Comprehensive Spending Review 2012-2013 - Report - 04 November 2011

Corporate Services

Scrutiny Panel

Comprehensive Spending

Review:

2012 – 2013 and Delivery

Presented to the States on 4th November 2011

S.R.14/2011

CONTENTS PAGE

1. CHAIRMAN'S FOREWORD......................................................................................... 2
2. EXECUTIVE SUMMARY .............................................................................................. 4
3. KEY FINDINGS AND RECOMMENDATIONS.............................................................. 5

1. KEY FINDINGS........................................................................................................ 5
2. RECOMMENDATIONS .............................................................................................. 6

4. INTRODUCTION .......................................................................................................... 8

1. TERMS OF REFERENCE .......................................................................................... 8
2. PANEL MEMBERSHIP .............................................................................................. 8
3. EXPERT ADVICE ..................................................................................................... 9

5. BACKGROUND INFORMATION ................................................................................10

1. CSR: PART ONE ...................................................................................................10
2. OBJECTIVES OF THE CSR ......................................................................................10
3. RESOURCES TO SUPPORT THE CSR ......................................................................11
4. PAST SCRUTINY ....................................................................................................12

6. WHAT IS THE VISION? ..............................................................................................14

1. CORE AND NON-CORE SERVICES...........................................................................16
2. COMMUNICATION AND ENGAGEMENT ......................................................................17

7. THE DEPARTMENTS .................................................................................................20

1. CSR OVERVIEW AND REPORTING METHODOLOGY – RED, AMBER, GREEN ...............20
2. ANALYSIS .............................................................................................................21
3. DEPARTMENTAL REVIEWS- CAUSES FOR CONCERNS ..............................................23
4. DEPARTMENTAL REVIEWS- RECOGNISED SUCCESS ................................................25
5. EXOGENOUS RISKS ...............................................................................................27
6. SALAMI SLICING ....................................................................................................29
7. UPDATED RED-AMBER-GREEN INFORMATION .........................................................29

8. FUTURE WORKING: 2013 AND BEYOND .................................................................30

1. MEDIUM TERM FINANCIAL PLANNING ......................................................................30
2. 2013 AND BEYOND ................................................................................................31

9. BUSINESS TRANSFORMATION AND LEADERSHIP ...............................................32

1. CROSS CUTTING ISSUES .......................................................................................32
2. BENEFITS REALISATION .........................................................................................33
3. "SYSTEMS THINKING" - PROFESSOR JOHN SEDDON ................................................35

10. CONCLUSION ............................................................................................................37

11. METHODOLOGY AND EVIDENCE CONSIDERED ....................................................39

1. DOCUMENTS .........................................................................................................39
2. WEBSITES ............................................................................................................39
3. PUBLIC HEARINGS.................................................................................................39

12. APPENDIX A: REPORT BY MR NEIL MCLOCKLIN ..................................................41

13. APPENDIX B: REPORT BY PROFESSOR MICHAEL OLIVER .................................57
14. APPENDIX C: BIRMINGHAM CITY COUNCIL: CASE STUDY ..................................75

1. CHAIRMAN'S FOREWORD

When this iteration of savings in States expenditure was launched, we were promised something slightly different. Not just limiting expenditure by £65 million, but an in-depth, detailed analysis of what we do, and whether it could be done in a different way.

Effectively, it should be about identifying our core and non-core services. The diagram on page 18 of our report encapsulates the promises that were held out to us, as States Members, and to the public. The promised savings would go hand in hand with the necessary tax rises, the combined result being sufficient to bring us out of a projected deficit position by 2013.

Our conclusions as to the actual outcome of these undertakings are mixed, and we remain extremely concerned at the continued level of States expenditure, particularly in these constrained and uncertain economic times.

To start, we have been asking a very simple and direct question: "Where is the vision? "

The Corporate Services Panel has been asking this question for the last 3 years. Our findings are that if there is a vision, in the words of the Chief Minister, it is "cloudy".

Without a vision and the whole hearted take-up of business transformation, the current Comprehensive Spending Review (CSR) process is merely an attempt to balance the books. The Island deserves better than this.

The process has not been helped by the fact that there is a distinct lack of congruence of the perceived CSR objectives between the Chief Minister and the Minister for Treasury and Resources. The Treasury Minister viewed the CSR process as driving the changes required by the States machine whereas the Chief Minister saw it as part of an overall Integrated Business Improvement Programme and agreed that the vision was a little "cloudy".

Concentrating on the numbers alone will not produce the culture changes which are essential to the States machine. This is reflected in the relative importance attached to the cross cutting issues. As the Comptroller and Auditor General said in 2008[1], the big prizes are the cross cutting issues, Procurement, Property, Human Resources and Information Technology. It was not apparent that the same importance has been given to these areas as we would have expected.

We do acknowledge that the CSR supervisory team have operated efficiently and have made a valiant attempt to keep the CSR process on track. However, from the evidence we have received, this is not sufficient to effect a meaningful business transformation. The team would seem to have fulfilled more of an administrative function, rather than driving the business transformation culture.

There must be a determined and dedicated high powered team in order to drive this transformation, as in the Birmingham experience, and a realistic time frame must be set. Two and a half years is insufficient – it is a five to ten year timeframe.

We have received recent updates on the CSR programme which we cannot discuss in detail due to the confidentiality restrictions. However, since we have not received the necessary details, it is difficult to make any meaningful comments. The summary appears to confirm that the process is on target to meet the £65 million savings. Unless there have been significant improvements since March 2011, plus compensation somewhere for the loss of some £7 million savings at Education, we would be surprised to see the total savings of £65 million being attained. In reality we do not think that the promised savings will be totally achieved.

The budget anticipates a 20% increase in Income Tax receipts in the period 2011 – 2014, and on that basis the forecast deficit/surplus reduces from a deficit of £(66m) for 2011 to a surplus of £6m and then £9m for 2013 and 2014. A 2% variation in income tax receipts (downwards) would be sufficient to wipe out any projected surplus. Equally, it is not clear as to what extent the Budget estimates incorporate the purported savings. If those savings have been included in the Budget then, as the Fiscal Policy Panel observed, the results are extremely tight and leave very little room for error.

We do recognise that progress has been made, and indeed some of the smaller Departments appear to be on track to achieve all of their savings. However, the next Council of Ministers will face continued and significant challenges in the area of controlling expenditure.

Amongst these, Business Transformation and Cultural Change have to be one of the key priorities of the new Council, in order to break down the increasing silo' mentality that we (as States Members) often see in our dealings with Departments. The rewards are great and the downsides of NOT achieving change are too important to contemplate.

In conclusion, we feel that whilst the CSR programme has achieved some progress, it has not achieved what was originally held out when it commenced. There has not been a clear vision, and there appears to have been a lack of understanding or priority attributed to the cross cutting issues. This must not occur again if we are to have a chance of achieving a States which is both effective and provides genuine value for money.

Senator S. C. Ferguson

Chairman – Corporate Services Scrutiny Panel

2. EXECUTIVE SUMMARY

A Comprehensive Spending Review (CSR) was initiated in 2010, and proposals were put forward to save 2% in 2011, 3% in 2012 and 5% in 2013. Having reviewed the first part of the CSR, we have now investigated proposals for the subsequent years and highlighted a number of issues.

We have found that there is no clear vision for the Island or what the role of government and the States is. The Council of Ministers is not inspired to create a clear vision for Jersey's future, and the main drive is that books should balance. It is our view that, once a clear vision has been developed, Ministers will know in what direction to take their Department and can develop clear strategies to develop this.

We have highlighted that only some Departments have defined their core and non-core services. We believe that it is imperative for all Departments to revisit what is core and what is non-core because not defining these could prevent more radical approaches being developed.

The Red-Amber-Green reporting enabled us to compare and contrast the progress being made in different Departments. We have found that some Departments are doing better than others regarding making their savings. Furthermore, some have rated nearly their entire CSR three year programme as green; therefore it is clear that they are confident in achieving their savings targets.

Whilst it was pleasing to see that some Departments are looking beyond 2013, others are only concentrating their efforts on 2011, 2012 and 2013. In order for fundamental change, all Departments should be looking beyond 2013.

Allowing frontline staff to suggest savings through their managers is an approach that improves services and is an integral part of business transformation. There was insufficient evidence that Managers are working "with" their staff in order to make significant cultural changes. The command and control philosophy still seems to permeate the States' system.

We conclude this report by explaining that, from the evidence presented to us, Departments fall into two camps. Some Departments recognise that the objective of the CSR is about saving 10% but also about fundamentally questioning what they do and how they do it. Other Departments, however, acknowledge the financial aims of the CSR but are still in the old model of evolutionary change. This is not surprising when the Minister for Treasury and Resources and the Chief Minister have very different perceptions as to what the objectives of the CSR Programme are and whether or not this includes defining and shaping the role of government in the future.

We have also concluded that there has been insufficient emphasis on the importance of transformation issues. Our expert witness, Professor John Seddon gave evidence of how to transform services through understanding the customer and the demand for the service. He explained that elsewhere in the UK, local governments are achieving savings in the order of 20% to 40% through transformation initiatives.

In summary, we are in unprecedented economic times and there must, therefore, be a greater obligation than ever before to ensure that the States provides value for money in the services it provides and is seen to be doing so. Where services are "non-core" they must be re-evaluated. Accordingly, whilst the present CSR has made progress, it has yet (and is unlikely) to fulfil the promises made at the outset. This will have to be addressed by the next Council of Ministers with greater vigour than ever before.

3. KEY FINDINGS AND RECOMMENDATIONS

1. Key Findings

1. There is no vision between the two key Ministers. There is confusion about the objectives, scope and role of the CSR Programme and what is within the scope of other initiatives. The Treasury and Resources Minister viewed CSR as a programme that was re-defining the shape of the States – what it did and how it did it. It was all encompassing. However, in contrast the Chief Minister saw the CSR essentially focused upon achieving £65 million short-term savings within the 3 year period.
2. Defining Core Services has only happened in some Departments and not in the context of an overall vision and definition of the role of government in Jersey, despite the initial assurance that it would occur. Even within a "core service" there will be elements of non-core activities which must be identified, costed, and appropriate strategies developed. Soft market testing with private and third sector organisations are an effective way to develop a challenge to the existing services model.
3. The  Programme  Management  Office  would  appear  to  be  effective  in  managing  the  CSR Programme, but the Panel questions the value it is offering in providing capability to help Departments really transform.
4. The lack of congruence between the vision of the Chief Minister and Minister for Treasury and Resources has contributed to the absence of a clear Business Transformation Programme. The qualities required to run the CSR programme are not the same to those required to run a Business Transformation Programme.
5. Some  Departments  are  doing  better  than  others  regarding  making  their  savings.  Some Departments have rated nearly their entire CSR three year programme as green; therefore, they are confident in achieving their savings targets. However, we also note that in March 2011, 54% of the overall total was defined as red. We would therefore question the likelihood of the CSR achieving its overall target by the end of 2013.
6. The average total compensation package for the public sector now significantly exceeds the equivalent for the private sector.
7. The review of Staff Terms & Conditions is one of the most critical indicators to the CSR Programme's success and there are significant risks attached to the realisation of this saving.
8. It appears that the biggest spending Departments are unlikely to achieve their targets which will endanger the success of the CSR programme objectives.
9. We  have  found  examples  of  Good  Practice  that  should  be  shared  more  widely  amongst Departments.

10. The evolution of the public service is an ongoing process. In some Departments, the priority has been to make savings until 2013, with no vision for 2014 and beyond.
11. Ministers  need  to  acknowledge  the  importance  of  Cross  Cutting  Initiatives.  Cross  cutting initiatives are fundamental to the CSR process. The Panel believe that there is insufficient evidence of resources being allocated to allow for significant cross cutting savings to be initiated.
12. Although frontline staff are able to suggest savings through their managers, the Panel has found insufficient evidence that Managers are working "with" their staff in order to make significant cultural changes. The command and control philosophy still permeates the States' system.

2. Recommendations

1. The Panel recommend that the CSR Programme, as a matter of urgency, clarifies the objectives, scope and role of the Programme. It is also recommended that this is within the context of a wider discussion to determine the vision for the Island and the role of government. To this aim the Panel recommend that there should be a public debate, led by Executive politicians about the role of the States.
2. A clear statement must be produced from the Council of Ministers on the direction they intend to take the Island, and a vision for the level of government expenditure and priority areas for that expenditure.

This vision may relate to the provision of the most effective public services in Europe as a catalyst to attract further inward investment. Such a vision could clearly be a mechanism to stop the benchmarking of practice in mainland UK (often to find reasons not to change) and make Jersey the ultimate benchmark.

It would also reinforce the concept of CSR being with the States for life not just three years.

3. The Panel recommends that it is imperative for all Departments to once again revisit what are the Core Services to their Department - which services are no longer required and which services are mandatory or political necessities. Also if they are required, who is best to deliver them – the Department, another Department, the private sector, or the third sector. There should be no areas that are not open to challenge.
4. Councils such as Birmingham City Council (appendix C) have properly constituted, high level teams  with  political  ownership  and  Directors  of  the  main  cross  cutting  services  (Human Resources, Information Technology, Property and Procurement).

In order to take Business Transformation forward, there needs to be a high level team within the States of Jersey taking ownership with effective political leadership.

5. The CSR Programme must ensure that there is complete consistency on the application of Red Amber Green reporting status definitions.
6. The easy solution would be to freeze the public sectors wages bill. Evidence has shown that there is an emphasis on "catch up" once the freeze is lifted and the net effect is counter productive.

  The importance of the terms and conditions revision cannot be stressed too strongly. This is the

most difficult area of the CSR to accomplish and it is likely to take some time. It is, however, crucial  and  it  is  essential  that  adequate  resources  are  devoted  to  this  area  and  that  the implementation plan is fast tracked to delivery significant and long-lasting changes to terms and conditions.

7. Any failure in the Review of Staff Terms and Conditions has the potential to de-rail the entire CSR Programme. There is significant evidence that this can be the case from the UK Mainland where some authorities have not been managed such reviews effectively resulting in all other initiates being put on hold for several months. We would recommend that this is considered as one  of  the  main  priorities  and  appropriate  resources  in  terms  of  engagement  as  well  as programme management is invested into this area.
8. It is essential that changes in services are monitored to ensure that alternative methods of delivery of services do deliver the savings.
9. The Panel recommends that each major element of the CSR programme must have a developed contingency plan in the event of non-delivery of their savings target.
10. Departments must continue to evolve their services and evolve their thinking in order to make savings in future years and become more efficient. Departments should be planning to make further efficiency savings in 2014, 2015, and 2016 and beyond. There needs to be a cultural challenge to enable continuous challenge and improvement.
11. The approach to improving services is an integral part of business transformation. Whilst a leadership programme should be commissioned to develop and coach senior managers to be able to think laterally and deliver services in a more effective way, there must be a change of culture throughout the States.

4.  INTRODUCTION

By 2013, it is estimated that the States will be spending £50m per year more than it earns because of a drop in tax receipts and a fall in investment income. As a result, a Comprehensive Spending Review (hereafter known as "CSR") was initiated in 2010.

We reviewed the first part of the CSR when Departments put forward proposals to save 2% of expenditure which were agreed by the Council of Ministers in May 2010. These proposals were approved and formed part of the 2011 Business Plan which was debated in September 2010.

The CSR is now in its second stage and Departments are working towards delivering 3% savings in 2012 and a further 5% savings in 2013. The 2011 Budget was approved in December 2010, which incorporated spending limits for 2012 and 2013. Proposals will now be subject to further analysis by Departments before forming part of the Business Plans for 2012 and 2013.

A CSR Programme Team is coordinating the drive by Departments to implement the agreed savings. During our first review we were concerned that some Ministers would fail to produce the 2% of savings. We have therefore explored whether clear and thorough delivery and implementation plans have been established if the overall 10% is to be saved by 2013.

1. Terms of Reference

We established the following Terms of Reference for our review:

1. To examine how the CSR proposals will be implemented and assess whether there are rigorous delivery and implementation plans. In particular:

• Achieving sustainable efficiency savings
• Business transformation
• Cultural change in terms of business performance

2. To assess whether the savings will adversely affect the delivery of public services with particular reference to:

• Identification of core and non-core functions

3. To examine whether there is a long term plan to ensure that spending balances appropriately with taxes on an ongoing basis.
4. To consider whether the stated objectives of the CSR programme have been met.
5. To examine any further issues relating to the topic that may arise in the course of the Scrutiny review that the Panel considers relevant.

2. Panel Membership

The Corporate Services Scrutiny Panel constitutes the following members:

Senator S.C. Ferguson, Chairman; Deputy J.A.N. Le Fondré, Vice-Chairman; Senator J.L. Perchard;

Deputy D.J. De Sousa

3. Expert Advice

For the purposes of the review, we engaged two advisors:

• Mr Neil McLocklin of Capita Symonds: Director of Business Transformation and Innovation. Qualifications include Masters in Telecommunications Business, University College London and Masters in Business Administration, City University Business School. Mr McLocklin's report can be found in "Appendix A".
• Professor Michael J. Oliver: Associate of Lombard Street Research and Professor of Economics at ESC Rennes School of Business in France. Professor Oliver's report can be found in "Appendix B".

We also held a Public Hearing with Professor John Seddon, a British occupational psychologist who specialises in service industry reform. He is lead consultant of Vanguard, a consultancy company he formed in 1985.

5. BACKGROUND INFORMATION

1. CSR: Part one

During early 2010, the Council of Ministers started to review spending forecasts and considered how to deal with projected deficits. All Ministers agreed that States spending would need to be controlled to guard against future structural deficits. The CSR provided for 2% of savings for 2011, 3% in 2012 and 5% in 2013, which brings the total to an overall 10% worth of savings.

The CSR was designed to deliver three major challenges, which required:

• a review of those services which are essential or highly desirable
• a determination to deliver services efficiently
• a wider implementation of user pays principles

In 2010, there were four major reviews looking at Terms and Conditions of Employment; Court and Case Costs; Education Sport and Culture; and Home Affairs. States Departments started reviewing their activities and budgets as part of the CSR. The initial savings proposals for the first 2% were submitted in April 2010. Initially, £50m (10% of budget) worth of savings were sought from the 2011-2013 Business Plans, but this has since risen to £65m.

The proposals for £65 million of savings by 2013 are made up as follows[2]:

£m 2011 Department savings  12.0 2012/13 Department savings  30.4 2011/12/13 User Pays  2.2 2012/13 Corporate Savings   6.5 2012/13 Staff Terms and Conditions  14.0 Total Savings by 2013  65.1

Since the CSR began, it is true that £12 million has been saved in 2011.The remaining £53 million are intended to come out of budgets in 2012 and 2013. However, against this background it should be noted that overall expenditure levels continue to grow in absolute terms

2. Objectives of the CSR

 In summary, the objectives of the CSR have been to:

• control States spending by setting tough but achievable savings targets and realistic growth proposals;
• improve financial management across the States by ensuring incentives are built into the budgeting system to encourage improved decision making;
• extend the States planning horizon so that clear three-year plans are made and adhered to;
• bring greater transparency to financial planning and provide more complete cost information for decision making; and

• deliver  better  value  for  money  and  good  management  of  assets  and investments.[3]

3. Resources to Support the CSR

The 2011 Business Plan included a Restructuring Provision of £6 million to support the CSR process. This provision aimed to provide funding for "invest to save" initiatives, which included longer term savings (voluntary redundancy) as well as central support to assist Departments in delivering their savings.

A Ministerial Decision was made on the 31st January 2011 by the Minister for Treasury and Resources which approved a budget provision of £2,455,000 to deliver the CSR proposals funded from  the  Treasury  and  Resources  Restructuring Provision.  The  £2,455,000  can be broken down as follows[4]:

£'000

1. Programme Office  410
2. Organisational Development / Change Lead  200
3. Employee Relations Support  100
4. Procurement Transformation Programme:

• Ongoing funding of procurement team, systems, training to deliver  1,300 savings target
• Invest to save bid to deliver H&SS 2011 procurement savings  365

5. Actuarial Review of the PECRS Scheme  80 TOTAL  2,455

Since the first part of the CSR, and following the Ministerial Decision outlined above, there have been five developments[5]:

Programme Office

"A central Programme Office has been established to ensure the project is effectively planned, managed and monitored. Regular reports are prepared for the Programme Board[6], the Political Steering  Group[7] and  the  Council  of  Ministers.  The  team  comprises  the  CSR  Programme Director, a CSR Project Manager and Programme Office Support, as well as a Communications Manager  seconded  from  the  Communications  Unit,  to  co-ordinate  all  internal  and  external communications relating to both CSR and the Fiscal Strategy Review (FSR) [8]".

Organisational Development / Change Lead

"An interim appointment has been made to assist and support the scale of change necessary within the organisation over 2011, 2012 and 2013. The interim appointment has the current job title 'Director of Human Resources - Strategy and Change'. However, from 3rd October 2011 when the newly appointed Director of HR is in post, the job title will change to HR Project Manager[9]."

Employee Relations Support

"A member of staff (whose job title is Senior Employee Relations Manager) with relevant Employee Relations experience has been seconded from the Health and Social Services Department into Human Resources (cost in 2011 is £100,000). The rationale behind this development is that the CSR proposals indicate that there will be significant impact on staff if the savings are to be achieved. This is unsurprising given the fact that staff make up over half of the States expenditure. In addition to the £14 million target for Terms and Conditions, there are many Departmental proposals which affect staff[10]."

Procurement Transformation Programme

"The Procurement Strategy to deliver savings of £6.5 million was supported by the States during the debate in July 2010 for funding under Article 11(8) of the Public Finances (Jersey) Law 2005. This effectively brought forward £500,000 of the 2011 estimated cost of £1.8 million into 2010[11]."

Actuarial Review of the PECRS Scheme – Tribal review Terms and Conditions

"A CSR target of £14 million has been agreed by amending terms and conditions of all States employees following a review undertaken by Tribal. Based on the recommendations from Tribal, who proposed that the employer should carry out its own actuarial review, a Steering Group[12] on Terms and Conditions of employment made a number of recommendations in relation to pensions. The cost of this actuarial review, following a tender exercise, was £80,000 and the States Employment Board agreed that the review was undertaken[13]."

4. Past Scrutiny

During our first review of the CSR we made the following observations:

• The Island was being pushed towards a high tax, high spend government;
• The 2% savings should have been sustainable and an integral part of the overall 10%;
• Due to the tight timeline of the CSR, a strategic approach to achieving savings had not been possible in many cases;
• There was a lack of vision and drive necessary to instigate cultural change from a political level;
• The 2% savings should have been "business as usual";

• The failure to match income and expenditure has consequences for the people of Jersey, but the consequences of failure of Ministers to provide the necessary savings was unclear.

We concluded our report by agreeing that making savings across all Departments are never going to be popular, but they are necessary in order to balance out income and expenditure. Despite any criticism as to how the CSR is delivered, Jersey is in a structural deficit and spending needs to be brought back in control.

6. What is the vision?

The Panel's previous report questioned what the Minister's vision of the Island was, and in this context what was the role of government and the States. It was our view that the Council of Ministers was not inspired to create a clear vision for Jersey's future, and the main drive was that books should balance. There was little evidence found by the Panel that Ministers were working towards a coherent future.

During this review, we saw little evidence of any change from our previous misgivings about a clear vision and shared understanding of the role of the States in the future. Indeed, this seemed most prevalent during the Hearings with the Chief Minister and the Minister for Treasury and Resources, as both had very different opinions as to what the objectives of the CSR Programme were and whether or not this included defining and shaping the role of government in the future.

The Minister for Treasury and Resources said that the CSR is a never-ending process and one that does not end in 2013. He said "we are trying to change the culture in the States to one of continual improvement and continued efficiency drives so there will be a C.S.R. 2, 3, 4[14]."

However, the Chief Minister said that the performance of the public sector is going to be improved by the long-term business transformation activities rather than the actual CSR process. It was obvious to us that the Chief Minister sees the CSR and transformation separately. He also said that the overall change in the approach is going to be beneficial, but he would not link it purely to the CSR: "I think this is where we get this danger of trying to think of the C.S.R. as the overall umbrella; to me it is not, it is just one of 2 important areas[15]."

Thus there are two very different perceptions of the scope and objectives of the CSR between the Chief Minister and Minister for Treasury and Resources. The Chief Minister also said when asked about the vision for the Island and the role of government "I do not think at the moment it is sufficiently well articulated. There is a vision but it is still rather cloudy I would say at this stage[16]." If there is no coherency, we cannot help but wonder where that leaves other Ministers.

The Panel also questioned all Ministers about the relationship between the Integrated Business Improvement Programme (IBIP) and CSR. Other than the Chief Minister, it appeared that they had not made the connection between the two, or even were aware of the IBIP[17].  

KEY FINDING ONE:

There is no vision between the two key Ministers. There is confusion about the objectives, scope and role of the CSR Programme and what is within the scope of other initiatives. The Treasury and Resources Minister viewed CSR as a programme that was re-defining the shape of the States – what it did and how it did it. It was all encompassing. However, in contrast the Chief Minister saw the CSR essentially focused upon achieving £65 million short-term savings within the 3 year period.

RECOMMENDATION ONE:

The Panel recommend that the CSR Programme, as a matter of urgency, clarifies the objectives, scope and role of the Programme. It is also recommended that this is within the context of a wider discussion to determine the vision for the Island and the role of government. To this aim the Panel recommend that there should be a public debate, led by Executive politicians about the role of the States.

In his report, our advisor, Mr Neil McLocklin says: "The States of Jersey is in a relatively strong financial position compared with public sector agencies in the UK and elsewhere in Europe. There is a desire to address a structural deficit, and balance the books, but not a compelling reason for change. A political drive to be Low Tax, Low Spend' would not appear to manifest itself into an operational philosophy - for example in the way that London Borough of Barnet's Easy Council' (no thrills Easy Jet model) operates, or Essex Works – the Vision for Essex County Council which is to create the best quality of life in England, but on a foundation of developing a purely commissioning based organisation working with private and third sector organisations, and realising £300m of efficiency savings. A commissioning based organisation for Essex County Council will result in the government only having 20-25% of existing staff, with other agencies responsible for delivery."

We came to the same conclusion about vision in our August 2010 Report:

"For the CSR to succeed the Council of Ministers and the Assembly must demonstrate strategic thinking and more imagination. So far, there is little evidence of such lateral thinking. It is essential that we identify the activities where government must be involved, the activities best done by the private sector and those best left to the individual."

Our previous review challenged Ministers about what the vision was and nobody was able to articulate it. There was some consensus about what the States wanted to leave behind (silo working, inefficient work practices) but not where it wanted to get to and what the organisation would look like in five years time. Without a vision it is difficult for Ministers and Departments to prioritise options for change and associated expenditure and investment for the CSR and service strategies beyond. Once the vision has been developed, Ministers will know in what direction to take the Departments and can develop a Strategy that will deliver this.

Our advisor, Mr Neil McLocklin said in his report (appendix A): "given the fact that the States has control of all the levers of government servicing a relatively small community, there is an opportunity to develop a real showcase for government and public service delivery. The States is more akin to the Swiss canton model, where local State government is also responsible for health, education, law enforcement and so on, for areas with populations, in many cases, of similar size to Jersey. Joined up thinking at the local level to deliver the prevention agenda in health, for example, could create a really effective public service that could reinforce the appeal of the Island in attracting business".

RECOMMENDATION TWO:

A clear statement must be produced from the Council of Ministers on the direction they intend to take the Island, and a vision for the level of government expenditure and priority areas for that expenditure.

This vision may relate to the provision of the most effective public services in Europe as a catalyst to attract further inward investment. Such a vision could clearly be a mechanism to stop the benchmarking of practice in mainland UK (often to find reasons not to change) and make Jersey the ultimate benchmark.

It would also reinforce the concept of CSR being with the States for life not just three years.

1. Core and Non-Core Services

We asked every Minister whether they had identified their core and non-core services, as it is our view that if a Department knows what their core services are, the non-core services could be outsourced to third parties, or ceased entirely, thereby making savings. This sentiment was also shared by the Minister for Treasury and Resources who said  ".the public sector can be efficient. It can be incredibly efficient and you have got to take services on a case-by-case basis. However, having said all of that, do I think that the Jersey third sector and the Jersey private sector does have in the future a bigger role to play in providing services? Yes, I do[18]."

It was interesting that some Departments were able to provide us with their core services, whilst others were not in a position to do so. When asked what the timescale was to identify its core and non-core services, the Chief Officer of Health and Social Services responded by saying:

Chief Officer of Health and Social Services:

"I am almost inclined to say it is an iterative process, I am not sure you get to the end of it because we offer such a wide range of services across all of those areas, and I suspect there is probably bits of the service we offer that until we have had a look at it we did not even know was there, or certainly we were not giving close attention[19]."

Whilst accepting that the Department has started analysing its core services, which, according to the Chief Officer, is an ongoing process, we asked whether this should have preceded the CSR:

The Assistant Minister for Health and Social Services:

"That is exactly when it was done. If you look at the results of the Comprehensive Spending Review you will see that very little has been done to social services. That is because they are already doing just the core services, just statutorily what they need to do[20]."

The Panel is concerned that it is often too easy for a Department to come to the conclusion that its services are all core. The Panel is conscious of the strong evidence of mission creep within Departments over the years, and the CSR Programme was supposed to address this. For example, in the area of health, nobody would argue that health overall is core but with the service there are obvious areas to question. Is managing nurses' homes core to the health service? The Panel is sure that nursing home provision is necessary but is housing administration a core competence of the Heath and Social Services Department? One can extend the challenge to areas closer to the core service such as Diagnostics or Therapeutic Services, where there may be private or third sector organisations who have a strong competence or capability than that of the Health and Social Services Department. This is the type of challenge that the Panel would like to see, and, as the Chief Officer of Health and Social Services stated it must cover all areas individually. It is also important that such matters are subject to rigorous financial approval.

During our Public Hearing with the Minister for Transport and Technical Services he said that identifying the core and non-core services within his Department "has been very fundamental in the whole review[21]". He explained that a day's workshop was organised (attended by himself, his Assistant Minister and senior management) where all the services within his Department were identified and evaluated as: a legal requirement being essential or desirable; who the provision was for; whether the Department's specialists skills were required; whether there was any alternative provisions available within the Island and therefore whether it should be continued, and also whether it should be continued in the current form[22].

The Planning and Environment Department had a very open approach to nearly all their services which they consider not to be mandatory, but delivered as part of political choice. This created an open approach to questions like should building regulation services be delivered or be reliant on architectural self certification.

We believe that defining core services should have been the starting point in the CSR Review. Not defining core services prevents more radical approaches such as income generation and user pays or outsourcing being considered.

The Panel also heard evidence from Departments that outsourcing in some areas was not an option but noted that these statements were not backed up by evidence. For example, in Education Sport and Culture the Director stated "the private sector may not be able to deliver the other benefits that, as a Government organisation, we would want to see them deliver because they are not profitable"[23].  Soft market testing exercises with the private and third sector to determine the appetite to take on services and the commercial benefits of the sourcing route should be performed.

KEY FINDING TWO:

Defining Core Services has only happened in some Departments and not in the context of an overall vision and definition of the role of government in Jersey, despite the initial assurance that it would occur. Even within a "core service" there will be elements of non-core activities which must be identified, costed, and appropriate strategies developed. Soft market testing with private and third sector organisations are an effective way to develop a challenge to the existing services model.

RECOMMENDATION THREE:

The Panel recommends that it is imperative for all Departments to once again revisit what are the Core Services to their Department - which services are no longer required and which services are mandatory or political necessities. Also if they are required, who is best to deliver them – the Department, another Department, the private sector, or the third sector. There should be no areas that are not open to challenge.

2. Communication and Engagement Value Jersey

The Minister for Treasury and Resources explained that "Value Jersey" has been introduced as a specific label for efficient delivery of the CSR for the public to understand. Its aim is to keep people up to date on progress with savings, and to encourage people to get involved (via Facebook, Twitter and the gov.je website) in creating better value for Jersey. He said:

The Minister for Treasury and Resources:

".Jersey politics is a funny place because people get bored with acronyms and they get bored with programmes pretty quickly. So we talk around the table "C.S.R." If I take a sample of 100 people walking up and down King Street this morning, most of them would not understand what C.S.R. is or was or anything[24]"

We would point out that this has only recently been introduced. Whilst this is a welcomed development it should have been more rigorously applied as part of an original communications strategy.

Communications to all stakeholders is critical to the success of the CSR: why we are doing it, where we want to get to, how we are going to do it and what the impact is on residents and staff. Figure one articulates the initial process that was the foundation of the CSR:

1. What do we do?  2. What are people's needs  

• and expectations?
  3. Do we need to continue  
  • to do it?

4. Who should do it ?  6. Who should cover the  5. How can we do this  costs ?  differently and for less  

• money?
  7. How should we go about  
     • change ?

Figure one   Source: CSR PowerPoint Presentation: States of Jersey

The model in figure one asks all the relevant questions and we believe that it could be applied not only on a Departmental or service level, but also at a political level. Based upon the information we collected from the review and with the input from our advisor, we have developed it further to create a framework that incorporates the stakeholder needs, and develop the CSR programme from vision, through to developing core services, to transformation of the core services, underpinned by the Transformation Capability of the programme. This is set out below in figure two:

Figure two

Communications, as we know, is part of the CSR Programme Office. Simple diagrams such as figure two articulate the CSR Programme's methodology to Stakeholders and enable staff, the public and others to quickly understand what is happening and the context. The Panel were provided  with  lots  of  information  and  financial  numbers  but  very  little  in  terms  of  simple communications, particularly for the public. It is noted, however, that "CSR News" was issued to all staff from January 2011.

The  Transformational  Capability  that  is  supporting  the  Programme  not  only  includes communications,  but  Programme  Management,  Change  Management  and  a  Project Management  team  to  support  Departments.  There  was  clearly  evidence  of  an  effective measurement and management of CSR initiatives using the "Red-Amber-Green" Reporting, but there was little evidence of Departments as a whole taking advantage of the wider support of project management and change management. The Panel also question whether the right capability is being developed.

The Acting Chief Executive stated that the States were weak in project management and hence the need to develop this capability centrally. However, there does not seem to be a capability around  process  re-engineering,  as  recommended  by  Professor  Seddon,  being  developed internally or sourced externally

KEY FINDING THREE:

The  Programme  Management  Office  would  appear  to  be  effective  in  managing  the  CSR Programme, but the Panel questions the value it is offering in providing capability to help Departments really transform.

KEY FINDING FOUR:

The lack of congruence between the vision of the Chief Minister and Minister for Treasury and Resources has contributed to the absence of a clear Business Transformation Programme. The qualities required to run the CSR programme are not the same to those required to run a Business Transformation Programme.

RECOMMENDATION FOUR:

Councils such as Birmingham City Council (appendix C) have properly constituted, high level teams  with  political  ownership  and  Directors  of  the  main  cross  cutting  services  (Human Resources, Information Technology, Property and Procurement).

In order to take Business Transformation forward, there needs to be a high level team within the States of Jersey taking ownership with effective political leadership.

7. THE DEPARTMENTS

The Council of Ministers is responsible for leading and directing the CSR process, therefore, all Ministers have ultimate accountability for delivering the CSR programme. Individual Ministers are responsible for bringing forward proposals in their Department to meet Council of Ministers Departmental and corporate CSR targets. Ministers are also responsible for ensuring their Accounting Officer delivers proposals within Cash Limits.

We acknowledge that the CSR is an ongoing process, with methodologies, implementation plans and risk analysis changing and developing all the time. Once we had analysed the information we received in March 2011, further updated information was sent to us in September 2011. We have therefore illustrated our findings from the first set of information, and have also examined, at the end of this section, the most recent information given to us.

Therefore, we set out below a summary of the status of the CSR Review as reported to us in March 2011, and then detail out causes for concern as well as recognising the successes that have been achieved. We also highlight exogenous risks and building from our previous report the problems associated with "salami slicing".

1. CSR Overview and Reporting Methodology – Red, Amber, Green

A CSR Programme Reporting methodology has been developed by the Programme Office which lists  all  proposals  and  identifies  various  risks  on  delivery,  inter-dependencies  (i.e.  States approval/law  amendments)  and  resources  required.  This  is  then  used  to  assess  overall "Proposal Delivery Confidence" in which proposals are rated as Red, Amber or Green depending on the confidence of them being delivered. The CSR Programme Office has defined them as follows:

During  the  Hearings,  it  became  apparent  that  each  Department  had  a  slightly  different interpretation as to the exact meaning of the Red-Amber-Green status definitions.

RECOMMENDATION FIVE:

The CSR Programme must ensure that there is complete consistency on the application of Red Amber Green reporting status definitions.

We questioned all Ministers in order for us to get an overview of how each Department was achieving its savings, and whether their proposals had been risk assessed as Red, Amber or Green. The table (on the next page) summarises the high, medium, low risk assessments for each Department in March 2011:

2. Analysis

We have calculated the following percentages in respect of the figures articulated in the table above:

Ministers seem to be supporting the CSR, and the leadership in most of the Departments have recognised that there is no option but to achieve the savings. Savings initiatives have been identified, developed and in many cases delivered. Overall, the CSR Programme Management office is co-ordinating reporting and sharing knowledge and best practice. The remit of the CSR Programme Board and support team is to drive the savings, and report back on risk and mitigating actions in delivery of the numerous initiatives to achieve the goal across the States. Reporting on a monthly basis shows these initiatives migrating from red, through amber, to green status as the initiatives are developed and the risk of not achieving the savings is reduced.

We  have  calculated  the  savings  based  on  the  figures  in  the  Annual  Business  Plan  2012 (£58,003 million which excludes the unallocated £7 million from the Education, Sport and Culture department). The figures below illustrate each Department's percentage:

The  Red-Amber-Green  (RAG)  Reporting  enabled  us  to  quickly  compare  and  contrast  the progress being made by different Departments. We were pleased to see that most Departments have the 2011 savings rated as green or banked', and indeed some Departments, noticeably Economic Development and Housing, have rated nearly their entire CSR three year programme as green, which means the initiatives have been defined, there are no external dependencies and the Department is very confident in realisation.

KEY FINDING FIVE:

Some  Departments  are  doing  better  than  others  regarding  making  their  savings.  Some Departments have rated nearly their entire CSR three year programme as green; therefore, they are confident in achieving their savings targets. However, we also note that in March 2011, 54% of the overall total was defined as red. We would therefore question the likelihood of the CSR achieving its overall target by the end of 2013.

3. Departmental Reviews- Causes for Concerns

A massive 70% of States spending comes from just four Departments: Education, Sport and Culture, Home Affairs, Social Security and Health and Social Services, and staff pay accounts for up to 80% of cost in many areas. As part of the CSR Programme, significant reviews that have been completed to date are:

• Tribal, Comprehensive Spending Review: Peer Review report – Education, Sport and Culture (25th August 2010)
• Tribal, Comprehensive Spending Review: Peer Review report – Home Affairs (26th August 2010)
• Tribal, Court and Case Costs and Criminal Justice Review (3rd September 2010)
• Tribal, Terms and Conditions Review (September 2010)

The main area of concern is that staff terms and conditions is the biggest cross cutting area of savings. The States have recognised that change has to incur in this area. The anticipated savings are in the region of £14 million from a £345 million staff cost (4%), although the Tribal Report identified in the longer term the potential for savings could be double this.

Average costs of employing staff in the public and private sector, 1998–2009 (per FTE)

Figure three illustrates total compensation in the public and private sector since 2003, divided by per full time equivalent (FTE) employee. This total includes salaries, wages, pension and social security. The Panel advisor, having undertaken a study per head count as opposed to per FTE, into the difference in pay between the public and private sector from information which is publicly available, noted that there is an increase from £9,230 per head to £14,587 per head by 2009.[26]

Our advisor, Professor Michael Oliver says:  The differential which now exists between the private and public sector seems very difficult to justify, particularly as the growth of labour productivity in the public sector has been very sluggish since 2000. It could in fact be argued that the large increase in costs involved in employing staff in the public sector actually worked as a disincentive to productivity enhancements, which reinforces the key findings of Tribal and other studies that show how semi-automatic pay and promotion systems do not reward innovation or ability and that there are difficulties in sacking underperforming workers and rewarding staff who perform exceptionally well.

The Annual Business Plan 2012 explains the work that is progressing with staff Terms and Conditions including a revised pay structure for manual employees and civil servants[27]. We wish to emphasise the importance of this part of the CSR particularly in the context of figure three and consider that such reforms should continue to be emphasised and implementation should be achieved expeditiously.

KEY FINDING SIX:

The average total compensation package for the public sector now significantly exceeds the equivalent for the private sector.

RECOMMENDATION SIX:

The easy solution would be to freeze the public sectors wages bill. Evidence has shown that there is an emphasis on "catch up" once the freeze is lifted and the net effect is counter productive.

The importance of the terms and conditions revision cannot be stressed too strongly. This is the most difficult area of the CSR to accomplish and it is likely to take some time. It is, however, crucial  and  it  is  essential  that  adequate  resources  are  devoted  to  this  area  and  that  the implementation plan is fast tracked to delivery significant and long-lasting changes to terms and conditions.

The Panel recognised the Review of Staff Terms and Conditions as critical to the success of the CSR Programme for two reasons:

1. The size of the potential savings – £14 million of the entire CSR challenge
2. The sensitivity of achieving these savings. There is a challenge of maintaining morale whilst cutting back on benefits, and at the same time achieving transformational savings. The latter typically needs staff on board. Similar levels of savings in the UK are currently resulting in industrial action.

KEY FINDING SEVEN:

The review of Staff Terms & Conditions is one of the most critical indicators to the CSR Programme's success and there are significant risks attached to the realisation of this saving.

RECOMMENDATION SEVEN:

Any failure in the Review of Staff Terms and Conditions has the potential to de-rail the entire CSR Programme. There is significant evidence that this can be the case from the UK Mainland where some authorities have not been managed such reviews effectively resulting in all other initiates being put on hold for several months. We would recommend that this is considered as one  of  the  main  priorities  and  appropriate  resources  in  terms  of  engagement  as  well  as programme management is invested into this area.

Despite our earlier key finding where we established that some Departments have rated nearly their  entire  CSR  three  year  programme  as  green,  we  have  also  noted  that  there  is  low confidence of success in achieving the target amongst the three largest Departments:

Education Sport & Culture

We found evidence of using UK experience to justify why savings could not be achieved in some areas, but not to look for evidence of good practice in other areas[28].

There would also appear to be a mindset that the private sector could not be engaged in areas such as outsourcing management of leisure facilities[29], when we are aware that Guernsey are exploring this as an option.

Health

The red status of the Department's target for 2013 must put significant risk and doubt on the achievement of its overall CSR target. However, it would appear that they are starting a bottom- up lean think programme[30] that is really challenging the way things are done and we would hope this will pay dividends as the programme develops.

Home Affairs

Home Affairs is only committed to 7.7% saving of their budget which could rise to 7.9% with some user pays initiatives[31]. They still have some way to go to achieve the 7.7% target and really have little in way of plan B savings in their pipeline. However, the programme methodology adopted has resulted in strong evidence of evolution of projects from red to amber and then green status. All the 2011 targets are rated as green but we have significant concerns about the risks  associated  with  achieving  later  savings  and  would  suggest  further  opportunities  are identified now to ensure fall back initiatives.

KEY FINDING EIGHT:

It appears that the biggest spending Departments are unlikely to achieve their targets which will endanger the success of the CSR programme objectives.

4. Departmental Reviews- Recognised Success

The Panel would also like to recognise the success of some of the Departments in achieving savings,  with just  a sample  of  examples  to  demonstrate  the  way  the  CSR  Programme  is addressing the challenges in different ways.

Housing

The Department has delivered most of its planned savings already largely through initiatives that benefit both residents as well as saving the States money, following engagement with tenants' forums:

• The roll out of user controlled heating and insulation is anticipated to save the residents money, as well as significantly reduce maintenance costs to the States.

• Redecoration grants to incoming tenants which reduce voids and give tenants choice and options.

Housing are also fundamentally questioning their role, recognising that the existing model is not an option, and evaluating the best model of managing the portfolio to address the maintenance back log including an Arms Length Management Organisation, a Housing Association, a hybrid trading company and so on. It is important that the options are evaluated with rigour from a financially independent perspective to ensure the result best meets the needs of the entire States organisation rather than that of any one Department.

Social Security

A focus on removing waste' from the back office and moving the freed up capacity to the front office has been supported by staff. The staff involved in this process and related to the reduction in waste' is better than a process of finding efficiency'. We also understand that an appointment has been made to lead a Seddon' type review of the organisation.

Economic Development

We noted that the Department is working with the third sector, for example RNLI (Royal National Lifeboat Institution), in provision of services at lower cost. This is just one example of an alternative delivery mechanism that could be explored by other Departments.

Planning and Environment

Shifting the balance of user pays to reflect the cost so that there is a high charge for large planning and building regulation applications. This has less political impact and makes business sense. The Department is also supporting new ways of working to enable staff to be more effective in the field whilst at the same time reducing their requirement for desks.

Transport and Technical Services

The Department demonstrated examples of staff suggestion schemes which delivered real savings such as their UV bulbs.

Treasury and Resources

Taking the lead on CSR, the Department does have a perspective that we are all in this together' and a role which is to support Departments' build capacity and achieve their savings, and ensure they are sustainable not just deferring expenditure. The positives include:

• Migration into a three year budgeting process that allows Departments to have more delegated responsibility.
• Financial modelling capability and knowledge, and a capital planning methodology that have been developed in one Department are being shared across Departments.
• The introduction of accommodation charges for Departments in occupying space from 2012 on wards to ensure Departments have a financial incentive to make the changes anticipated from the Property Transformation.
• Information Communication Technology (ICT) outsourcing data centres to the private sector to reduce cost and enhance resilience.

Whilst we accept the different challenges faced by different Departments, the positives illustrated above would suggest that more can be done elsewhere as well.

KEY FINDING NINE:

We  have  found  examples  of  Good  Practice  that  should  be  shared  more  widely  amongst Departments.

RECOMMENDATION EIGHT:

It is essential that changes in services are monitored to ensure that alternative methods of delivery of services do deliver the savings.

5. Exogenous Risks

There is always risk with a programme like the CSR of activities outside the control of the Programme or the Departments having impact on the programme. This can be a "wild card" like a  pandemic  impacting  health  and  social  security,  economic  risks  associated  with Global/European recession, or political risk. An example is in respect to fee paying schools as outlined below. Given these risks it is important that the Programme develops contingencies to ensure at least some of the impacts can be managed and targets maintained.

Fee-Paying Schools  

Fee paying primary and secondary schools receive half the funding of educating a child in a States secondary school and a quarter the cost of a States primary. As part of his CSR proposals, the Minister for Education, Sport and Culture, announced plans to reduce the support for secondary schools to the same level provided to primary schools, essentially reducing their subsidy by 50%. This would mean a reduction from £9.8 million to £5.5 million a year, saving the States £4.3 million annually.

Senator Shenton lodged a proposition "Grant Aided Schools: Grants" (P.72/2011) which called for the Minister to maintain the grants at the current levels pending publication of the Education White  Paper,  and  ensuring  that  there  is  meaningful  consultation  through  a  Green  Paper beforehand. This was approved by the States on 14th June 2011.

When we held our Public Hearing with the Minister the debate on Senator Shenton's proposition had not yet taken place. We questioned him on whether he had identified any alternatives should the reduction of grants not have been acceptable to the States:

The Minister for Education, Sport and Culture: "No, because there are not any."

Senator J.L. Perchard:

"That is a bit of a contradiction: "No, because there are not any"."

The Minister for Education, Sport and Culture: "Well, there are not."

Senator J.L. Perchard:

"So there are no alternatives?"

The Minister for Education, Sport and Culture:

"There  are  no  alternatives  as  far  as  I  am  aware  and  I  believe  would  be  politically acceptable"[32]

We spoke with the Minister for Treasury and Resources on the 13th June 2011 (a day before Senator Shenton's proposition was approved) about the grant to fee-paying schools and he said "We  cannot  deliver  other  savings  over  and  above  those  that  we  have  already  asked Departments to do at this stage in the C.S.R. if school fees or other private schools, or other States schools, are insulated from budget cuts. There is no way[33]."

Whilst we understand that each Department has a significant task identifying proposals which are manageable, it is clear that the Education Department did not provide for alternatives or "plan B's". When this was voiced with the Minister for Treasury and Resources he said that if all school budgets were insulated from the CSR, the CSR would not deliver the £65 million it is aiming for:

The Minister for Treasury and Resources:

"There is not an alternative to deliver the Education savings if you insulate all school budgets, either the private sector budgets or the publicly funded school budgets. Education will not deliver their C.S.R. targets if you are saying that you are going to insulate 80 per cent of their spend. Yes, of course they can do other stuff and they are doing it. We have had difficult and challenging discussions with education and all the others, but if you insulate all school budgets at this stage from the C.S.R. you will not deliver the £65 million. You just cannot do it[34]."

The risk of not providing for alternative savings when proposals such as School fees are subject to a States decision is that Ministers are relying heavily on the votes in favour of whatever they are proposing. When speaking with the Minister for Social Security, he had assessed some of his proposals as red, and said: "I have taken the view that if it needs a States' decision, I have to put it as red as it is outside of my control. I cannot do anything to mitigate that and, therefore, I put it as red. I am aware that not every Department has quite taken that view[35]."

Although there is no dispute that Ministers and their Departments must be confident in the proposals that they are identifying, it is sensible, to assume that proposals needing a States decision should be assessed "red" at high risk of not being achievable.

RECOMMENDATION NINE:

The Panel recommends that each major element of the CSR programme must have a developed contingency plan in the event of non-delivery of their savings target.

User Pays

We noted that some Departments, such as Environment, have introduced user pays. Whilst being  an  effective mechanism  for  some  services  (such  as  the  Department's  planning  and building regulation applications), it does not help with making a Department more efficient. We should like to point out that the CSR is about making efficient savings rather than balancing the books.

6. Salami Slicing

One of the findings from our first review was that it was rushed, and Departments had to "salami slice" to make their quota of savings. We would stress that for CSRs 3, 4 and 5, this must not happen again.

The Chief Officer of Health and Social Services said that at the beginning of the CSR process, which slightly pre-dated her arrival on the Island, savings for 2011 had to be made very quickly. She explained: "I think like most Departments you go and look for the easy things and they tend to be things where you just salami slice a little bit off the budgets and look to just tighten your belt a bit. Most of our 2011 C.S.R. savings are very much those sorts of projects[36]."

The Minister for Home Affairs agreed that the CSR process is essentially a response to a short- term challenge and "we have to have a culture of constant review and constant change, and I think there are fundamental issues at a wider level than are being met by the C.S.R. as to the way in which we run the public sector in Jersey. But that is not a Home Affairs issue; I think this is a right across the board issue[37]."

In order to make sustainable savings of 10%, we believe that fundamental changes within Departments need to be instigated. There is no scope for scrimping which has evidently happened in the past. There is no doubt that Departments have been under pressure to deliver 10% over 3 years, with some finding it more difficult than others. The problem with some Departments focussing on the 3 year period only, leaves the timescale tight to carry out any meaningful structural reform. It is obvious that if too much focus is put onto the 3 years, the easy option would be to "salami slice" budgets to meet the quota.

7. Updated Red-Amber-Green Information

Since March 2011, the CSR Delivery Team has been reviewing the monitoring of the overall Programme to better reflect the actual confidence of Ministers in delivering their savings proposals.

Following the updated RAG tables, which we received under a confidentiality agreement, we have made the following observations:

• The new analysis acknowledges the £7 million unidentified savings proposals which exist following the approval of P.72/2011 (Grant Aided Schools: Grants);
• 14% of the overall target has now been achieved;
• 7% has been designated as "Red" (current forecast over Departments)
• 42% has been designated as "Amber" (current forecast over Departments);
• 26% has been designated as "Green" (current forecast over Departments).

8. Future Working: 2013 and beyond

1. Medium Term Financial Planning

The Minister for Treasury and Resources lodged "Draft Public Finances (Amendment No.3) (Jersey) Law 201-"(P.97/2011). The Finance Law only requires that one year's expenditure and taxation be approved by the States Assembly. The purpose of the amendment, as explained in the accompanying report, proposed changes to establish a Medium Term Financial Planning Framework, whereby the overall income targets and spending limits are set for a period of years, equivalent to the term of a Council of Ministers.

As part of our review, we held a separate Hearing with the Minister for Treasury and Resources regarding the amendment. The Minister explained that the amendments to the Public Finances (Jersey)  Law  2005  ("the  Law")  will  be  brought  forward  in  two  phases.  Phase  one  was amendment No.3, which was approved by the States on the 19th July 2011.

Phase two of the amendments will follow in the months after the elections, which  will be designed to deal with the big financial management decision-making process within the States.

Amendment No.3 means a total spending limit for 3 years and Departmental allocation for 3 years. The Minister said that it is the first time a creation of two centrally-held funds within a 3 year period. One is for growth and the other is a contingency amount to deal with political priorities which are not entirely predictable.

The Minister said that he thinks moving toward 3 year budgeting means that there is a more medium-term outlook generally. Ministers and their Departments will have the right to have a medium-term certainty in terms of their budget, and they will need to be responsible to work within it.

The Panel agreed that medium term financial planning will aid the CSR in future years, because there will be greater flexibility for Departments to plan ahead and deliver changes. This new process is referred to in figure four below:

New COM Dec 2011 New COM Dec 2014

CSR 2012

July  Year 1 Year 2 Year 3  July 2012 Firm         Firm Firm 2015

2011          2012       2013          2014         2015          2016          2017        2018Part 2  

October  Year 2      Year3  

2010 .  Firm Firm

Part 1  

July  YFiermar   1    I n dYiceaatriv2e       I nYdeicaart i3v e Jul  Year 1 Year 2 Year 3  2010 2015 Firm           Firm           Firm