than forecast income in 2015 and the likely distributional impact of the planned proposals. We decided to extend the time frame to enable departments to find efficiencies to meet the target, thereby helping to minimise the impact on islanders. This means departments will continue to restructure and reduce costs but over a longer period. Service reviews are still underway and further efficiencies will come as the public sector adopts a culture of continuous improvement and reaps the benefits of technological change and office rationalisation.

We will deliver £73 million in staff and non-staff savings by the end of 2019, most of which is being delivered through efficiencies, workforce modernisation and pay restraint.

We anticipate that the next Medium Term Financial Plan will still require efficiency savings in order to continue to meet the rising costs of an ageing population. This will be an important aspect of a culture of modernisation across the public sector.

In seeking savings and efficiencies throughout the public sector, departments are working to:

• focus on priority services
• provide services more efficiently and cost effectively
• simplify processes
• restructure and merge departments
• remove unnecessary regulations
• maintain pay restraint
• invest in e-Government

To support this effort over the period of the plan £40 million has been allocated to transform the public sector, invest in e-government and improve customer services, as well as funding workforce modernisation, staff redundancies and severance. Our emphasis is on voluntary programmes, using the 6% staff turnover rate to manage vacancies and reducing headcount naturally as staff leave.

Workforce modernisation

We value the contribution of our public sector workforce and recognise the importance of developing a fair pay structure through Workforce Modernisation. We also have to recognise that staff costs represent more 50% of our budgets and we must keep the same tight rein on the pay bill as on the rest of our resource, to deliver best value for money.

We have been designing a new pay structure that will help us change the way we provide services. This new structure will integrate the variations in terms and conditions that exist across the organisation and will be simpler and fairer, ensuring equal pay for work of equal value. It will also make it easier for employees to move around the public sector in response to changing customer and service needs.

We have been applying a policy of pay restraint across the public sector since 2012, to help keep the public sector pay bill within the agreed limits and support investment in our strategic priorities. This policy will need to be maintained for the period of this plan and will contribute significantly to the spending target.

Staffing

Our employees are the organisation's most valuable asset and we know they value job security. However the public sector has to react to changing circumstances. We have agreed to reduce the number of staff as we restructure the organisation and make the most of rapidly developing technology. Overall we will see fewer staff in some areas, but numbers will rise in priority areas of health and education.

Officers are working with staff and their representatives to redesign the way we provide services. Until reviews are concluded later this year we cannot say precisely what the figures will be.

The continued focus on restructuring services and reducing headcount has seen 162 applications for voluntary release approved since 2015, which has produced annual savings of £5.5 million per year.

Benefit changes

The Social Security Department provides more than £350 million worth of benefits every year. This includes £167 million for old age pensions and £75 million for Income Support, as well as funding for GP and drug subsidies, incapacity allowances, long term care and cold weather payments.

Benefit changes of nearly £10 million were agreed last year as part of the first stage of the Medium Term Financial Plan, to support extra investment in health and education spending.

The changes were chosen with an emphasis on ensuring that the benefit system is fair, encourages financial independence, and to ensure that public money is well targeted. As far as possible, the effects on individuals are being minimised by spreading the impact across larger groups of claimants.

A new targeted Christmas bonus and an expanded health scheme for people over 65 will provide extra support to key groups.

Distributional analysis

One of the ways we can assess the impact of spending and savings proposals is to research their impact on various households with different levels of income. This kind of assessment is not the only way to inform policy decisions. It has to be balanced against other priorities like the health of the economy and other ways of regarding fairness.

The distributional impacts of policy changes are complex and not always clear cut, especially where changes in expenditure are included. Even where it is possible to consider the impact of measures on households of different income this may only be looking at part of the picture. To fully understand the situation it would also be necessary to take account of wider impacts in terms of wealth, welfare and impacts over people's lifetime which are difficult to assess.

Health and social services

Spending on health and social services is generally considered to benefit all, but particularly those in lower income groups. The Institute for Fiscal Studies concludes that the largest item of public spending, health, benefits lower income groups as that is where ill health is concentrated.

Education

The impact of education spending on different households is less clear. However, a large proportion of the increase in education spending is on the Jersey Pupil Premium, with a further increase in secondary education. This suggests that the increase in education spending will benefit those in lower income groups. We are also increasing funds by £2 million to help more people on lower incomes access Higher Education.

Benefits

A number of benefit changes were agreed last year as part of the first stage of the Medium Term Financial Plan. These changes were made up of £8.3 million from Income Support and £1.6 million from removing the previous Christmas bonus.

Income Support is paid almost entirely to people on lower incomes. Changes were designed to target spending more carefully and to encourage claimants to move towards financial independence. They affect about 6,500 households who are mainly towards the lower end of the income distribution. These changes do not affect about 36,500 households who do not claim Income Support, and these households range from the low end to the top end of the income distribution.

The previous Christmas bonus provided nearly £85 to about 19,000 households (mainly pensioners) irrespective of wealth. By introducing a new, means tested, Christmas bonus and by providing an expanded health scheme for people over 65, much of the impact of this change will be offset, and vulnerable households at the lower end of the income distribution will not be affected.

Other spending

The  distributional  impact  of  spending  outside  health,  education,  social  housing  and  welfare  is  not straightforward. Likewise the beneficiaries of capital spending are not always clear.

Distributional impacts need to be balanced against other ways to assess fairness, for instance inter-generational fairness, and against other objectives such as the efficiency of public services, the competitiveness of the economy and the requirement to put finances on a sustainable footing to help secure economic growth and future prosperity.

It is also important to put it in the context of the impact of government policy as a whole, and to consider the options for compensating measures to offset any impacts thought to be unfair. However, the Council of Ministers has taken into account the distributional analysis undertaken and adjusted its plans accordingly. (see Section 14 for a Summary)

User pays charges

Health

As sustainable savings are now being delivered, the Council of Ministers proposed the form of a new funding mechanism to help pay for the significant investment in health and social care. The original plan was that this  new charge would raise up to £35 million per year by 2019. Given time to reflect on the better than expected financial position in 2015 and improved income forecasts for 2016-2019, the Council of Ministers proposed that an income-based charge be introduced which would raise £7.5 million by 2018, increasing to £15 million in 2019. However, the States rejected these proposals and the Council of Ministers will consider future revenue raising measures to replace this income ahead of the Budget 2018.

This  financial  plan  proposes  efficiencies  and  savings.  It  also  asks  Jersey  businesses  to  pay  their  way, acknowledging the fact that many local firms do not pay tax and have enjoyed public services subsidised by personal taxpayers for many years.

Waste

We have been looking at introducing user pays charges for waste disposal, as is done everywhere else. The

intention was to raise up to £10 million to pay for services, improve environmental outcomes and manage demand. We have agreed to introduce charges for the disposal of commercial waste as these services have, up to now, been paid for out of general tax revenue rather than by the companies themselves. This means individual taxpayers have been subsidising business costs.

The Council of Ministers has reviewed the £10 million target and raised it by £1 million, so the Infrastructure Department will bring detailed proposals to the Assembly in 2017 to raise £3 million in 2018 and £11 million in 2019. The phased introduction of these waste charges will result in businesses budgeting for their own refuse and liquid waste disposal.

Other User Pays

There are a number of other charges that help to make up the £4.6 million of user-pays charges.

An extra £0.1 million is being allocated to the Nursery Education Fund to provide States funded places for children in nurseries to cater for high birth numbers in 2010-12. However, higher income families will receive less support as a result of means-testing access to 20 free hours of pre-school education for households earning more than £85,000.

The Education Department will review the fee-paying sector to ensure full value for money and that the service is in line with the Department's key priorities. Subsidies are likely to be reduced by 1% in 2018 and 3% in 2019, subject to States approval.  

Businesses will pay for the cost of their fire certification, a service that is currently subsidised by tax payers, and the work of the explosives officer will be covered by charges to those that use the service.

Strategic and Long Term vision

Over the next 20 years our community will face unprecedented changes. Like many other places Jersey is experiencing an ageing population; growing health challenges; increasing resource pressures; the need to respond to climate change; and rapid technological innovation changing the way we live and work. How we adapt will determine the future wellbeing of our Island.

Managing a successful future will require strategic direction and investment over many years, so the Council of Ministers has reviewed the way Jersey's government plans for the long term and is introducing a new approach that reflects international advice and well established practice. Its key elements are to focus on outcomes, on the impact policy changes have on people's lives and on government working together with the private, voluntary and community sectors to tackle the biggest challenges facing our Island.

The focal point of this new approach is a long term Island Vision that describes what we, as a community, believe Jersey can achieve over the next 20 years. The Council has launched a ten month consultation designed to help develop this new 20-year Island Vision.

The new approach will set a clear direction for the future and set the framework for how to get there. It will enable the government to sequence policy, investment and funding priorities so that short and medium term plans serve as stepping stones towards the agreed long term outcomes. This plan is an important step in that direction.

Conclusion

Jersey has a clear plan to tackle the issues that are also facing many advanced economies. Our society is ageing, global competition is intensifying, and we are seeing rapid technological and environmental change. Unlike many other places Jersey starts from a position of considerable strength with little debt, significant reserves and a proven track record of fiscal discipline and remaining nimble in the face of rapid change.

This plan explains how we will prioritise our available resources to achieve our strategic goals of investment in health, education, St Helier, economic growth and maintaining our vital infrastructure, while delivering balanced budgets by 2019. At the same time we are ready and able to act on the basis of FPP advice should there be any impacts on the local economy from the UK's decision to leave the EU.

It highlights our strategy for seizing opportunities and maintaining our success as a community in a fast changing world.

3. Strategic and Long Term Vision

Our Purpose

The Council of Ministers, as the government of Jersey, serves and represents the best interests of the Island and its citizens. In order to do this, they must:

• Provide strong, fair and trusted leadership for the Island and its people.
• Deliver positive, sustainable economic, social and environmental outcomes for Jersey.
• Ensure effective, efficient and sustainable management and use of public funds.
• Ensure the provision of modern and highly valued services for the public.

Our Strategic Goals

The Council has a collective responsibility to deliver better lives for Islanders and a better future for Jersey. Ministers are the custodians of a range of social, environmental and economic Strategic Goals which are currently organised around Ministerial portfolios:[1]

SG1  Maintain a safe and just society.

SG2  Pforor allmo andte health an protectindgso thcieal inweteresllbeints ogf t fohr te frailhe w andhole thcoe mvumlnuerabnity, prle. oviding prompt services SG3  Hvuelplnerab peole in ple in Jouerser comy amchiuneityve . and maintain financial independence and safeguard the most

SG4  Champion a proper supply of housing of all types, promote affordability, improve housing

standards and build strong communities.

SG5  Plifelorovidnge learnia first nclass g. education service, supporting the development of skills, creativity and

SG6  Increase the performance of the local economy, encourage economic diversification and

improve job opportunities for local people.

SG7  Promote sporting, leisure and cultural activities that enrich Islanders' lives.

SG8  Promote Jersey's positive international identity.

SG9  Protect and enhance the Island's natural and built environment.

Provide attractive and well maintained public spaces, protect the environment from the SG10  impact of waste products and develop public transport, road and cycle networks that meet

the needs of the community.

SG11  Look after Jersey's finances and assets, ensuring responsible use of public funds.

The Strategic Plan process

Each new Council publishes a Strategic Plan for its term of office which –

• identifies the Council's key priorities for its term of office, focusing on the key areas where significant change will make the biggest difference to Jersey's future;
• sets the strategic direction for detailed delivery plans.

This process requires the Council to review Jersey's progress against the Strategic Goals and identify where priority focus is required in response to key pressures or opportunities. The 2015 Strategic Plan identified five Priorities–

• Sustainable Public Finances
• Improve Health and Wellbeing
• Improve Education
• Optimise Economic Growth
• Improve St Helier

Prioritisation does not automatically mean additional funding. In some areas, targeted growth has been agreed to invest in new initiatives or respond to increasing demand but prioritisation is also about transforming the way we develop services, processes - and even strategy.

Changing World, Changing Island

Over the next 20 years, Jersey like all countries around the world will need to revise their policies to accommodate unprecedented changes to the economic, social and environmental conditions we've become accustomed to.

These challenges will transform Jersey as we know it today. Jersey has always been able to adapt to address economic and financial challenges and changed through time and the Island is more than capable of meeting the challenges of tomorrow. The responsible policy approach is to create a business environment which meets these changes along with an ever increasingly skilled workforce equipped to compete in the changing world.

Experience shows that taking decisions early will always secure a better outcome. Jersey distinguishes itself from other jurisdictions in already having taken difficult decisions that others have put off and need to take today.

The changing age and health profiles of our population will change the nature of our community and increase demand on our services. New technology is already changing our homes, the jobs we do, the ways we socialise and the ways we shop. A changing climate will impact on our environment, our businesses and our way of life. Jersey is already experiencing increasing air and sea temperatures, more frequent severe weather events and rising sea levels. Climate change impacts will have a significant implications for our environment, our businesses and our way of life. There are very real risks but also clear opportunities for Jersey to differentiate itself as a secure, resilient Island.

How we adapt to all these changes will determine the future wellbeing of our Island and because we have already taken certain difficult decisions early, particularly related to our ageing population the Island is now in a position of strength.

Preparing for the Future

The 2015 Strategic Plan and the MTFP represent this Council's medium-term plan to help prepare Jersey for the challenges and opportunities we will face, as a community, in this changing world.

The MTFP represents one step on a journey, but a single term of office is too short a period in which to introduce new policies and demonstrate their true impact. Shaping and securing our future will require strategic direction and investment of effort over many years.

This is why the Council of Ministers has reviewed the way Jersey's government plans for the future and is introducing a new approach that reflects international advice and well established practice.

The key elements of this new approach are:

• a focus on outcomes – results which people can identify with such as living longer, healthier lives or getting good jobs – which are designed to stay in place for the long term rather than a single election cycle;
• indicators which show the change we want to bring about and let us know if we are succeeding;
• a focus on the impact on people's lives– not about how things are delivered, the amount of money spent or the number of programmes that have been introduced; and
• an opportunity for government to work together with the private, voluntary and community sectors on the development of plans and actions to tackle the biggest challenges facing our Island.

The focal point of this new approach will be a long term Island Vision that describes what we, as a community, believe Jersey can achieve over the next 20 years and defines the level of change required. That means understanding where we are now, what we value most about Jersey today and agreeing our shared aspirations for the future.

Consultation

In June 2016, the Council launched a consultation to help develop this new 20-year Island Vision. This is a ten month project organised in three phases:

Phase One: Share' (June to July 2016):

Gather ideas from residents about their vision for the future of Jersey.

Phase Two: Shape' (July to December 2016)

Consider the feedback from Phase 1, take into account evidence about key social, economic and environmental trends and invite further debate on specific issues. Consider best practice from elsewhere, discuss potential trade-offs and how we can work together to bring an Island Vision to life. This phase will produce a draft Island Vision for discussion.

Phase Three: Agree' (January to April 2017)

Provide opportunities for Islanders and stakeholders to review the draft Vision and consider if it's heading in the right direction.

The new approach will set a clear direction for the future, define what we believe Jersey can achieve, and set the framework for a coherent set of delivery strategies designed to get us there.

The Vision Framework

Around the world, strategic planning is often based on three core themes of community, economy and environment. This approach recognises that achieving a balance between these themes is key to making a place attractive to live, invest or visit.

If we are to organise a broad-ranging conversation about Jersey's future that addresses each of these themes and defines what we hope to achieve, we need a coherent structure to collate and interpret Islanders' views.

This is the purpose of the Vision Framework. We built it by drawing on local experience and best practice elsewhere, then tested and refined it in workshops with members of the public, politicians and officers

Figure 1: The Vision Framework

Each Goal breaks down into a set of Outcomes. These are the things that must go well' if it is to be achieved. So for example, the Safety and Security Goal cascades into outcomes about crime, fire safety, health and safety, road safety and emergency planning. These five outcomes are all essential to the safety of people and property in Jersey.

The Outcomes are the fundamental building blocks of the Island Vision. They are about the wellbeing of the Island. As such, they require the participation of the whole community, public and private partners to make a difference.  

The Island Vision

The Island Vision will define our shared ambitions for each of the community, economic and environmental outcomes. It will become the cohesive document that sets the signposts for the future' as envisaged by the States in 2012.[2]

It will:

• provide clarity about Jersey's future ambitions for its economy, community and environment and the level of change required to get us there;
• clearly identify key inter-dependencies and where difficult choices need to be made. It ensures that the options are more explicit and makes it easier to resolve trade-offs;
• stimulate discussion on the resource prioritisation and different ways of working needed to deliver the required levels of change;
• provide a clear mandate for the ongoing development of joined-up delivery strategies designed to put Jersey on a course to achieve these agreed outcomes;

 The Island Vision will also provide transparency on what the States is working to achieve, not just during one political term of office, but over the longer term.

Measuring Jersey's Progress

The next key component of the Framework is a core set of headline' Indicators that measure Jersey's progress as a whole, rather than Ministerial or departmental performance.

These Island Indicators will be collated and published in an accessible, transparent way so they can be used to understand Jersey's progress and inform strategic planning. Setting the Island Indicators is the first step in the development of a new, comprehensive performance management framework for government and its partner agencies.

Wherever possible, the proposed Island Indicators have been chosen because they are already in use locally and are widely represented in similar indicator systems adopted across the world.

Reviewing the Vision  

The Island Vision will provide an  overarching brief to set  direction, guide decisions and  ensure delivery strategies,  policies and services are  properly aligned. Of course, it  cannot be completely fixed with  certainty from the outset. It is,  after all, created at a particular  moment in time on the basis of  the available information. It  must evolve in response to  circumstances and learning  along the way.  

Each incoming Council will have the right to review and refresh the Vision. It will need to undertake a strategic assessment that takes into account progress towards, and achievability of, the Vision in the light of changing circumstances.

This will help incoming Councils recalibrate the Island Vision, identify the pressing priorities of the day and develop their own medium-term plans to keep Jersey on course.

Four Year Focus – the Common Strategic Policy  

By Law, each new Council of Ministers is required to produce a statement of their common strategic policy' within four months of their appointment.

The common strategic policy' will become a four-year Priority Plan that enables each new States Assembly to make informed decisions on their priorities' in the context of the Island Vision.[3] It defines what each new Council will do during its tenure, taking into account the issues and resource capacity identified in the strategic assessment. The Priority Plan informs –  

• recalibration of the Delivery Strategies designed to help achieve Jersey's desired long term outcomes;
• a Medium Term Financial Plan which aligns funding of departments and delivery strategies accordingly;  
• a Corporate Delivery Plan which collates the major change projects that departments will deliver during the Council's term of office. These change projects will align to the Delivery Strategies or the corporate services (human resources, information technology, etc) that support their delivery;
• the development of integrated departmental plans which identify their role in the delivery of the Island Vision, the change projects they own, how the services and infrastructure they manage contribute to the Delivery Strategies and how their performance will be measured and improved.

This new approach will facilitate improved integration of all aspects of the planning system, including performance and risk management. It will also promote an improved approach to strategy design and co- ordination.

An important feature of the framework is that it can be reviewed through different lenses. Addressing issues such as social exclusion, climate change or the key determinants of health require a focus on different Goals from across the framework and the interplay between them. The framework provides the enduring framework against which cross-cutting issues can be tested and evaluated.

Figure 2 summaries the proposed new strategic planning system. Figure 2: The Strategic Planning Process

Public Sector Reform

The public sector will play an important part in helping deliver many of these outcomes. No other organisation has the same capacity to deliver social, economic and environmental change in the Island. Setting an Island Vision requires government to step back and think about the role it expects the public sector to play and the capacity of the organisation to respond to emerging challenges and opportunities. Ensuring that the public sector is ready for the challenges that lie ahead is, above all else, what public sector reform is about. More information on the Public Sector Reform Programme is provided at Section 11.

4. Development of Medium Term Financial Plan Addition

The Medium Term Financial Plan process

The Medium Term Financial Plan (MTFP) sets out the States' overall tax and spending envelope for the period 2016 - 2019. The MTFP 2016 -2019 was split into two stages to allow more time to develop the detailed department expenditure proposals for 2017-2019, recognising the scale of the reform of public expenditure required because of the reduction in income forecasts and the uncertainty over the MTFP period.

In the first stage of the process, the MTFP 2016 – 2019, P.72/2015, approved in October 2015, set the financial framework and limits within which the detailed income and expenditure proposals for 2016 - 2019 were to be developed and the States agreed:

• Total States income targets for 2016-2019;
• Total maximum expenditure allocations for each year 2016 – 2019;
• Total net capital expenditure allocations for each year 2016 – 2019;
• Department spending limits, central contingencies, savings and other measures for 2016 only.

The MTFP 2016 - 2019 also provided indicative capital expenditure programmes for 2016 - 2019 and the intended transfers to and from the Strategic Reserve for 2016 - 2019, the latter were subsequently approved by the States.

MTFP Addition

The MTFP Addition 2017 - 2019 is the second stage of the process and provides the detailed revenue expenditure proposals for 2017 - 2019 representing:

• Individual Departmental spending limits, central contingencies, savings for 2017 – 2019;
• Central Growth allocation for 2018 and 2019;
• Total depreciation estimates for 2017 - 2019;
• Expenditure, income and minimum contributions, if any, from States Trading Operations for 2017- 2019.

The above figures have to be set within the maximum expenditure limits set in the MTFP 2016 – 2019.

In addition the Council of Ministers proposed, in principle, a funding mechanisms for Health (although this was rejected by the States), which was to be finalised in the Budget 2017 and new "user pays" charges including for waste. In order to provide a more inclusive picture of States resources and following input from the Comptroller and Auditor General forecasts for the funds administered by Social Security are also provided in the Addition.

The structure of the Medium Term Financial Plan provides that it is traditionally split into two parts and the format for the MTFP 2017 -2019 Addition is no different:

• The formal lodged report and proposition which provides background to the States financial and economic position, the revenue and capital expenditure proposals and details of the measures that are proposed to maintain a balance on the Consolidated Fund, supported by proposals to actively manage the balance sheet to deliver balanced budgets by 2019.
• A detailed Annex which provides summary information and detailed financial information for each department, describing the department's purpose and responsibilities and the major changes planned to support the Council of Ministers' priorities and government's broader Strategic Goals for 2017 – 2019 including:

• detail of how the proposed department expenditure limits will be allocated to services in each year;
• a summary service analysis for the department for each year, including manpower levels;
• a reconciliation of the changes in expenditure allocations for each year; and
• details of the individual savings, efficiencies and user pays proposals by department for each year

Development of the Medium Term Financial Plan Addition  32 | P a g e

5. Resource Principles and Fiscal Framework

Sustainable Public Finances

The States agreed to make sustainable public finances a priority as part of the Strategic Plan in April 2015. Simply put, if the finances of this Island do not continue to be sustainable, then it will not be possible to fund the other strategic priorities.

In this context, the ambition of the Strategic Plan is to place Jersey on a sound path to structural fiscal balance and aim to balance States income and current expenditure (including depreciation) over the economic cycle. The Council of Ministers aim to achieve this by 2019, in line with the current advice of the Fiscal Policy Panel (FPP).

Resource Principles for Spending and Taxation

The MTFP 2016-2019 was developed in line with the Resource and Taxation Principles reviewed and agreed as part of the Strategic Plan (April 2015). Together with the MTFP 2016-2019, the MTFP Addition 2017-2019 aligns resources to priorities, maintains core services and meets government's statutory responsibilities. The Plans are supported by the new Fiscal Framework which sets out a clear and transparent decision making process. It will assist in making fiscal decisions that support the Island's economic objectives as set out in the Strategic Plan and underpins medium-term fiscal sustainability.

The Resource Principles agreed in the Strategic Plan are:

Spending

• Be prudent, taking account of the uncertain economic and financial outlook and build flexibility into future plans.
• Identify and implement all possible savings and efficiencies.
• Challenge existing expenditure in the context of strategic objectives.
• Optimise service delivery, to improve service delivery and value for money.
• No additional spend unless matched by savings or income.
• Support the economy in line with advice from the Fiscal Policy Panel.
• Undertake a comprehensive programme of zero-based budget reviews including a consideration of whether there is an obligation to provide the service.
• Maintain balanced budgets over the economic cycle.
• Actively manage our assets by maximising investment returns within agreed levels of risk.
• Plan expenditure on capital and infrastructure over the longer-term and consider carefully the appropriate sources of funding for other projects, including borrowing.

Taxation

• Taxation must be necessary, justifiable and sustainable.
• Taxes should be low, broad, simple and fair.
• Everyone should make an appropriate contribution to the cost of providing services, while those on the lowest incomes are protected.
• Taxes must be internationally competitive.
• Taxation should support economic, environmental and social policy.
• We shall develop a new Fiscal Policy framework and look at ways to promote financial stability.

Jersey's Fiscal Framework for MTFP 2016-19 and beyond

The Minister for Treasury and Resources published the report Updating Jersey's Fiscal Framework' as R.102/2014, building on its recommendations and setting out the framework that will cover decisions taken over the course of the Medium Term Financial Plan 2016-19 and beyond.

It builds on the experience in Jersey in recent years, draws on international best practice and sets out a clear and transparent decision making process. It will assist in making fiscal decisions that support the Island's economic objectives as set out in the Strategic Plan and underpins medium-term fiscal sustainability.

The fiscal framework is a key pillar of Jersey's macroeconomic framework but it is critical that wider policy also focuses on improving productivity and competitiveness. The supply side of the economy is essential for aligning short-term objectives (e.g. the need for discretionary policy to support the economy) and longer-term fiscal objectives (e.g. medium-term sustainability of public finances) when interest rates cannot be used as a macroeconomic policy instrument.

The key components of the fiscal framework are summarised below and are set out in more detail in the detailed paper. Experience internationally with setting and maintaining fiscal rules has been mixed and for these reasons the framework will use fiscal guidelines that are overseen by the FPP rather than strict fiscal rules.

Fiscal guidelines

1. Aim to balance the States' current budget (which excludes capital expenditure but includes depreciation) over the economic cycle.
2. The Social Security Funds (including the Health Insurance and Long-term Care Funds) should be kept on sustainable medium-term footing through Government Actuary Department (GAD) reviews and well planned policy changes.
3. Monitor the States' net asset position over the economic cycle and relative to size of the economy.
4. The FPP will advise on progress in keeping to the above guidelines through their normal reporting structure and with continued focus on medium-term sustainability.

There are a number of other rules effectively in place as a result of the Public Finances Law that limit the amount the States can lend or borrow. It is not suggested they are changed or removed from the law at this stage. However, they should be kept under review to make sure they do not constrain fiscal policy decisions that are in keeping with the fiscal guidelines and FPP advice.

Rules for the key funds

The rules for the key funds (set out below) remain as already agreed by the States, although the operation of the funds will need to be consistent with the new fiscal guidelines.

1. The Strategic Reserve
2. The Stabilisation Fund
3. The Housing Development Fund, and
4. Consolidated Fund

The Fiscal Policy Panel

The role and responsibilities of the FPP are now on a statutory basis in the Public Finances Law and the FPP's Annual Report will remain the cornerstone of fiscal framework. With the formation of the new Income Forecasting Group (IFG) the FPP have agreed to endorse the economic assumptions used for financial forecasts which will help improve the transparency and credibility of that part of the forecasting process.

The Annual and Medium-Term budgetary framework

Jersey has made significant steps forward in establishing its medium-term planning framework in recent years. Building on these positive developments the new framework follows the FPP's advice (similar recommendations have been made by the Comptroller and Auditor General (C&AG) and Corporate Services Scrutiny Panel) that MTFP and Budget Reports will include new information that can help inform decision making.

Further development

Fiscal frameworks should evolve over time and learn from experience and best practice elsewhere. An integral part of the previous framework and this one is that it is kept under review and that there is a continuous process of improvement. However, any changes to the framework should be explicit and transparent and in context of the existing framework and its future evolution.

6. Economic Background and Outlook

International developments

The global economy has entered a new period of heightened uncertainty and financial market turbulence following the decision of the UK to leave the European Union. The implications for the UK economy in both the short and long term remain unclear and the Bank of England has already stated that some "market and economic volatility can be expected" as result of the decision and the process to leave unfolds. The Bank has also indicated that in the future it "will not hesitate to take any additional measures required".

Even before these new developments, the OECD highlighted in their June Economic Outlook that "Eight years after the financial crisis, the recovery remains disappointingly weak" and that the global economy is expected to grow by 3% in 2016 (similar to that in 2015) and with only a slight improvement in 2017. They also stressed that the EU referendum in the UK had raised uncertainty and that "an exit would depress growth in Europe and elsewhere substantially".

Global trade growth is also very subdued, with the emerging economies having lost momentum and a modest upturn in the advanced economies held back by slow wage growth and weak investment. Low commodity prices and interest rates will continue to offer support to many countries although this will be offset by volatile financial market conditions.

The combination of all these factors leads the OECD to conclude - even before the UK referendum - that growth rates would be much weaker than anticipated a few years ago and well below pre-crisis levels. In addition, such an extended period of low growth is likely to have damaged the supply-side potential of economies.

The OECD highlight that risks persist with financial instability in emerging markets and difficulties in agreeing effective policy responses to the economic challenges in many economies, particularly in Europe. These risks will have been compounded following the UK's decision on EU membership.

Figure 3: World economic growth quarter-on-quarter % changes at annual rates

Source: OECD Economic Outlook 2016/1

Jersey Economy

Despite the uncertainty at the global level the most recent data on the performance of the Jersey economy in the period before the UK referendum remains positive. The Business Tendency Survey (BTS) for 2016Q2 showed that the headline all sector business activity remains positive although below the levels seen through most of last year. The results for the whole economy showed eight indicators were essentially unchanged compared with the previous quarter, whilst those for business activity and future employment declined. Seven of the ten indicators remained positive.

Figure 4 shows that in the finance sector conditions appear to have improved in the last two quarters of 2016 after indications of a slight dip in performance in 2015Q3. In the latest quarter two of the indicators improved compared with the previous quarter, three declined and five were largely unchanged. The new business indicator saw the greatest improvement, returning to the strongly positive level seen in the first half of 2015, while that for future employment saw the largest decline (moving from strongly positive to marginally positive).

Figure 4: Finance business tendency results

% balance of respondents

Source: States of Jersey Statistics Unit

In the non-finance sector eight of the ten indicators were essentially unchanged and while future business activity improved that for current business activity declined, becoming negative for the first time in two years. Within the non-finance sector the construction sector reported a generally more negative perspective than in the previous quarter and in wholesale and retail two of the ten indicators improved and four declined in the latest quarter.

Figure 5: Non-finance business tendency results

% balance of respondents

Source: States of Jersey Statistics Unit

In its March 2016 letter to the Treasury Minister the FPP indicated that they had refreshed the analysis they undertook as part of the 2015 Pre-MTFP Report and looked again at the issues of trend growth and spare capacity in the Jersey economy. The Panel concluded that although this analysis is fraught with difficulty it still expected the economy to return to capacity between 2017 and 2019. However, this assessment is subject to great uncertainty dependent on:

• the speed and stability of global economic growth
• the competitiveness of Jersey financial services
• and the ability of businesses to employ people with the right skills

It is clearly very important under these circumstances to monitor the degree of spare capacity on an ongoing basis. An important qualitative indicator is the Business Tendency Survey (BTS) question about the extent to which businesses in Jersey are working above and below capacity. The chart below shows that the BTS indicator moved positive in the finance and non-finance sectors in the first two quarters of 2015 and has remained so since. However, in the first quarter of 2016 it appears to have eased back slightly.

As the BTS has only been in existence since the onset of the financial crisis this indicator does need careful consideration alongside other indicators. To fully assess the degree of spare capacity it will be important to monitor other indicators including global economic growth, the competitiveness of financial services, trends in Jersey GVA, labour market trends and the ability of businesses to employ people locally. The FPP is likely to cover such issues in its 2016 Annual Report.

Figure 6: Capacity utilisation

% balance of respondents above/below capacity

Source: States of Jersey Statistics Unit

Other indicators tend to point to a consistent picture of continued growth in the economy in 2015 and into 2016. They also suggest that the signs in the BTS that the economy is beginning to use up spare capacity in the economy are reflecting the actual experience in the economy. As Figure 7 below shows, total employment in December 2015 was at the highest level on record, as was private sector employment. The numbers actively seeking work were 1,440 on a seasonally adjusted basis in May 2016, compared with the peak of 1,970 in April 2013.

Figure 7: Employment trends in Jersey

% change in total employment in December each year compared to a year ago

Source: States of Jersey Statistics Unit

In the immediate years after the global financial crisis Jersey households (like those in many other economies) experienced a squeeze in incomes as unemployment rose and earnings growth tended to be lower than inflation (in 4 out of 5 years between 2008 and 2012). The chart below shows that these trends reversed in 2013 and that average earnings in Jersey has exceeded inflation for three consecutive years. The combination of real growth in earnings and strong growth in employment is a sign of real economic growth in the economy. However, with indications that capacity in the economy is being used up it will be important that wage pressures do not build up to the extent that they outpace productivity improvements and undermine the competitiveness of Jersey businesses.

Figure 8: Earnings growth and inflation

% change in average earnings and retail prices index

Source: States of Jersey Statistics Unit

Drawing on all the trends within the local and global economies the FPP expect that the economy has continued to grow in 2015 and into 2016 and that moderate growth will continue until 2018 when the economy is likely to return to capacity. However, in their letter to the Treasury and Resources Minister in March they also highlighted that the risks to the global economy "have, if anything, increased still further. In these conditions, it is important to ensure that the MTFP Addition has sufficient flexibility to adapt to changing economic circumstances. Also these assumptions should be used with more than the usual caution."

The UK referendum decision means that the risk of changing economic circumstances has increased significantly although at this stage it is still unclear what the impacts will be on the UK economy, financial markets and hence the Jersey economy.

On the basis of the FPP's March advice the financial forecasts underpinning the MTFP Addition have been derived from the economic growth assumptions that are highlighted in Figure 9. The effect of the revised economic assumptions in August 2016 was reflected in lower real growth in GVA in 2015-2017.

Figure 9: GVA trends

% change in real GVA, actual (blue bars) and FPP assumptions (red bars)

Source: Fiscal Policy Panel

The FPP have also consistently highlighted concerns about Jersey productivity performance in recent years. While there are general concerns about productivity performance in many economies since the financial crisis, Jersey's productivity trends have been weaker for a longer period. The latest data on productivity performance (as measured by GVA/fte) shows that productivity increased in 2014 across the economy as a whole, although this was a result of an increase in financial services productivity with the non-finance sector seeing a slight fall in productivity. The increase in financial services productivity will have been driven by the sharp rise in financial services profitability which was partly due to one-off factors. It will be important that these improvements are repeated in coming years and across the economy as a whole if Jersey is to improve its productivity trends and start to see an underlying improvement in its economic performance. The fact that the UK will be leaving the EU if anything places even greater emphasis on the need to deliver these improvements in productivity and economic performance.

Figure 10: Productivity growth in Jersey

GVA per person employed (full-time equivalent), 2013 prices £000s

*All sectors and non-finance exclude rental

Source: States of Jersey Statistics Unit

The FPP highlighted that such productivity trends when combined with the fiscal implications of the ageing society will risk pushing Jersey's public finances back out of structural balance in the long-term. In particular the FPP advised in their 2015 Pre-MTFP Report that:

The States should act now and develop a clear strategy for raising productivity (in both the public and private sectors) and competitiveness in the Jersey economy. Ongoing improvements in these areas will help to manage the fiscal consequences of an ageing society and make it more likely that Jersey's economy will grow in the future.

As well as investing in health, education, St. Helier and the need to maintain in the Island's infrastructure as set out in the MTFP 2016-2019, the Strategic Plan sets out how Council of Ministers will rectify this productivity performance and optimise economic growth by:

• Promoting jobs and growth in the technology sector, with a particular focus on Fintech.
• Delivering and further enhance the existing Financial Services Policy Framework
• Promoting higher productivity in all economic strategies, including the new Tourism, Retail and Rural Economy Strategies
• Developing a new and challenging Enterprise Strategy, a new Innovation Strategy and attracting more inward investment
• Reviewing and upgrading the existing Skills Strategy
• Developing a new Competition Framework and reviewing opportunities to promote competition
• Identifying and addressing barriers to work for key groups
• Adopting environmental management principles to help improve productivity and efficiency and attract environmental businesses in line with our economic growth objectives

Jersey's fiscal position

Having updated their analysis of trend growth and the economic outlook in March 2016, the FPP reiterated their previous advice that:

".the focus of the MTFP should be to address any structural imbalance in States finances by 2018/2019 whilst ensuring that the range and timing of the measures minimises the risk to the economic recovery. This continues to mean that in the early years of the MTFP it may be appropriate to use the States' reserves to strike the right balance."

The FPP Annual Report in August 2016 maintained the view that "the overall profile of the States' adjusted fiscal position and significant stimulus it adds to the economy over the MTFP period is appropriate". . The FPP also recommended that the "time to address any (as yet unidentified) structural impacts of the UK's decision to leave the EU on the local economy and States finances is the next MTFP period".

The Council of Ministers has framed the MTFP and the MTFP Addition to follow the FPP's advice in terms of addressing any structural imbalance and being careful about the impact on the economic recovery. In addition, they have followed the FPP's advice that the overall approach for fiscal policy over the life of the MTFP should be:

Once Jersey is on a sound path to structural fiscal balance, the States should aim to balance its tax revenues and current expenditure over the economic cycle, including an appropriate allowance for depreciation.

Figure 11 shows that after all the measures proposed in the MTFP Addition the current budget (including depreciation) will move from a deficit of £90m in 2016 to a broadly balanced position by 2019. On the basis of the FPP advice this suggest that any underlying structural mismatch as a result of growth in funding of strategic priorities between revenue and expenditure will have been broadly addressed by 2019.

Figure 11: States current budget position (reflecting September 2016 update to income forecasts) £m

Note: Assumes the Council of Ministers will identify alternative proposals to raise £7.5m and £15m in 2018 and 2019 respectively, following States rejection of the proposals for a Health charge

Source: Treasury and Resources Department

Underpinning these trends are a period of more gradual growth in Consolidated Fund net revenue expenditure (includes expenditure gross of departmental income) which will increase at a much slower rate over the 2015- 19 period of about 1.5% p.a. compared with just under 2.5% over the 2011-15 period. Figure 12 also shows that in real terms Consolidated Fund net revenue expenditure will be largely flat over the 2011-19 period following a period of growth in 2011-14 and a period of decline 2016-19.

Figure 12: Trend in total Consolidated Fund revenue expenditure £m, real in 2011 prices

Source: Treasury and Resources Department

To get a better understanding of the scale of the economic impact of the proposals over the life of the MTFP it is possible to adjust the operating balance to take account of cash flows in terms of what will actually be spent on capital projects rather than what is allocated and what the impact will be from the balance on other States funds such as the Social Security and Health Insurance Fund (HIF).

Figure 13 shows how the calculation can be built up. Firstly the initial operating balance is adjusted for the best estimate of the capital expenditure profile. There are large adjustments to account for the scale of capital expenditure on key projects such as social housing, sewage treatment works, a new school, a new hospital and by the subsidiary companies SoJDC, Andium Homes and Ports of Jersey (and the fact that a large part of the expenditure is not financed from tax or other revenue taken from the economy in the year of the spend). On this basis the net fiscal position moves from one of moderate deficits (moving to surplus) to one of significant deficits throughout the 2017-2019 period. [The final adjustment to include the position on the trading, Social Security and Health Insurance Funds is relatively minor and does not alter this profile significantly].

Figure 13: Adjusted fiscal position (reflecting September 2016 update to income forecasts)

*includes future hospital and office modernisation

Note: Assumes the Council of Ministers will identify alternative proposals to raise £7.5m and £15m in 2018 and 2019 respectively, following States rejection of the proposals for a Health charge

Source: Treasury and Resources Department

These adjusted deficits are large relative to the size of the economy in the later years, suggesting that significant fiscal support could be added to the economy in the 2017-19 and at a time when the FPP currently expect the economy to be returning to capacity. Adjusted deficits rise from just less than 1-2% of GVA in 2013- 15 to between 6-7% in the 2017-19. However, this does include two large projects of which the timing of delivery is still uncertain – the hospital and office modernisation. If these projects are excluded from the analysis the chart below shows that the adjusted deficits are about 4-6% of GVA in 2017-19. Nonetheless, this does suggest that significant fiscal support will remain in place while the economy is expected to be performing below capacity. It also suggests that there may be increased risks about the scale of fiscal support in the later years if the economy continues to recover and spare capacity is used up. Whether the economy remains on the path currently expected will now largely depend on any impacts of the UK's decision to leave the EU on the local economy, which is covered more below.

Figure 14: Adjusted fiscal position (reflecting September 2016 update to income forecasts)

% of GVA, excluding hospital and office modernisation capital expenditure

Note: Assumes the Council of Ministers will identify alternative proposals to raise £7.5m and £15m in 2018 and 2019 respectively, following States rejection of the proposals for a Health charge

Source: Treasury and Resources Department

This is a high level assessment and it will be important to consider how capital expenditure and construction related spend actually impact on the economy. For example, whether there are large projects that may spend a high proportion on imported capital equipment and/or a high proportion on employment in the Jersey economy. In addition there could be delays in key projects and/or some could be brought forward which could significantly alter the profile of capital expenditure.

The economic implications of the profile will be kept under review to determine whether adjustments or compensating measures could be required in future years. If the economy is close to capacity and the State's capital programme combined with private sector activity risks a build-up of inflationary pressure then this will be carefully managed to limit the demands on local resources and ultimately the impact on the economy. FPP advice in future reports will be instrumental in determining what approach is required to ensure that the important investment planned in the Island and the benefits it will bring are achieved without any negative consequences for the local economy and Islanders.

The decision by the UK to leave the EU and its implications for the UK and Jersey economies are at this stage unclear but they place even greater emphasis on the FPP's advice to ensure that the MTFP Addition has flexibility to deal with changing economic circumstances. The Council of Ministers has heeded this advice and can adapt the MTFP if necessary in light of the UK's pending exit from the EU.

The Treasury and Resources Minister wrote to the FPP to seek an update on their March advice. In particular, whether in their view there is a reason to change their advice at this stage in terms of the economic outlook, the need to continue to support the economy in the short-term and to aim to balance our books by 2018/19. The FPP Annual Report in August 2016 maintained the view that "the overall profile of the States' adjusted fiscal position and significant stimulus it adds to the economy over the MTFP period is appropriate". The FPP also recommended that the "time to address any (as yet unidentified) structural impacts of the UK's decision to leave the EU on the local economy and States finances is the next MTFP period".

The Jersey economy goes into this period of heightened uncertainty in a strong position and we are well placed to deal with any fallout. As already highlighted in this section, economic indicators were pointing to a period of continued growth and record employment before the UK referendum. Public finances are strong, not least with net assets of over 100% of GVA.

The Council of Ministers retains the flexibility to alter the MTFP and subject to further advice from the FPP. It is far from apparent that a change of course is required as the MTFP was already following FPP advice to support the economy in the near term. When capital expenditure is taken into account the net impact of States spending will be to add 4%-6% of GVA over the 2016-19 period. However, the Council of Ministers is ready and able to respond should the external economic environment start to deteriorate and FPP advice be to adopt a different approach. Nonetheless, it is also just as important now for Jersey to address any structural imbalance in public finances as before the EU referendum.

If uncertainty results in the external economic environment deteriorating and the FPP advice is to adopt a different approach then there are a number of routes open to support the local economy:

• Allow the automatic stabilisers to adjust and help smooth any impacts on the economy. This is where elements of spending (such as those on benefits) may rise and parts of revenue fall as the economy slows.
• If economic conditions and FPP advice merit discretionary action then Council of Ministers are ready to place funding in the Stabilisation Fund if needed. This funding could come from contingencies or reserves and be used in a timely, targeted and temporary way to support the economy if required.
• Finally, the Economic and Productivity Growth Drawdown Provision is already in place to support policies that can help bolster economic growth. Proposals to use this funding to mitigate the economic impacts of the UK's withdrawal from the EU would potentially be in scope for this funding.

FPP advice in future reports will be instrumental in determining what approach is required to ensure that the important investment planned in the Island and the benefits it will bring are achieved without any negative consequences for the local economy and Islanders. This includes, if necessary, putting in place an appropriate and targeted response to mitigate any impacts on the local economy of the UK's withdrawal from the EU.

7. Financial Forecast 2016 – 2019 (September 2016)

Summary of Financial Forecast for MTFP Addition 2017-2019 (September 2016)

The draft MTFP Addition 2017-2019 was lodged and proposed on the basis of States income and expenditure forecasts as at June 2016. The forecasts took into account the latest economic assumptions from the FPP (March 2016), the expenditure limits agreed in the MTFP 2016-2019, P.72/2015, and the funding measures required to achieve balanced budgets by 2019. The June 2016 income forecasts and underlying economic assumptions were prepared before the UK decision to leave the EU, although the impacts of uncertainty surrounding a "BREXIT" were identified in the forecasts.

However, as a result of the UK Referendum decision to leave the EU and the implied impact on the UK and Jersey's economic prospects the Minister for Treasury and Resources asked the FPP to provide an economic update ahead of its Annual Report for 2016.

The FPP produced an economic update for all States members in July and stated that a sensible approach would be to maintain the current course until there are clearer indications of how the Jersey economy is being affected, and to not make ad hoc changes to the path set out by the Medium Term Financial Plan Addition.

The FPP presented its Annual Report for 2016, including revised economic assumptions in August 2016, and these assumptions form the basis of the interim update to the States income forecasts, which were prepared with the IFG and included in the final MTFP Addition 2017-2019 as amended.

The Council of Ministers was committed to ensuring that States members had the most up to date information and presented the Interim Update to States Income forecasts as a 4th Addendum, P.68/2016 Add.(4), in advance of the MTFP Addition debate in September 2016.

Figure 15 summarises the forecast position, including the interim update to States income and also reflecting the States decision to reject the proposed Health charge. The Council of Ministers is proposing to identify further revenue raising measures to replace the income from the Health charge for consideration ahead of the 2018 Budget.

The forecasts proposes a return to broadly balanced budgets by 2019, including depreciation, in accordance with the recommendations of the Fiscal Policy Panel. The interim update to the income forecasts (September 2016) is included in this Section and the agreed sustainable savings and funding measures are described in Section 10 and Section 12. The measures to manage the balance on the Consolidated Fund in the short-term are outlined in Section 13.

The impact of the September 2016 update to the income forecasts in overall terms is that the financial position is forecast to have worsened slightly by £6 - £7 million pounds per year in 2017 – 2019 when compared to the forecasts prepared in June 2016 and included in the draft MTFP Addition.

Figure 15 – Summary of Financial Forecast for MTFP Addition 2017-2019 – amended for the interim income update and the States decision to reject the proposed Health charge.

Notes:

1. The forecast includes the Council of Ministers proposals that further revenue raising measures will be identified to replace the income from the Health charge and these will be identified for consideration ahead of the 2018 Budget.
2. The figures include the September 2016 update to the income forecasts

States Income Forecasts 2016-2020 Background

The original forecasts for all States income derived from taxation and duty for the draft MTFP Addition, as lodged, were reviewed and agreed by the new Income Forecasting Group (IFG) in June 2016. The June IFG forecasts are summarised below and further details were included in the Appendices to the draft MTFP Addition report. The detailed Income Tax Forecast for June 2016 was prepared for IFG and was published by the Minister for Treasury and Resources as an Addendum to the MTFP Addition, P.68/2016 Add.(2).

The next revision of States income forecasts would normally have been for the draft Budget 2017 in October 2016. However, as a result of the UK Referendum decision to leave the EU and the implied impact on the UK and Jersey's economic prospects the Minister for Treasury and Resources asked the IFG to provide an interim update of the States income forecasts ahead of the MTFP Addition debate and based on the economic assumptions from the FPP's Annual Report (August 2016).

The Interim Update to States Income forecasts was presented as a 4th Addendum, P.68/2016 Add.(4), in September 2016 and has been included in this final MTFP Addition Report for 2017-2019 as amended.

The States income forecasts have therefore been revised twice since the forecasts published for the Budget 2016 based on:

June 2016

• Updated Fiscal Policy Panel endorsed economic assumptions for 2015-2017 from the Panel's letter to the Treasury Minister, 11 March 2016, which show a slight reduction in the assumptions over the forecast period.
• The financial outturn for 2015 for all States income and detailed income tax data for year of assessment 2014. The financial performance in many areas show improvement on the forecasts in September 2015.
• Updated data on personal and corporate tax for year of assessment 2015 and initial data for other income areas for the first quarter of 2016.

September 2016

• Updated FPP endorsed economic assumptions for 2016-2018 from the Panel's Annual Report for 2016, 30 August 2016, which show a slight reduction in the assumptions over the forecast period largely reflecting the uncertainty and implications arising from the outcome of the UK referendum.
• The latest in-year forecasts for 2016 for all States income and further information from the Taxes Office. The in-year data for 2016 shows that in most cases the June 2016 forecasts are robust, in particular corporate tax is expected to exceed forecast. There are slight variations in impôts and stamp duty.
• The income tax forecasting model has been updated to reflect the latest FPP endorsed economic assumptions and IFG discussions regarding trends from the in-year Taxes Office data.
• All other areas of income have been remodelled with new economic assumptions and appropriate in- year 2016 data.

The forecasts of States income are a critical component of the States medium and long term financial planning. They are also required as part of an annual Budget and MTFP, alongside forecasts of States revenue and capital expenditure, to assess the projected balance on the Consolidated Fund. This is a requirement of the Minister for Treasury and Resources in accordance with the Public Finances (Jersey) Law.

Summary

The forecasts of States income are presented as a range and within the context that, if anything, uncertainty in the economic outlook has increased since the Budget 2016. This uncertainty has been emphasised by the IFG and by the FPP in its Annual Report (August 2016).

The FPP have advised that uncertainty around the economic assumptions has increased. The IFG's view is that the balance of risks to the financial forecasts remains on the downside, but less so than at the time of the June 2016 forecast. The IFG view reflects the fact that some of the uncertainty regarding Brexit is now factored into the FPP's latest economic assumptions of August 2016. The FPP and IFG have both intimated that there are also business opportunities within these areas of uncertainty.

The IFG would emphasis certain factors which reflect uncertainty in the outlook:

• income tax from shareholder income,
• the combined impact of future changes in fiscal policy such as public sector reform and future capital expenditure,
• the impact of the UK banking reforms on banking profits,
• the impact on business decisions of the UK referendum on its future relationship with the EU.
• prospects for the global economy, loss of momentum in advanced economies, transition in China and risks to emerging economies.
• impact of current and proposed EU and OECD international tax initiatives.
• impact of proposed changes to UK tax policy and anti-avoidance measures.

For this reason it is important that the States must continue to include appropriate flexibility in the proposals for the MTFP Addition and future Budgets to recognise the potential range of outcomes and the risks for States income forecasts around the downside of the central scenario.

Movement in forecasts since Budget 2016

The final forecast for the MTFP Addition 2017-2019 shows a number of variations compared to the Budget 2016 forecast position.

The main variations for June 2016 are summarised below and were described in more detail in the individual Appendices to the draft MTFP Addition (as lodged). The variations for September 2016 are also summarised below and presented in more detail in the individual Appendices to this final MTFP Addition report (as amended).:

June 2016

• Improvements in personal income tax:
  • Improved 2015 outturn and 2014 year of assessment
  • Improvements indicated in 2015 IT IS data
  • Faster growth in pension income
  • Improvements in personal tax yield assumptions from 2014 YOA and 2016 budget measures
  • Partly offset by the impact of reduced economic assumptions
• A small net reduction to corporate income tax forecasts:
  • Improvements in 2014 YOA and 2015 outturn
  • Improvements more than offset by indications from 2015 YOA provisional assessments for the Top 88 company tax payers showing a 4% reduction in tax collectable – extrapolating this variation across all company tax results in a net reduction in forecasts from 2016.
  • Previous adjustments reflecting knowledge of significant anticipated changes for corporate taxpayers have been re-assessed and are maintained.
• Reductions in Impots duty forecasts reflecting the 2015 outturn in relation to alcohol commodities and the revised forecasts for tobacco duty adjusted for the impact of the bonded warehouse. The forecasts are also reduced for the slight drop in future RPI assumptions.
• An improved base from the 2015 outturn is more than offset from 2017 by a more prudent approach to stamp duty from higher value properties, reducing future uprating, to recognise that these transactions do not necessarily follow the general housing market trends.
• A range of small negative variations, resulting in the most part from the remodelling of income forecasts using the revised FPP economic assumptions from March 2016.
• The latest forecasts of the requirements from a funding mechanisms for health (£15 million) and rates (£900,000) have been included at reduced levels than previously considered, based upon the latest forecasts of income and in light of the potential need to raise further revenue to fund a new hospital.
• In addition and to enable the Department of Infrastructure to fund proposals for a Concessionary travel scheme for people with disabilities and to allow flexibility to meet the department's significant savings targets, the annual; return from the Car Parking trading Fund to General Revenues is being phased out.

September 2016

Income Tax

• The new forecast suggests that income in 2016 will be £4m higher than previously expected, due to improvements in the in-year corporate tax data from the Taxes Office.
• Lower earnings growth forecast for 2016, based on the FPP endorsed economic assumptions, will result in £3m lower personal tax in 2017, while data from the Taxes Office suggests that corporate tax may also be £3m lower in 2017 than previously forecast.

• Reduced economic assumptions mean that personal tax is expected to be £6m lower in 2018, rising to a £9m downgrade by 2020. Corporate tax is relatively unchanged over 2017-2019 as the lower economic assumption is offset by in-year data from the Taxes Office. The net impact is that the income tax forecast in 2019 is now expected to be £6m lower than the June 2016 forecast.

GST, ISE Fees and Import GST

• The current in-year data shows the income from all these areas is in line with the June 2016 forecast and in respect of ISE fees these are now largely complete for 2016.
• The reduction in the FPP's real GVA forecast in 2017 causes a small downward adjustment to the level of increase in future GST revenues based on forecast trends agreed by IFG.

Impôts Duties

• The current in-year data suggests a small increase in duty revenues for 2016 and coupled with the increased FPP inflation assumptions for 2016 and 2017 provide a small increase in the expected revenues for future years.

Stamp Duty

• The FPP have revised downward the forecast for house price inflation in 2017 and when this is applied in the stamp duty model to all transactions below £2 million it results in a small decrease in income in each forecast year.
• The volume of activity in the first half of 2016 is slightly down on forecast and as a result the 2016 forecast is reduced slightly. Due to the volatility of the property market this reduction is not yet carried forward in the base until the final 2016 position is clearer and will be reviewed in March 2017.

Other Income

• The other income forecasts show that, with the exception of the delay in receipt of the anticipated SoJDC dividend, compared to the June 2016 forecasts there is a slight reduction in income which broadly reflects the prudent approach to investment income and the small changes due to revised RPI assumptions.

Other changes to Income Forecasts at debate

The States rejected Part c) of the Proposition for an in principle income-based Health charge with the effect of reducing States income by £7.5 million in 2018 and £15 million in 2019. The Council of Ministers will consider future revenue raising measures intended to replace the funding mechanism for Health in 2018 and 2019, with these measures to be brought forward by the Budget 2018. These measures to be developed following the current tax review and subsequent engagement with States members during the first half of 2017.

Draft MTFP Addition forecasts 2016-2020 (September 2016)

Figure 16 – Updated States Income Forecasts for MTFP Addition 2017-2019 (September 2016)

Further details of the States income forecasts in Figure 16 are provided in Appendices 4 to 10 of this report and at Figure 19.

Overall range of forecasts

The latest economic assumptions (August 2016) provide a range of assumptions higher, lower and central. These assumptions are used within the modelling of the different types of States income along with some other factors to provide an illustrative range of income forecasts.

The proposed range in the forecasts by 2020 is just over £130 million between the higher and lower scenarios which represents broadly +/- 9% around the central scenario. The proposed range represents a funnel around the central scenario as can be seen in Figure 17 and includes the proposed mechanism to offset the States payment of rates and a funding mechanism for health.

The central scenario is broadly the mid-point of the range but as proposed by the IFG there are risks on the downside of the central scenario and the proposals for the MTFP Addition must consider and include appropriate flexibility within this range, particularly on the downside. The response to any variations in income will vary depending on the scale of change but the Council of Ministers has identified contingency plans at Section 15 depending on the scale of variation. The Council of Ministers has also proposed that £16 million is drawdown from the Strategic Reserve in 2018 as a result of the slight reduction in the September 2016 update to the income forecasts and associated impact on the Consolidated Fund.

Figure 17 – Forecast range of States Income to 2020 (September 2016)

£'000 Draft States Income Forecast Range

950,000 Budget 2016

900,000 850,000 800,000 750,000 700,000 650,000 600,000

Draft MTFP 2 Addition (June 2016)

MTFP 2 Addition (September 2016)

Higher Growth Scenario

Lower Growth Scenario

Outturn

2014 2015 2016 2017 2018 2019 2020

The States income forecasts have been extended to 2020 for the first time and the intention was to include indicative expenditure forecasts in the draft Budget 2017 as part of the rolling approach to financial forecasts to maintain a five-year outlook. With the significant uncertainty in the forecasts post Brexit, additional work was considered necessary before further expenditure forecasts were produced and these will be completed to maintain the five-year outlook for the Budget 2018.

Summary of Economic Assumptions for the MTFP Addition 2017-2019

R.102/2014 Updating the Fiscal Framework' recommended the involvement of the FPP in the preparation of economic assumptions to be used for financial forecasting. The FPP endorsed the latest economic assumptions for March 2016; these were also considered by IFG and agreed as the basis for the draft income forecast modelling for the MTFP Addition (June 2016). The March 2016 economic assumptions factored in the latest local and international developments at that time. A report was prepared for IFG by the Economics Unit and included in the detailed Income Tax Report (published as the 3rd Addendum to the draft MTFP Addition) and is summarised here.

Changes in assumptions 2016 Budget to MTFP Addition (March 2016)

The economic assumptions were shared with the Minister for Treasury and Resources and with States Members on  11  March  2016.  The  FPP's  letter  to  the  Minister  can  be  found  on  the  FPP  web-site www.gov.je/fiscalpolicypanel

When compared to the previous (September 2015) assumptions, the main changes were:

• Financial services profit growth – now expected to have been higher in 2015 given the latest expectations in the Business Tendency Survey.
• Inflation – expectations for 2015-2017 are lower than previously assumed. This reflects lower than expected outturns and results in lower expectations for average earnings in 2016 and 2017.
• Employment growth – now expected to be somewhat slower in 2015, due to revisions of past data.
• UK policy interest rates – now expected to be lower throughout the forecast period, reflecting changes in market expectations.

The changes in these assumptions have had knock-on effects on the nominal and real economic growth (GVA) assumptions, with real growth expected to be somewhat faster in 2015 but somewhat slower in 2016. There are no changes to the trend assumptions for any of the economic variables in 2018 and 2019.

The full range of assumptions for March 2016, used for the draft MTFP Addition as lodged (June 2016), are included at Appendix 11.

FPP Annual Report - August 2016

The FPP presented its Annual Report for 2016, including revised economic assumptions in August 2016. In order to ensure States members had the latest information these assumptions formed the basis of the interim update to the States income forecasts (September 2016) which were available to States members in advance of debating the  MTFP  Addition.  The August  2016  economic  assumptions  and  update  to  the  States  income  forecasts (September 2016) are included in this final MTFP Addition 2017-2019 as amended.

Changes in assumptions March 2016 to MTFP Addition (August 2016)

The updated FPP endorsed assumptions are shown at Figure 18 and have been used in the update of the States income forecasts. The economic assumptions were published on 30 August 2016 in the Panel's Annual Report for 2016.

When compared to the (March 2016) assumptions, the main changes are:

1. Outturn data – there have been a number of new data:
   1. Financial Services profits for 2015 were lower than forecast.
   2. FTE Employment growth in 2015 was higher than forecast.
   3. Finance sector compensation of employees grew by 9 per cent (nominal) in 2015; leading to a higher expectation for compensation of employees overall.
2. Average earnings growth for 2015 was 0.7 percentage points lower than forecast.
3. Financial Services profit growth – growth expected to be slower in 2016 and 2017.

4. Non-finance profit growth expected to be slower in 2017.
5. Inflation – expectations for 2016-2017 are higher than previously.
6. Average earnings – 2017 expected to be slightly higher (in nominal terms, due to higher inflation).
7. Employment growth – is now expected to be slower in 2017.
8. UK policy interest rates – are now expected to be lower throughout the forecast period.

The changes in these assumptions have had knock-on effects on the nominal and real economic growth (GVA) assumptions, with real growth expected to be slower in 2015-2017. The fall in real growth in 2015 is primarily due to the lower outturn for financial services GVA (1 per cent lower than expected) while the lower forecasts for 2016 and 2017 are primarily due to higher expected inflation (due to the depreciation of sterling).

The FPP has not made any change to forecasts for GVA growth in 2018 or 2019, though 2020 has now been added to the forecast range.

The full range of assumptions for August 2016, used for the debate of MTFP Addition, are included at Appendix 11.

Figure 18 – Economic Assumptions (August 2016) for the MTFP Addition 2017-2019

The updated income forecasts for September 2016 presented in this final MTFP Addition report (as amended) will be unchanged for the draft Budget 2017.

Figure 19 – Detailed Forecasts of States Income for the MTFP Addition 2017-2019 (September 2016 – as amended)

Note 1: The forecast includes the Council of Ministers proposals that further revenue raising measures will be identified to replace the income from the Health charge and these will be identified for consideration ahead of the 2018 Budget.

States Revenue Expenditure Forecasts (as amended)

The detailed expenditure allocations for 2016 and the total States expenditure limits for 2017-2019 were agreed in the MTFP 2016-2019 in October 2015. The proposed detailed expenditure proposals  for 2017-2019 at Summary Table B, represent the outcomes of the further spending and savings review of the Council of Ministers since the MTFP in October and the amendments agreed as part of the MTFP Addition debate in September 2016. The detailed department and central expenditure allocations are within the total spending limits agreed. Figure 20 shows indicative department expenditure limits allowing for the allocation of pay and growth provisions which will initially be held centrally for 2017-2019.

Figure 20 – Total Indicative States Net Revenue Expenditure Forecasts for 2016-2019 (as amended) Indicative cash limits include the estimated allocation of pay and central growth provisions to Departments

Indicative Cash Limits including Pay Awards and Central Growth Allocations Figure 21 – Movement in Indicative Department Expenditure Limits

Figures 20 and 21 have been included to summarise the detailed expenditure allocation to departments and are extended to illustrate the indicative allocations from the pay and central growth provisions in future years. The allocation of the pay provisions and central growth allocation to give a much clearer illustration of the final anticipated budgets for departments.

In particular, the Health Cash Limit would increase by £31 million from 2016-2019 and the Education cash limit would increase by £6 million over the same period. Indeed, the Health expenditure would be a further £5 million higher if it were not for the proposed transfer from the HIF in 2017 to 2019. The graph also removes the £11 million of proposed commercial waste charges.

Without these indicative allocations the full extent of the allocations in line with strategic priorities is not clear.

A summary of the individual cash limit movements are shown in Appendix 3 and full details of all department's expenditure limits and the detailed allocations to service areas are provided in the MTFP Addition Department Annex (as amended), provided as an Addendum to the MTFP Addition.

The States Assembly at this stage is asked to approve department cash limits before the allocation of pay provision and central growth allocations for 2017 to 2019. The Annual Updates to the Department Annex for 2018 and 2019 will reflect these decisions in due course.

Depreciation

Following the recommendations by the Fiscal Policy Panel (FPP) in their Pre-MTFP Report' issued in January 2015, estimated depreciation has been included in the financial forecast to assist in identifying whether there is a forecast surplus or deficit.

Recognising depreciation in this way provides a closer proxy of the estimated expenditure required to renew and replace States' assets.

The estimated annual depreciation charge does not represent actual expenditure out of the consolidated fund but the inclusion of it in financial planning assumptions, when balancing tax revenues and current expenditure, provides for a cash balance in the consolidated fund. This balance then ensures that there are sufficient resources available to fund the annual capital programme allocations at an appropriate level to maintain the States' asset base.

The principle of including depreciation in the measure of expenditure was reiterated by the Comptroller and Auditor General in the Review of Financial Management' report issued in April 2015. The recommendation to include depreciation in the measure of expenditure for which funds are allocated by the States Assembly has been accepted and as a movement towards full implementation of that recommendation the MTFP Addition Proposition asks States Members to endorse the total amount of non-cash net revenue expenditure for 2017- 2019.

The forecast increase in depreciation over the MTFP period 2016 – 2019 is directly correlated to the indicative capital programme over the same period with the increase predominantly related to the increase in the Infrastructure Rolling Vote; all expenditure on infrastructure assets, with the exception of the creation of additional assets, is recognised as depreciation in the year it is incurred.

The forecasts for 2017-2019 have reduced slightly in the MTFP Addition compared to those presented in the MTFP 2016-2019 last year as the phasing of the individual capital projects have been updated by departments.

Analysis of cash flow forecasts for capital expenditure as opposed to sums allocated for depreciation is provided at Appendix 12.

Changes to Expenditure Allocations following the MTFP Addition debate (September 2016)

The seventh amendment was adopted by the States, along with proposals from the Chief Minister to commit to provide funding for 2 teachers who would be employed by the Education Department to teach Jrriais. No net change to total expenditure, but additional funding for the Department to be provided from within the Chief Minister's Department and Economic Development, Tourism, Sport and Culture Department ("EDTS&C"). It is now clear that the £30,000 transfer between Education and EDTS&C, agreed as part of the seventh amendment, was unnecessary and will be reversed during 2017 by Ministerial Decision.

The Health and Social Services Department's net expenditure was dependent upon the approval of transfers from the HIF for 2017, 2018 and 2019. With the States' rejection of the Health charge, P.82/2016 from the Minister for Social Security has been withdrawn, which means that the Health and Social Services Department's gross expenditure and income are both reduced by £5 million in each of the years 2017 – 2019. The Council of Ministers is proposing to earmark £5 million to replace the expenditure allocation for 2017 as a first call on 2016 underspends to be carried forward and applied to Health and Social Services. The Council of Ministers will explore sustainable expenditure measures with departments to identify £5 million on a recurring basis ahead of the Budget 2018. Alternatively, proposals for the allocation of Central Growth for 2018 and 2019 would also be considered as part of the Budget 2018, which currently include £9.7 million and £17.5 million of Health growth in 2018 and 2019 respectively.

8. Central Contingency Allocations 2017-2019

Central contingencies are a fundamental part of the Medium Term Financial Plan as it gives the States a degree of flexibility to manage its finances over a longer time period. The main contingency for DEL is for urgent and unforeseen items of expenditure and for AME is to provide provision for unpredicted fluctuations in benefits expenditure which are difficult to forecast.

The States have also established contingency provisions to support one-off expenditure for specific programmes like Public Sector Reform, Pay, Pensions, Workforce Modernisation and the Economic and Productivity Growth Provision. The Council of Ministers is also proposing a new provision for initiatives to support vulnerable children.

The States allocate funding to these contingency provisions for the period of the MTFP but this funding by its very nature may remain unspent and can be returned to the Consolidated Fund depending on the financial position. If contingency is unspent it can also be carried forward to provide greater flexibility in the following year. The Council of Ministers has provided carry forwards from 2015 to enable funds to be provided for certain commitments and emerging pressures. This funding and that currently uncommitted in 2016 will enable resources to be set aside quickly to respond to the BREXIT decision. In the event this proves necessary, the Council of Ministers is also proposing that current underspending on Social Security benefits is earmarked to be carried forward, to help manage within expenditure limits in future years and minimise the impact of the required expenditure measures on the economy, allowing efficiencies to be delivered over a longer timeframe.

Types of Central Contingency Allocation Central Allocation - DEL Contingency

Departmental Expenditure Limit (DEL) Contingency is provided for urgent and unforeseen items of expenditure. A DEL Contingency of £5 million is proposed for each of 2017-2019 which represents 1% of DEL expenditure across the various departments.

The intention is that contingencies would not be spent unless there are more urgent and unforeseen pressures than could be met from existing department cash limits.

In the MTFP 2013-2015, the intention was to provide within the total Departmental Expenditure Limit (DEL) Contingency for one-off unforeseen and unexpected items. In practice, a number of recurring pressures emerged in the first two years of the MTFP which the Council of Ministers agreed to provide from Contingency. Several of these pressures have now been prioritised within the additional funding for 2016-2019 and are proposed as part of departments' cash limits in 2016.

The principle is that the first call on any emerging pressure or priority is from within the department itself. The DEL Contingency must only provide a short-term funding solution in order to allow a department some time, generally during the remainder of a financial year, to adjust its spending plans accordingly. The intention is that it should not provide a recurring source of funding for the remainder of the MTFP period.

The Minister for Treasury and Resources, along with all other Ministers, is determined to ensure discipline and adherence to these principles is achieved, particularly when significant savings and efficiencies are being delivered across the States.

P.72/2015.Amd. (11), approved by the States Assembly during the MTFP debate on 6th – 8th October 2015, resulted in an increase to the net revenue expenditure limit for Education of £263,200 which is funded by a decrease in Central Contingency Allocations of an identical amount. The DEL Contingency was therefore reduced by £263,200 in 2016. This adjustment has been reversed in 2017 and a DEL Contingency of £5 million is proposed for each of the years 2017-2019.

Central Allocation - AME Contingency

Annually Managed Expenditure (AME) is defined as expenditure which cannot be controlled by the department and where the influences on the level of expenditure are not predictable and typically significant demand-led spending such as welfare, benefits and pensions.

Within the States of Jersey, the AME Contingency is set aside to provide a 2% contingency for un-forecast variations in Income Support and other tax funded benefits which are in excess of the 1% contingency provided for by the Social Security Department within its annual cash limit. The level of Income Support and benefits is difficult to forecast and significantly influenced by the performance of the economy. Variations in economic forecasts lead to different levels of benefit spending. At a level of £2 million the central AME contingency provides a further 2% cover for this area of expenditure and or alternatively provides some contingency for higher education grants. This is another budget where there could be significant uncertainty over the period of the MTFP 2016-2019 and is dependent on the policies adopted by the UK government and UK universities.

Any AME contingency budget unspent at the end of a year would normally be expected to be carried forward to provide further contingency against variations in future years. Conversely, if forecasts were suggesting an overspend that would exceed the AME contingencies the Council of Ministers would need to consider funding from other available contingencies or, if necessary, consider a re-allocation of existing expenditure budgets.

Use of 2016 underspend to be earmarked and carried forward

The principle of unspent AME contingency being carried forward is being applied in 2016 where the Social Security department at Q1 are reporting a significant forecast underspend. This means that as well as an underspend on the AME budgets in Social Security of almost £5 million the AME Contingency in 2016 will not be required. The Council of Ministers is proposing to earmark these sums amounting to £6 million to fund the required provisions for AME Contingency in 2017-2019.

Central Allocation - Restructuring and Redundancy Provision

The Council of Ministers proposes to combine the Restructuring and Redundancy provisions which will provide greater flexibility across Public Sector Reform initiatives. The Council of Ministers is also proposing to carry forward the unspent and uncommitted balance of redundancy provision from 2016 to reduce the level of allocation required from expenditure limits for the new joint provision in 2017 to 2019. It is currently estimated that an element of the £22 million originally provided for Redundancy will be uncommitted at the end of 2016 due to reduced levels of staff savings, vacancy management and natural attrition.

Restructuring

In the MTFP 2013-2015, the Restructuring Provision supported the final year of the Comprehensive Spending Review (CSR) programme and Phase 1 – the enabling' stage - of the Public Sector Reform (PSR) programme which commenced in 2012. In this first phase, the funds were used predominately to support the individual workstreams of Workforce Modernisation, e-Government, LEAN and "Culture" which incorporated leadership, training and engagement.

In the MTFP 2016-2019, the Restructuring Provision is required to maintain support for PSR in the second phase – the implementation' stage – and is required for the following projects:

• To complete the Workforce Modernisation project;
• To continue funding for e-Government initiatives – the project is currently funded up to 2015, further allocations will be required in 2016 and future years to deliver the full capability;
• To provide programme support for PSR; and
• To provide a funding route for future Voluntary Release Schemes and Compulsory Redundancies if required.

Redundancy

The voluntary release scheme provides a mechanism for employees who wish to volunteer to leave the organisation through redundancy or early retirement to receive a redundancy payment or immediate pension. The scheme has been made available to all employees in 2015 and 2016.

It is anticipated that future use of such schemes would be more targeted throughout 2016 to 2019 focusing on areas where re-design of services are identified that will add value to the services provided by the public sector. This focused approach in partnership with our Unions should reduce the need for compulsory redundancy and facilitate the achievement of the people saving targets for the period.

The Council of Ministers identified £2 million in 2015 and the States agreed a further £4 million to be allocated in 2015 and £16 million in 2016 to the central redundancy provision as part of the amendments to MTFP 2016- 2019.

All redundancy applications received are being considered firstly by department Chief Officers and authorised where the business case demonstrates financial viability. The current terms of the scheme and any future alterations require approval of the States' Employment Board. Release of central funding for redundancy payments requires authority of the Chief Executive, Treasurer of the States and the Director of Human Resources.

At the time of lodging the MTFP Addition £6 million had been allocated from the provision with further sums to be committed in 2016. Departments have also identified further commitments for 2017-2019 as part of their savings returns but at this stage the committed and estimated sums fall short of the £22 million set aside.

Carry forward of uncommitted sums

The Council of Minister is proposing to earmark the uncommitted redundancy funding at the end of 2016 and carry this forward to reduce the required expenditure allocation for the Restructuring and Redundancy Provision in future years, see Figure 22.

Central Allocation – Pay, PECRS and Workforce Modernisation Provision

As part of the Public Sector Reform programme, the Workforce Modernisation project continues to be developed in partnership with Trade Unions. It will deliver an improved, more productive and sustainable public service by unifying at least 11 pay groups (75% of the workforce) onto a single reward framework with the same employee terms, conditions and policies that are fair, transparent, and fit for the future, thus providing equal pay for work of equal value and enabling well designed jobs to be managed through an improved performance culture that provides organisational flexibility and supports continual service redesign.

The introduction of modern reward structures require funding in order to facilitate employees moving onto their new terms and conditions whilst maintaining services and redesigning the organisation.

Provision is made for pay for 2017-2019 in addition to the awards agreed for 2016 but we need to continue the policy of pay restraint, to help keep the public sector pay bill within the agreed limits and support investment in our strategic priorities. This policy will need to be maintained for the period of this plan and will contribute significantly to the spending target. Pay restraint is an important element of the total savings delivery required to balance the books and provide funding required for the essential investment in health and education.

The new PECRS CARE scheme was open to new starters from 1 January 2016 and to existing staff from 2019. The increased employer contributions for new starters are included from 2016 and the full employer costs of the new scheme will be phased in at £2 million p.a. over 3 years from 2019. Provision is also proposed for the increases in the cost of the PECRS pre-1987 debt over the period 2017-2019.

Central Allocation - Economic and Productivity Growth Drawdown Provision

The MTFP 2016-2019 established the Economic and Productivity Growth Drawdown Provision (EPGDP), which is designed to support new initiatives that will have a positive impact on economic and productivity growth but cannot be funded from within existing budgets.

To qualify for funding from the EPGDP, proposals must be capable of offering cost effective demonstrable impacts in terms of economic growth and/or increases in productivity alongside a strong rationale for government intervention.

Financial management of the allocations is through the Minister for Treasury and Resources subject to oversight and recommendations from the Economic Policy Political Oversight Group (EPPOG) – a sub-group of the Council of Ministers. Further details of the Provision were made available to States members in MTFP 2016-2019.

Work to begin supporting economic and productivity growth has commenced in 2016, robust governance procedures have been established and a project manager has been appointed to manage the allocation process and work with departments who are preparing applications for the Provision. So far 6 applications are in varying stages of development and 2 are currently being reviewed by the EPPOG. The 2 proposals being reviewed by Ministers entail digital skills courses to respond to an identified shortage of locally qualified workers in the digital sector, measures to enhance the capacity of the Digital Jersey Hub to provide co-working facilities and a proposal to enable the Island to respond to the threats and opportunities presented by changes to European data protection legislation. Pending bids include funds to implement the outcomes of a review of the Competition and Regulatory Framework in Jersey and the view of Professor Sir John Vickers conducting the review is that "Conducting competition and regulatory policy well is hard, but the economic benefits can be substantial. I hope this review will help Jersey continue to improve what its institutions do so that residents and businesses can benefit from a more efficient and effective economy".

MTFP 2016-2019 set funding levels for the EPGDP at £5m in 2016 and envisaged similar levels of funding for 2017-2019. Whilst a number of worthwhile proposals are being developed, the volume and quantum of applications has been lower than initially anticipated when the EPGDP was first proposed. At this stage is appears unlikely that the £5m available in 2016 will be fully allocated during the year. It has also been recognised that the best economic outcomes may be achieved by preserving capacity to fund existing economic initiatives

Proposals to use this funding to mitigate the economic impacts of the UK's withdrawal from the EU would potentially fit the scope for this funding.

The Council of Ministers concluded that a proposal to protect from an element of savings the base budgets of the External Relations Department and the Digital, Innovation, Financial Services and Competition Team within Chief Minister's Department was likely to offer better support for the economy than likely new initiatives from these areas. It was similarly recognised that the growth bid in respect of the implementation of the McKinsey recommendations was well aligned with the criteria of the EPGDP and should be prioritised over any new bids.

As a result of this exercise, the current experience of volume of bids and the pressures on expenditure limits the Council of Ministers is proposing that the EPGDP Provision be used to fund the items described.

The remit of the EPGDP already extends to assist initiatives that arise in response to BREXIT and if required funding can be transferred from other contingencies to support these initiatives as well as from EPGDP.  Central Allocation – Earmarked Provision for initiatives to support vulnerable children

As part of the overall review of growth requirements by departments a number of pressures were identified in respect of investment in initiatives that support vulnerable children including:

• additional capacity in the Law Officers' Department, Children's and Family division;
• continued development of family centres and early intervention initiatives;
• development of the Youth Enquiry Service;
• additional child protection officers and other enhancements to work on safeguarding;
• support towards a sexual assault referral centre;
• continuing development of support for pre-school special needs children, and
• fulfilling our commitment to the 1001 critical days agenda - a twenty point action plan has been

drawn up which includes initiatives to improve antenatal preparation, perinatal mental health care and early literacy. There are also plans to promote breastfeeding and a public health campaign to focus on avoiding alcohol during pregnancy.

These initiatives include currently undelivered recommendations arising from previous reports/inspections. The need for any additional future investment will be assessed once the Independent Jersey Care Inquiry has made its final report and recommendations.

Central Growth

Proposals  for  the  Central  Growth  allocation  for 2018  and  2019  are  detailed  in  Section  9.  The  proposed allocations are and required by the "Finance Law" to be proposed separately in the main proposition.

Figure 22 – Summary of Proposed Central Contingency Allocations for 2017-2019

The planned carry forward of funding of contingencies for AME, Redundancy and Restructuring and reducing the sum available for EPGDP over the period, contribute to enabling expenditure to be met within the limits set by the States Assembly, and for growth allocations to be increased for 2017-2019 above previous plans.

Annual AME Contingency would have to be re-instated in 2020 however EPGDP funding was always intended to be limited to the current period and it is anticipated that lesser sums would be provided for future reform programmes, given what will be delivered by the end of this MTFP period.

Rules of Operation

The operation and management of central contingencies is covered by Financial Directions which require all departments, in the first instance, to demonstrate that contingency requests cannot be funded from within existing cash limits.

A business case is then submitted, with the support of the Accounting Officer, for consideration by the Treasurer of the States. The Treasurer will advise the Minister for Treasury and Resources who in turn will consult the Council of Ministers before making a decision on the allocation of funds.

All central contingency allocations are recorded in a formal and public Ministerial Decision. Central contingency allocations are reported to the Council of Minsters as part of quarterly financial monitoring reports and to the States as part of the half-yearly Budget Management Report.

9. Additional Funding for Pressures, Demographics and Growth

Background

The Council of Ministers established the initial four strategic priorities of Economic Growth, Health and Wellbeing, Education and St. Helier ahead of the Strategic Plan. As part of the MTFP 2016-2019 Departments were asked to review existing base budgets and consider if any of the initiatives to deliver the strategic priorities required additional revenue or capital funding over the period 2016-2019.

In many cases the delivery of the strategic priorities will be achieved or partly delivered by the re-prioritisation of existing resources or the redesign of services. This is particularly the case in those departments where the greater extent of savings target has been allocated to date. The reallocation of resources also recognises the necessary spending constraint in order to deliver sustainable public finances and balanced budgets over the period.

The bids were categorised as:

• Base Pressures – addressing pressures created by a shortfall in projected income or in maintaining standards (eg. H&SS).
• Committed – services, initiatives or legislation which have been committed to by the States or the Council of Ministers during the course of the MTFP 2013-2015 and where permanent funding is now required, often replacing temporary contingency funding.
• Demographics – addressing demographic pressures within existing policy and assuming existing service standards are maintained.
• New Growth – departmental or strategic priorities which require additional funding or growth in base budgets.

Strategic Priorities

The Strategic Plan (P27/2015) clearly identified the strategic priorities: Funding the increasing cost of health and social care

In line with the decision taken in previous Business Plans and the MTFP 2013 – 2015, there is a continued commitment to the policy of investment in health and social care service standards and healthcare inflation. It is recognised that new developments (eg new treatments and drugs) and healthcare inflation require funding in order to allow Jersey to continue to provide health and social care at a comparable standard to neighbouring jurisdictions.

In P82/2012 Health and Social Services: A New Way Forward', the Assembly also recognised the need to transform services in order to meet the demands of the ageing demographic in Jersey, and to ensure that the size of the new Hospital can be appropriately contained through the delivery of more services in community settings.

The Health and Social Services Department undertook a full review of the next phase of the P.82 proposals affecting 2016 and 2017 as part of the MTFP 2016-2019. As indicated at that time, a further review of the detailed business cases has been undertaken in preparation for the MTFP Addition which in turn has considered the phasing of 2018 and 2019 and given initial consideration to 2020. MTFP 2020 – 2023 will consider the third phase of the 10 year investment plan envisaged in P82.

The proposals in the MTFP Addition maintain the £25 million P82 and service standards funding from the MTFP 2013-2015. Furthermore the 2016 additional funding of £8 million for service standards and additional P82 funding is also being maintained. The review has enabled a re-phasing and reprioritisation of the proposed additional P82 funding for 2017-2019 leading to a reduction of £1 million funding by 2019 reflecting a commitment to deliver further efficiencies from within the programme itself.

The Health and Social Services Department continues to participate in the corporate commitment to deliver savings through efficiencies and review of services. As part of that the Department put forward a range of savings options and user pays charges. Over the past year there have been a series of workshops and reviews that have considered these options and refined the proposals included in this MTFP Addition. Furthermore, the corporate Distributional Analysis and Ministerial review of strategic priorities considered the impact and level of the proposed savings and user pays charges and proposed a reduction in the initial savings proposals by £1.5 million in 2019, reflecting the strategic priority of Health and the potential distributional impact of the savings on individuals. These amended proposals are also intended to make the package of measures more progressive.

The provision of modern, safe and appropriate health and social care services is predicated on the delivery of the whole transformation programme – as is the size of a hospital required in the future. Key aspects of this programme of change have already been implemented in accordance with the States decision to support P.82/2012. It is important that this change continues if health and social care services are going to be adequate to meet the needs of the ageing demographic into the future. Funding to support this change is included in this MTFP Addition – in Health and Social Services for 2017 and held in the central growth provision for 2018 and 2019. The allocation of this funding is dependent on achievement of savings targets and income forecasts for the States as a whole and will be proposed in the annual Budget and approved by the Assembly in the relevant years.

This need to invest in health and social care services must also be balanced against the need to deliver sustainable and affordable health and social care and the MTFP Addition proposed the introduction of an income based "Health charge" from 2018, although this was rejected by the States.

The additional funding currently proposed for Health and Social Services amounts to £38.5 million p.a. by 2019, in addition the Council of Ministers is proposing a further £1.65 million p.a. from 2017 to be available through the contingency process to appropriate departments in an earmarked provision for initiatives to support vulnerable children.

Funding for strategic priorities in Education

Education is another one of the four main strategic priorities of the Council of Ministers. Additional funding was proposed and prioritised in MTFP 2016-2019 to address raising standards, support and improve the ICT investment in schools and to address the demographic pressures from early years through to post-16 education.

A further review of growth in preparation for the MTFP Addition has maintained the original additional funding for Education with a small reprioritisation to enable the crucial work on improving standards in three main areas:

• Targeted funding to address the risk of low performance across all groups of pupils vulnerable to lower attainment. If young people in Jersey are to meet and exceed outcomes of their peers in neighbouring jurisdictions a local equivalent to the UK's Pupil Premium' is required. Growth funding aims to bring the level of entitlement for those less advantaged pupils in our schools in line with those in the UK, resulting in higher standards achieved.
• Raising standards is not possible without robust data systems. An enhanced data insight team would provide the essential analytical tools to match those available to all education services in the UK. The addition of two data analysts is required.

• The expansion of the School Achievement and Standards Team to include two additional Professional Partners. This is the most effective and economical means of expediting the changes necessary to raise standards.

The level and profile of additional funding and level of proposed savings was subject to the corporate Distributional Analysis and Ministerial review for the MTFP Addition. As a result of this review Council of Ministers is proposing additional funding for higher education of £2 million by 2019 and also a reduction in the Education savings target, this aligns with States strategic priorities and will also make the Council's package of measures more progressive.

The additional funding for these important measures currently proposed for Education now amounts to £10.6 million p.a. by 2019.

Funding to maintain support of the economy

The MTFP 2013-2015 provided significant funding to support the strategic priorities of economic growth and getting people into work. This important injection of funding was allocated across a range of projects in different departments and amounted to £14 million per annum by 2015.

As part of the spending review, the majority of this investment is being maintained from 2016 where it continues to provide effective investment in the ongoing priorities, or will be reprioritised towards other measures to grow the economy.

The Council of Ministers has also made provision centrally for funding of economic and productivity growth initiatives which cannot be met from the resources in base budgets with £5 million allocated in 2016. This funding has been reviewed as part of the MTFP Addition proposals and the level of bids currently received for 2016. As a result of this review the proposal is to divert some of this funding to largely protect the base budgets of key areas like Digital, innovation, Competition and External Relations and to reduce the original funding proposals over the MTFP period reflecting the level of bids currently proposed and the importance of protecting and prioritising existing base budget funding. (see Section 8).

Funding for other priorities and pressures

All areas of additional funding have been reviewed as part of the MTFP Addition and most of the original proposals are being maintained but some areas have been able to be reduced from those original allocations.

Proposals for new additional funding since MTFP 2016-2019

The review of additional funding identified further requirements for growth, which are summarised in Figure

23. These requests were considered and prioritised alongside the existing growth requests and the savings proposals to ensure the funding was not only prioritised against strategic priorities but also against existing base expenditure and funding pressures. Some of the areas are unavoidable arising out of pay agreements and insurance provisions and include the prioritisation of £2 million by 2019 for Higher Education and £1.65 million for improvements in child protection and policy. In total the additional proposals will amount to £7.8 million p.a. by 2019.

Figure 23 – Summary of additional funding proposals in the MTFP Addition 2017-2019

Note; In addition the Minister for Infrastructure will be proposing £0.6m from the Car Parking Trading Fund for a new Concessionary Travel Scheme for people with disabilities for 2017.

Allocation of Growth proposed for 2016 and 2017

Additional funding for 2016 was incorporated in Departments' cash limits in the MTFP 2016-2019 last year and it is proposed to incorporate the 2017 additional funding into Departments' cash limits in the same way, subject to States approval. The proposals for 2017 additional funding are shown in Figures 24 and 26.

Proposals for a Central Growth Allocation for 2018-2019

Although growth for 2016 and 2017 is allocated to departments, the intention is to use a central growth allocation for 2018 and 2019 as part of the proposals for the MTFP Addition. This would be consistent with provisions in the "Finance Law" and the principles adopted in MTFP 2013-2015.

This will provide an important part of the Council of Ministers contingency planning and allow the level of additional funding and growth envisaged for 2018 and 2019 to be agreed in the annual Budgets for 2018 and 2019 on the basis that the savings targets and/or projected income levels are achieved. If either savings or income forecasts fail to reach the proposed targets the level of additional funding will need to be revisited. The total spending limits for the four years cannot be exceeded, other than in exceptional economic or environmental circumstances, and the financial position needs to be broadly balanced by 2019.

A certain element of the 2018 additional funding is the recurrent full year effect of proposals from 2017 and these amounts are proposed to be incorporated into 2018 and 2019, see Figure 24. This is particularly the case with the Education proposals and an element of the Health P82 funding. After adjusting for these amounts the proposed level of additional funding to be held as central growth would be £10.4 million in 2018 and a further £10.1 million in 2019, Figure 26.

Changes agreed in MTFP Addition debate

The States rejected the proposed Health charge which resulted in the withdrawal of the proposed HIF transfers and reductions in Health expenditure of £5 million for 2017 to 2019. The Council of Ministers has committed 2016 underspends to be carried forward for 2017 Health expenditure and intends to work with departments to identify sustainable expenditure measures to replace the £5 million p.a. expenditure which was dependent on the HIF transfers in 2018 and 2019. The levels of health central growth in 2018 and 2019 would be reviewed alongside the proposals for the £5 million sustainable expenditure measures ahead of the draft Budget 2018.

Process for monitoring growth

Procedures are currently in place to report on the progress of implementing previous growth proposals. These procedures, which involve extended quarterly monitoring and reporting to Corporate Management Board and the Council of Ministers, were introduced immediately following the first MTFP debate for the financial year  2013. These procedures will continue through the period of the MTFP 2016-2019 at a similar level of detail and will be extended to closely monitor progress towards the achievement of savings targets.

Figure 24 – Balance of Original Additional Funding for Growth Proposals for 2017-2019 (excluding items proposed for Central Growth Allocation 2018-2019)

Note: Treasury and Resources – Asset valuation is represented as one-off funding due to the requirement to undertake asset valuations only in particular years so recurring funding not required as it is with most proposals.

Figure 25 - Proposals for Additional Funding for Growth since the MTFP 2016-2019

Figure 26 – Proposals for Central Growth Allocation 2018 - 2019

Note: Central growth in 2018 and 2019 would be considered alongside sustainable expenditure measures being identified to replace the £5 million Health expenditure which was dependent on HIF transfers for 2018 and 2019

Narrative for All Addition Funding for Growth

Strategic Priority for Health

HSS  2% investment in Service Standards and Healthcare Inflation  £4.2m in 2016 £19.0m by 2019

The 2% funding for Health and Social Services is provided to help the department respond to changes in standards of care recommended by the Royal Colleges and other professional bodies; to maintain services at a comparable standard to neighbouring jurisdictions; provide for increases in demand for specific care, meet healthcare specific inflation costs (e.g. drugs) and make new drugs, treatments and therapies available to islanders where appropriate. Therefore, the exact allocation of this funding each year is variable and dependent on factors outside the control of the department.

HSS  White Paper funding – P.82/2012 Health Transformation

HSS  Acute Services Strategy  £1.6m in 2016  £8.7m by 2019

Acute services are being redesigned to ensure that we avoid hospital attendance, reduce hospital admissions and reduce the length of stay of those who do require admission.

Priority investments in ambulatory emergency services' are needed to provide enough capacity until the opening of the Future Hospital. Patient pathways need to be redesigned to reduce hospital length of stay and ensure only those needing an inpatient stay are admitted. This work will be underpinned by the ongoing process of workforce redesign to ensure best value is obtained from these posts and that they are appropriate for a future where care will be wrapped around the needs of patients.

Making these essential changes to the models of care is critical in order to deliver the proposed size of the Future Hospital.

HSS  Healthy Lifestyles  £0.4m by 2019

Further investment in health promotion programmes has been phased in order to reduce costs in 2016 and 2017. From 2018 additional investment is planned to introduce targeted programmes on key initiatives, such as weight management programmes introduced through schools and referral schemes through primary care. Prevention and early intervention is more efficient and effective in the longer term than treatment and will help to reduce the incidence of long term conditions. Investment will enable health and social care professionals to focus on health promotion activities, thereby improving health outcomes for Islanders.

HSS  Mental Health Services  £0.5m in 2017  £1.4m by 2019

One in four people will experience a mental health problem at some point in their lifetime and one in six adults has a mental health problem at any one time. One in ten children aged between five and 16 years has a mental health problem, and many continue to have mental health problems into adulthood. Mental health problems can have a wide ranging impact including: obtaining housing, participating in education and training, physical health and relationships with family and friends. Investment has already been made to improve and develop services but more is needed. This will result in an integrated service (spanning both mental health and physical health needs), incorporating specialist expertise for individuals with alcohol and/or drug dependency, dual diagnosis', learning disability, autism, a new recovery model, investment in more community services and improved medium and low secure facilities.

The Mental Health Strategy has been produced with Islanders, carers and service users and prioritises investment in crisis, recovery, early intervention and criminal justice. This work will build on what has already been achieved in 2013-2015 when P82 funding was used to establish Jersey Talking Therapies, providing accessible services for individuals with anxiety and depression in non-stigmatised, local settings. Furthermore in 2015 the Department opened new, safe facilities on Robin Ward for children and young people with mental health problems.

HSS  Out of Hospital Services  £0.3m in 2016  £5.6m by 2019

In the 30 years from 2010 to 2040 the numbers of Islanders aged over 65 is projected to rise by 95%; in the period to 2020 the increase is projected to be 35%. This demographic change will create a surge in demand for health and social care services which would overwhelm the current capacity of existing services.

The current capacity in community services will be inadequate to meet demand. Investment has been made in out of hospital' services during MTFP 1, such as the rapid Response and Reablement service; these have had a positive impact on hospital demand, choice and patient experience. These services need to be expanded in the coming years, to ensure Islanders can be cared for in their own homes rather than in hospital or long term residential settings.

Investment in the care needs of the whole person will be prioritised rather than in silo-based specific conditions or diseases. This will ensure that individuals receive the relevant blend of physical and mental health care, and will help to improve outcomes for individuals and for the whole system. Needs will be proactively identified, and care co-ordination provided by the most appropriate professional. The aim of this investment is to manage care effectively and so reduce crises, the need for ED attendances and hospital admissions. Care will be provided in partnership across the system (including Primary Care and the voluntary sector), and with patients, carers and families themselves.

International evidence demonstrates that IT is an important enabler for integrated health and social care and the delivery of safe, effective services for patients. Investment, including IT integration, will support a single care record, and facilitate teams working closely together (including Primary Care and the voluntary sector) to meet the needs of Islanders.

HSS  Services for Children (Early Interventions)  £1.9m in 2016  £3.4m by 2019

Investment in early intervention can have a profound impact on a broad range of socio-economic, health and wellbeing factors. This includes future development, learning, behaviour, health and the ability to build positive, secure attachments. It can also affect truancy, conduct disorder and risk-taking behaviours such as substance misuse and mental illness. UK studies have shown that each child with untreated behavioural problems costs statutory services an average of £70,000 a year by the time they reach 28 years old, the average cost of an individual spending a lifetime on benefits is £430,000 not including lost tax revenue. Returns of up to 3 to 7 times the original investment can be achieved by the time the young person is 21 years old. Investment in 2013 – 15 was targeted in this way, with funding for new services such as Sustained Home Visiting, and increased services such as Mellow Parenting.

Investment in service redesign is needed in order to:

• Discharge the States' statutory obligation to safeguard and promote the welfare of children
• Prevent breakdown of families where children are in need and have a range of complex needs
• Improve outcomes for the most vulnerable and at risk children
• Minimise the risks of young people's suicide and increase treatment options for children and young people with mental ill health
• Deliver timely and high quality child protection services to prevent further and/or more significant harm
• Provide quality services to looked after children
• Intervene with pregnant women with a range of risk factors likely to impact on their parenting abilities

Strategic Priority for Education

EDU  Primary School Demographics  £0.7m in 2016  £2.4m by 2019

Primary school numbers are set to increase due to a high number of births in 2010, 2011 and 2012 (average 1,092 per year compared to 1,006 in 2007-09). Average birth numbers are predicted to be 1,029 per year until 2020. As a result it is predicted that 400 new primary school places, (which equates to an average of 3 additional classes per year) will be required in the non-fee paying primary sector between 2016 and 2020. Additional capacity has been created as part of the primary school building programme in 2014-15.

EDU  Secondary School Demographics  £1.3m in 2016  £1.5m by 2019

Pupil numbers in secondary schools are predicted to increase from 2017-19 for Year 7-11. In addition, more pupils are staying in education until 18, resulting in additional pressure from 2016. There were 90 more pupils in the system in 2015 than forecast. There is capacity in the four 11-16 schools to meet this increase in demographics, which is a reversal of the decline we saw over the previous MTFP period.

EDU  Nursery Education Fund   £0.4m in 2016  £0.1m by 2019

High birth numbers in 2010-12 will result in more children requiring States funded places in private or voluntary nurseries provided through the Nursery Education Fund (NEF). This provides parents with the opportunity to access 20 hours per week (term time) of early years' education at a registered private or voluntary sector nursery for children aged 4, and works in conjunction with the proposed means testing as part of the department's saving measures.

EDU  Revenue consequences of capital schemes – ICT Skills Strategy  £0.8m in 2016  £0.8m by 2019

The IT strategy was launched in October 2012 to provide the best IT education possible and a workforce fluent in technology. The initial £3 million funding from 2013-2015 provided better infrastructure and saw schools developing solutions that meet the needs of their pupils, provide teachers with continual professional development and develop the IT skills that are important in the 21st century. Funding of £750,000 from 2016 onwards will meet the increased cost of the fibre infrastructure, together with continued investment in training and physical IT within schools.

EDU  Revenue consequences of capital schemes – New Schools  £0.1m in 2016  £0.5m by 2019

New premises cost more to run than previous premises due to the additional facilities provided. The new schools at St Martins and Les Quennevais and additional primary classes at six schools will all require increased non-staff revenue budgets to run.

EDU  Raising Achievement Funding  £0.8m in 2016  £2.5m by 2019

Academic outcomes for Jersey students have plateaued in recent years and are now trailing the UK. If young people in Jersey are to meet and exceed outcomes of their peers in neighbouring jurisdictions a local equivalent to the UK's Pupil Premium' is required. This provides targeted funding to address low performance among pupils vulnerable to lower attainment. Growth funding will provide disadvantaged pupils in our schools with comparable help to those with identical disadvantages in the UK. The department will select from a range of methods that have been evaluated as successfully raising standards. These are likely to include booster classes, 1:1 tuition, peer mentoring, teacher training and teaching assistants.

EDU  Provision of a Data Team  £0.1m in 2016  £0.1m by 2019

An enhanced data insight team to provide the kinds of analytical tools available to the education services in the UK, is essential if young people in Jersey are to meet and exceed outcomes of their peers in neighbouring  jurisdictions. Better data would enable the current Professional Partner team to support schools more effectively and ensure the focus remains on raising standards. It would also enable continued long term planning in a period of constantly changing demographics. This team does not only provide schools' data, but also has an important link to the Statistics Unit and population predictions.

EDU  Extend Professional Partnering  £0.3m in 2016  £0.3m by 2019

The success of the Island's schools has a clear link with engagement with high quality school self-evaluation under the Professional Partner scheme, established in 2009-10. The Professional Partner programme has ensured rigour in pupil assessment and improvements in teaching, learning, care and curriculum provision. To improve attainment, schools and colleges must become more accountable for outcomes. With greater autonomy comes an increased need for enhanced accountability, evaluation and inspection. The expansion of the School Achievement and Standards Team, encompassing two additional Professional Partners, is the most effective and economical means of expediting essential change and raising standards.

EDU  Early Years (SEN)  £0.3m in 2016  £0.3m by 2019

In 2012-2013 a working group reviewed the Island's Early Years' provision and highlighted the need for a coherent support system for children and families from pre-birth to five. Pre-school provision is not statutory in Jersey and, unlike the UK, receives no funding from the States. Multi-agency work has clearly identified all the under-fives with special educational needs in States nurseries and pre-school. Working with this group ensures the children get the best possible start to their education and that they are better able to access school when they start. Research shows early intervention is key.

 EDU  Higher Education Funding  £0.6m in 2017  £2.0m by 2019

Council of Ministers agreed an additional £2 million per year by 2019 following the Distributional Analysis of spending proposals and the Ministerial review of savings and growth. The proposals include using the £2 million to provide more financial support so more students to access University. In particular, the household income threshold for receiving a full student grant will be raised and the maximum amount paid for living expenses through the maintenance grant will increase, helping people on lower incomes. Other higher education initiatives will also be investigated.

Funding for Other Priorities

BC  Security and Health and Safety in Royal Court  £0.1m in 2017  £0.1m in 2019

A Health and Safety report has identified deficiencies in the current security measures for the Royal Court. The improvements to the security measures proposed are to include "on entry search facilities" which will also require increased staffing. With the savings measures required the additional funding could not be found from within existing Non Ministerial budgets.

CMD  Financial Services/McKinsey Implementation (EPGDP)  £0.5m in 2016  £0.5m in 2019

The Government supported a jurisdictional review of the Financial Services sector in 2012/2013 which produced a strategy from which a government policy framework was developed. Both require significant government involvement to maintain the sector. This involvement requires resources both staffing and operating costs. Over the past 18 months this involvement has resulted in the industry stabilising and growing. Given the changing external environment the immediate future is even more challenging. This funding is essential for ensuring the future of employment and tax income from this critically important sector which supports all other sectors of the economy.

This growth funding is being offset by a reduction in the EPGDP Provision, reflecting the importance of this funding for economic and productivity growth.

CMD  Freedom of Information – Central Unit  £0.1m in 2016  £0.1m by 2019

This growth funding is for a permanent Central Freedom of Information Unit (CFU) located in the Chief Minister's Department. A temporary CFU team is currently in place but their funding ends on 31 December 2015. No specific FoI funding for individual departments will be allocated after 31 December 2015 so a small permanent CFU will help manage various aspects of the Law for the States in 2016 and beyond. Departmental costs are being absorbed within budgets.

The CFU's role is to manage the execution of the Law for the States. The CFU is customer facing, tracks metrics, provides policy recommendations, trains departmental staff in the various disciplines required to handle FoI requests and assists in managing the States' legal and reputational risks associated with the Law. The CFU currently receives FoI requests via foi@gov.je, a form on www.gov.je/foi and by post. The CFU coordinates, tracks, records and sends the responses back to the requestor. After the requester receives the response the CFU publishes final response on gov.je.

CMD  ISD Increased revenue budget required  £0.4m in 2016  £0.5m in 2019

As staff increasingly prefer to use their own tablets and smart phones to access corporate data extra funding is needed to ensure the security of that data.

The States of Jersey Wide Area Network (WAN) connects all departments to provide applications, telephony and internet connection. If the network has insufficient bandwidth all IT services and the phone system can be badly affected. To ensure departmental services are efficient and effective the network infrastructure needs to grow to cope with the increase in demand and services.

The Microsoft EA agreement is a five year contract with a three year break point with the price guaranteed at the start for any licenses under the agreement for the first three years. Microsoft has indicated that the cost of licences will be increasing in two steps in 2015 and 2017.

JD Edwards is expected to reach the end of its life in 2020 and a replacement is essential to ensure we can support the organisation as it responds to changing requirements.  

CCA  Revenue consequences of capital schemes – New Police-  £0.1m in 2016  £0.3m by 2019

Station and Prison Phase 6

The 2016–2019 MTFP included details of additional funding required for the revenue consequences of capital schemes – New Police Station and Prison Phase 6. These requirements have been reviewed in the light of more detailed information and the revenue consequences of the New Police Headquarters have been reduced. The revenue consequences of the next Phase of the Prison will not be required until 2020 due to the anticipated timing of the project.

CCA  Joint Safeguarding  £0.1m in 2016  £0.1m in 2019

An Adults' Safeguarding Board was established in 2014, bringing together agencies that work with adults who are, or may be, vulnerable and unable to take care of, or protect, themselves from significant harm or exploitation. The Board was initially funded from contingency funds with a commitment to establish funding in base budgets in MTPF2. The Board develops policies and procedures which help protect those adults. If someone does suffer harm the Board investigates and recommends action to help prevent a reoccurrence. In an ageing society, where more adults are cared for in different settings, it is important that steps are taken to help ensure their safety. Failure to do so has considerable consequences, first and foremost in human and social terms, but also economically as recently experienced in relation to the historic abuse of children.

DfI  Energy from Waste – shortfall in income  £1.1m in 2016  £1.5m in 2019

Since the commissioning and operation of the new Energy from Waste (EfW) plant at La Collette, the unit rate received from the Jersey Electricity Company for power has steadily reduced, mainly due to European energy market conditions (down 43% in 2016 compared to 2012). In addition, the economic downturn and success of the Island's recycling initiatives have reduced waste volumes. The assumptions used in calculating the cash limit have also assumed an increase in income of 2.5% per annum. The net effect of this is that the income budget is now unrealistically high. Projections at the time of the MTFP 2016-2019 indicated that the shortfall would be in excess of £1.26m for 2016 – 2019. The unit rate has reduced further since then and the latest forecast updated for the MTFP Addition require a further £220,000 in 2017 increasing to £240,000 by 2019 unless unit prices substantially increase.

DfI  Energy from Waste – no Guernsey waste income  £1.5m in 2016  £1.6m in 2019

In the 2013-15 MTFP, the Infrastructure Department's cash limit was reduced by £1.5 million to recognise the net anticipated effect of income from importing and treating Guernsey Waste. On 14 April 2016 it was announced that Guernsey would begin exporting their waste to Sweden for treatment from 2018, with a three year contract. With this announcement, it is now confirmed that this net income will not be forthcoming during the 2016-19 MTFP.

DfI  Tipping fees shortfall  £0.3m in 2018  £0.8m in 2019

Income is dependent on the level of construction and demolition activity in the Island and available locations for disposal or treatment of inert waste. Historically, tipping fee income has been on a downward trend and the availability of a new inert waste site which is due to open in 2018/2019 in St Peter's Valley is expected to have a further negative impact on income. The Infrastructure Department is not able to control this reduction in income and once La Collette inert waste site is full, the loss of all tipping income will create a pressure on income of approximately £1.3m. At the time of the MTFP 2016-2019 the estimated loss of income was £346,000 by 2019. A further review now estimates the potential shortfall to have increased to £796,000 by 2019.

DfI  Bus Contract – Main and School Bus Contract Shortfall  £0.3m in 2016  £0.3m in 2019

The new bus contract has delivered significant savings in addition to an increase in service levels, these savings have contributed to the CSR targets achieved by the department in 2011 - 2013. Increases in bus ridership have meant that expenditure on concessionary fares for pensioners and the school bus service is significantly in excess of budget. Concessionary fares are a substantial contractual cost of the service and these costs will continue to increase year on year, unless changes are made to the concessionary travel rules. The growth bid over the period of this MTFP represents the current shortfall in contractual payments.

DfI  Revenue consequences of capital schemes – new Sewage-  £1.7m in 2019

Treatment works (from 2019)

This provision is required from 2019 to fund the cost of capital from the currency fund infrastructure investment for a period of time until liquid waste charges are fully established to provide a revenue stream from which the costs of capital could then be funded in due course.

DfI  Additional Property Maintenance (HSSD Properties)  £4.0m in 2016  £4.0m in 2019

Jersey  Property  Holdings  (JPH)  procured  a  condition  survey  in  2014  to  identify  and  categorise  backlog maintenance in the Health (excluding the General and Acute Hospital) property estate, responsibility for which moved to JPH in 2015. The survey identified the poor condition of the portfolio and determined the requirement over a 15 year period to bring and maintain the estate in a good order. JPH will undertake further phased surveys on the remaining estate to determine the maintenance deficit.

Two growth bids were originally submitted, from Health and Social Services and JPH respectively to address the maintenance deficit, and following discussion by the Council of Ministers, the two entities were tasked with reprioritising these to produce a consolidated bid. That work has led to two lines of additional funding being included under Treasury and Resources as follows:

• Hospital transitional maintenance £2.85m, and
• JPH Backlog Maintenance (including Health and Community services properties) £1.15m.

Bringing the two items together and with the budget being allocated to JPH with a ring-fenced' budget for Health will allow a delivery schedule to be agreed with Health and further reprioritisation in year if necessary across the two sums.

A growth bid of £4 million per annum will address a proportion of the highest needs across the overall estate in the next MTFP period. Failure to undertake this necessary work will result in a greater call on JPH's reactive maintenance budget to address building and services failures, which is a less cost effective way of providing a fit for purpose estate for occupiers and service users and would reduce funding available for other priority maintenance.

DfI  Payment of Rates on States' Properties  £0.9m in 2017  £0.9m in 2019

In accepting the Connétable of St Helier's Amendment 7(6) to the Strategic Plan 2015-18, the Council of Ministers agreed to provide in the MTFP for the payment of rates on States properties and the additional income required to fund this payment.

At the time of the MTFP 2016 – 2019 it was estimated that a £1m allocation would be the likely additional cost of paying rates on States' properties. As further work has been carried out the estimate of the additional cost has been refined to its current estimate of £900,000. The Parish of St Helier will still be the main recipient of the States paying rates, estimated to be £611,000 or almost 70% of the total, with the Parishes of St Saviour (£153,000) and St Brelade (£67,000) being the other main recipients. In order to give effect to the proposal the necessary legislation, the Rates (Jersey) Law 2005, will be brought forward alongside the Budget 2017.

Further work and consultation with the Comité des Connétable s and the Island's Rate Assessors is required to develop an equivalent funding stream through the Council of Ministers preferred funding route which is the non-domestic Island-wide rate. To allow time for these proposals to be developed appropriately the Council of Ministers is proposing that the States payment of Rates begin in 2017, but the equivalent income stream be deferred until 2018.  

DPC  FoI – Office of the Data Protection Commissioner  £0.1m in 2016  £0.1m in 2019

The Freedom of Information (Jersey) Law 2011 creates the new statutory role of Information Commissioner whose department is charged with regulatory oversight. Due to risks of conflict, the Law Officers' Department are unable to provide the necessary legal support to the OIC for FoI as they do for Data Protection. Funding therefore needs to be allocated to the OIC to ensure appropriate legal support is available.

DPC  Impact of EU Regulations  £0.1m in 2017  £0.2m in 2019

The Data Protection Commission is budgeting this year for £120,000 of registration fee income, but new EU Regulations, in effect, prohibit the raising of registration fees. The local implementation date for a new DP Law to comply with these new EU Regulations is 2018, anticipated to be June.

That means a potential shortfall in 2018 of £60,000, and in 2019 of £120,000. It may be able to possible to identify alternative revenue streams to compensate, for example, charging for training or breach investigations, but at this stage that is purely speculative so an additional expenditure allocation is proposed.

In addition, the Data Protection Commissioner is currently estimating a requirement of £100,000 to cover permanent staff costs. This requirement will continue for 2018 and 2019, although the work planned to investigate additional income streams could look to recover these additional costs in due course.

EDTS&C Sports Strategy Funding  £0.45m in 2017  £0.45m in 2019

In the run up to the 2015 NatWest Island Games, £750,000 of additional funding was provided for a sports strategy, which was also extended from one-off funding to 2016. Since taking over the sports strategy funding from Education, EDTS&C has conducted a rigorous prioritisation exercise of this funding. The revised proposals are to focus on those original service elements which are deemed most vital; Clubmark and Events, Community Sport, Inclusion, PE & School Sport, School Swimming and Exercise Referral. This reduces the requirement for growth funding to £450,000 for each of the years 2017-2019 and Council of Ministers is proposing to incorporate base budget funding for these elements from 2017.

LOD  Revised Pay and Rewards Structure  £0.2m in 2016  £0.2m in 2019

A review of the Law Officers' Department by CAPITA in 2011 highlighted discrepancies in the pay awards of legal advisers. There was a lack of transparency, career progression, large inconsistencies in pay bands and an imbalance with market pay. In 2013, the States Employment Board agreed a new scheme, in line with the Workforce Modernisation project, to overhaul the reward structure for the Legal Advisers and the new scheme was implemented in 2014, with new job descriptions and competencies, pay bands and grades.

LtG  Cadet and Military Support Officer  £0.04m in 2016  £0.04m in 2019

Since its introduction, with short-term funding agreed in the last MTFP, this post now requires permanent funding. The CMSO has fostered links between Jersey and its Cadet Organisations. The loss of the post would be detrimental to those organisations. The CMSO promotes Jersey to Military Units, and his appointment has significantly increased the number of service visitors and revenue to the Island. Community projects are also undertaken by the Military for the benefit of Jersey. The CMSO is heavily involved in successfully supporting Island events and is a skilled organiser, without his input many Island events could suffer. Based at Government House he has developed an extensive network of contacts that support him in his role. His contribution to the Office of the Lieutenant-Governor is significant.

SA  States Members' Pensions  £0.05m in 2018  £0.1m in 2019

Following a recommendation made in 2014 by the States Members Remuneration Review Body (SMRRB), the Privileges and Procedures Committee members agreed that although the present financial situation of the  States remains challenging there is, in fact, unlikely ever to be a time when it would be easy or uncontroversial to introduce a pension scheme for States members, and therefore, it would be unfair on members to continue to ignore the recommendation of SMRRB.

As a result of the approval of P.72/2015.Amd(7) from the Council of Ministers, this funding has been deferred until at least May 2018, to allow any decision on States Members' pensions to be taken as part of a wider debate on the remuneration of States Members ahead of the new Assembly in May 2018.

SSD  Child Personal Care Benefit level 2 & 3  £0.5m in 2016  £0.5m in 2019

During the States debate of Deputy J A Martin of St Helier's amendment to the draft Income Support Regulations, P.90/2014, in respect of components payable to children with disabilities and long-term health conditions, the States  strongly  supported  a  move  to  make  payments  to  children  with  severe  or  very  severe  disabilities irrespective of the income or means of the family. As identified by the Minister for Social Security both prior to and during the debate, acceptance of the amendment carried with it significant implications in terms of both funding and administration, and this additional funding request is essential to ensure adequate funding for agreed legislation changes.

SSD  Targeted Christmas Bonus  £0.4m in 2017  £0.4m in 2019

The Christmas Bonus (Jersey) Law 2011 has been annulled as part of the benefit changes approved under the MTFP 2016. However, the Council of Ministers has agreed that a targeted bonus should continue to be provided to support vulnerable income support claimants and lower income pensioners.

The bonus will continue to be available at its current value to the following groups:

• Income support claimants who are over state pension age (65), in receipt of a personal care component level two or three or in receipt of a carer's component. Low income older individuals and younger adults living with a significant disability or providing unpaid care have less opportunities to improve their own income and will benefit from an annual Christmas bonus, which will be provided automatically through their income support claim.
• Other pensioners who do not pay income tax and have limited savings (excluding the value of the family home) will also be able to apply for a Christmas bonus.

Regulations will be added to the Income Support Law and the Social Security Bonus Law to provide for these bonuses from December 2016

SSD  Food Costs Bonus  £0.4m in 2017  £0.4m in 2019

The regulations for the current Food Cost Bonus are set to expire at the end of 2016. The Council of Ministers deferred a decision on the future funding of the food costs bonus last year but has now allocated funding for the remaining three years of the MTFP to provide for one further renewal of the food cost bonus regulations. The bonus will continue to provide an annual cash payment at its current value of £226.95 to households with incomes above the level to qualify for income support but below that to have an income tax liability.

The existing triennial regulations will be renewed to provide for a bonus in 2017, 2018 and 2019. T&R  Asset Valuation  £0.3m in 2017 only

The States of Jersey accounting policy requires that land and building assets are revalued every five years with an interim valuation in the third year of the cycle. A one-off increase in funding is required in 2017 to fund the next full valuation of States of Jersey's land and buildings.

T&R  Strengthening Shareholder Relationship Resources  £0.2m in 2016  £0.2m in 2019

Treasury and Resources provides the shareholder function for the States to its strategic investments such as Jersey Electricity, Jersey Telecoms and SoJDC. This role has a wider and more diverse scope now; in 2014, the Housing Department left the States and became a separately incorporated body, Andium Homes Limited and 2015 saw the incorporation of Ports of Jersey. There have been reviews carried out in recent years on Treasury and Resources' function as a shareholder and this additional funding will enable the department to action the recommendations of these reviews including strengthening the governance surrounding the relationships and providing Treasury with the necessary resources to engage specialists in relevant areas as and when needed.

H&SS/DfI/T&R - Increase in insurance premiums  £0.5m in 2017  £0.5m in 2019

As a result of increased settlements in Health and Social Services and Infrastructure, review clauses have been triggered resulting in increased premiums from 2016. The current balance on the Insurance Fund and the levels of self-insurance managed would not allow these level of increases to be absorbed within the fund. The 2016 premiums will be covered through contingency requests and funding for the affected departments is required from 2017. This represents a provision for three departments of:

• Department for Infrastructure £97,500,
• Health and Social Services for £200,000, and
• Treasury and Resources for £202,500, in respect of all departments.

Additional funding to be allocated to Contingency

Combined bid for investment in initiatives to support vulnerable children  £1.65m in 2017  £1.65m in 2019

Investment in initiatives that support vulnerable children including: additional capacity in the Law Officers' department - Children's and Family division; continued development of family centres and early intervention initiatives;  development  of  the  Youth  Enquiry  Service,  additional  child  protection  officers  and  other enhancements to work on safeguarding, support towards a sexual assault referral centre, and continuing development of support for pre-school special needs and the 1001 days initiative. These initiatives include currently undelivered recommendations arising from previous reports/inspections. The need for any additional future investment will be assessed once the Independent Jersey Care Inquiry has made its final report and recommendations.

Contingency – Additional Doctors Pay Award and PECRS Debt Repayment  £1.2m in 2017  £1.48m in 2019

Since the MTFP 2016-2019 was agreed settlements for Doctors and Junior Doctors in the UK have been agreed and the States' Employment Board (SEB) have sought to negotiate pay awards with these employee groups in Jersey for 2015 and 2016. SEB has reached agreement with Doctors and Consultants and are progressing negotiations with Junior Doctors. These awards are beyond the original pay provision and Council of Ministers has agreed the additional funding required.

The agreed funding for the Doctors and Consultants award is allocated to Health and Social Services department but until the Junior Doctors negotiations are completed the additional funding will be held in the pay provision.

Additional funding has also been agreed to provide inflation to the central pre 1987 PECRS debt repayment budget recognising that this will need to increase notwithstanding the general savings target on non-staff inflation. This additional funding will also be held in the central pay provision and allocated as required.

Additional funding to be allocated from Jersey Car Park Trading Fund

Concessionary Travel Scheme for people with disabilities  £0.6m in 2017  £0.6m in 2019

Following the unanimous adoption of P140/2015 "Concessionary Bus Fares for the Disabled" the Department for Infrastructure has been liaising with the Chief Minister's and Social Security departments to investigate the potential introduction of a concessionary travel scheme to assist people with disabilities. As a result the Minister for Infrastructure will be bringing forward proposals for establishing such a scheme in 2017 and proposing that this be funded from the Car Parks Trading Fund, given previous approvals (P147/2004) and (P104/2010) to use the fund for transport initiatives. Initial estimates are for funding at a level of £600,000 from 2017.

10. Sustainability in States Finances

Background

The Council of Ministers continues to work towards the recommendation of the FPP that the States should aim to balance its tax revenues and current expenditure, including an appropriate allowance for depreciation, over the economic cycle. The economy is currently expected to be close to full capacity by 2018/2019.

Equally, it is important that the States' fiscal position (the combined impact of expenditure and revenue decisions) continues to support the economy in the early stages of recovery.

Given the States priorities of investing in health and social services, the education system, St Helier and the need to maintain the Island's infrastructure, and the associated funding pressures, the Council of Ministers adopted a three-part approach to balancing States' finances by 2019 which was outlined in the States Strategic Plan (P27/2015):

Firstly, to secure the economic recovery forecast by the FPP and lay the foundations for raising productivity and the underlying rate of economic growth over future economic cycles, thereby increasing States revenues;

Secondly, to focus on;

- a programme of savings, efficiencies and expenditure constraint; and

- consideration of the level of provision of benefits and changes in fees and charges for services where appropriate.

When these measures are recognised agreement will be given to the introduction of an additional charge for Health and commercial waste disposal

The investment in health services envisaged can only be approved with the agreement to additional funding being introduced, in accordance with previous decisions to ensure funding of health and social care going back to P82/2012.

Ministers originally set a target to deliver £145 million of savings, charges and other measures by 2019, in order that the investment in health and social care and the education service could be made and vital capital spending delivered. The target represented an initial plan and recognised that this would need to be continually reviewed over the MTFP period and adjusted for any variation in income forecasts, savings and funding measures.

Ministers have reviewed the central plan and held a number of workshops with the Corporate Management Board to adjust the package of measures to ensure the proposals for the MTFP Addition delivers the funding needed for investment in strategic priorities of health, education, St Helier and the need to maintain the Island's infrastructure and aims to deliver balanced budgets for 2019 which recognises:

• the improvements in the Consolidated Fund balance from the 2015 Outturn
• the slight improvement in income forecasts to 2020
• the additional funding proposals for 2017-2019
• reduced forecasts of benefit spend
• the outcomes of the spending review and savings proposals for 2017-2019, and finally
• the Distributional Analysis of the current package of measures.

The Council of Ministers has adjusted the package of measures:

• to maintain the focus on strategic priorities
• to reflect the outcomes of Ministerial reviews of the proposals
• to attempt to make the package of measures more progressive
• to minimise the risk to economic recovery, and
• to deliver balanced budgets and sustainable finances.

As well as adjusting the package of sustainable measures the proposals for short-term funding have been revised and rephased to reflect the latest balances on available funds and reserves and the revised proposals are outlined at Section 13.

Funding the shortfall to achieve balanced budgets by 2019

In order to ensure up-front investment continues in health and education and to proceed with the planned investment in infrastructure, sustainable measures are required over the period of the next MTFP 2016-2019 in order to return to balanced budgets.

In the MTFP 2016-2019, the Council of Ministers proposed additional funding for Health, Education and Other departments amounting to £61 million. In addition proposals for a base capital programme and an adjustment to reflect annual depreciation provisions indicated a target for sustainable funding measures of £145 million by 2019, in order to achieve balanced budgets.

Changes since the MTFP 2016-2019 (October 2015)

Since that time income forecasts have improved both in the 2016 Budget, largely due to agreed budget measures, and then again in the forecasts for the MTFP Addition. At the same time depreciation and benefit forecasts have been revised and the Council of Ministers is also proposing further additional funding of almost £8 million by 2019 beyond the growth included in the MTFP 2016-2019 last year.

The £33 million of savings and £5 million of benefit changes proposed for 2016 are now in place as a result of the approval of detailed expenditure allocations for 2016 in the MTFP 2016-2019 in October 2015. Together with the improvements in income the remaining target for sustainable funding measures is now in the region of £80 million per annum.

Distributional Analysis and Ministerial Reviews

The purpose of the MTFP Addition was to allow more time for the detail of the proposals for 2017-2019 to be worked through and as a result the balance of measures has been adjusted to take account of the slightly improved financial position, the distributional impact of the original proposals and Ministerial reviews to assess the allocation of resources in line with strategic priorities.

The Council of Ministers is aware of the FPP's advice that the expenditure proposals should attempt to minimise the impact on the economy so as not impact the economic recovery.

Revised package of proposals

The Council of Ministers has therefore adjusted the package of measures for 2017-2019 and is proposing £77 million of savings, efficiencies and user pays by 2019 which is an additional £44 million over the £33 million savings agreed for 2015 and 2016.

Consideration has also been given to how the Plan is placed to address the result of the UK EU Referendum.

The Council of Ministers remains committed to continuing to strive for efficiencies and savings across Departments over this MTFP and for this culture to become part of our modernised, efficient and effective public sector delivering best value services in the future.

In order to ensure that expenditure limits established by the States Assembly are maintained, whilst efficiencies continue to be pursued, the Council of Ministers considered other measures and agreed the following proposals for inclusion in the MTFP Addition:

• an additional £1 million of waste charges by 2019
• £5 million a year was proposed to be transferred from the Health Insurance Fund to phase the introduction of the health charge and provide primary care funding for Health and Social Services for each of 2017-2019, this funding replaces £30 million previously proposed to be transferred from the HIF to the Consolidated Fund. Beyond 2019, this transfer should not need to recur as it is preferred that further efficiencies replace this funding in 2020.
• adjustments to the 2016 contingency provisions over the period of the MTFP reflecting the likely demands on these provisions as circumstances change and considering what will be sustainable provisions by 2019 and beyond.
• Uncommitted contingency funds in 2016 are earmarked to be carried forward to fund the AME contingency for 2017-2019
• The Redundancy and Restructuring Provisions are brought together to provide a single provision for Public Sector Reform over the period to provide not only for the voluntary release scheme but for all the many other public sector reform initiatives of eGovernment, Lean, service redesign and workplace modernisation.

The other proposals for funding mechanisms for health and rates have been revised as follows, particularly recognising the slightly improved financial position:

• The proposals were for a reduced income based Health charge from 2018 of 0.5% or £7.5 million, increasing to 1% or £15 million per annum by 2019 – a reduction of £20 million on the original proposals. However, the States rejected the proposed Health charge and the Council of Ministers will be bringing forward alternative revenue raising measures ahead of the draft Budget 2018.
• The proposals for a funding mechanism for States payment of Rates of £900,000 have proved more problematic than initially anticipated and have been deferred until 2018.

Further details of both funding mechanisms can be found in Section 12 and a summary of the revised package of measures to balance budgets by 2019 is shown in Figure 27.

Figure 27 - Summary of the revised package of measures to balance budgets by 2019

Note: the States rejected the proposed Health charge and the Council of Ministers will be bringing forward alternative revenue raising measures ahead of the draft Budget 2018.

Summary of Approach

The combination of all these measures results in an operating surplus by 2019 of £55 million, at least sufficient to cover the forecast of depreciation for that year. This results in books being broadly balanced for 2019 and represents the substantial setting of finances on a sustainable basis. The Council of Ministers could have decided to reduce growth allocations to deliver spending within the limits agreed. However, the Council strongly believes it is preferable to extend the period to deliver the relatively small remaining expenditure measures and in the meantime use balances on the Health Insurance Fund to maintain health spending and carry forwards to maintain an appropriate provision for variations in Social Security benefits spending.

Sustainable Funding Measures Economic Growth

The latest economic assumptions endorsed by the FPP show that the economy returned to real growth in 2014 and that growth is expected to continue in the 2015-17 period. The latest data, particularly on financial services profitability shows that the economy grew significantly more strongly than expected in 2014.

The investment in health, education, St Helier and the need to maintain the Island's infrastructure set out in this MTFP 2016-2019 will help to support the economy. In addition, the Strategic Plan sets out how existing policies on growth and productivity will be reviewed, refreshed and enhanced to help achieve the growth forecast in coming years but also quite critically achieve sustained productivity-led economic growth over future economic cycles. In particular:

• an increased focus on new, high potential growth sectors;
• increased innovation, enterprise and inward investment across all sectors;
• promoting competition within a new competition framework;
• an updated skills strategy;
• identifying barriers to work for key groups to improve participation; and
• ensuring Jersey has sustainable public finances and low inflation.

The total States expenditure limits agreed in the MTFP 2016-2019 maintained the majority of the £14 million investment from the first MTFP for getting people into work, back to work and employment initiatives, recognising the importance of investing in our economy and jobs.

MTFP 2016-2019 made an initial provision for £20 million funding for economic and productivity growth initiatives which cannot be met from the resources in base budgets of £5 million p.a. The proposals in the MTFP Addition maintain £18.5 million of this funding and proposals have already been made by departments for projects in 2016, see Section 8. Over the period 2017-2019, £3 million of this funding has instead been used to protect the budgets of external relations, financial services, digital, innovation and competition. Maintaining Jersey's reputation abroad and in key international organisations is vital to ensure the long term health of the financial services industry. The importance of this is underlined by the need to ensure Jersey's interests are maintained through these uncertain times, especially whilst the UK's withdrawal from the EU is negotiated.

The focus is to protect those services contributing to strategic priorities of health, education and economic growth and ensuring that existing base budgets are extensively reviewed to maximise efficiencies and reduce the level of savings which will result in a reduction in service to the public. Consideration has also been given to opportunities to fully recover the costs of appropriate services so that higher priority services can be protected.

Figure 28 shows how all departments have contributed to the expenditure measures but that the strategic priority areas of health and social services, education and areas contributing most to economic growth have been protected.

Figure 28 – Department Savings as a % of 2015 Cash Limits – illustrating Strategic Priorities

The review has also considered the distributional impact of the savings and been further informed by a series of Ministerial reviews of the final savings and growth proposals. As a result of the distributional analysis and Ministerial reviews a number of adjustments were proposed which reduced savings in priority areas or where the impact on the public or the level of service was deemed to be too high. The adjustments were also made to make the package of measures more progressive overall.

Savings, Efficiencies and User Pays

The original target for savings, efficiencies and user pays by 2019 was £90 million and following the prioritisation of funding to arrive at department allocations and contingency proposals for the MTFP Addition the proposed level is now at £77 million by 2019.

This is the maximum level of savings, efficiencies and user pays that the Council of Ministers considered could be proposed to be delivered by 2019 having considered the range of measures presented by departments.

The focus is to protect those services contributing to strategic priorities of health, education and economic growth and ensuring that existing base budgets are extensively reviewed to maximise efficiencies and reduce the level of savings which will result in a reduction in service to the public. Consideration has also been given to opportunities to fully recover the costs of appropriate services so that higher priority services can be protected.

The Council of Ministers has decided to extend the time frame to enable departments to find efficiencies to meet the target, thereby minimising any impact on islanders. This means departments will continue to restructure and reduce costs over a longer period. Service reviews continue and further efficiencies will come as the public sector imbeds a culture of continuous improvement and reaps the benefits of technological change and office rationalisation.

The Council of Ministers welcomes the extent to which the proposals are made up of efficiencies which should have little or no impact on the level of service provision experienced by the public. Efficiencies make up £71 million of the £77 million and further measures which result in small reductions in the Restructuring and EPGDP  provisions by 2019 also avoid the need to reduce services further and stay within expenditure limits set by the States Assembly.

Figure 29 – Summary of cumulative expenditure measures

Figure 29 shows that £1.8 million of the proposed measures are Savings and User Pays proposals of £4.6 million summarised at Appendix 2.

Pay Restraint

The  Council of  Ministers values  and  recognises  the  contribution of  our  public  sector  workforce  and  the importance  of  developing  a  fairer  and  more  equitable  remuneration  structure  through  Workforce Modernisation. At the same time we also have to recognise that staff costs represent over 50% of our budgets and we must therefore keep the same tight rein on the paybill as we are on the rest of our resource to deliver efficiencies and best value for money. Alongside Workforce Modernisation, pay restraint will need to continue over the period of the MTFP and will contribute significantly to the overall target for expenditure measures.

User Pays

The Council of Ministers has been quite clear about its policy regarding sustainable measures which require departments to firstly demonstrate that every effort has been made to prioritise existing services, drive out savings and efficiencies and demonstrate that public services are efficient and providing value for money, before increasing or introducing new charge for services. As a result the proposed "user pays" measures only include £4.6 million of the £77 million total.

As required by P63/2003 all new user pays charges are proposed in principle in the proposition such that they can be included in department expenditure limits and brought forward with appropriate legislation in due course.

Details of the User Pays proposed for 2017-2019 are provided at Appendix 1. Changes to Benefits

The MTFP 2016-2019 identified a target of £10 million in benefit changes in Social Security. The detail of the proposed benefit changes were detailed and the appropriate legislation was agreed at the time of the MTFP 2016-2019 debate. This included an amendment to maintain means tested free TV licences, reducing the savings by £157,000. The Social Security department will continue to implement the package of changes over the period of the MTFP to deliver £9.8 million by 2019.

The benefit changes were considered in detail using the following major themes:

• Promote financial independence – use changes in benefit to promote activities that will support the financial independence of claimants, and protect benefits which are supporting the financial independence of claimants;
• Improve targeting of benefits – change benefits in areas where public money is not specifically targeted to vulnerable groups; and
• Minimise individual impact – spread changes over larger groups of claimants, rather than a few individuals.

Figure 30 – Summary of Benefit Changes

Waste Transformation and Waste charges

It is acknowledged that additional charges for services which have been previously funded by taxation is, at best, challenging. However the principle of user pays charges will significantly improve the environmental behaviours with respect to transport, solid waste and liquid waste. Charging for commercial solid waste transfers the direct cost from the taxpayer to business, many of whom do not pay income tax, and will also enable alternative business opportunities for recycling which are currently suppressed due to DfI's free disposal option.

DfI will embark on a number of changes over the coming years, not least of which will be the potential for some areas to become a trading or separate operation. Whilst investigations into the feasibility of such a move are currently at very early stages, it is intended that proposals be brought forward to the States in the next phase of the current MTFP period. Further details of the proposed waste charges are detailed in Section 12.

Figure 31 – Proposed Commercial Waste Charges

Funding Mechanism for Health

The MTFP 2016-2019 identified a target of £35 million for a Health charge by 2019, starting with a charge for £15 million in 2018. The Council of Ministers had however stated that should the financial position improve through increased income that one of the considerations could be to review the level and timing of the Health charge.