States Spending Review - Report - 23 April 2010

Public Accounts

Committee

States Spending Review

Presented to the States on 23rd April 2010

P.A.C 2/2010

CHAIRMAN'S FOREWORD .............................................................................................. 2

1. EXECUTIVE SUMMARY.......................................................................................... 4
2. KEY FINDINGS AND RECOMMENDATIONS......................................................... 5
3. CHIEF MINISTER'S DEPARTMENT...................................................................... 17
4. ECONOMIC DEVELOPMENT DEPARTMENT...................................................... 21
5. EDUCATION, SPORT AND CULTURE DEPARTMENT ....................................... 25
6. HEALTH AND SOCIAL SERVICES DEPARTMENT............................................. 44
7. HOME AFFAIRS DEPARTMENT........................................................................... 61
8. PLANNING AND ENVIRONMENT DEPARTMENT............................................... 68
9. TREASURY AND RESOURCES DEPARTMENT.................................................. 72 APPENDIX....................................................................................................................... 80

Chairman's Foreword

Many of the proposals for savings in the Public Sector in the Comptroller and Auditor General's report Emerging Issues – States Spending Review' were originally suggested by Departmental Officers. Even allowing for the change in some of the personnel in the interim, the vociferous opposition to some of the proposals from those same Departments is somewhat perplexing.

Within  the  following  pages  the  Committee  have  concentrated  largely  on  the  big  ticket' Departments:  Education  and  Health,  although  no  Department  will  remain  untouched  by  the sweeping  cost  cuts  that  shall  be  required.  Overspending  issues  within  Home  Affairs  are investigated  and  some issues  have  also  been  highlighted as  case  studies,' questioning  the rationale for such opposition to change.

While the PAC supports the endeavours of the Treasury Minister to cut spending, and welcomes the imminent Comprehensive Spending Review, the PAC places emphasis on actual measurable achievements rather than promises - promises which sometimes prompt a certain sense of déjà vu. In fact, a previous Fundamental Spending Review, undertaken in 2004 to a fanfare of we will cut spending' was in some respects an abject failure. Expenditure increased significantly in the following years, despite the rhetoric.

The PAC has made some overarching observations at the beginning of this report. There are certain issues which arise repeatedly within our investigations of each Department and it is these problems which need to be addressed without delay.

Within these pages, the PAC has made several recommendations, and the Committee will be closely monitoring the Executive to ensure those recommendations are implemented.

Senator B.E. Shenton

Chairman, Public Accounts Committee

Acronyms and abbreviations used in this report

PAC – Public Accounts Committee

C&AG – Comptroller and Auditor General CMB – Corporate Management Board

ICR – Integrated Care Records

EDD – Economic Development Department ESC – Education Sport and Culture

JFL – Jersey Finance Limited

CSR – Comprehensive Spending Review HR – Human Resources

HSS – Health and Social Services

Committee Membership

The current membership of the Public Accounts Committee (as at 23rd April 2010) comprises:

States Members

Senator B.E Shenton (Chairman) Connétable J. Refault (Vice-Chairman) Senator A. Breckon

Senator J. Perchard

Independent Members

Mr K. Keen Mr A. Fearn Mr M. Magee

1. Executive Summary

1. In May 2008, the Comptroller and Auditor General produced a report entitled Emerging Issues – States Spending Review.' This report outlined proposals for cost cutting measures within most States Departments.
2. On 14th September, the Deputy Chief Executive supplied the Public Accounts Committee with a copy of a report presented to the Council of Ministers on 7th May 2009, consisting of responses to the C&AG's report by every executive States Department.
3. The Public Accounts Committee considered that the majority of Departmental responses were lacking in detail, analysis, and evidence based benchmarking techniques.
4. Furthermore, the Committee is concerned at the lack of challenge to these inadequate responses by the Corporate Management Board and the Council of Ministers.
5. The Committee has been in correspondence with every major States Department in order to follow up on progress with regards to the C&AG report.
6. On 12th January 2010, the Committee visited the Jersey Met Office along with the Chief Officer for Planning and Environment in order to discuss the C&AG's proposals for privatisation.
7. On 15th  January 2010, the Committee held Public Hearings with the Deputy Chief Executive and Chief Officer for Resources, the Director of Education and Senior Management at Health and Social Services.
8. The Public Accounts Committee is disappointed that nearly two years on from the C&AG's initial report, most of the cost cutting measures suggested have yet to be implemented.
9. In order to achieve the savings required in order to offset the imminent structural deficit, not only are substantial cost cutting measures required, but also the political appetite to achieve those savings.
10. Within this report, the Committee has examined many of the C&AG's proposals in detail, along with the respective Departmental reactions.
11. This report makes several recommendations for each Department. The Committee will be closely observing progress and ensuring that these recommendations are realised.

2. Key Findings and Recommendations

Overarching key findings and recommendations

1. KEY FINDING

The Comptroller and Auditor General's proposals within his Emerging Issues' report have largely not been acted on. The Public Accounts Committee is disappointed that the recommendations of the C&AG have not been implemented, and that there has been no apparent political will to do so, and no robust reason given for the lack of response.

2. RECOMMENDATION

The Public Accounts Committee formally requests that each Chief Officer replies to this report in a timely manner and indicates what action is to be taken in respect of every proposal of the C&AG pertinent to his or her Department. Where there has been no action taken, an adequate justification of this inaction is required.

3. KEY FINDING

States Assembly decisions are sometimes not implemented and it is not clear who is responsible for ensuring that they are.

4. RECOMMENDATION

Members of the States Assembly should be aware that the exact wording of a Proposition is more important than the accompanying report or what is said in the debate. Chief Officers should take account of the wishes of the Assembly when implementing policy, rather than simply ignoring policies that are inconvenient.

5. RECOMMENDATION

Chief Officers should be more heedful of their mandate to carry out decisions of the States. There should be a follow up process to ensure the work is done. A body or individual should be tasked with ensuring that the decisions of the States Assembly are realized. We note that there is currently no mechanism in place to ensure that this happens and recommend that the Privileges and Procedures Committee investigate whether such a mechanism should be put in place forthwith.

6. KEY FINDING

The Departmental responses to the C&AG's cost cutting proposals lack depth and analysis. Many of the Departmental responses are sparse or inadequate. There is limited use of benchmarking techniques i.e. comparison to other / equivalent jurisdictional spending levels. In the private sector the first job in cutting costs would be to establish what services the organisation (the States) need to provide as a statutory duty, and work forward from there. e.g to ask what services can be privatised using cost as the criterion. This kind of logical process appears to be missing in the States. It is almost as if there is a genuine belief amongst the public sector that they are not subject to the standard requirements of efficiency, benchmarking and cost control.

7. RECOMMENDATION

A robust system of benchmarking should be put in place where appropriate. It should be possible to demonstrate the efficiency of Departments through the use of appropriate benchmarking.

8. KEY FINDING

There appears to be a lack of challenge and leadership by the Council of Ministers. The Public Accounts Committee has witnessed no challenge to the inadequate responses of Departments to the C&AG proposals by the Corporate Management Board. This is not what the PAC would expect to see if the States are serious about efficiency gains and cost

cutting. The Departmental responses frequently mention that appetite and political will' will be required for savings to be achieved. But we see very little of that political will or appetite from the Council of Ministers. Other than the Public Accounts Committee, there appears to be no mechanism to challenge inadequate responses.

9. RECOMMENDATION

There needs to be more leadership within the Council of Ministers in order to cascade political decisions through to Departments. This may mean changes to the Public Finances (Jersey) Law 2005 in order to specifically ensure in law that Chief Officers (in particular the Treasurer) not only provide advice, but are responsible for ensuring that advice is implemented.[1]

Chief Minister's Department

10. KEY FINDING

"The public sector is 10% ahead of the market median and basic pay when compared to all organisations in the private sector and 3% above the market median in total earnings. This data suggests that the public sector is in a healthy basic pay position when compared against the private sector in Jersey. However, for some positions, the States pays most generously in comparison with the private sector. For some senior positions, the States remuneration system is not competitive with remuneration offered by private sector employers and in consequence, the States are at risk of losing senior employees." (Quote from the C&AG Report – Emerging Issues- States Spending Review.)

11. KEY FINDING

The biggest cost to the taxpayer is salary costs and benefits. Yet the decentralization of ownership of these costs to the States Employment Board leaves little responsibility within individual Departments. The provision of across the board pay rises does little to correct disparities within the public sector – effectively increasing the salaries of the overpaid and not correcting the underpaid.

12. KEY FINDING

The Public Accounts Committee is extremely disappointed that no action has been taken to ensure that staff remuneration is competitive but not unduly generous' as recommended by the Comptroller & Auditor General.

13. RECOMMENDATION

The Council of Ministers should undertake a comprehensive review of all pay and conditions and adjust remuneration levels where appropriate. Note- this could lead to a reduction in some remuneration packages.

14. KEY FINDING

The Public Accounts Committee is pleased to note that there is recognition that the current arrangements in respect of public sector pay needs to change.

15. RECOMMENDATION

A more flexible remuneration system which takes into account private sector remuneration needs to be introduced. Positions paying well in excess of their private sector equivalents should be abolished and replaced with structures that operate in a more cost effective manner.

Economic Development Department

16. KEY FINDING

There is a lack of demonstrable or specific achievement by Jersey Finance in order to justify their grant. It is simply unacceptable to declare that funding cannot be reduced if there has been no exercise to ascertain whether the budget is appropriate and that the funds are achieving targets.

17. KEY FINDING

The Public Accounts Committee agrees that investment in the Jersey Finance Industry is necessary, given its importance to the overall economy. However, the level of grant appears somewhat arbitrary and the Public Accounts Committee believes that a more scientific and accountable method of distribution needs to be devised.

18. RECOMMENDATION

The funding of Jersey Finance should be structured with a clear and fixed (by percentage) contribution from the finance industry. A matched financing approach should be considered.

19. KEY FINDING

It is important that taxpayers' money is used in an optimum manner and there appears no public documentation available that examines any consultation with the finance industry to determine whether Jersey finance is achieving its aim. At the very minimum, Economic Development should be examining why certain industry players are not members of Jersey Finance and their opinion of the size of grant funding an organisation of this nature should require. There are significant players of the Finance Industry who do not consider Jersey Finance to be a significant factor in their success.

20. RECOMMENDATION

The grant to Jersey Finance is substantial. A structured formula needs to be devised by the Economic Development Department.

21. KEY FINDING

The PAC is sceptical that something as broad as positive press coverage' can be attributed to the activities of Jersey Finance, as media coverage and reputation is comprised of a multiplicity of complex factors.

22. KEY FINDING

Many of the achievements listed here general Island successes only, not necessarily attributable to Jersey Finance (or if so, only in part).The PAC considers that Jersey Finance does not provide value for money, and that some of its speculative trips to the Far East are of uncertain value, considering that meetings with politicians and regulators did not create business for the Island. It is acknowledged however that if Jersey is marketing itself as an international finance centre, then this type of activity could be beneficial. However, the PAC is sceptical about whether this activity should be publicly funded.

23. RECOMMENDATION

The grant to JFL should be reduced to a level whereby 50% of the funding is provided by the Finance Industry, given their lower contribution to fiscal revenues.

Education, Sport and Culture Department

24. KEY FINDING

Education Sport and Culture, in providing free childcare in excess of 20 hours, is operating outside of its remit. Given the lack of educational benefits in providing childcare at this age

and the fact that there is no legal requirement to provide education under the age of 5 means the provision of nursery care should be seen as a luxury. The Public Accounts Committee questions whether the public sector should be involved in this service provision.

25. RECOMMENDATION

The introduction of 20 free hours nursery care was intended to provide a level playing field with the private sector. The PAC recommends that charges are introduced for more than 20 hours, based on the full costs, including premises, of providing that service. The fact that public sector nurseries (30 hours) are over subscribed emphasises the fact that the promised level playing field' has not been delivered.

26. KEY FINDING

The predicted impact of a fee increase is greatly overstated by ESC, especially as many schools have waiting lists. These assertions are made without any supporting documentation and some conclusions appear recklessly incorrect. It is highly unlikely that there will be the level of withdrawals from fee paying schools indicated by Education Sport and Culture based on the fee increases indicated. The suggestion that a small increase in fees would result in the removal of all fee paying students (at a subsequent costs to the taxpayer of up to £7 million) is absurd.

27. RECOMMENDATION

The PAC requests that Education Sport and Culture undertake a meaningful examination of optimal fees, taking into account waiting lists and the apparent lack of confidence by some parents in the non fee paying sector. Furthermore the PAC acknowledges that the continuation of funding fee paying schools at an optimal level is prudent from both a financial and educational perspective.

28. KEY FINDING

There is potentially no incentive for Ministers to make savings within their Department as the resulting money saved would be lost from their budget. The shared approach to fiscal management simply does not work; there are no incentives for individual ministers to act in a fiscally responsible fashion. This is the case not just within Education, but across the board.

29. RECOMMENDATION

The performance of the Department and its Managers should be administered on a benchmarking basis whereby financial management and cost control is rewarded. In order to achieve this, there has to be a significant shift in the mind-set' of the Department and a full understanding of the cost of education in Jersey. An incentive to save should be introduced through a basic bonus structure. This could be reviewed in line with the C&AG finding that there was a degree of under remuneration at senior executive level.

30. KEY FINDING

The PAC notes that there are 22 primary schools, with many empty seats. To have this number of schools in such a small Island is a nice to have' but certainly not a necessity in the current economic climate. Although the PAC is pleased to note that the ESC Department has acknowledged that the C&AG's proposal is viable (albeit potentially unpopular) the Committee is concerned that no detailed analysis of exactly which primary schools two form entry system should be affected or considered for closure has been put forward.

31. RECOMMENDATION

The PAC recommends immediate progress on this issue, with the identification of which schools are to be affected.

The PAC detects an inconsistency of approach as to how and where political decisions are being made. The senior management at Education Sport and Culture are making political decisions that are outside their remit. A political decision appears to have been made at civil servant level. It is not the job of the civil service to make political decisions of this nature or to speculate about potential public reaction to a political decision.

33. RECOMMENDATION

In times of financial constraint, financial management must take precedent over personal preferences and perhaps public opinion. A blueprint for Education should be drawn up using financial management as one of its prime criteria.

34. KEY FINDING

Any savings resulting from falling pupil numbers will be reflected in the budget settlement from Treasury.

35. RECOMMENDATION

The Public Accounts Committee would like an assurance from Education Sport and Culture that they are capable of taking the tough decisions necessary to manage the demographic decline in student numbers while simultaneously increasing educational standards.

36. KEY FINDING

£480,000 (the proposed reduction of funding to the fee-paying colleges) appears to be an arbitrary figure and not reflective of the true costs. ESC does not know the true cost of sending a pupil to JCG or Victoria College.

37. RECOMMENDATION

The grant system to the private educational sector does provide value as it encourages a large proportion of taxpayers to contribute to education through fees. However, the funding mechanism must be transparent and shows no favouritism to individual schools.

38. KEY FINDING

The Director of Education Sport and Culture is vague about what his costs actually are. The Public Accounts Committee is concerned that without a thorough analysis of costs, a realistic saving plan is impossible to implement.

39. RECOMMENDATION

Budgets passed to Chief Officers must be based on the funding of all costs, including property costs. Education within the public sector must be regularly benchmarked and the results published.

40. KEY FINDING

Not all schools are members of the Schools Instrumental Service and those schools are still able to provide excellent music tuition. The conclusion fails to point out that many of the students come from affluent backgrounds and are more than able to purchase their own instruments. There is no evidence to suggest that serious students would be affected by the withdrawal of the service. For example, schools that are not members of the Schools Instrumental Service to excel. The PAC considers the service in its current form to be an unnecessary extravagance.

41. RECOMMENDATION

Loan charges should be introduced forthwith for musical instruments and the grant to the service cut accordingly. However, the PAC acknowledges that students from less affluent backgrounds should not be excluded from the opportunity to master a musical instrument. A more targeted approach is therefore supported in order to subsidise such students.

It is unclear what the long term plan for Highlands funding is. It is also unclear what the aims of Highlands are.

43. RECOMMENDATION

The long term business plan for Highlands needs to be developed – and it needs to decide exactly what Highlands is. Longer term funding arrangements require clarification, as the provision of fiscal stimulus funding is only a short term solution. A set formula needs to be developed in respect of Highlands funding – which is not based solely on student numbers.

44. KEY FINDING

The lack of clarity in respect of the functions and funding of the Jersey Childcare Trust is unacceptable. This matter was highlighted by a C&AG report back in September 2006 which noted the lack of cohesive Government strategy on Childcare provision in the Island.[2]

45. RECOMMENDATION

A model for the Jersey Childcare Trust, with long term value for money financial planning, needs to be developed as a matter of urgency.

46. KEY FINDING

In the hearing, the Director of Education expressed that fact that the corporate goals of the Corporate Management Board and the goals of individual Ministers can often clash. The Minister for Education is a good example as he has made it publicly clear that he will oppose any move to cut his Department's budget.

47. RECOMMENDATION

In the UK, each council had an officer whose statutory duty it was to report back if there was concern in respect of the financial situation. There is currently no such statutory duty in Jersey. Chief Officers may well be more diligent in carrying out their accountable duties if such legislation were in place and if they had incentives to make necessary cuts. The culture of protectionism needs to be driven out of the system and a more business-like financial approach developed in terms of overall management. Ministers need to realise that whilst they have responsibility to protect their Department, their ultimate responsibility is to the whole Island and they must manage the assets under their capital in a prudent manner.

Health and Social Services Department

48. KEY FINDING

The Director of Finance and Information Services for Health and Social Services  has confirmed that it is impossible to know how much certain services cost in the Health Department. Without this information it is also impossible to know whether you are getting value for money, or whether some services would be better off outsourced. The PAC is concerned about how a meaningful comprehensive spending review can be undertaken without such fundamental information being available.

49. RECOMMENDATION

The PAC believes that Health and Social Services should know the true cost of very service provided. This body of work should be undertaken where possible, with the figures published, including appropriate benchmarks for comparison purposes. Concentration should be given to areas where private sector provision is already available.

There is a lack of a professional interface between primary and secondary care.

51. RECOMMENDATION

The Health and Social Services Department should determine essentially which core services that they should offer, and negotiate a clear segregation of services and responsibilities with the primary care body. The trend within other jurisdictions has been to encourage as many initial investigatory procedures as possible within primary care clinics. This has the benefit of speed of service and avoids the use of expensive hospital based services.

52. KEY FINDING

The lack of data gathering and monitoring, both in terms of what costs are and in terms of patient information, is a recurrent theme within Health. Without the existence of such information, cost cutting measures will be difficult if not impossible to implement.

52. RECOMMENDATION

An appropriate Integrated Care Record system should be installed in order to achieve the identified savings.

53. KEY FINDING

Although the PAC acknowledges the unpredictable nature of Health spending, Health Tourism is an area which has yet to be satisfactorily addressed.

54. RECOMMENDATION

Swift moves should be made to progress a Health Tourism policy.

55. KEY FINDING

When looking to make substantial savings such as those required now, difficult discussions' are unavoidable and should not be seen as a barrier to progress.

56. RECOMMENDATION

Political will is required to implement unpopular yet necessary decisions. Greater emphasis on overall costs should be undertaken in respect of the selection of the service provider.

57. KEY FINDING

There appears to be little urgency to adopt a user pays policy within the Health Service. With Health costs likely to continue to rise at above inflation levels, this could lead to an inappropriate use of resources, with core services neglected as funds are diverted to areas where a user pays policy would be more appropriate.

58. RECOMMENDATION

Where appropriate, user pays' policies should be introduced, rather than waiting for them to be forced on the Department due to budget constraints.

59. KEY FINDING

The initiative of working with Guernsey to develop joint services in health has merit, and should be pursued. The Public Accounts Committee shall seek to work closely with its Guernsey counterparts in order to advance inter-island co-operation, and a further meeting with the Guernsey Public Accounts Committee is currently being planned.

60. RECOMMENDATION

The financial model for the provision of all ambulance services should be reviewed. A benchmarking process using the taxpayer costs to the Guernsey taxpayer (of a similar service) should be published and reviewed.

The Acting Chief Officer of Health saw the job of addressing high absence levels in his Department as beyond his control. He saw this task as a centralised function.

The Public Accounts Committee was extremely concerned at the lack of ownership by H&SS management in respect of the management of sickness levels. Because HR had been centralized the problem had been passed away from the coalface – and lost at the centre. Good sickness management can achieve considerable savings for the taxpayer – yet there is a lack of ownership of the problem. The PAC sees no indication that the Acting Chief Officer of Health understood the relationship between effective resource management and the ability to achieve the desired outcomes in a Department. If there is no accord in working towards shared corporate objectives (in this case, making savings) then those objectives will not be achieved.

62. KEY FINDING

There are mixed messages from the Executive. There appears to be no consistency regarding whether sickness absence levels are a cause for concern and very little ownership of HR issues by the Departmental Chief Officer of Health. Without buy in from key officers and an acknowledgement of the problems that exist, progress on implementing savings arising from these issues is unlikely.

63. RECOMMENDATION

The absence of staff through sickness is considered more of a nuisance than a cost. Whilst the management of HR has been centralised, the management of sickness has not and this fact should be conveyed to all staff in management positions.

64. KEY FINDING

The position of Hospital Director has been removed. Therefore there is no longer any distinction between the operational running of the hospital and the strategic management of the Department. Therefore long-term planning had been somewhat neglected in favour of day to day fire fighting.'

65. RECOMMENDATION

There are two distinct spheres of HR management: process management and the way in which line managers manage. The latter cannot be outsourced. Managers need to take ownership and responsibility for of some aspects of HR management, otherwise certain issues, which are costing taxpayers' money, cannot be addressed

66. KEY FINDING

There is significant overspending due to an over reliance on locum staff, and problems within the recruiting process.

67. KEY FINDING

One of the reasons for believing that substantial procurement savings might be available was that the Department had issued a very large number of States purchasing cards. This indicates that many items are purchased on a piecemeal basis rather than by means of general contracts – where terms can be controlled.

68. RECOMMENDATION

The Procurement Manager at Treasury and Resources should be given overarching control over all HSS procurement functions.

69. KEY FINDING

While the PAC anticipates that savings will flow from the centralisation of IS under Chief Ministers, it is troubled that the savings mentioned above are promises for the future and that the above technology is not already in place. Installing and implementing ICT systems is only part of the picture. It appears that the rationale for procurement in this area has

been simplistically based on the purchase of equipment, without consideration of the process design which will allow staff to use it properly.

70. KEY FINDING

The PAC are heartened to note the efforts made to buy as a consortium.

71. RECOMMENDATION

More efforts should be made to co-operate with Guernsey in Health. The PAC recommends that potential avenues for making savings via joint purchases be thoroughly explored.

Home Affairs Department

72. KEY FINDING

The response to the PAC was that closure of the Western Fire Station would result in a saving of £5,000. Yet in the private sector, the Finance Director would look at the sub- station as an asset – probably worth in excess of £500,000, as well as the running costs. He would also look at the cost of equipment duplication and the administrative burden. Based on site value, the elimination of maintenance and administration costs, and the fact that the capital sum released could be better utilised elsewhere, his conclusion may be that closure would result in significant savings to the Company and its shareholders. Yet in the public sector, the cost of the asset is considered differently and the true' cost of a service is not costed correctly. The rental from the premises in no way covers the capital employed in maintaining the service.

73. KEY FINDING

It is perverse that a recommendation by the Department is then opposed so robustly.

The PAC intends to undertake further work in respect of the efficiency of the Fire Service.

74. RECOMMENDATION

The PAC would like the option of closing the Western Fire Station to be fully costed and re- presented.

75. KEY FINDING

The PAC is concerned that political decisions seem to be being made at individual Departmental level.

1. It is not a civil servant's job to anticipate or make decisions based on an anticipated political reaction.
2. Even if the public reaction were to be disapproving, it does not necessarily follow that the saving should not be made.

There has to be a clearer and stronger direction by Ministers in respect of policy. The replies to the C&AG's Emerging Issues report were largely unacceptable in terms of quality and structure. However, they appear to have received the sanction of the Minister.

76. RECOMMENDATION

Ministers should ensure that policies determined by the States are upheld and not side- tracked by their Department. There appears to remain confusion as to where a Minister's loyalty lies. An oath of office should be sworn by each Minister promising to uphold his responsibilities to the public.

77. KEY FINDING

The Department's conclusion here cautions that there would be "significant risks" to the "sustainability of the business" if charges for the inspection of commercial premises were

implemented. Our Committee is unconvinced as to what these risks would be. Are "commercial expectations" really so much more demanding? In terms of safety implications, this is a worrying statement. We are also sceptical towards the assertion that the introduction of charges would dissuade individuals or companies from taking the appropriate advice. Surely compliance with safety regulations is mandatory, regardless of costs? Also, we are aware that many developments are undertaken by large companies who can more than afford to pay.

78. RECOMMENDATION

The Jersey Fire Service inspection unit should be reduced to a size whereby self-financing is possible. An internal transfer from Planning and Environment to cover services provided should be introduced. Alternatively, Planning and Environment could provide this service internally – reducing the fire service staffing in this area.

Planning and Environment Department

79. RECOMMENDATION

The Public Accounts Committee is perplexed by the statement that (in order to privatise the Met Office) a large investment into the IT infrastructure would be required "of the order of £500,000 to £1m plus additional ongoing costs." The C&AG was not necessarily suggesting the creation of a hefty independent entity to compete immediately in the European market place. The Committee does however think it is fair to question whether the wholesale funding of a local weather forecasting service by the taxpayers money is entirely justified. With this in mind, we suggest that other options including outsourcing need to be examined more realistically.

80. RECOMMENDATION

The PAC believes that this service could be marketed much more effectively than it is now, as there are many groups (e.g. farmers or builders) who would buy the service. The report is currently posted and/or emailed out. If it were available online via a subscription service that was effectively advertised, more income could be obtained. Services to all media organisations should be reviewed and charges introduced where appropriate.

81. KEY FINDING

Manpower is the main cost to the Met office.

82. RECOMMENDATION

The PAC considers that it is possible to cut staff further at the Jersey Met Office, particularly as an entirely automated night observation could be technically possible in the future. A saving could be made with a move away from shift work pay to normal working hours.

The PAC notes that technology is always improving. Radar has trouble differentiating between rain snow and drizzle but soon, improved technology will mean that they can be more easily distinguished. Also, unmanned night time monitoring is technically feasible, meaning less staff are required.

83. RECOMMENDATION

A rental income should be transferred to the Met Office in order to facilitate its transformation to a standalone entity

84. KEY FINDING

The establishment of a Met Office as a QUANGO has been very successful in New Zealand.

85. RECOMMENDATION

Rather than total privatisation, Jersey Met could be re-established as a States owned commercial trading enterprise.

Treasury and Resources Department

86. KEY FINDING

It is clear that the Chief Officer of Resources has no appetite to identify a lot of redundant properties. The implications of this are serious, in that this is an example of a Chief Officer failing to implement a decision of the States Assembly. This Chief Officer is also allowing personal concerns (his budget) to take precedence over corporate objectives and goals. The PAC is concerned by not only is the lost opportunity to save public funds, but there is also an overarching issue of the lack of accountability of a Chief Officer in carrying out States decisions.

87. RECOMMENDATION

All property assets should be assigned to relevant Departments as a matter of urgency.

A full list of all assets, detailing both their capital value and rental value should be submitted to the States Assembly as a report within 6 months.

88. KEY FINDING

There appears to be a fundamental failure by the Public Sector in properly accounting for the services that they deliver. Furthermore, there is a failure in understanding the importance of this concept.

89. RECOMMENDATION

There appears to be a significant deficiency in the mind-set of Public Sector Managers in respect of understanding the time cost of the service or Department that they are responsible for. The PAC recommends that the Treasury a policy of education' amongst its Public Sector Managers in order that they fully understand their role and the true costs of running their Departments.

90. KEY FINDING

Basic management deadlines are not in place which dilutes accountability and urgency.

91. RECOMMENDATION

All policies should have set time frames for implementation together with regular review. The Property Plan has the consent of the Assembly and should be implemented forthwith.

92. KEY FINDING

The Chief Officer of Resources does not appear to consider it his role to ensure that policies are implemented in Departments. He sees is as the job of the respective Ministers. He sees his role as to provide opportunities' for savings and expertise.' There is a vast financial cost difference between giving Departments what they want' as opposed to what they need.' There appears to be no incentive in place to ensure that public funds are not wasted.

93. RECOMMENDATION

The extent of the savings now required calls for consistent and strong leadership from the centre. Political will is required to effect unpopular yet necessary decisions. The Chief Officer of Resources requires the mandate to implement and cascade these political decisions, insisting on changes if necessary. The provision of this mandate will require changes to the Public Finances (Jersey) Law 2005.

94. KEY FINDING

In other jurisdictions, including the UK, an officer is assigned with the specific responsibility for financial management. No such framework exists in the States of Jersey.

95. RECOMMENDATION

The PAC recommends that the responsibilities for financial management (in line with the Section 151 Officers' in the UK) are added to the duties of the Treasurer, so that his responsibility is enshrined in law.

3. Chief Minister's Department

1. Are we paying too much for our Public Sector?

Within his States Spending Review Report, the C&AG quoted the findings of the Hay Group, who undertook a survey between January and March 2006 of the remuneration paid by the States of Jersey to their staff and compared that with remuneration paid to staff of similar grades within the private sector in the Island and within the public sector on the mainland.

2. KEY FINDING

"The public sector is 10% ahead of the market median and basic pay when compared to all organisations in the private sector and 3% above the market median in total earnings. This data suggests that the public sector is in a healthy basic pay position when compared against the private sector in Jersey. However, for some positions, the States pays most generously in comparison with the private sector. For some senior positions, the States remuneration  system  is  not  competitive  with  remuneration  offered  by  private  sector employers and in consequence, the States are at risk of losing senior employees." (Quote from the C&AG Report – Emerging Issues- States Spending Review.)

3. There is a seemingly inability to look at the cost of the Public Sector in a truly holistic manner. Other Public Sectors worldwide have viewed the maintenance of employment levels as being of higher priority than the maintenance of salary levels.
4. The public sector have an even healthier market position when compared against the private industrial and service sector with a 23% lead on the market median inpensionable pay and are 21% ahead of the market median in total earnings.' [4]- Hay Group.
5. The Public Accounts Committee is concerned that the apparent decision to not consider salary reductions will ultimately lead to much higher unemployment levels than may be necessary. There is no doubt that those fighting for unjustified pay increases will be increasing the risk of putting colleagues out of work.
6. The CAG report suggests that a remuneration system dedicated to ensuring that staff remuneration is competitive but not unduly generous may prove to be less expensive to the States than the present arrangements.'[5]

7. There is little doubt that if the States were to move towards a more market led approach then it would require a transformation of the employee relationship, job evaluation, the process of salary determination, collective and/or individual bargaining and the relationship with trade unions. This would be both a significant and expansive piece of work. The first step would be to analyze the options for moving towards a new remuneration system and the approach needed to implement a new system.
8. KEY FINDING

The biggest cost to the taxpayer is salary costs and benefits. Yet the decentralization of ownership of these costs to the States Employment Board leaves little responsibility within individual Departments. The provision of across the board pay rises does little to correct disparities within the public sector – effectively increasing the salaries of the overpaid and not correcting the underpaid.

9. KEY FINDING

The Public Accounts Committee is extremely disappointed that no action has been taken to ensure that staff remuneration is competitive but not unduly generous' as recommended by the C&AG.

10. RECOMMENDATION

The  Council  of  Ministers  should  undertake  a  comprehensive  review  of  all  pay  and conditions and adjust remuneration levels where appropriate. Note- this could lead to a reduction in some remuneration packages.

11. Remuneration and redundancy arrangements in the Public Sector

12. The PAC questioned the Chief Officer of Resources about progress on the above issues.

Mr. K. Keen:

In the private sector the individual's needs would have to go to one side for the survival of the business, so it would be much more quick and instant than that and people might have to take a pay cut. How do you align the public sector with the private sector so that you do have that sort of shared pain or I suppose we are talking about shared vision? What is fair

enough for the private sector is also fair enough for the public sector rather than these long, drawn-out reviews and even longer implementations. Back to pay again.

Deputy Chief Executive and Chief Officer for Resources

Well a number of public sector organisations I am aware of in Jersey have delivered very effective change programmes where the change to their staff levels, their remuneration levels, et cetera have been managed over a period of time. We have seen some recently being publicised. I know of a number of big organisations in the past who have done exactly the same thing and we have to work towards making sure - we in the States I think are seen as a good employer - and we have to remain a good employer and we have to manage our staff properly. There are 2 or 3 very big organisations in the private sector I know of over here who have managed a significant transition, I know 2 of them quite well, and I am very, very impressed as to how they have done it. If I could mirror that in the States I think we would be doing equally well but they have not all been quick-fire, one-off changes. Most of the changes I know of in the big private sector companies have been properly managed over a period of time.

Senator J.L. Perchard:

Does that mean replacing the Hay evaluation system with something new and more modern and more relevant?

Deputy Chief Executive and Chief Officer for Resources

As part of my role running Human Resources, and I know my H.R. Director is of the same view, we would both like to see the Hay system replaced and we would also very much like to see a far more common grading system. While I am on that, I have a very strong view that I think we have a structure which in some way divides the organisation between manual workers and civil servants. My goal would be that we have a one-tier structure. We obviously have to keep nurses and teachers in separate scales but within the service, I would like to do away with the manual worker and civil service grades. I would like to have one structure, one spine that recognises and rewards people and far fewer grades than we have.

Senator J.L. Perchard:

I think that is music to my ears, personally. Also, redundancy arrangements, and I do feel that the States have rightly earned a reputation for being a "job for life". Once you are a States employee you have a job for as long as you want it and I suspect that the States are carrying much dead wood. Are there any plans to review the redundancy arrangements within the States?

Senator B.E. Shenton:

Can I add to that, would you say that the current redundancy arrangements are over- generous compared to the private sector?

Deputy Chief Executive and Chief Officer for Resources The current voluntary redundancy arrangements?

Senator J.L. Perchard:

Yes, the whole redundancy arrangements, Chairman, rather than the financial arrangements, the fact they have identified people who are not performing and doing something about it.

Deputy Chief Executive and Chief Officer for Resources

Well, I am going to reflect back for a moment on my track record on what I have done in my organisation in that, within Transport and Technical Services public service, I took 100 staff out between the1998 service review and leaving the department in May last year. Now if I can do it with the current constraints and the current pressures, then I have to ask the question why can it not be done elsewhere?

Senator J.L. Perchard:

It has to be done, John, do you agree?

Deputy Chief Executive and Chief Officer for Resources Absolutely, yes.

Senator B.E. Shenton:

But would you say that the current redundancy arrangements are very generous in the public sector?

Deputy Chief Executive and Chief Officer for Resources

I have to say my initial reaction would have been yes, until I heard some of the others being offered, some quite recently. Before I would give a definitive answer, I would want to understand exactly what was being offered currently in other areas.[9]

13. KEY FINDING

The PAC is pleased to note that there is recognition that the current arrangements in respect of public sector pay needs to change.

14. RECOMMENDATION

A more flexible remuneration system which takes into account private sector remuneration needs to be introduced. Positions paying well in excess of their private sector equivalents should be abolished and replaced with structures that operate in a more cost effective manner.

4. Economic Development Department

1. The Jersey Finance Grant

The Comptroller and Auditor General proposed that the Economic Development reduce the grant to Jersey Finance:

2. The  Economic  Development  Department  opposes  the  proposed  reduction  in  grant  to Jersey Finance Limited.
3. In its preliminary response to the proposal to cut the budget to Jersey Finance, EDD was clear in its view that to do so is not appropriate.[11]

4. In fact, the converse was considered the case and that rather than reducing the grant, the Department claimed that further investment is required to compete effectively and promote Jersey businesses.'[12]  And that to decrease the grant might result in a decrease of Government revenues:

The London Business School Report identified that the Jersey government needs to invest more rather than less resources into promoting the finance industry. Recent analysis of this issue demonstrates that the finance industry does contribute does contribute at least as much as if not more than the current States grant by in kind' contributions. Adequately promoting the finance industry is essential in order to compete effectively with other jurisdictions, especially during a period of increasingly demanding market conditions. It is also necessary to counteract the impact of the globalisation of the industry where individual Jersey firms no longer market Jersey because they have themselves become global financial services businesses. By contrast reducing the investment in promoting the finance industry may result in the deterioration in scale and or profitability of the industry. This would have significant impact on the Treasury's revenues as finance currently contribute considerably more than 50% of government revenues.[13]

5. KEY FINDING

There is a lack of demonstrable or specific achievement by Jersey Finance in order to justify their grant. It is simply unacceptable to declare that funding cannot be reduced if there has been no exercise to ascertain whether the budget is appropriate and that the funds are achieving targets.

6. How is the grant currently justified?

In 2010, Jersey Finance Limited will receive a grant of £1.8 million from the Economic Development Department's budget. The Chief Officer of EDD maintains that the awarding of this grant was subject to a scrupulous process, and that the activities of Jersey Finance are monitored in any event by his attendance on their board:

The award of this grant follows a rigorous analysis of a detailed business and marketing plan submitted to the Department. The analysis undertaken is informed, in no small part, by the presence on the Board of both me, as the EDD Accounting Officer, and Mr Martin De Forest-Brown, the States Director of International Finance.[14]

7. However, the Chief Officer confirmed that EDD does not use a benchmark of what is spent on other industries to determine the JFL grant. We do, for illustrative purposes, publish the percentage "split" by sector that results from our budget and business planning process.[15]
8. KEY FINDING

The Public Accounts Committee agrees that investment in the Jersey Finance Industry is necessary, given its importance to the overall economy. However, the level of grant appears somewhat arbitrary and the Public Accounts Committee believes that a more scientific and accountable method of distribution needs to be devised.

9. RECOMMENDATION

The funding of Jersey Finance should be structured with a clear and fixed (by percentage) contribution from the finance industry. A matched financing approach should be considered.

10. How is the effectiveness of the grant measured?

The Public Accounts Committee wrote to the Chief Officer for Economic Development expressing its concern that there appeared to be no measurement of the effectiveness of the grant and no way of ascertaining the optimum grant level required to achieve all objectives.

11. The Chief Officer disagreed, stating that the grant was subject to a stringent business plan:

The business plan is tested against the States strategy for financial services which is defined, in part, by the 2008 report by the London Business School, one of the world's leading authorities on financial services development, and other work commissioned by JFL that assessed the impact of the global economic climate on Jersey's Finance industry and suggested a number of specific actions to address both risk and opportunity.[16]

12. Furthermore, the Chief Officer held that the outcomes of Jersey Finance Limited's activities are both measurable and monitored:

In addition to the establishment costs which given the expertise of staff members and remit of the organisation are modest, the JFL business plan consists of a series of projects and activities, each of which addresses elements of the States strategy and defines, on a project by project basis KPIs, outputs and outcomes. This includes a sophisticated measurement of the performance of JFL's marketing and promotional activity, within which year on year continuous improvement targets are set.[17]

13. The achievements of Jersey Finance:

a) The provision of technical consultation

Economic Development's Chief Officer outlined some of the achievements of Jersey Finance, stating that the organisation provides technical consultation in the development of legislation:

JFL plays a vital role in undertaking technical consultation with industry that informs the development of financial services legislation. The subsequent aggregation of industry response is a significant benefit to the speed of our legislative development process. We estimate that the value of pro bono contribution of industry professionals who engage with JFL in this process is very significant. Indeed, in the absence of such a contribution, the States would struggle to fund the required technical and industry input to legislative development. On this aspect alone JFL makes a measurable contribution to the cost of legislative development and reform.[18]

14. However the PAC notes that many key industry players are not involved with Jersey Finance. The Committee wrote to the Chief Executive of Jersey Finance with this concern. He indicated that in his view, many key groups and individuals were engaged:

Whilst Jersey Finance is fortunate enough to have over 190 firms as it members who we meet and correspond with on a daily basis, we also sit on each financial trade association to ensure that if a firm is not one of our members, we are capturing the overall agreed views and priorities of each industry. Furthermorewe are members of strategic working groups and also engage third party consultants, such as the London Business School, to provide detailed analysis of opportunities and challenges facing Jersey's finance industry to ensure we are focusing our energies in the optimum direction'[19]

15. KEY FINDING

It is important that taxpayers' money is used in an optimum manner and there appears no public documentation available that examines any consultation with the finance industry to determine whether Jersey finance is achieving its aim. At the very minimum, Economic Development should be examining why certain industry players are not members of Jersey Finance and their opinion of the size of grant funding an organisation of this nature should require. There are significant players of the Finance Industry who do not consider Jersey Finance to be a significant factor in their success.

16. RECOMMENDATION

The grant to Jersey Finance is substantial. A structured formula needs to be devised by the Economic Development Department.

17. b) Enhancing the Island's reputation in the international marketplace

The Chief Officer of Economic Development asserted that JFL fulfils an important and highly credible role in preserving and developing the island's reputation as a well regulated and co-operative jurisdiction in the international financial services marketplace. The efficacy of this activity is clear from the extensive and positive press coverage enjoyed by Jersey at the height of the global financial crisis.'[20]

18. KEY FINDING

The PAC is sceptical that something as broad as positive press coverage' can be attributed to the activities of Jersey Finance, as media coverage and reputation is comprised of a multiplicity of complex factors.

19. c) Other achievements

Some other achievements outlined by the Chief Executive of Jersey Finance were:[21]

• Receiving G20 white list status from the OECD
• STEP Best International Finance Centre 2009
• Moving to the top of the offshore centres in the Global Financial Centres Index.
• IMF review placing Jersey at the very top globally in terms of the finance industry's engagement with regulation.
• Acquiring 15 new member firms
• Launch of a new website
• High increase in press engagement locally and internationally
• Generated £1,022,482 cost equivalence of publicity (as at October 2009)
• Launch of successful school roadshows programme.
• Facilitation of 37 events and visits.
• Launch of Foundation and associated regulation as a new product.
• Provision of ongoing consultation over Funds and Trust regulation.
• Regular communication and presentation to local industry regarding technical developments and issues.
• Opened representative offices in London and Hong Kong.
• Jersey Companies granted the right to list on the Hong Kong stock exchange
• Diversified into other markets recommended by LBS, namely China, India and Eastern Europe.
• Continued regular promotional visits to Hong Kong and PRC, focusing on corporate opportunities and to reflect the importance of this market.
• Led delegation visits to Mumbai and Delhi
• Created a strategy to promote our product and service offering as Islamic compliant.
• Initiated a project to review in China/Hong Kong and India discriminatory blacklists and identify the Double Tax Agreement provisions which Jersey should seek to negotiate.

• Developed a proposal to assess insurance as a possible 4th market sector.

20. KEY FINDING

Many of the achievements listed here general Island successes only, not necessarily attributable to Jersey Finance (or if so, only in part). The PAC considers that Jersey Finance does not provide value for money, and that some of its speculative trips to the Far East are of uncertain value, considering that meetings with politicians and regulators did not create business for the Island. It is acknowledged however that if Jersey is marketing itself as an international finance centre, then this type of activity could be beneficial. However, the PAC is sceptical about whether this activity should be publicly funded.

21. RECOMMENDATION

The grant to JFL should be reduced to a level whereby 50% of the funding is provided by the Finance Industry, given their lower contribution to fiscal revenues.

5. Education, Sport and Culture Department

1. On the 15th January 2010, the PAC held a hearing with the Director of Education, to explore the issues raised in the Emerging Issues report, pertinent to Education Sport and Culture.
2. He said: We are content that the C.M.B. (Corporate Management Board) has taken the report seriously. Obviously some of the proposals will take some time to deliver, if they can be delivered at all'.[22]
3. The Director of Education announced that he had commissioned several reviews in his Department:

We have a review looking at school funding, we have a review that is looking at demographics, we have a review of inclusion - and this is about our special provisions and the accommodation that we make in mainstream schools for children with special needs - and we have a review of the structure of secondary education and a review of vocational education 14 to 19. Now, it does not matter which way you cut it, the fact of the matter is that they are all inter-linked.[23]

4. He supplied a catch all terms of reference for these reviews as being:

"A strategic review of the demographic and curricular pressures on arrangements for secondary education in Jersey to develop options which will enable the service to improve and broaden its curriculum offered to students in a cost-effective and efficient way."[24]

5. The proposed reviews in ESC, with costs are included in the Appendix of this report.
6. On the 10th February 2010, the PAC wrote to the Director of Education with the following concerns with regard to these reviews:

• The Comptroller and Auditor General's 2008 report Emerging Issues – States Spending Review' contained several proposals pertinent to the Department, yet it was not clear how this body of work is to be integrated into the proposed reviews.

• The Committee requested an explanation as to how the cost for each review was assessed, and what element related to external consultants. The Committee was minded that should surely it was well within the scope / remit of the Department to do this without external cost, bearing in mind the previous reviews that have been carried out.
• The Committee expressed its surprised to see no targets within the terms of reference of these reviews for an appropriate level of efficiency and savings, and no mention of use / adoption / leveraging of the available central services existing within the States.
• Concern was expressed that there appeared to be no review of mandatory / statutory services versus non statutory / statutory services. The Committee was troubled that the normal and accepted methods of identifying and understanding where efficiencies can be applied are not being used as part of these reviews.[25]

7. On the 19th February 2010, the Director of Education responded and confirmed that:

The proposals contained in the C&AG's report, together with any recommendations that flow from the reviews initiated by the Department, will form an integral part of the Comprehensive Spending Review (CSR).'

8. Also, he confirmed that there were four reasons for bringing in expert consultants:

• The Senior Management team at ESC is small and requires added support.
• Much of the work is technical and will benefit from specialist expertise.
• A number of the areas of review have been considered sacred cows' so a degree of independence is desirable
• The short term use of external consultants is value for money compared to the costs of extending the Senior Management Team'[26]

9. Free Nursery Education

Senator B.E. Shenton:

Just digressing a little bit to early years strategy, a decision was taken not to charge for more than 20 hours within the public sector on the nursery side.

Director of Education: That is right, yes.

Senator B.E. Shenton:

Was this a political decision or was this a decision by the department?

Director of Education: It was a political decision.

Senator B.E. Shenton:

Did the Department make any recommendations to the Minister?

Director of Education:

Well, it is for the Department to provide the options, quite clearly. Yes, in terms of making recommendations, our department, based on capacity and being able to predict what would happen in the future, will be saying: "One step at a time." It was thought appropriate that one step at a time as this was the introduction of what was a fairly significant strategy for the department: the introduction of the early years strategy from September.

Senator B.E. Shenton:

But the idea was to level the playing field - and I am digressing a little bit - but the playing field has not been level because you get 30 hours free in the public sector and 20 hours free in the private sector.

Director of Education:

You do, and that is currently a political decision. But the Minister has committed to review all aspects of that.

Senator B.E. Shenton: By ...? Do you know when?

Director of Education:

Well, we do not have a timescale for that. When you see the reviews that are going on at the moment - and the C&AG and myself did agree in the report that capacity within the department is a major issue, and we are focusing on some big-ticket issues here - I think the important thing for us is to be able to manage that in a way that we can bring forward conclusions that are positive and get a result.[27]

10. KEY FINDING

Education Sport and Culture, in providing free childcare in excess of 20 hours, is operating outside of its remit. Given the lack of educational benefits in providing childcare at this age and the fact that there is no legal requirement to provide education under the age of 5 means the provision of nursery care should be seen as a luxury. The Public Accounts Committee questions whether the public sector should be involved in this service provision.

11. RECOMMENDATION

The introduction of 20 free hours nursery care was intended to provide a level playing field with the private sector. The PAC recommends that charges are introduced for more than 20 hours, based on the full costs, including premises, of providing that service. The fact that public sector nurseries (30 hours) are over subscribed emphasises the fact that the promised level playing field' has not been delivered.

12. The C&AG's Proposals for Fee-paying provided schools

13. The  ESC  Department  provided  some  figures  to  represent  what  they  saw  as  the implications of the above savings:

Assuming that these changes were passed on to parents via fee increases, it can be assumed from the current occupancy levels that fees would have to increase by £90-£100 per term per child at the preparatory schools and around £140-£160 per term per child at the Colleges. These increases represent a rise of about 8% for the preparatory schools (fees currently £1,100-£1,260 per term) and 12% for the Colleges (fees £1,175-£1,260 per term). The schools' usual fee increases vary between 3-6%, so the total increase in the year of introduction would be in the range 11%-18%.

It is not known what the financial sensitivity of parents is to increase in fees, but it would seem reasonable to assume that an increase of this order would meet opposition from parents and could result in some parents deciding to withdraw their children from fee- paying education.[29]

14. In the public hearing, the Director of Education confirmed that the fee levels were recommended by the Board of Governors and approved by the Minister.' [30] It seemed that the Minister was planning to increase fees to a certain extent, albeit in a very gradual manner:

Director of Education:

Well, the Minister capped the fees for 2009 and he expects the colleges to go through a process which is around justifying any fee increases that they would want to make. In terms of the recommendation in the C.&A.G.'s report to pass an additional £800,000 on to the parents of those schools, in fact, a commitment has been made in the Business Plan from 2011 plus to take forward £480,000 of that.

15. The Director of Education appeared to believe that a fee hike might well result in a mass departure of students from fee paying schools, saying that:

If you create a situation where there is an exodus from fee paying education into non-fee paying education it will increase the costs because you are going to pick up obviously the full cost of educating those young people. So, what we have done is to introduce it gradually over a period so the grants to fee paying schools will be reduced by £80,000 each year for 6 years.[31]

16. KEY FINDING

The predicted impact of a fee increase is greatly overstated by ESC, especially as many schools have waiting lists. These assertions are made without any supporting documentation and some conclusions appear recklessly incorrect. It is highly unlikely that there will be the level of withdrawals from fee paying schools indicated by Education Sport and Culture based on the fee increases indicated. The suggestion that a small increase in fees would result in the removal of all fee paying students (at a subsequent costs to the taxpayer of up to £7 million) is absurd.

17. RECOMMENDATION

The PAC requests that Education Sport and Culture undertake a meaningful examination of optimal fees, taking into account waiting lists and the apparent lack of confidence by some parents in the non fee paying sector. Furthermore the PAC acknowledges that the continuation of funding fee paying schools at an optimal level is prudent from both a financial and educational perspective.

18. Senator B.E. Shenton:

My understanding is the Board of Governors wanted to increase the fees but you capped it to save money for the States.

Director of Education:

I do not cap the fees, the Minister makes the decision.

Senator B.E. Shenton:

Well, the Minister capped the fees to save money for the States; in effect saving money for parents as well because it is this 50/50 arrangement, is that right?

Director of Education:

I do not feel it is for me to answer for the Minister in this situation, however, I would say that one of the considerations that he took into account was the economic climate at the time.[32]

19. The PAC were interested to discover whether it would be in the interests of the Education Minister to make the savings proposed, given that presumably any savings would be returned to the centre and taken away from Education:

Director of Education:

The effect of paying the full cost, for example, in our provided fee paying schools ... well if you think that the provided fee paying schools are costing in the region of about £13 million and we receive just over £8.6 or something similar in fees, the cost of providing that at the moment the revenue cost is £5.6 million. So the saving would be in the region of £5.6 million and whatever else you would save in terms of property.

Senator B.E. Shenton:

All right. If you as a department saves sums in that amount, would that be then returned to the centre as opposed to just being used in the Education budget elsewhere?

Director of Education:

I suppose that is down to the end of year political discussion.[33]

20. KEY FINDING

There is potentially no incentive for Ministers to make savings within their Department as the resulting money saved would be lost from their budget. The shared approach to fiscal management simply does not work; there are no incentives for individual ministers to act in a fiscally responsible fashion. This is the case not just within Education, but across the board.

21. RECOMMENDATION

The performance of the Department and its Managers should be administered on a benchmarking basis whereby financial management and cost control is rewarded. In order to achieve this, there has to be a significant shift in the mind-set' of the Department and a full understanding of the cost of education in Jersey. An incentive to save should be introduced through a basic bonus structure. This could be reviewed in line with the C&AG finding that there was a degree of under remuneration at senior executive level.

22. The C&AG's Proposals for Primary School Provision

23. The Director of Education confirmed that some work had already been done in this area:

We have taken steps with the primary schools. We have closed a form of entry at Rouge Bouillon School and we have closed a form of entry at Samares School. These work their way through the schools over a period of 7 years. So at the end of 7 years - and I think we are in the third year now - you have lost 14 classes which is equivalent to taking the variable costs out of one-form entry schools but clearly it affects costs for them.[35]

24. In its response, the ESC Department also provided some background statistics:

Capacity in primary schools

There  are  currently  22  non  fee  paying  primary  schools.  Of  these,  14  schools  were designed to accommodate one form of entry (175-182 pupils), 7 schools have two forms of entry (350-364 pupils) and one school was designed to provide 3 forms of entry (525-546 pupils).

Projected primary school roll

Demographic  projections  to  2015  indicate  a  reducing  primary  population.  Predictions beyond 2011 are less robust as pupils for these year groups have not yet been born. Should  the  birth  rate  increase  as  happened  in  2007  these  numbers  could  change significantly.

Influencing factors

There are 2 factors which influence the way that capacity is utilised across the primary phase; class size policy and the amount of spare capacity that is required to meet demand in particular catchments and accommodate the needs of families moving from one area of the Island to another. Capacity is currently calculated on class sizes of 25 and a maximum of 208 classes across the system (5,200 places).

In order to facilitate pupil movement between schools and to accommodate demand in each catchment area, a minimum of 5% spare capacity is required across the system. Even at this level, it is not always possible to accommodate families moving from one catchment area to another. Jersey has a low level of capacity when compared with most parts of the UK, where the average is 10%. A reasonable target capacity for ESC would be 10% in line with UK arrangements, as this would give the Department sufficient flexibility to manage  pupil  admissions  and  transfers.  On  current  projections  this  target  could  be achieved by 2013.'[36]

25. In  their  initial  response  to  the  C&AG's  proposals,  the  Department  examined  two possibilities:

Reduce the number of forms in two form entry schools. Reducing a two form entry school to a single form of entry school is unlikely to be problematic. If the numbers are viable and the process is carried out with care, there is no reason why this cannot continue. Under these arrangements there remains the flexibility to reopen additional places if required. This is less disruptive than closing a school, with the resultant requirement to move existing pupils to different schools.

Primary school closures. Closing a school is more problematic. Public and political reaction would be strong. The Department has an obligation to provide appropriately located schooling for children of primary age and parents have an expectation that it will be provided.'[37]

26. The response also states that public and political reaction would be strong' to closing a primary school.'  Also, that  the Department has an obligation to provide appropriately located schooling for children of primary age and parents have an expectation that it will be provided.[38]
27. The Department preferred the option of reducing the number of forms in two form entry schools:

This is a less radical option but it is more likely to be publicly and politically acceptable. Under this option the cost of providing the service would be lower, given the reduction in total student numbers, but the total number of schools would remain the same. This means there would be flexibility to increase or reduce the total number of classes according to changes in population, reduce class sizes in more challenging schools and also to meet the proposed target capacity of 10%.'[39]

28. The Department identified achievable savings as follows:

Primary school closures. The saving from a one from entry school would be in the order of £600,000.

Reduce the number of forms in two form entry schools. Each individual class closed would save approximately £50,000-£70,000 assuming that no pupils had to be relocated to other schools. Reducing a 2 form entry school to a 1 form entry would therefore save in the order of £350,000. However, as the Department is already funded based on the overall number of pupils this would not result in any further decrease in the budget.[40]

29. The ESC's current stance on the proposals regarding primary education

In a letter from the Director of Education dated 19th February 2010, the PAC were informed that since the C&AG's review, the birth rate has increased, and also the Department closed 7 classes at Rouge Bouillon School (one form of entry) this means that spare capacity across the system in 2015 is now expected to be around 9% rather than the 14% originally predictedin effect this means that other mechanisms are required to create spare capacity if the closure of a primary school is to be considered. This will necessarily include policy reviews in respect of class sizes, the desirability of teaching mixed age groups and the potential for federating schools to make the best use of resources.'[41]

30. KEY FINDING

The PAC notes that there are 22 primary schools, with many empty seats. To have this number of schools in such a small Island is a nice to have' but certainly not a necessity in the current economic climate. Although the PAC is pleased to note that the ESC Department has acknowledged that the C&AG's proposal is viable (albeit potentially unpopular) the Committee is concerned that no detailed analysis of exactly which primary schools two form entry system should be affected or considered for closure has been put forward.

31. RECOMMENDATION

The PAC recommends immediate progress on this issue, with the identification of which schools are to be affected.

32. Political Decisions?

The Director of Education confirmed that when it came to the CMB report, many of the decisions are political decisions.'[42]

33. The Director of Education refused to speculate on whether reducing the number of sixth forms on the island was a possibility:

Senator B.E. Shenton:

Will the review look at perhaps closing schools or recognising the sixth form colleges?

Director of Education:

I think if it was looking at closing schools it would have reached the conclusion in a sense before the review had been conducted. I think if closing a school is an option that comes out of it, then obviously that would be one that would be presented for politicians to take a view on. There are small, or have been small, secondary schools and that was a matter of choice. You do have 6 sixth form providers in the Island if you include Highlands College in that and politically you would want to know, I guess, that that is giving you value for money and that your system could not be organised more efficiently and this will tell you that. But it will require obviously some serious consideration of the implications, particularly in maintaining the balance between fee paying and non-fee paying and the costs of reorganisation. So it will all be in there but it would be wrong for me to pre-empt the outcome at this point in time.[43]

34. Yet, as seen above, the Director of Education was content to speculate as to what public reaction would be to closing a primary school or increasing school fees.[44]
35. KEY FINDING

The PAC detects an inconsistency of approach as to how and where political decisions are being made. The senior management at Education Sport and Culture are making political decisions that are outside their remit. A political decision appears to have been made at civil servant level. It is not the job of the civil service to make political decisions of this nature or to speculate about potential public reaction to a political decision.

36. RECOMMENDATION

In times of financial constraint, financial management must take precedent over personal preferences and perhaps public opinion. A blueprint for Education should be drawn up using financial management as one of its prime criteria.

37. The  C&AG's  Proposal  for  the  Re-organsiation  of  Secondary Education

38. The Director of Education confirmed that The Minister has already made a commitment in the Business Plan to bring to the States by June, or at least bring options to the States by June, for restructuring secondary education.'[46]
39. The ESC Department indicated that this saving was viable providing pupil numbers remain at a certain level:

Secondary places are not funded on the basis of capacity; they are funded on pupil numbers. A reduction in the numbers will result in a reduction in funding. Provided pupil numbers do not fall beneath the level which allows schools to deliver a broad and balanced curriculum, this saving is achievable. The level of saving is dependent on actual numbers.[47]

40. However,  the  Department  cautioned  that  interim  funding  might  be  required  and  that redundancies may follow if such a policy was pursued:

The main implication (of the proposed saving) is that schools may need transition funding to adjust to changes in their roll. For example, if at the end of an academic year 150 pupils leave a school but only 100 are admitted at the beginning of the next academic year, the school still has the full cost of staffing but has lost £200,00 from its budget.[48]

Some investment may be required to support any secondary school adjusting to a sudden drop in pupil numbers. If redeployment was not an option for some teachers, redundancy might need to be considered.[49]

41. In the public hearing, the Director of Education expressed concern that changes to the current system could a) incur extra costs b) would take time and c) potentially jeopardize principles of inclusion:

There is a precarious balance in Jersey between fee paying education and non-fee paying education and if you are going to do anything that would in any way endanger or tip that balance, you have to be cautious because in actual fact you can incur additional costs. That is not something that can be done too quickly and it is not something that can be done on the basis of cost alone. There are other issues. There is the issue, for example, around vocational provision, around how you manage inclusion.[50]

42. KEY FINDING

Any savings resulting from falling pupil numbers will be reflected in the budget settlement from Treasury.

43. RECOMMENDATION

The Public Accounts Committee would like an assurance from Education Sport and Culture that they are capable of taking the tough decisions necessary to manage the demographic decline in student numbers while simultaneously increasing educational standards

Victoria College

44. Education - Knowing the Costs

The theme of not knowing what the costs actually are (which also arose in our examination of the Health Department) arose again within Education. The PAC was sceptical of what the calculations were based on:

Senator B.E. Shenton:

At the moment De La Salle College and Beaulieu College pay for their own buildings and infrastructure.

Director of Education:

Yes, and they set their fees at a level that they determine.

Senator B.E. Shenton:

Victoria College and J.C.G. (Jersey College for Girls) for example have free buildings and free infrastructure.

Director of Education:

Well, they are supported by the States, that is correct.

Senator B.E. Shenton:

Yes. What is going to happen to address that? Because without knowing the cost of that infrastructure we do not know how much it costs the taxpayer to send a child to J.C.G. or Victoria College.

Director of Education:

Well, what I have just explained is that we have agreed to pass on £480,000 of the costs ... Senator B.E. Shenton:

But that is an arbitrary figure; that is not a true cost.

Director of Education:

It is a figure that was based on some calculations which I do not have at the moment that would enable us to monitor the impact for passing additional costs to fee paying parents.

Senator B.E. Shenton:

So would you agree that the Education Department does not know the cost of sending a child to J.C.G. or Victoria College?

Director of Education:

The Education Department does know the cost of sending a child ...

Senator B.E. Shenton:

But does it include infrastructure and everything else?

Director of Education:

What I would say is clearly we know the full cost in terms of the money we provide to the school, but there are additional costs that are incurred by Property Holdings in terms of maintenance. We could have told you the exact amount of that when we were responsible for the property maintenance of the buildings but we are not responsible for that at this stage.[51]

45. The Department's current stance on the proposals regarding secondary education

On the 19th February 2010, the Director of Education wrote to the PAC to confirm that there was progress in this area:

The proposed reviews of the funding of secondary education, demographics, vocational provision for 14-19 year olds and social inclusion will provide the basis for the Department to develop options for the re-organisation of secondary education. The retention of 14 plus transfer and the role and funding of fee-paying schools, both provided and private, will be considered in this context. In the meantime, a decision has been taken to reduce funding to the fee paying colleges by £480,000 over six years from 2010.[52]

46. KEY FINDING

£480,00 appears to be an arbitrary figure and not reflective of the true costs. ESC do not know the true cost of sending a pupil to JCG or Victoria College.

47. RECOMMENDATION

The grant systems to the private educational sector does provide value as it encourages a large proportion of taxpayers to contribute to education through fees. However, the funding mechanism must be transparent and shows no favouritism to individual schools.

48. Highlands College

A similar issue arose in respect of Highlands College: Senator B.E. Shenton:

When you look at the cost of educating the students at Highlands, do you take into account the cost of the infrastructure, the buildings and so on and so forth, or is that outside your equation?

Finance Director, ESC:

It is now all based on pupil numbers and we have tried to incorporate the fixed courses to have one pupil number amount.

Director of Education:

We do not obviously at this point in time across the States of Jersey take the cost ...property is a free good but obviously that will change in time. One would assume that Education, Sport and Culture would have to calculate the true cost of the property it occupies and pay for that in some way.

Senator B.E. Shenton:

So at the moment you do not know the cost of the properties you occupy?

Director of Education:

Well, we knew the cost of the properties we occupied when we managed the budget but we do not know exactly how much is being spent on those properties by Property Holdings at this ... I do not have those figures with me but I could get those figures.[53]

49. KEY FINDING

The  Chief  Officer  is  vague  about  what  his  costs  actually  are.  The  Public  Accounts Committee is concerned that without a thorough analysis of costs, a realistic saving plan is impossible to implement.

50. RECOMMENDATION

Budgets passed to Chief Officers must be based on the funding of all costs, including property costs. Education within the public sector must be regularly benchmarked and the results published.

51. Schools Instrumental Service. The Proposal by the C&AG

52. In their initial response to the proposal, the Department stated that such a saving would be difficult to achieve:

It would be necessary to charge an average of around £175 p.a. per instrument (there are currently approx 580 instruments on loan). Given that a student violin typically costs about £50, and a clarinet costs about £200, some parents would opt to purchase their own instruments outright. This would necessitate a further increase in the annual hire charge for

those instruments still on loan. Another option would be to introduce an annual hire charge that would be relative to the cost of the instrument, but this would mean that the charge for the more expensive instruments would be much higher than the £175 average..[55]

53. Furthermore the Department believed that such a move might discourage young people from learning to play some instruments:

It is believed that the introduction of loan charges would result in a significant lowering of demand for core instrumental tuition, with serious consequences for the other services provided by JIS e.g. concerts, workshops and ensemble activities. By way of comparison, the introduction of minor charges for instrumental services in the Isle of Wight resulted in a drop of approx 30% in the number of students.[56]

54. and that the JIS principles of inclusion would be compromised:

It is considered that children from less affluent backgrounds would find it difficult to afford the loan charges, and the service would therefore become more exclusive. This would be contrary to one of the fundamental principles of the JIS, which is to provide maximum access and inclusion, regardless of family circumstances.[57]

55. In addition, the Department said that such a scheme would be difficult, and potentially costly to administer:

The system would be complicated to administer, given the type and number of instruments. Administrative support would be needed to maintain records, arrange for the collection of fees and manage late payments. An initial estimate indicates that a person would have to be employed for two days a week during the school term to administer the scheme.[58]

56. The PAC is very sceptical of the inference that if children buy their own instruments then the level of deposit will have to rise. There are currently 580 instruments on loan as seen above. However, if all parents purchased their own instruments, there would be significant savings and each parent purchasing would result in one less instrument needing to be made available. If all parents purchased then no instruments would be required.
57. The principle of inclusion

The PAC wrote to the Director of Education with the above concerns on 30th October 2009. The reply explained that approximately 50% of parents currently purchase instruments. These tend to be the parents of those pupils who are performing at an intermediate or advanced level.' Therefore, the view was that the Jersey Instrumental Service requires a stock of instruments to enable budding musicians to access a free trial period.[59]'

The current policy is to ensure that any child who wishes to play an orchestral instrument has the opportunity to access specialist tuition, free of charge. Any change to this policy would obviously require Ministerial approval.'[60]

58. At the public hearing, the Director of Education confirmed that the principle of inclusion had been a barrier to introducing fees:

Director of Education:

There has been no will to introduce charges or to introduce hire charges for instruments because it has always been perceived that this might affect the capacity of families who are less well-off to access the services.

But surely you could move to a means testing or at least you could charge the fee paying schools.

Director of Education:

That would be an option.[61]

59. However in his letter of 17th November, the Director of Education stated that if more parents purchased instruments, this would mean a rise in rental fees if the C&AG's income target of £100,00 was to be attained. This would mean that, in some circumstances, the cost of hiring an instrument would be more than the cost of purchase.'[62]
60. He gave consideration to the principle of a realistic hire charge' in the region of £30 p.a. per instrument, (which would generate an income of around £15,00 p.a.) but cautioned that the associated cost of administering the scheme would erode the income generated.'[63]
61. The PAC notes that not all schools benefit from the JIS group and individual instrumental tuition. However, it also observes that the fee paying schools which benefit most make a contribution to the service. The contribution for 2009 was set at £66,000.[64]
62. KEY FINDING

Not all schools are members of the Schools Instrumental Service, and those schools are still able to provide excellent music tuition. The conclusion fails to point out that many of the students come from affluent backgrounds and are more than able to purchase their own instruments. There is no evidence to suggest that serious students would be affected by the withdrawal of the service. For example, schools that are not members of the Schools Instrumental Service continue to excel. The PAC considers the service in its current form to be an unnecessary extravagance.

63. RECOMMENDATION

Loan charges should be introduced forthwith for musical instruments and the grant to the service cut accordingly. However, the PAC acknowledges that students from less affluent backgrounds should not be excluded from the opportunity to master a musical instrument. A more targeted approach is therefore supported in order to subsidise such students.

64. Highlands College – the C&AG Proposals

65. The initial Departmental written response explained that such proposals needed to be viewed in context, and warned that valuable services would be cut:

This proposal needs to be seen in context. Highlands College has been making efficiency gains since 2005, and in 2008 it was required to make a saving of £200,000.

Based on the proposed funding formula for 2009 a further £250,000 saving would translate to a reduction in student numbers - approximately 40 full time students. The majority of students who attend Highlands College have no alternative place to study, as they do not have the entry qualifications that are required for sixth form education. In the context of the current States policies, where there is an emphasis on developing the skills of the local population, consideration would need to be given to the acceptability of reducing access to further education.

Another option would be to reduce the numbers of staff. It could be argued that the natural turnover of staff would allow for such a reduction, but this could have an impact on teaching ratios and therefore on the quality of teaching provision. Class sizes at Highlands College are already higher that the average level in U.K. Colleges of Further Education. Relying on natural turnover could mean that the College would have to cut courses that were essential to the skills needs of the Island. College staff tend to be specialists whose skills are not generally transferable.[66]

66. When pressed, the Director of Education conceded that the funding for Highlands had risen:

Senator B.E. Shenton:

Now you use age-weighted pupil numbers at Highlands, is it not the case that many Highlands' students do not work throughout the whole year? It is quite generous in that you have part-time students in effect where you have given full-time funding.

Director of Education:

We have turned our attention to Highlands over the last couple of years to try and ensure that the funding formula for the college is appropriate. Not just to meet the college's needs but to meet the funding aspirations that we would have at the department. We have also enhanced the governance and accountability arrangements with the college to make sure that  we  know  what  the  money  is  being  spent  on.  So  we  now  have  a  new  funding

arrangement which I can provide you with a copy of which clearly outlines how the college is funded. It is now based on the true cost of running courses at the college including an allocation for overheads.

Senator B.E. Shenton:

When you say the "true cost", how is that true cost calculated?

Director of Education:

Well, the true cost is calculated on the basis of weightings that are equated to the cost of educating a young person, for example, in the sixth form at Hautlieu and comparing that with similar costs and further education in the U.K. So, it will be a long story to take you through the detail at this point in time. What I can say is that the costs of running courses are reflected now in the funding, that the funding arrangement clarifies what the college gets funding for, that there is a stronger governance arrangement and an annual budget settlement process that we go through which involves the Skills Board; the operational group of the new Skills Executive. For example, one of the flexibilities that it gives us now is that if we were to decide for some reason that we wanted to use the resources to purchase services that Highlands is providing elsewhere, we could do that.

Senator B.E. Shenton:

But have you changed the funding just to get yourself some more money? Because you are getting in the Skills Executive more diverse pupils that may be more expensive to ... and now by changing the way you are funded you can say: "We want more money for this special needs service."

Director of Education:

No, if we did that we did not do it very successfully. It is absolutely the reverse of that.

Senator B.E. Shenton:

So has funding for Highlands College as a result of this change gone up or down?

Director of Education:

There have been a number of benefits in the new arrangement for funding Highlands College and one is greater clarity.

Senator B.E. Shenton:

So has funding gone up or down?

Director of Education:

But the big difference is that Highlands College is no longer funded on predicted numbers; it is funded on planned numbers, so our budget is no longer a hostage to fortune.

Senator B.E. Shenton:

Right. So has overall funding for Highlands College gone up or down as a result of this change?

Director of Education:

Well, Highlands' funding has increased but it has increased because numbers have increased and the increases - I think there has been an additional 100 students this year - have been funded from fiscal stimulus money.

67. KEY FINDING

It is unclear what the longterm plan for Highlands funding is. It is also unclear what the aims of Highlands are.

68. RECOMMENDATION

The long term business plan for Highlands needs to be developed – and it needs to decide exactly what Highlands is. Longer term funding arrangements require clarification, as the

provision of fiscal stimulus funding is only a short term solution. A set formula needs to be developed in respect of Highlands funding – which is not based solely on student numbers.

69. On 19th February 2010, the Director of Education wrote to the PAC and confirmed the current plans for Highlands:

The role of Highlands College will be reviewed and the feasibility of it becoming a Tertiary College delivering both general further and sixth form education considered as an option. There are both sound educational and financial reasons for doing so. However, the effect of this on the balance between fee-paying and non-paying education and the sustainability of the private sector needs careful consideration.'[67]

70. Jersey Child Care Trust – the C&AG Proposals

71. The Child Care Trust is a promotional body which get a grant indirectly from the States Charity Commission and also directly from the States. Is seems to spend a significant sum on promoting affordable child care.
72. In its written reply to the C&AG report, the ESC Department re-iterated its fears of public opposition' to what it sees as inevitable service cuts:

The saving is not achievable if the services supported by the Jersey Child Care Trust are to be maintained, for it would have a major impact on the work of the Trust and it would be unable to continue in its present form..The main barrier to achieving the saving is one of concern about the impact on the range of services provided by the Jersey Child Care Trust and the alternative arrangements that would need to be made if these services were to be provided by ESC or another department. It is likely there would be significant public opposition to any proposed reduction in the services provided, particularly from parents who would be directly affected by the change.[69]

73. At the public hearing, it became clear that while sponsorship from the private sector has been secured, a clear remit still had not been established for the Trust:

Senator B.E. Shenton:

If we could move on then to Jersey Childcare Trust which is an issue that came up in the report and the important question whether the purposes of the trust have been made clear in the terms of reference and so on. Have you been able to reduce the funding to the trust? Director of Education:

No, we have not reduced the funding to Childcare Trust at this point in time and we have not determined the final model. The C.&A.G.'s report obviously does not make a clear recommendation on the model because at that point in time the future of the early years strategy was not clear. The early years strategy was implemented in September and the Jersey Childcare Trust have played a significant role in the implementation of that by helping us to develop a consultation to provide information to parents, et cetera. It was always envisaged that at the end of this first year, now that we have established a new early years partnership, that we would revisit this and the context has changed in another couple of ways. For a start the trust has started to bring in more funding itself, so if you were to look back at 2005, I think the funding that the trust managed to generate in sponsorship was around £29,000 a year; in 2008 it was about £154,000 a year. It has dropped slightly last year to £77,000 but the trust has made efforts to generate more funding through sponsorship. The other thing that has changed the context slightly is almost the introduction of a fourth option because there has been the development of a children's ... this concept of a children's information service in the U.K., and we have had discussions with the trust about it taking on some of the responsibilities of a more comprehensive children's information service in Jersey which is more than just about childcare; it is about health, it is about parenting support, it is about education in general. The third thing is really the development of a Children's Plan for Jersey which the new Children's Policy Group has committed to do. So, in that context we will be revisiting the role of the trust.

The Connétable of St. Peter :

Can you quantify for us how much the external funding is that the trust achieved? How much achieved came from external sources?

Director of Education:

Yes, those were the figures that I just expressed. I think in 2008 £154,000 and last year £77,000.

The Connétable of St. Peter :

It reduced last year by almost 50 per cent?

Director of Education:

Less sponsorship, yes. Obviously, I think, a lot of the charitable trusts were affected last year.

Senator B.E. Shenton:

When do you think you will determine the final model for the trust because it has sort of been going on for a while?

Director of Education:

Well, we have committed to doing something about that by the end of this year..[70]

74. KEY FINDING

The lack of clarity in respect of the functions and funding of the Jersey Childcare Trust is unacceptable. This matter was highlighted by a C&AG report back in September 2006 which noted the lack of cohesive Government strategy on Childcare provision in the Island.[71]

75. RECOMMENDATION

A model for the Jersey Childcare Trust, with long term value for money financial planning, needs to be developed as a matter of urgency.

76. Accountability within the Education Sport and Culture Department

The Committee addressed the recurrent issue of lines of accountability between Ministers and Chief Officers, asking the Director of Education for his take on the matter:

Mr. K. Keen:

In dealing with this structural deficit, which is obviously a huge issue for the Island, one of the things it seems to me that when you are trying to go through a change the clarity of leadership and reporting lines is pretty crucial. I get confused between the responsibilities of an accounting officer to the Chief Executive and to his Minister. Do you think that that is clear enough now?

Director of Education:

Well, it is certainly clear enough to me. The Minister has sole and legal responsibility. I guess the difficulty is political and it is not for me to comment on but I am clear on my responsibilities to my Minister and I am clear on my responsibility to present a broad range of options to him. Some of those options obviously would be good ways forward from an educational perspective but some of them might not be. Some of them might require us to cut services. If you are going to take the amount of money out of the States of Jersey to meet the deficit that you are facing, I guess you are going to have to look at cutting services.

Mr. K. Keen:

So you have made it quite clear your responsibilities to the Minister, what would be your responsibilities to the Chief Executive, then?

Director of Education:

Well, the Chief Executive is obviously my line manager so the Minister is responsible for matters of strategy and policy within the department and I am responsible for supporting my Minister. The way that I support the Minister obviously would be a matter for discussion with the Chief Executive because he has the responsibility to ensure that each of the Ministers gets the appropriate support. But quite clearly on the day-to-day business and on the corporate agenda, I have a responsibility to the Chief Executive and answer to him. But if you are saying to me: "How do you deliver savings in a corporate agenda without the consent of a Minister who has political responsibility?" then my answer would be: "With great difficulty."[72]

77. KEY FINDING

In the hearing, the Director of Education expressed that fact that the corporate goals of the Corporate Management Board and the goals of individual Ministers can often clash. The Minister for Education is a good example as he has made it publicly clear that he will oppose any move to cut his Department's budget.

78. RECOMMENDATION

In the UK, each council had an officer whose statutory duty it was to report back if there was concern in respect of the financial situation. There is currently no such statutory duty in Jersey. Chief Officers may well be more diligent in carrying out their accountable duties if such legislation were in place and if they had incentives to make necessary cuts. The culture of protectionism needs to be driven out of the system and a more business-like financial approach developed in terms of overall management. Ministers need to realise that whilst they have responsibility to protect their Department, their ultimate responsibility is to the whole Island and they must manage the assets under their capital in a prudent manner.

6. Health and Social Services Department

1. The importance of the C&AG's report

The Director of Finance and information for Health and Social Services confirmed that the C&AG's report had been taken seriously within his Department, and also took personal responsibility for working towards making savings and achieving value for money:

Senator B.E. Shenton:

How high up the in-tray would a report like this be when you are sort of looking to what you can achieve at Health?

Director of Finance and Information Services for Health and Social Services:

For me personally, in my role, it is extremely high up the in-tray because obviously achieving value for money and working through the cash limits and maximum services for the resources we have is fundamental to my role in Health and Social Services.[73]

2. In order to undertake a comprehensive spending review, it is vital to know the costs.

The Committee re-iterated its concern that the Health Department did not know what its costs actually were. Unless these costs are known, it is surely impossible to know whether value for money is being achieved. The Director of Finance and Information Services for Health and Social Services explained that even though establishing these figures was standard practice within his background at the NHS, in Jersey, such a costing exercise was not a priority and that there were insufficient resources to carry it out:

Senator B.E. Shenton:

When you were last here you admitted that you did not know the cost of a hospital bed, because you had some people who were in the hospital that should have been in nursing homes or residential homes, and that was seen as a saving because you were not paying a third party provider. But you did not know the cost of keeping them in the hospital.

Director of Finance and Information Services for Health and Social Services: .traditionally Jersey Health and Social Services has not undertaken the same rigorous costing exercises that I have come from in the N.H.S. So, for example, the reference cost process, while has flaws in it in the N.H.S., is a comprehensive N.H.S.-wide process of costing hospital activity. There are not the resources in the finance team in H.S.S and has not been seen as a high enough priority piece of work to undertake to ensure that we regularly and routinely cost and understand all of our activities in a systematic way. If someone wanted to know a specific cost of a certain hospital bed or a certain activity, we would undertake a costing exercise as a specific one-off to deliver that. So, I think the important thing is saying we can identify what the costs are in response to questions, but we do not routinely cost up all of the hospital activity in the same way as with the N.H.S.[74]

3. KEY FINDING

The Director of Finance and Information Services for Health and Social Services  has confirmed that it is impossible to know how much certain services cost in the Health Department. Without this information it is also impossible to know whether you are getting value for money, or whether they would be better off outsourced. The PAC is concerned about how a meaningful comprehensive spending review can be undertaken, without such fundamental information being available.

4. RECOMMENDATION

The PAC believes that Health and Social Services should know the true cost of very service provided. This body of work should be undertaken where possible, with the figures

published, including appropriate benchmarks for comparison purposes. Concentration should be given to areas where private sector provision is already available.

5. Senator B.E. Shenton:

I am trying to get my head round how you can do a Comprehensive Spending Review if you do not know the cost.

Acting Chief Officer, Health and Social Services:

It is not just a press of a button, is it? That is the point. We know what our average length of stay is; we know what our delayed discharges are. But I am sure we could calculate for you an average bed cost, but it is like saying how much does a car cost. An intensive care bed is entirely different from a bed on an acute ward.

6. While the PAC understands that not all hospital beds cost the same amount, it considers that this is no reason not to undertake the calculations (as occurs in the NHS), otherwise any spending review will not work.

Senator B.E. Shenton:

But the implication is that this whole Comprehensive Spending Review system is a mirage, because you are just going to go through and look at all the costs and carry on spending the budget exactly as you were spending it before.[75]

7. The costs of primary care

Senator B.E. Shenton:

Will you be looking at going back to your core services within and the provisional of core services?

Acting Chief Officer, Health and Social Services:

I think that is a really good question, particularly with respect to saving money across the health economy. The real trick is in all the transition points between primary, secondary and tertiary care, and if it is co-ordinate ... I mean, you have got to look within the box to find savings and efficiencies; I do not doubt that. But it is the interface between primary and secondary care, and secondary care and tertiary care that are big savings to be made. We are now moving in a positive direction with primary care, as of last night.

Senator B.E. Shenton:

Which says that you were not moving in a positive direction before last night.

Acting Chief Officer, Health and Social Services: I am not sure we were moving.

Senator B.E. Shenton:

You were not moving at all. [Laughter]

Acting Chief Officer, Health and Social Services:

The primary care body is making very positive noises about working with us in the future.

Senator B.E. Shenton:

Okay; because the State does do an awful lot that perhaps we should not be doing.

Acting Chief Officer, Health and Social Services:

I just think they could be more effective. There could be more effective interface between primary care and secondary care.

8. KEY FINDING

There is a lack of a professional interface between primary and secondary care.

9. RECOMMENDATION

The Health and Social Services Department should determine essentially which core services that they should offer, and negotiate a clear segregation of services and responsibilities with the primary care body. The trend within other jurisdictions has been to encourage as many initial investigatory procedures as possible within primary care clinics. This has the benefit of speed of service and avoids the use of expensive hospital based services.

10. Free prescriptions have a cost

Senator B.E. Shenton:

Just as an aside; the financial impact of introducing free prescriptions to the department was a loss of revenue of what?

Director of Finance and Information Services for Health and Social Services: £100,000.

Senator B.E. Shenton:

Are you concerned about the fact that since prescriptions were made free the general level of prescriptions has gone up? I know this is not an area that you are funding but obviously it did have an implication on your department when it came in.

Director of Finance and Information Services for Health and Social Services:

To answer that question comprehensively we have recently approved a post in the pharmacy to review ... their prime role is to review drug prescribing by clinicians to ensure that it is appropriate, cost effective and, from a planning point of view, this post is about delivering estimates and plans as to what is happening with drug dispensary in our organisation. Obviously the outputs of those types of reports should be options for the senior management team to consider around where certain clinicians are operating in certain ways that may be, for example, outside N.I.C.E. guidance and what the options would be on those. By having this pharmacy post dedicated to that role it means that another clinician effectively is in a position of expertise to challenge other senior clinicians about what they are doing.