Forecasting of Expenditure - Ministerial Response - 4 June 2010

Findings

Comments

1

The Sub-Panel notes and approves of the Treasury Department restructure. (pg 17)

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The Chief Minister welcomes the support of the Panel and can report that the restructuring is on target to be introduced from early June.

2

There are no powers for the Treasurer to enforce compliance with Financial Directions issued by the Treasurer under the Law. (pg18)

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This finding appears to be drawn from the C&AG Report on the Finance Law which is down to an interpretation of the provisions in the Finance Law for the Treasurer and Accounting Officers.

At Article 28 the responsibilities of the Treasurer are:

28 (3) It is the responsibility of the Treasurer to ensure the proper stewardship and administration of the public finances of Jersey and, in particular –

(a) to set financial management standards for their administration and

for monitoring compliance with those standards;

The law then provides at Article 34 for Financial Directions:

34 Financial directions

1. The Treasurer may, with the approval of the Minister, issue financial directions.
2. Financial directions –

1. shall specify any matter required by this Law to be so specified by

financial directions; and

2. may comprise such additional directions and information as appear

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to the Treasurer to be necessary or expedient for the proper

administration of this Law and of the public finances of Jersey.

Having established that Financial Directions are a function of delivering aspects of the Law and can be issued by the Treasurer

The Law then specifies the "Functions of accounting officers" at Article 38.

At Article 38 (4) these functions include:

(4)  Financial  directions  may  otherwise  specify  the  functions  of  an accounting officer and how they are to be carried out.

The C&AG contends that the Finance Law could be more specific and suggests that Accounting Officers be obliged to comply with financial directions or require that Accounting Officers should be obliged to follow the guidance issued by the Treasurer.

It could be argued that the Finance Law should be clearer in its intent

3

Forecasting of expenditure at department level is reasonably accurate. (pg 18)

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Forecasting of expenditure at departmental level is now also a monthly reporting requirement as part of the new framework and controls in Treasury.

4

January  is  very  early  to  complete  an  accurate forecast and does not allow for changes within the year preceding the forecast year. (pg 19)

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The  timing  of  expenditure  forecasts  is  driven  by  the  debate  and  lodging timescales for the annual Business Plan. Departments are required to provide initial forecasts in January but final draft cash limits are not agreed by the Council of Ministers for proposal to the States until early July. Departments are therefore able to update their initial forecasts during the period up to the lodging of the Business Plan.

5

There  is  no  position  of  overall  responsibility  for expenditure in the Island.(pg 20)

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The Chief Minister, on behalf of the Council of Ministers, is responsible for proposing overall expenditure limits to the States in the annual Business Plan, but the current structure provides that the States determines the final level of expenditure, following debate of any lodged amendments which may vary the limits proposed by the Council of Ministers. It might be argued that the Annual Business Plan is primarily a financial document and should be presented by the Treasury Minister, with subsequent responsibility being with Treasury. This would require a review of the purpose of the ABP, and a change to one or more Laws.

6

The Sub-Panel approved of the commissioning of the Fiscal Strategy Review and the Comprehensive Spending Review. (pg 22)

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The Chief Minister welcomes the support of the Panel for both these reviews and will ensure that the Panel is regularly briefed on their progress.

7

There  is  no  individual  political  responsibility  for States expenditure. (pg 23)

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See the comments to Key Finding 5

8

Discipline is required within States debates on expenditure. (pg 24)

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The Chief Minister agrees with this finding and ask that the Panel work with him and the Council to better inform and persuade all States members of the need for financial discipline generally, and particularly at this time to address the structural deficit.

Recommendations (pg 25)

To

Accept/ Reject

Comments

Target date of action/ completion

1

The  Minister  for  Treasury  and  Resources should  enable  departments  to  produce forecasts for expenditure later than January of the year prior to the year forecast.

T&R

Accept

•

The timing of expenditure forecasts is currently driven by the debate and lodging timescales for the annual Business Plan. The Comprehensive Spending Review (CSR) is proposing a detailed review of expenditure limits every three years rather  than  the  annual  business  plan  review. The  intention  is  to  use  the  time  created  by moving  away  from  the  annual  business  plan process  to  enable  a  focus  on  longer-term planning.  The  CSR  also  has  an  objective  of identifying  cost  drivers  within  States  and  all departments' expenditure. As the new process develops every opportunity to provide more time for departments to prepare their forecasts will be

Ongoing

taken.   Also,  within  the  3  year  process departments will be able to update the detail of their forecasts up to the lodging of the business plan later in the year.

2

The  Minister  for  Treasury  and  Resources should  ensure  that  forecasts  of  the  second and third years be tightened.

T&R

Accept

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As commented above one of the key objectives of the CSR is to improve longer-term financial planning. The CSR is also proposing that three- year spending limits are set, starting with 2011, but typically following the election of each new Council of Ministers.

Ongoing but first three-year Business Plan due to be presented to the States in October 2010

3

The Sub-Panel agrees with the reviews being undertaken and recommends that the Chief Minister ensures that the difficult choices likely to be exposed within the reviews be openly dealt with by the relevant Ministers.

Chief Minister

Accept

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The  Chief  Minister  and  the  Council are committed to a transparent CSR process. This has  already  begun  with  briefings  for  States members, staff, Union representatives and the media.  The  Communication  Plan  provides  for similar  briefings  at  appropriate  junctures throughout the process as proposals are agreed or decisions made. The Chief Minister is also committed  to  the full  involvement of  Scrutiny, through the Corporate Services Panel but also with individual Panels and their departments and Ministers.  The  draft  Business  Plan  2011  will detail  all  the  savings,  user  pays  and  growth proposals  for  individual  departments.  The proposals for 2012 and 2013 will be included in a  Part  Two Business Plan  to  be  lodged  and debated  alongside  the  2011 Budget  later  this

year.

Ongoing

4

The  Chief  Minister  must  find  a  method  of ensuring  strict  political  discipline  in  dealing with  expenditure,  with  an  auditable  line  of responsibility.

Chief Minister

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The proposal to move to 3-year cash limits and 3-year business planning should help to instil financial discipline in that States members will be clear what the agreed expenditure limits are over the 3-year period. However, this will not prevent individual States members from lodging Propositions which have financial implications. Whilst the recommendation could be accepted, there is currently no means of enforcement.

5

The  Minister  for  Treasury  and  Resources must  find  a  method  of  ensuring  that expenditure in Jersey is income driven.

T&R

Accept

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The  Minister  for  Treasury  and  Resources committed in his Budget speech last December to  prepare  a  contingency  plan,  within  twelve months,  to  address  the  structural  deficit.  The Minister  worked  with  the  Chief  Minister  and Council of Ministers in January to determine a Tax  and  Spending  Envelope  within  which spending  is  matched  with forecasts  of States revenues  to  achieve  a  return  to  balanced budgets  by  2013.  Within  this  framework  the Minister  has  launched  a  Comprehensive Spending  Review  to  identify  a  significant expenditure savings complemented by a Fiscal Strategy  Review  to  consider  options  for business  tax  changes  and  personal  taxation. These  outcomes  of  these  two  significant reviews, including a public consultation process for FSR, will come together in proposals in the

2011 Budget in October.

October 2010