Medium Term Financial Plan - Ministerial Response - 5 December 2012

Findings

Comments

1

Broadly  speaking,  the  draft MTFP is to be commended for its primary objectives, its scope and  the  detailed  workings which underpin it.

 Noted

2

The MTFP should ideally last 5 years.

• The general intention of this comment from the Corporate Services Scrutiny Panel, that we should have a longer-term planning horizon, is understood and welcomed.

• The  period  of  the  MTFP  allows  each  new  elected  States Assembly the opportunity to have a plan that corresponds with its term. The present 3 year MTFP (2013 – 2015) will be followed by a 4 year plan (2016 – 2019).

• In addition, Treasury and Resources are doing further work on  long-term  financial  planning  with  a  view  to  bringing forward a Long Term Capital Plan and a Long Term Revenue Plan.

• The current MTFP includes a Long Term Capital Plan and an outline of Long Term Tax Policy.

3

There is a consensus of opinion that  future  MTFPs  should  be established on a rolling' basis.

 The CIPFA Advisor's report expressed concern that the fixed period  weakened  the  rigour  of  continuous  challenge.  The Treasury  has  a  strong  monitoring  process  to  continually review progress against our estimates.

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• The existing financial monitoring process by the Treasury involves Treasury officers meeting monthly with the Finance Director of each Department to discuss financial performance to date. Quarterly monitoring meetings are held between the Treasurer, the Chief Officer and the Finance Director of each Department. This process has been in place for 18 months and is well established.

• Consolidated reports are presented monthly to the Corporate Management Board and quarterly to the Council of Ministers. Currently,  actual  performance  is  monitored  against expenditure  and  income  projections  set  in  the  Annual Business Plan and Budget. From 2013, this monitoring will take place against Medium Term Financial Plan expenditure limits and income targets.

• The  intention  is  to  expand  the  regular  reports  to  provide specific feedback on the MTFP. The reports have already been  expanded  to  include  areas  which  are  frequently  the concern of the Council of Ministers; Scrutiny and the PAC, such as use of carry-forwards and progress on CSR savings.

• It is planned to extend this reporting process to include more detail  on  reserves  and  provisions,  and  balance  sheet management  in  general.  In  particular,  information  on  the performance  of  the  Common  Investment  Fund  and Consolidated Fund cash management will be disseminated more widely. Further, the Annual Report and Accounts will also  provide  a  process  and  medium  for  monitoring  and reporting  against  the  Medium  Term  Financial  Plan.  A specific proposal relating to the MTFP is to report on the use of growth allocations. For each item of growth it is proposed to report –

• Amount approved in the MTFP
• Amount spent to date

• Amount to be returned to the consolidated fund as not needed (if any)

• Brief details of how the money was spent
• Outcomes anticipated from the expenditure
• Actual outcomes achieved.

• Progress  will  be  reported  in  line  with  the  established performance  management  framework,  including  6 monthly reports to the Council of Ministers and the States, and an annual Performance Report.

4

Some  welcome  improvements have  been  made  to  the modelling  of  income  from Income Tax.

 This  will  be  monitored  on  an  annual  basis,  and  further improvements made as part of the ongoing work in longer- term  forecasting  with  the  Income  Tax  Forecasting  Group, which includes Treasury (Income Tax, Tax Policy, Corporate

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Comments

Finance) and the Chief Minister's Department (Economics Unit and External Affairs Adviser).

5

Expenditure  proposals  within the draft MTFP rely too heavily upon  income  and  economic forecasts. There are doubts as to whether these forecasts will be  realised,  particularly  in respect  of  2014  and  2015. These  doubts  have  been apparent for some time, and yet the  Minister  for  Treasury  and Resources  has  decided  not  to amend the draft MTFP, despite downgraded forecasts for 2013.

• A number of comments have been made in the lead-up to the Medium Term Financial Plan debate about whether the States income forecasts are robust or indeed that they are overly optimistic in the light of economic forecasts.

• A robust methodology was used to develop the economic assumptions  and  the  income  tax  forecasts.  The  Corporate Service  Scrutiny  Panel  noted  in  their  report  that  "some welcome improvements have been made to the modelling of income from income tax". In addition, comparisons show that the  economic  assumptions  used  reflect  the  same  level  of caution  as  other  independent  bodies.  The  Medium  Term Financial Plan forecast was done in March 2012 and based on the  published  FPP  economic  forecasts  at  that  time,  with assumptions used for 2013 and 2014 being that the economy would return to an average performance, reflecting long-term trends  and  recent  experience.  The  approach  taken  is consistent with that adopted by the UK's independent Office for Budget Responsibility (OBR).

MTFP Jersey assumptions v OBR UK forecasts

Outturn  Forecasts

Real economic growth % change  2010  2011  2012  2013  2014  2015 Jersey  -5.0*  1.2  1.4  2.0  2.5  2.5 UK  2.1  0.8  0.8  2.0  2.7  3.0

• The available evidence suggests that the forecasts are robust. The most recent monitoring information at the end of the second quarter shows that income tax receipts are higher than budget  and  exceed  the  forecasts  in  the  Medium  Term Financial Plan. This is consistent with us achieving the levels of income set out in the Medium Term Financial Plan. This likely  higher  starting  point  for  2013  acts  as  a  mitigation against  some  of  the  lower  economic  forecasts  and assumptions referred to by the Scrutiny Panel.

• The  Corporate  Services  Scrutiny  Panel  advisor  produced scenarios where more pessimistic assumptions were used to model  future  income  tax  forecasts,  and  even  with  these assumptions the income forecasts were still broadly within the  range  of  forecasts  calculated  for  the  Medium  Term Financial Plan.

• These  scenarios  helped  to  confirm  the  sensitivity  analysis calculated at the time of the production of the Medium Term Financial Plan which showed, from an evaluation of the key drivers of income tax revenues, that there would have to be a significant percentage change in the key economic variables to  drive  tax  revenues  to  fall  outside  the  current  range  of forecasts. As an example, a +/-1% change in employment or earnings  growth  would  lead  to  an  approximate  £3 million variation in tax revenues.

Findings

Comments

• The  Fiscal  Policy  Panel  has  downgraded  its  economic assumptions  for  2012  and  2013  and  comments  that  the income forecasts are likely to be in the lower range by 2014 and 2015 but the FPP does not make a recommendation to amend the Medium Term Financial Plan forecasts.

• There has also been comment as to the level of increase in tax revenues over the Medium Term Financial Plan period, but the key drivers of that increase are in relation to personal income tax (corporate income tax receipts are only forecast to grow  £9 million  over  the  course  of  the  Medium  Term Financial Plan period). The forecasts are based on the level of inflation, plus a weak growth in employment and earnings and  a  small  improvement  in  the  tax  yield,  and  these assumptions  are  consistent  with  those  used  by  the  OBR where growth in earnings in excess of inflation is forecast to be greater in the UK than assumed for Jersey.

• Income tax forecasts are by their very nature uncertain, but the range around the income forecasts in the Medium Term Financial  Plan  and  the  underlying  methodology  can  be demonstrated  to  be  robust  when  compared  to  other independent forecasts.

6

Further  work  is  required  to demonstrate  that  the  fiscal stimulus  elements  contained within  the  draft  MTFP  are timely, targeted and temporary.

• Agreed, whilst the economic benefits of the proposed capital programme have been a central part of the thinking, we could do more to make this explicit. Some initial work has been completed  to  apply  the  3T  test  (timely,  targeted  and temporary) and further work will be done with Departments.

• The increased capital expenditure in 2012 and 2013 from one-off receipts was considered by the Council of Ministers as part of the evaluation of the MTFP. Discussions regarding the schemes were largely centred on the need to help the construction  industry  and  do  more  investment  in infrastructure which acts as a stimulus.

7

Proposed  States  income  and expenditure  levels  are  finely balanced  in  the  draft  MTFP, suggesting  that  there  is  little room for flexibility in the event that  intended  income  is  not realised.

• A number of comments have been made in the lead-up to the Medium  Term  Financial  Plan  debate  about  whether  the proposals allow sufficient flexibility to deal with variations in States income, but also to address any new spending priorities and pressures which emerge during the course of the next 3 years.

• The  Council  of  Ministers  had  proposed  that  the  growth available for 2013, 2014 and 2015 be allocated principally to the  priorities  of  Getting  People  Back  to  Work,  Economic Growth  and  Reform  of  the  Health  Service.  However,  an amendment approved by the States has resulted in a small central growth allocation for 2014 and 2015.

• Notwithstanding the proposals to allocate the growth funding to departments as part of the initial spending limits, there is

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still a significant amount of flexibility within the Medium Term Financial Plan to address new developments or new policies as they arise.

• The total Capital Programme proposed in the Medium Term Financial  Plan  amounts  to  £222 million,  and  decisions  to allocate this funding to individual capital projects will not be taken until the annual Budget each year. This means that £56 million will be decided in the 2013 Budget, £89 million in 2014 and £77 million in 2015.

• It is accepted that the Council of Ministers has proposed that central contingencies are reduced from initial levels but the Medium  Term  Financial  Plan.  Nonetheless,  the  MTFP provides for £19 million to be available over the next 3 years, with £6 million in 2013, £6 million in 2014 and £7 million in 2015.

• A  new  process  for  carry-forwards  is  now  in  place  where departments have been given greater certainty in respect of the  carry-forward  of  identified  underspends  against  future commitments. The process also provides that any windfall or unforecast underspends are returned to the Treasury, which provides  an  opportunity  to  consider  whether  these  funds should  be  returned  to  the  Consolidated  Fund  or  used,  for example,  to  provide  a  further  contingency  against  any unfunded priorities during the course of the next 3 years.

• The certainty over carry-forward arrangements is important to departments to enable them to manage changes in priorities over  the  3 years  of  the  Medium  Term  Financial  Plan.  In addition,  departments  have  been  encouraged  to  hold  and develop appropriate contingencies to manage any pressures and priorities as they arise, and must demonstrate that they have  considered  all  other  measures  before  they  need  to approach the Treasury for any central contingency.

• Other provisions are in place to deal with some of the known funding  pressures  for  the  next  3 years.  These  include  a provision  for  the  costs  of  claims  from  the  Historic  Child Abuse Enquiry (HCAE) process, provision in the form of a smoothing  reserve  and  funds  in  the  Criminal  Offences Confiscation Fund (COCF) in respect of any increase in court and case costs and a fully funded central insurance fund.

• Each of the flexibility options would enable provision to be made during the next 3 years for any priorities or pressures that may arise, and before any change in underlying tax and spending  policies  are  required  in  the  next  Medium  Term Financial Plan. The Council of Ministers will also consider any opportunities for budget reductions or efficiency savings that  may  arise  from  the  Public  Sector  Reform  and Modernisation  Programme  or  other  measures  which  may provide additional flexibility, particularly by 2014 and 2015.

Findings

Comments

8

Carry-forwards have previously been  used  to  fund  new  and potentially  ongoing  revenue expenditure.

• Examples have been given in the Scrutiny Panel's report to support the finding that carry-forwards have been used to fund new and potentially ongoing revenue expenditure. The example of staffing levels within the Department of Social Security was challenged for factual accuracy on the basis that the current provision for services includes staff employed on temporary  contracts  and  has  been  implemented  in  2012 because  of  the  pressing  need  to  provide  Back  to  Work services.

• The  Treasury  evaluates  carry-forward  requests  before  the Minister for Treasury and Resources presents them to the Council of Ministers for authorisation. Part of this process is to ensure that these requests are for one-off expenditure that does not create a recurring revenue expenditure requirement. This monitoring is in place for the 2012 requests and beyond.

9

There  is  inconsistency  in  the application of policy on carry- forwards  and  the  reliance  on carry-forward funding suggests a  lack  of  rigour  in  base budgeting  for  departmental expenditure.

• The carry-forward process has been consistently applied. The Treasury  would  welcome  any  particular  examples  that Scrutiny consider where this is not the case, so that they can be dealt with directly.

• Departments are required to allocate carry-forwards in a way that does not create ongoing commitments that cannot be met from  within  budgets.  Departments  are  required  to  have sufficient flexibility to ensure that any additional expenditure requirements can be met within their base budgets.

• Carry-forward requests are made by departments at the end of the financial year and are based on the forecasts made in Quarter 3. Any notified underspend that is fully justified will be included in the carry-forward proposal taken for approval to the Council of Ministers. The carry-forward process is an essential  part  of  financial  management  for  departments because it allows them flexibility to manage their funding across years.

10

There is insufficiently detailed information  in  respect  of  the capital  programme,  meaning that the revenue consequences of individual projects may not be clearly understood.

 Capital  projects  for  2013 – 2015  are  supported  by  outline business  cases,  and  departments  were  asked  to  consider revenue implications for capital schemes. Departments were aware  that  the  assumption  made  was  that  any  identified revenue implications would either be funded through base budgets or should be proposed as growth bids.

11

Capital allocations proposed in the draft MTFP assume that the Housing  Transformation Programme  will  be implemented,  notwithstanding that  the  States  Assembly  has yet to approve the Programme. Approval  of  the  draft  MTFP

 A funding source for Housing is the repayment of an advance of £27 million made in 2012. In 2014, £26 million is used as a funding source with the remainder being allocated to 2015. In 2014, there is also a repayment of £11 million for earlier advances relating to Le Squez and Pomme D'Or Farm. These are repayable by Housing upon incorporation, because the new Incorporated Body will then be able to access funding through  infrastructure  loans  from  the  Currency  Fund.  In

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could  therefore  provide  the Assembly with little option but to pursue the Programme.

parallel  to  this, Treasury  are  working  on  evaluating  other funding  options,  and  any  changes  to  the  incorporation timetable would have this as a planned mitigation in terms of alternatives to this repayment.

12

There  is  no  growth  allocation within  the  draft  MTFP  as envisaged  in  Article 8  of  the Public Finances Law, contrary to  what  the  States  Assembly expected  when  it  moved  to longer-term financial planning.

• As part of the initial work on the Medium Term Financial Plan and the resource statement in the States Strategic Plan, a level  of  £26 million  was  proposed  for  growth  by  2015 (£6 million by 2013, £16 million by 2014 and £26 million by 2015)  as  part  of  the  total  States  spending  limits  for  the Medium Term Financial Plan.

• Against  these  original  growth  allocations,  the  Council  of Ministers  received  growth  requests  from  departments amounting to almost £35 million. The growth requests also proposed that a higher level of growth was required in 2013 to address the immediate priorities of Getting People Back to Work, Economic Growth and Reform of Health and Social Services. In addition to the main growth bids, initiatives for Back to Work and Employment projects (which may not be permanent and recurring) of £7 million by 2015 were also proposed.

• The Council of Ministers and Corporate Management Board conducted a  prioritisation  process  with departments  which attempted  to  reduce  the  requests  to  the  level  of  growth funding available. Treasury also worked with departments to identify if there were other ways that the growth requests could be funded within existing spending limits. Departments were encouraged to reprioritise existing services and identify efficiency savings wherever possible.

• The Council of Ministers then went through a process of 7 iterations. A fully funded package of proposals was agreed which  will  prioritise  the  growth  bids,  taking  into  account changes to resources that Treasury could identify, to help deliver the Strategic Priorities.

• The  prioritisation  process  dovetailed  with  the  work  being carried out by a number of Ministerial Oversight Groups, for example  on  Health  and  Social  Services  and  Housing Transformation. White Papers were due to be published, and the MTFP has been prepared to be consistent with what will be proposed, without in any way pre-empting the support of the States for the funding proposals in the MTFP.

• The Council of Ministers considered that there remained a priority  to  find  additional  funding  for  Reforming  Health Services,  Getting  People  Back  to  Work  and  Stimulating Economic  Growth,  and  proposed  to  allocate  all  of  the available growth in the Medium Term Financial Plan. This was not the original Plan, which would have left some growth available  to  allocate  in  future  years,  but  the  immediate

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funding of these initiatives in 2013 was felt to be vital to provide a stimulus to employment, the economy and also to begin the essential reform of Health and Social Services. A further change was made in the Amendments to the MTFP to the effect that a small central growth allocation was made for 2014 of £2.21 million and £1.46 million for 2015. No central growth allocation was made for 2013.

• The  Council  of  Ministers  was  conscious  of  the  need  to provide some future flexibility, especially for 2014 and 2015, and  this  has  been  achieved,  for  example,  through  the provision  of  contingencies  and  the  agreement  of  the £222 million capital programme on an annual basis.

• One of the Council of Ministers' key resource principles is to maintain a balanced budget position and deliver affordable and sustainable public services, and this determined the final option which required a final prioritisation process to select growth bids to be removed and not funded as part of the Medium Term Financial Plan proposals. These removed or deferred  growth  bids  amounted  to  £11.6 million  in  2013, £7.4 million in 2014 and £5.1 million in 2015.

• Whilst the growth is fully allocated in the MTFP, there is still an opportunity to influence new developments in policy on an annual  basis.  Each  department  has,  to  differing  degrees, discretionary elements of funding, together with flexibility through  department  contingencies  and  carry-forwards  to reprioritise  their  funding  to  address  new  developments. Centrally, there is flexibility through the central allocation of contingency  and  restructuring  funding  and  this  is acknowledged in the report. There is also the opportunity to influence capital expenditure on an annual basis.

13

The role of the States Assembly in  setting  overall  spending limits  has  been  diminished, contrary to the provisions and spirit  of  the  Public  Finances (Jersey) Law 2005.

 The MTFP is a proposition to the States Assembly which is voted  upon  by  States  Members.  The  States  Assembly, therefore, has the overall say in setting spending limits.

14

Growth'  funding  has  been provided for services that were already being delivered.

 Treasury  do  not  accept  that  growth  funding  has  been provided  for  services  that  were  already  delivered.  The example given for the Department of Social Security relates to the temporary provision of staffing in 2012, which has no permanent  funding  from  2013  onwards.  This  funding  has been provided in 2012 because of the pressing requirement of Back to Work initiatives.

15

There will be less contingency available during the lifetime of the  draft  MTFP  than  was initially envisaged.

 The original allocation to contingency was initially planned to  be  £13 million  in  2013,  £12.5 million  in  2014  and £12.5 million in 2015.

Findings

Comments

• The Council of Ministers has endeavoured to work within overall States spending limits, and has considered the balance between  un-earmarked  contingencies  and  funding  urgent growth allocations to deliver the agreed strategic priorities.

• The  draft  MTFP  presented  to  the  States  for  approval  has reduced  contingency  allocations  but  these  still  amount  to £6 million  in  2013,  £6 million  in  2014  and  £7 million  in 2015.

• This is an improvement on previous Annual Business Plans in which there was no provision for contingencies.

• There  is  a  process  for  the  authorisation  and  use  of contingencies that will be followed for future allocations of the balances shown in the MTFP. This is a defined process and  provides  a  governance  framework  for  the  Council  of Ministers.

16

Contingency funding has been used for growth' bids and as a means to balance the budget.

• The use of contingencies within the MTFP is to enable the States to meet service needs for local people and has not been undertaken lightly. This has resulted in a minimum allocation for unforeseen or unquantifiable pressures, with any balance used within the MTFP to help fund the delivery of strategic priorities.

• The proposed allocation of contingencies was done as part of the MTFP process to help bring forward expenditure into 2013 which is in line with the advice given in the FPP report.

17

The  draft  MTFP  proposes  the use of contingency funding for matters  which  are  known funding  pressures,  rather  than being left to address unforeseen items. This is contrary to what the  States  Assembly  was advised when it agreed to move to  longer-term  financial planning.

• The  Council  of  Ministers  does  not  contest  that  the Contingency for Emerging Items is for known items rather than unforeseen, indeed the Council of Ministers has been quite transparent about this. However, the reason this remains a Central Contingency is that the amount, the timing and the value of the allocation required to individual departments are all  unknown.  The  Council  contends  that  this  remains  an appropriate Contingency item.

• The Treasury does not accept that other contingency funding has been used to fund known pressures.

18

There  is  a  concern  that insufficient  contingencies  will remain,  particularly  for  the latter part of the MTFP in 2014 and 2015.

• The MTFP is a 3 year plan and it is not possible with any estimates to give certainty about the outcome of any plan. There are contingencies in 2014 and 2015 of £6 million and £7 million respectively. These contingency amounts are for unforeseen events that are not currently funded within the MTFP.

• Any  concern  about  the  level  of  contingencies  can  be addressed through careful monitoring and, if necessary, the earmarking of any uncommitted underspends that occur in the early years of the Plan.

Findings

Comments

19

No  transfers  between  the Consolidated  Fund  and  the Strategic Reserve are proposed in  the  draft  MTFP  although consideration is due to be given to the policy underlying use of the Reserve.

 Noted

20

No  transfers  between  the Consolidated  Fund  and  the Stabilisation Fund are proposed in the draft MTFP.

 Noted

21

The draft MTFP relies upon the delivery  of  considerable funding  from  policy  options that remain to be discussed and agreed by the States Assembly, for example use of the Health Insurance  Fund  and  income through  the  management  of Guernsey's  waste.  Until  such time  as  those  decisions  are taken,  the  policy  proposals contained  in  the  draft  MTFP can  only  be  viewed  as provisional  and  resulting income  as  uncertain. Furthermore, the hands of the Assembly could be tied through adoption of the draft MTFP.

• The MTFP does not tie the hands of the States Assembly for major  policy  decisions  such  as  Housing  Transformation Project and the Health reforms. For example, both of these debates will be held shortly after the main MTFP debate.

• The MTFP includes expenditure for the Housing Department on  the  same  basis  as  previous  Annual  Business  Plans. Appendix 6, on page 294 of the MTFP, sets out the financial implications that would arise if the Housing Transformation Project is voted for by the States Assembly.

• The use of the Health Insurance Fund and the redemption of the JT Preference Shares are detailed as dependencies in the proposition. It is therefore clear what the implications are for States members.

• The proposal for the redemption of the JT Preference Shares was part of the MTFP Proposition P.69/2012 – paragraph (f), and the Proposition for the use of the Health Insurance Fund, P.88/2012, was lodged and debated by the States Assembly alongside  the  income  and  expenditure  proposals  for  the MTFP. These were approved by the States.

• The JT Preference Share redemption returns £20 million to the  States  without  diluting  the  ownership  of  JT Group Limited, which remains 100% owned. These funds have been allocated  to  the  Capital  Programme  (£15 million)  and  the Innovation Fund (£5 million).

• The Annual Budget for 2013 will detail additional measures that will contribute to additional income from tax collection and reduce avoidance.

• The  other  budget  measures  do  provide  sufficient  time  to allow departments to work towards achieving these proposals before  the  funding  streams  are  required.  This  is  why  the Guernsey  waste  disposal  amount  of  £1.5 million is  in  the MTFP from 2015 onwards; Social Security supplementation of £1.8 million from 2014 onwards (£3 million in 2015) and new fees of £0.6 million from the Control of Housing and Work (Jersey) Law 2012 from 2014 onwards.

Findings

Comments

 The proposals for Guernsey Waste are at an early stage and an  estimate  of  net  income  has  been  included  within  the MTFP, from 2015 onwards. If this policy is not agreed, then this  variance  could  be  dealt  with  through  the  use  of contingencies or other budget measures.

22

The original target of delivering savings of £65 million through the  CSR  will  not  be  met. Shortfalls may arise in relation to  Terms  and  Conditions  and Procurement. Furthermore, it is currently  uncertain  whether further  savings  proposals included in the draft MTFP will be realised. A concern therefore arises as to whether the States has truly developed a value-for- money culture.

• The overall target of £65 million was affected by the States decision  on  £7 million  of  the  savings  proposals  from Education (this relates to the decision not to reduce the grants to fee-paying schools and the associated amendment which protected the non-fee-paying schools as well).

• £56 million of CSR savings will be delivered by 2013. The shortfall  is  predominantly  made  up  of  £6.3 million  in Education  and  £3.3 million  which  is  the  cost  of  the consolidated 1% pay offer in 2013. Current projections on corporate  procurement  savings  indicate  £3.5 million  per annum on identified projects so far, with work ongoing on other projects with a view to delivering £5 million or more against the original target of £6.5 million.

• Education,  Sport  and  Culture  has  brought  forward compensating  savings  of  £2.8 million,  and  Social  Security has  brought  forward  further  savings  proposals  within  the MTFP amounting to £3 million. This means that by 2016 the Council  of  Ministers  would  only  be  short  of  £3.6 million against the original target of £65 million. This is very close to the  shortfall  associated  by  the  States  not  approving  the reduction  in  grants  to  fee-paying  schools.  In  total,  CSR savings of £61.4 million should be delivered by 2016.

• A  further  publication  providing  details  of  all  the  latest savings proposals for 2011 to 2013 was made available in advance of the MTFP debate on 6th November as a further Annex to P.69/2012.

• The Social Security savings of £0.3 million are as a result of measures that are already in place.

• The work to review Social Security benefits that would give rise to a £3 million saving from 2014 is at an early stage, which is why the Minister for Social Security was unable to specify how these savings would be achieved. The intention of the Department is to deliver these savings through a range of policy options that will require States decisions in due course.

• CSR savings are monitored regularly and presented to the Council  of  Ministers.  An  example  of  such  a  report  was published for States members in August and included details of the 2013 proposals.

Findings

Comments

23

It  is  vital  that  an  appropriate reporting  and  monitoring mechanism  is  developed  in relation to the MTFP to ensure not only the sound management of States finances but also the delivery of decisions made by the  States  Assembly.  Further work in these areas is required.

• The Treasury will continue with its monitoring process, and this will ensure that there is visibility both on performance and on the delivery of decisions made by the States Assembly in relation to the MTFP.

• The 2013 Accounts will similarly include any appropriate changes  to  financial  performance  to  reflect  the  MTFP proposals.

Recommendations

To

Accept/ Reject

Comments

Target date of action/ completion

1

The  Minister  for  Treasury  and Resources  should  examine  and report  to  the  States  Assembly  by July  2013  on  the  implications  of extending  the  period  of  future MTFPs to 5 years in duration.

T&R

Accept

Noted and accepted with Comments  associated  to the Findings.

July 2013

2

The  Minister  for  Treasury  and Resources  should  report  to  the States  by  July  2013  on  the implications  of  establishing  future MTFPs on a rolling' basis.

T&R

Accept

Noted and accepted with Comments  associated  to the Findings.

July 2013

3

The  Minister  for  Treasury  and Resources  should  report  to  the States Assembly at a minimum of 6 monthly  intervals  on  the implications  for  the  MTFP  of updated  economic  and  income forecasts.

T&R

Reject

Please  see  the  previous comments  in  relation  to the  monitoring  of  the MTFP.

September 2013, 2014 and 2015

4

The  Minister  for  Treasury  and Resources should report back to the States  Assembly  within  3 months with confirmation that elements of fiscal stimulus proposed in the draft MTFP  are  timely,  targeted  and temporary.

T&R

Accept

Treasury  would recommend  that  the Capital  Programme  is subject to a formal review against  the  Timely, Temporary  and  Targeted (3T) criteria.

March 2013

Recommendations

To

Accept/ Reject

Comments

Target date of action/ completion

5

The  Minister  for  Treasury  and Resources should review the use of carry-forwards  to  ensure  that,  in future,  they  are  used  consistently and to reduce their use on new and potentially ongoing expenditure.

T&R

Accept

Treasury  will  continue with their current process of  monitoring  carry- forwards  and  will introduce  an  enhanced reporting  mechanism  for the Council of Ministers. This  will  form  part  of future  published  reports on  financial  progress  in the year.

April 2013

6

The Annual Budgets for 2013, 2014 and 2015 should provide sufficient detail on individual capital projects, including the revenue consequences of those projects.

T&R

Accept

The  Annual  Budgets  for 2014  and  2015  will include detail of revenue implications  of  capital projects.

September 2013 and September 2014

7

The  States  Assembly  should  in future be provided the opportunity to discuss growth allocations at the time  of  the  Annual  Budget,  as envisaged  in  the  Public  Finances Law.

T&R

Accept

As a result of the approval of  the  Amendment  to Amendment 9  (1+2),  as amended  by  the  Chief Minister,  Treasury  and Resources will propose an annual  allocation  of central  growth  provision for debate in the Annual Budgets  for  2014  and 2015.

September 2013 and September 2014

8

The  Minister  for  Treasury  and Resources should review the policy for the  application  of  contingency and should report back to the States Assembly on the matter.

T&R

Accept

There  is  a  published policy on the allocation of contingency –  R.10/2012, and  this  will  be  applied for  the  period  of  the MTFP.  The  Minister  for Treasury  and  Resources will  report  regularly  on the  decisions  made  with regard  to  any  allocations from contingency.

9

The  Minister  for  Treasury  and Resources  should  ensure  that amendments  to  the  policy underlying  use  of  the  Strategic Reserve  are  brought  to  the  States Assembly for approval.

T&R

Accept

The Minister for Treasury and  Resources  will consult  with  the  States Assembly if any changes are proposed to the use of the Strategic Reserve.

Recommendations

To

Accept/ Reject

Comments

Target date of action/ completion

10

The  Minister  for  Treasury  and Resources should review the policy underlying transfers to and from the Stabilisation Fund.

T&R

Accept

Treasury  and  Resources will  review  the  policy underlying  transfers  to and from the Stabilisation Fund.

July 2013

11

The  Minister  for  Treasury  and Resources should review and report back to the States Assembly on the monitoring  and  reporting mechanism  that  will  be  used  in respect of the MTFP.

T&R

Accept

Noted –  see  response  on Findings.

March 2013