Medium Term Financial Report - Panel Reports - Report - 22 October 2012

Corporate Services Scrutiny Panel

Review of the Medium Term Financial Plan (MTFP)

Chief Minister's Department

1. Conclusions  1
2. The MTFP and the 2012 Annual Business Plan  2
3. Departmental Services  3
4. Growth Allocations  4
5. Other Allocations  9
6. Capital Allocation  11
7. Savings  11

9.  Bibliography  13

Review of the Medium Term Financial Plan Corporate Services Scrutiny Panel

Report relating to the Chief Minister

1. Conclusions

1.1  As a result of the work we have undertaken, we have found the following:

1. The Chief Minister's Department advised us that some core services' (for example in External Relations) had been funded from non-recurring sources; in other words from the carry forward of under-spent funds. That essentially means the Department has been able to fund these services from the expenditure limits agreed in previous Annual Business Plans. It is therefore not clear why additional funding is required: if the Department has been able to find funding to date for these services, why does it require growth funding for them?
2. External Relations and Human Resources are primary growth areas in the Department. External Relations has evolved over the last few years to the extent that it now has a separate Accounting Officer. The Panel has agreed to consider undertaking a review relating to External Relations.
3. Growth funding is being provided for the establishment of a London Office. However, costs elsewhere are being reduced through the closure of a London office used by the Director of International Finance. It would appear the States is looking to open one office at the same time as it is closing another.
4. The effect of the Modernisation programme on the MTFP has not yet been made apparent, including the impact of any savings which might arise.
5. Some of the Department's overall funding requirements for its growth bids remain to be determined. For instance, the costs of the London Representative Office have yet to be finalised.
6. Freedom of Information is described as an emerging item' in the draft MTFP. It is not clear why it should be described as such when the States Assembly has already adopted the draft Law. Yet there was not a growth bid for it and provision is only reportedly made in the draft MTFP for it to be funded through contingency. It is, however, hardly an unforeseen' matter.
7. The aim to make £14 million of savings in Terms and Conditions by the end of 2013 is currently due to fall short by £3.3 million due to the terms of the current pay offer.

8. We were advised that the non-consolidated elements of the current pay offer would not increase overall spending limits from one year to the next; each non-consolidated element would effectively amount to a bonus in the year it applied. Nevertheless, the non- consolidated elements will still represent expenditure beyond what was initially envisaged by the Council of Ministers and will still be paid for from tax-payers money.
9. There is an assumption that £600,000 in fees will eventually be raised each year through Orders under the Control of Housing and Work (Jersey) Law. However, those Orders have yet to be made.
10. Contingency funding is being used to fund some of the Department's growth bids. It is unclear how these items can be described as unforeseen' when plans are already being made to address them. It would be preferable not to fund such items unless true' growth funding becomes available.

2. The MTFP and the 2012 Annual Business Plan (ABP)

1. The 2012 ABP provided the Chief Minister's Department with a net expenditure limit for 2012 of £22,952,000 which, with depreciation, amounted to £22,783,500. The net expenditure limits proposed in the draft MTFP for 2013, 2014 and 2015 are respectively £18,855,500; £20,166,600; and £20,258,600 (inclusive of depreciation). We were advised that the reason for the difference came from "CSR savings, central procurement savings, inter-departmental transfers, inflation allowances and growth bids."[1] The Annex to the draft MTFP shows that savings have amounted to a reduction of £947,800 from 2012 to 2013 whilst the draft MTFP proposes overall growth of £828,000 in 2013; £1,792,000 in 2014; and a net reduction of £30,000 in 2015.
2. In terms of inter-Departmental transfers, those relating to the Department were for the PECRS Pre- 1987 Debt to Treasury and Resources; Regulation of Undertakings and Developments from Economic Development (£368,800); and maintenance of the Caesar GST collection system from Treasury and Resources (£13,300).[2] The largest part of these was the transfer of responsibility for the PECRS Pre-1987 Debt which amounted to £4,436,900.
3. We were advised that there had been no extraordinary' growth commitments in the 2012 ABP for the Department.[3] However, growth funding of £152,000 was secured for two posts to work with UK Government Departments following the withdrawal of resource in the UK by the UK government. There were no growth commitments for 2013 and 2014.

4. Growth funding had also been received in earlier ABPs. For 2009, the Department had received £770,000 for new posts in International Relations; Emergency Planning; and Social Policy. Growth funding was also received for 2010 and 2011, but these commitments had since been transferred to other Departments.[4]
5. The Department received approval for Carry Forward funding (from 2011 to 2012) for a conference for developing countries to promote understanding of Jersey as a finance centre (£100,000); and for expert advice on technical matters relating to UK membership of the World Trade Organisation to include Jersey (also £100,000).

3. Departmental Services

1. The Department's service analysis has changed from that provided in the 2012 ABP. It now comprises the Policy Unit; External Relations; Law Drafting; Information Services; Human Resources; and the CSR Team.[5] The analysis previously explicitly mentioned sections such as the Economics Unit or the Statistics Unit but these are now subsumed into the Policy Unit for the purpose of the analysis. The Department has two Accounting Officers: the Chief Executive and the Director of International Affairs.[6]
2. We were advised that the primary policy change being pursued by the Chief Minister relates to Public Sector Reform.[7] The Annex to the MTFP supports this statement. However, placing External Relations on a sound footing and delivering the remaining CSR savings also appear to be significant Departmental priorities.[8] The Annex also reports that both HR and External Relations have been receiving funding from non-recurring sources for core services.
3. The Department advised us that the Human Resources section is due to be changed through a strengthened senior team; reform of policies; support of public sector reform; purchase of modern HR IT; and a corporate health and safety resource.[9] HR would also explore extending flexible working practices to support family-friendly HR policies (in order to support the Strategic Plan priority of promoting family and community values).[10]
4. In terms of the modernisation programme, the Chief Minister advised us that the Executive had been "quite cautious in not booking the benefits in the M.T.F.P. or savings that might arise from that."[11] He later described the questions that would need to be asked during business transformation: "That is, what are the jobs that we need? What are the bodies that we need?

What are the services that we want to provide? What is the interaction that we have with the community? How do they interact with us? How would they like to or want to do that in the future?"[12] We understand that the £14 million of savings in Terms and Conditions that are due to be made by the end of 2013 do not form part of the modernisation programme.

5. The External Relations function is also due to be developed, continuing evolution that we understand has occurred over the last four years. In that time, the function has evolved to fulfil a broader and more central role than the comparatively narrow remit with which it was provided at the outset. Operational funding requirements have been clarified and budget items previously funded from non-recurring sources have thereby come to be subjects of growth bids for the MTFP.[13] Net expenditure on External Relations is set to increase from £940,800 in 2012 to £1,959,600 in 2015.[14]
6. According to the Department's policy priorities and success criteria, the States can expect to see implementation of the Strategic Plan; development and approval of the Housing Strategy; co- ordination of a 15-year policy plan; agreement regarding reform of the public sector; successful implementation of Freedom of Information arrangements; agreement of a revised population policy; promotion of Jersey's identity and reputation; delivery of CSR savings; and development of the Human Resources function.[15]
7. Adoption of the draft MTFP would see the Chief Minister's Department Full Time Employee (FTE) count rise from 204 in 2012 to 223 in 2015; an increase of 19 FTE. This will result from one additional FTE in External Relations; one additional Law Draftsman; one additional FTE in Information Services; 20 additional FTE in Human Resources; and two additions to the CSR Team. However, there will also be reductions of 5 FTE in Information Services and 2 FTE in Human Resources.[16] This works out as an increase of 19 due to the manner in which FTE are calculated. Of particular interest is the growth in Human Resources, which will see its FTE count rise from 56 in 2012 to 74 during the lifetime of the MTFP.[17] This increase will arise from a permanent restructuring of the Human Resources function.  

4. Growth Allocations

1. According to the draft MTFP, the Department made 17 growth bids, 14 of which were successful' and taken forward by the Council of Ministers. Funding of these 14 successful bids will amount to £828,000 in 2013; £2,620,000 in 2014; and £2,590,000 in 2015. However, not all of the growth bids will be funded through growth' expenditure, as shown in the following table:

In terms of growth expenditure alone, the Department will receive 5.1% of the total available in 2013; 6.63% in 2014; and 6.38% in 2015. Most of the bids are for items for which non-recurring funding has been secured in the past.

2. Information on each of the bids is provided in the draft MTFP but we sought additional advice:

1. The London Representative Office

Due to receive £600,000 of Contingency funding in 2014 and £600,000 of growth funding in 2015, we understand the Office will be similar to the existing Channel Island Brussels Office. The cost of the London Office could be halved by working with Guernsey although detailed costs have not yet been worked out. The Chief Minister confirmed this at the Public Hearing. He indicated Guernsey would not currently be able to join the scheme and that consideration would be given to using space at the British Council for the office.[18]

2. International Advisor to the Council of Ministers

Non-recurring funding had been used to provide this position in the past. It would receive £50,000 of growth funding in both 2014 and 2015.

3. Shortfall in Grant to the Channel Islands Brussels Office

Established in 2010 at a cost of £350,000 per annum, it has since been discovered that the costs  are  closer  to  £400,000  and  the  draft  MTFP  therefore  proposes  the  allocation  of £50,000 of growth in 2014 and again in 2015. We understand the increase was due to being unable to recruit at original salary levels and the costs of operating in Belgium.

4. OECD Global Forum / Peer Review Group / Annual Contribution to the British-Irish Council Secretariat

Non-recurring funding had been used in the past for these items. £60,000 of growth funding would therefore be provided in both 2014 and 2015.

5. International Meetings / Monitoring and Visiting Dignitaries

In 2010 and 2011, these items were met through fiscal stimulus funding. The budget was £260,000. However, due to joint working with Guernsey from 2012 onwards, closing the London office previously used by the Director of International Finance and cancelling the Paris monitoring contract, the budget is now £160,000. Growth funding of that amount is proposed in the draft MTFP for both 2014 and 2015. That funding will provide a recurring budget for core staff and office expenses. However, the draft MTFP shows that the international operations programme is not funded and this pressure has seemingly therefore not been addressed in its entirety.

6. External Specialist advice on External Relations
7. One additional Law Draftsman

Two temporary appointments were made for two years to support the CSR programme; housing reform; pension reform; and the next IMF visit. Funding for those appointments came from Restructuring Provision, the Department of Housing, the Department of Treasury and Resources and the JFSC. A subsequent review of the law-drafting programme has identified the need for one additional post from 2014 and growth funding of £130,000 in both 2014 and 2015 is therefore provided in the draft MTFP.

8. Learning and Development

Three established programmes have been funded from non-recurring and £170,000 of growth is proposed for both 2014 and 2015.

9. Two additional HR posts for Health and Social Services

These arise from the Verita Report and its recommendation regarding the establishment of a specialist Director of HR at the Hospital and a dedicated Medical Staffing Manager to oversee locum appointment arrangements. Restructuring provision was used to fund these posts in 2011 but permanent funding is now sought and growth amounting to £580,000 over the course of the MTFP is proposed.

10. Data Security Officer

This arises from a recommendation made in 2009 by the C&AG and is intended to ensure proper governance of data. It was confirmed at our Public Hearing that attempts had previously been made to recruit with funding from each Department, but this had not been

successful (something not made apparent in the draft MTFP itself).[19] A total of £232,000 of growth funding is therefore proposed over the lifetime of the MTFP.

11. Corporate Health and Safety

Growth funding of £174,000 over the course of the MTFP is proposed to provide a new team member to support the T&TS manager to create a Corporate Health and Safety function across the States. This was still being scoped and might not in fact report through the Chief Minister's Department.

12. HR Fit for Purpose
13. HR Base Budget Shortfall
14. Funding for Permanent Members of the CSR Team

3. Items l, m and n are not due to be funded through growth allocations or through contingency funding. They will instead be funded through restructuring provision. Indeed, only two additional HR officers; a Data Security Officer; and a Corporate Health and Safety function will be funded entirely from growth' throughout the entirety of the MTFP. Other successful bids will only be funded from growth' in 2014 and 2015.
4. The only three completely new' bids from the Chief Minister's Department were for the London Representative Office, the Corporate Health and Safety Officer and the HR Fit for Purpose' Team (Items a, k and l above).[20] Otherwise, the bids relate to items where non-recurring funding has been provided in the past.[21] In other words, for those other bids the funding is required to maintain expenditure that is already incurred and not funding those bids would potentially lead to the cessation of a service that already exists. The MTFP lists only the London Representative Office; the two additional HR officers; and the (unsuccessful) States of Jersey Trainee Scheme under Strategic Plan priorities. The other 14 bids are all listed under Other Growth'.
5. It can be seen that many of the bids relate to HR and External Relations. Indeed, six of the growth bids relate to External Relations. The Chief Minister explained how external relations had come to be funded: "I took the view, as I have always done that if it is something that we proactively think that we should be delivering then we need to put it on to a proper funding in base budget."[22] He subsequently acknowledged that it was not ideal for recurring expenditure to be invoked when there were not the recurring sources to fund it.[23] In relation to external relations specifically, he advised, "I think that external pressures are either only going to continue at the level that we are

seeing them or increase."[24] When asked whether he was content that funding for some external relations matters would not become available until 2014 or 2015, the Chief Minister advised that he was content that the funding would be delivered during the lifetime of the MTFP.[25]

6. In terms of the Department's unsuccessful bids, the Department advised us that they had all been new bids.

15. Loss of income in the Communications Unit

Economic Development withdrew its funding of the Communications Unit in 2010. A part- time post was saved but the shortfall could not be absorbed within the remaining FTEs.

16. Departmental Unallocated Provision

The MTFP provides for unallocated contingencies. It is recognised that some flexibility to respond to events would be beneficial for Departments but the CMD had no budget for this.

17. States of Jersey Trainee Scheme

Funding for the States of Jersey Trainee Scheme had been provided in 2010, 2011 and 2012 through the Fiscal Stimulus Package.[26] The Department unsuccessfully bid for funding for the Scheme in the draft MTFP. It was ultimately decided that this would not represent value for money compared to an alternative approach suggested by the Skills Board. The Chief Minister confirmed at our Public Hearing that the Skills Board would be able to deliver the same programme, but at less cost.[27]

7. We asked why no growth bids had been made in relation to the Population Office (given the impending implementation of the Control of Housing and Work (Jersey) Law) and we were advised that the technology requirements for the Office had already been funded (whilst fees were expected under the auspices of the Law). Similarly, no bids had been made in relation to the Department's role in overseeing policy and strategy development as the relevant changes to the Department had been made within existing resources.[28]
8. At the Public Hearing, the Chief Minister confirmed that there were no further spending pressures of which he was aware and which were not addressed in the draft MTFP.[29]

5. Other Allocations

1. Not all of the growth bids will be funded entirely through growth' funding (indeed, if at all). Furthermore, not all of the funding pressures facing the Department seemingly led to an application for growth funding. We looked at the Department's other sources of funding, including Restructuring provision; access to Contingency funding; and Departmental income.
2. Restructuring provision is proposed to address the shortfall in the HR function, to ensure HR is fit for purpose' and to strengthen the delivery team to transform the HR function. This funding would increase the section by 8 FTEs to support workforce planning, organisational development and talent management. In total, £2,112,000 of restructuring provision has been allocated to HR over the lifetime of the MTFP. The Department advised us that its submission to the MTFP had been designed to cover the years 2013 to 2015. Nevertheless, further restructuring funds might be required for the Public Sector Reform agenda.
3. Restructuring provision of £150,000 in both 2014 and 2015 will also be used to fund permanent members of the CSR Team. The role of the team in the future will be to manage the reform of the public service. A recurring budget for the two permanent members of staff is required although additional resource requirements are anticipated.
4. In the draft MTFP, the delivery of restructuring provision to Departments has been offset by the achievement of procurement savings, the implication that any failure to make those savings will be matched by a corresponding reduction in the amount of restructuring provision made available. However, we were informed that, even if no further procurement savings were achieved, the Restructuring Provision allocated to the Department for reform of HR would be available.[30]
5. The Department advised us of the Restructuring provision it had received in 2011 and 2012.[31] There were also some current requests for 2012 (and one stretching into 2013) for Voluntary Redundancies in Information Services; Data Centre Migration; and Programme Management Office for Reform.[32] Beyond the allocation of restructuring described in the draft MTFPfor growth bids, there will potentially be bids in the future for redundancy costs arising from further CSR initiatives; Workforce Modernisation Phase 2; Programme Management Office for Reform Phase 2; and replacement of VOIP.[33]
6. In terms of Contingency, we were advised that £500,000 would be available from Central Reserves in 2012 for implementation of the Freedom of Information (Jersey) Law. Provision would also be

made in the draft MTFP in the Central Contingency for Emerging Items'.[34] There had been no growth bid in relation to Freedom of Information, however, and the Chief Minister confirmed that more work was needed before the full costs of the Law could be understood.[35] The Historic Child Abuse Enquiry might also require additional funding. The Department indicated that its current thinking would be to seek contingency funding for that item as well, if the need arose.[36]

7. In respect of income, the Department confirmed it received no funding from charitable sources.[37] The Department's sources of income arise from internal recharges (for delivery of IS and HR services) whilst, externally, it receives fees through the Population Office (for lodging house registration and housing consents); IS charges to Jersey Telecom for VOIP telephony; a recharge to Jersey Airport for the Director of Civil Aviation; and other sources amounting to £93,000. In 2012, the total income target was £1.2 million. Housing consent fees will be replaced by new fees under the Control of Housing and Work (Jersey) Law but the level of income is assumed to continue in the MTFP.[38] The amount to be raised is dependent upon the consultation undertaken in 2012 but the draft MTFP assumes income of £600,000 in both 2014 and 2015.
8. Given the delay in implementation of the Control of Housing and Work (Jersey) Law, we asked the Chief Minister what impact that would have, given the source of income described in the draft MTFP (from fees under the Law) would not be available. We were advised that £200,000 would be carried forward from 2012 to 2013 to cover the loss' of income whilst implementation of the Law was awaited. It was expected that the Law would be implemented in sufficient time, however, for the remaining £400,000 to be received in 2013. The Carry Forward of £200,000 would be achieved through the delay of recruitment to vacancies. The assumption that Control of Housing and Work Law fees would bring in £600,000 per annum was said to be a prudent one and greater income could in fact be generated.[39]
9. All growth allocations for 2013 were subjected to a 10% reduction. We were advised by the Department that this had led to a shortfall of £602,000 in its budget which would be covered by Carry Forwards from 2012 to 2013 and the new fees arising from the Control of Housing and Work (Jersey) Law.[40] In the annex to the MTFP, it is stated that Carry Forwards and Law fees will fund £420,000 of existing commitments in External Relations and £92,000 for the 10% reduction in 2013 of growth allocations.[41]

10. The Department advised us that Carry Forwards from 2012 would be used to fund existing recurring cost pressures, in particular those relating to External Relations which would not receive growth funding until 2014.[42] This funding will also be used to address the shortfall arising from the 10% reduction in growth allocations for 2013.[43]

6. Capital Allocation

1. The Chief Minister's Department has provisional capital allocations in the draft MTFP for web development; Microsoft update; JD Edwards upgrade; application of remediation of Windows 8; and HIRS Replacement. Capital allocations to the Department amount to £1,503,000 in 2013; £1,040,000 in 2014; and £450,000 in 2015.[44]
2. Within the Long Term Capital Plan, we were advised that Department has provision for the relocation / refurbishment of the Data Centre at Cyril Le Marquand House; replacement of web infrastructure; and replacement of corporate shared storage.[45]
3. Those capital projects for the Department for which funding remained to be identified were mobile technology infrastructure and equipment (to facilitate the Public Sector Reform agenda); and replacement of VOIP.[46] Alternative funding sources were to be considered. We were advised that the mobile technology was important for the modernisation programme as it would allow for flexible working. It would either be funded internally from reprioritising in ISD or through application for further restructuring provision.[47]
4. In relation to VOIP, we were advised that in-year money was to be re-prioritised to fund a feasibility study. The work could become wrapped up in a larger work stream regarding the future of Cyril Le Marquand House. Both work on VOIP and mobile technology would fit in with business transformation and we were advised that "we will find alternative ways of progressing them appropriately."[48]

7. Savings

1. We were advised that the Chief Minister's Department had achieved, or was on course to achieve, its CSR Savings of £1,319,000. Delivery of the Department's CSR savings for 2013 (amounting to £776,000) was said to be one of its top priorities for the MTFP.[49]

2. An analysis of the options for delivering £14 million in Terms and Conditions savings by the end of 2013 is being undertaken. We understand that this initial target was predicated on a pay freeze for the public sector in 2012 and 2013. The base assumptions for the MTFP continue to assume Terms and Conditions savings of £14 million, notwithstanding that negotiations are underway with employee groups and the current offer does not reflect a pay freeze. Instead, the draft MTFP reflects the most recent offer (made in July 2012): a 1% non-consolidated award for 2012; a 1% non-consolidated award and 1% consolidated award for 2013; and a 4% consolidated pay award for 2014 (in return for signing up to the Modernisation programme). Negotiations have not extended beyond 2014 and the base assumption of 2.5% for 2015 is therefore maintained. The July 2012 offer did not include employee groups with specific pay agreements (e.g. doctors, consultants and prison officers). The cost of the current pay offer will require additional funding of £5.5 million in 2013 increasing to £7.35 million in 2015.
3. As a result of the pay offer, we were advised, £10.7 million of the £14 million in Terms and Conditions savings would be delivered by 2013. This is because the non-consolidated elements of the offer are non-recurring and not carried forward in the cash limits from one year to the next. It must be said, however, that expenditure on the non-consolidated elements will still be more than was envisaged when the pay offer effectively amounted to a pay freeze. It should also be noted that the present pay offer provides for a 4% consolidated increase in 2014. The shortfall of £3.3 million in 2011-2013 Terms and Conditions savings is therefore the cost of the consolidated 1% in 2013.[50]
4. In terms of user pays charges, as previously stated the Department has undertaken public consultation on fees arising from the Control of Housing and Work (Jersey) Law, implementation of which could lead to income of £770,000 per annum (net of costs).[51] This figure is higher than the £600,000 of income which the draft MTFP assumes in both 2014 and 2015.

States of Jersey Draft Medium Term Financial Plan (MTFP)

http://www.gov.je/SiteCollectionDocuments/Government%20and%20administration/R%20Medium%20T erm%20Financial%20Plan%2020120718%20APC.pdf

States of Jersey Annex to the Draft Medium Term Financial Plan

http://www.gov.je/SiteCollectionDocuments/Government%20and%20administration/R%20annex%20to% 20draft%20Medium%20Term%20Financial%20Plan%202013-2015%2020120808%20JS.pdf

Record of Public Hearing with Minister for Treasury and Resources dated 17th September 2012

http://www.statesassembly.gov.je/ScrutinyReviewTranscripts/2012/Transcript%20%20Medium%20Term %20Financial%20Plan%20Review%20-%20Minister%20for%20Treasury%20and%20Resources%20- %2017%20September%202012.pdf

Record of Public Hearing with the Chief Minister dated 3rd September 2012

http://www.statesassembly.gov.je/ScrutinyReviewTranscripts/2012/Transcript%20%20Medium%20Term %20Financial%20Plan%20Review%20-%20Chief%20Minister%20-%203%20September%202012.pdf

Response to Scrutiny questions

http://www.statesassembly.gov.je/ScrutinyReviewSubmissions/Submission%20- %20Medium%20Term%20Financial%20Plan%20-%20Chief%20Ministers%20Department%20- %205%20October%202012.pdf

2012 Annual Business Plan

Letter from Treasury and Resources dated 20th June 2012 Half Year Corporate Report

Corporate Services Scrutiny Panel

Review of the Medium Term Financial Plan (MTFP)

Department of Treasury and Resources

1. Conclusion  1
2. The MTFP In Relation to the 2012 Annual Business Plan  2
3. Departmental Services  3
4. Growth Allocations  5
5. Other Allocations  6
6. Capital Allocation  8
7. Savings  8

9.  Bibliography  10

Review of the Medium Term Financial Plan Corporate Services Scrutiny Panel

Report relating to the Minister for Treasury and Resources

1. Conclusions

1.1  As a result of the work we have undertaken, we have found the following:

1. Significant work will be undertaken by the Department of Treasury and Resources during the lifetime of the MTFP in relation to Procurement; the Taxes Transformation Programme; reform of Public Sector pension schemes; and repayment of the Pre-1987 PECRS Debt.
2. The Taxes Transformation Programme will be funded from existing resources, notwithstanding the fact that the department had initially included this item as a growth bid. Similarly, growth funding was initially sought for 2015 for an interim valuation of assets but it will instead be funded from existing resources. It must therefore be questioned whether other Departments' growth bids could have been dealt with in a similar way or whether the easy option' of seeking growth funding has been pursued.
3. Consideration will be given during the lifetime of the MTFP to the policy applying to the Strategic Reserve as it was suggested that the Reserve could potentially be used to assist the repayment of the Pre-1987 PECRS Debt.
4. £3.4 million of Procurement savings remain to be found by the end of 2013. It is not clear how the remaining savings will be delivered although we were informed that the Treasurer of the States is responsible for their delivery and understand that the Minister for Treasury and Resources is therefore accountable.
5. There are seemingly various sources from which funding could be drawn and which are not described in the MTFP in any detail. These include the Insurance Fund, the Criminal Offences Confiscation Fund and the Drug Trafficking Confiscation Fund. This raises the question of what other contingencies or reserves the Council of Ministers may be able to access during the lifetime of the MTFP over and above the overall expenditure that the States will be asked to approve. It suggests there has been an emphasis on finding funding from any available source. Finally, it also raises the question of whether the funds are to be used in accordance with the policies that govern their application.

6. We were advised that a funding pressure exists in relation to property maintenance and yet funding for backlog maintenance will be lower during the MTFP than was envisaged in previous Annual Business Plans.

2. The MTFP and the 2012 Annual Business Plan (ABP)

1. The Department of Treasury and Resources was allocated a net expenditure limit of £36,662,400 for 2012 in the 2012 ABP which, excluding depreciation, amounted to £24,772,600.[52]
2. In the draft MTFP, the Department is allocated net expenditure limits of £30,001,200; £31,412,400; and £30,583,600 in 2013, 2014 and 2015 respectively (excluding depreciation). The increase from the 2012 ABP can be explained in part by an allocation for price inflation; in part by growth allocations in the draft MTFP and CSR savings (both of which we will consider later in this report); in part by a capital-to-revenue transfer relating to the Backlog Maintenance Programme; and in part by Departmental transfers.
3. The increase primarily stems from the transfer of £4,436,900 from the Chief Minister's Department (£5,571,900 in 2013) of responsibility for the Pre-1987 PECRS debt. Otherwise, the Department will see some smaller transfers: £88,900 to Health and Social Services for staff budget; £10,700 to Home Affairs for Accounts Payable Staff; and £13,300 to the Chief Minister's Department for maintenance of the Caesar GST collection system.[53]
4. We were advised that there had been no growth commitments for the Department in the 2012 ABP for 2013 and 2014.[54] However, we were informed that, in the 2010 ABP, the States had agreed to £20 million from 2010 to 2014 for investment in property maintenance. The draft MTFP continues that funding, albeit it proposes to amend the amount allocated in due course as part of budget-balancing measures.
5. The draft MTFP shows that the Department received approval for the following Carry Forwards from 2011 to 2012:

1. £40,000 for the Modern Managers Programme;
2. £101,000 for actuarial advice for the pension review;
3. £381,500 for the Taxes Office Transformation Project; and

4. £265,253 for backlog maintenance for refurbishment of Les Chênes.[55]

More recently, figures forecast that the Department will underspend its 2012 budget by £2 million.[56]

3. Departmental Services

1. The Department advised us that no service changes were envisaged in the draft MTFP.[57] The Department comprises the Treasury; the Taxes Office; Jersey Property Holdings; Corporate Procurement; Insurance; and Pensions.[58]
2. In addition to business as usual', the Department will manage insurance risks; provide procurement advice to Departments; manage the balance sheet; provide funding advice to Departments; improve financial performance reporting; support Departments in longer-term planning; implement the Taxes Transformation Programme; deliver a public sector pension scheme; and keep tax policy under review.[59]
3. The draft MTFP assumes no new taxes within the period of the plan. However, the Department will review matters in order to safeguard revenues and to simplify the tax regime. This will include a) enhancing the Income Tax system in relation to corporate structures, property ownership and development; b) reviewing the feasibility of moving to independent and current year taxation for all taxpayers; and c) monitoring international tax standards.[60]
4. The Taxes Transformation Programme started in October 2011 and is intended to deliver increases in tax revenue; efficiency savings; increased information powers and information- sharing; self-assessments; simplified rates, allowances and exemptions; and fit-for-purpose IS solutions. The Programme received Carry Forward funding from 2011 to 2012 and we initially understood that funding for the remaining three years of the project had not been identified. However, we were subsequently advised that the Department would manage its resources to deliver the programme. The Treasurer stated, "I would rather we tightened our belts in Treasury to manage better the resources that we have in order for Health to receive the funding that Health need in order to improve their services and, similarly, the other priorities being housing and jobs, which are job creation and job retention, which are obviously very important." There was confidence that no additional funds would therefore be requested.[61]

5. In relation to property, Jersey Property Holdings have been allocated £11.25 million of additional funds from 2013 to 2015 for backlog maintenance (reflecting the decision made in the 2010 ABP). As we shall explore, it will deliver CSR savings of £750,000 in 2013 by passing on the tenant's obligations to the occupier; this will have an impact on the budgets of other Departments and third party occupiers of States property. Two key capital projects to progress are the relocation of Police headquarters and the feasibility study for a new hospital. We were informed that the Police relocation is the first phase of the office rationalisation programme.[62]
6. The amount provided for backlog maintenance over the lifetime of the MTFP will be lower than initially envisaged. The draft MTFP explains that use of the Technology Forge system has identified the possibility of reducing the Backlog Maintenance budget by £2 million from 2015. Furthermore, a contribution to procurement savings of £0.75 million has been identified from 2015. This will reduce the amount spent on backlog maintenance to £1.75 million per annum (from the figure of £4.5 million which was established with the appropriation of growth funding in the 2010 ABP – see Paragraph 2.4, above).  
7. The draft MTFP also proposes developments in relation to shareholder returns. Strategic investments were valued in the 2011 Accounts at £326 million. Dividend income of £10 million by 2015 is accounted for in the draft MTFP. Initiatives being taken with the Utilities and the States of Jersey Development Company could improve that amount, leading to additional income of £3 million from 2015.[63]
8. We were advised that the Department will also examine the policy underlying the Strategic Reserve, for instance to consider how large it should be and how additional growth could be used. This work would be carried out over the lifetime of the MTFP.[64]
9. Procurement will continue the roll-out of its transformation programme. It is intended to deliver on £6.5 million of CSR savings; develop a function based on category management; and implement a procure-to-pay system.[65]
10. Work will also be undertaken in respect of pensions in relation to which there is a liability for the Pre-1987 Debt. The draft MTFP explains that there are plans to implement a repayment schedule which would see the debt repaid more quickly than is currently envisaged. At present, the States is repaying past service debt on PECRS over a period of 82 years. The debt is valued as a salary linked bond and the level of the debt is sensitive to market conditions. It can therefore increase or decrease. In 2012, the rate of repayment was £4 million per annum. This was projected to rise to £10 million by 2032 and £131 million by 2083 (when the debt will be repaid in full). We were advised that this would amount to a total cost of £2.6 billion for the States (rising to £2.9 billion when admitted bodies are taken into account).

11. Consideration will be given to how repayments can be increased and the debt restructured. In the draft MTFP, an additional £1 million per annum will be appropriated for paying off the debt. At our Public Hearing, we were advised that the Department had yet to ask the Actuary for an estimate of the impact on the repayment schedule that such a measure would have.[66] The Assistant Minister advised us that further attempts would be made to pay off the debt more quickly, for instance if greater revenues than anticipated were received. He also suggested that additional' revenue from the Strategic Reserve could feasibly be used.[67] Consideration will need to be given to the repayment of a similar debt pertaining to the JTSF.
12. Beyond addressing the Pre-1987 Debt, we understand the Department will also work on reforms to PECRS itself. In that regard, the draft MTFP confirms that public sector pension reform should be delivered by 1st January 2015.[68] The Department advised us that Carry Forwards from 2012 to 2013 would be used to fund this work.[69]
13. The Department's FTE count will reduce from 257 in 2012 to 246 in 2013 and then remain constant for the duration of the draft MTFP. This reduction stems from measures taken before the MTFP (i.e. through the CSR) and equates to the reduction of 1 FTE in the Treasury; 8 FTE in the Taxes Office; 3 FTE in Jersey Property Holdings; and 1 FTE in Corporate Procurement.[70]

4. Growth Allocations

1. The Department advised us that it faced funding pressures in relation to Property Maintenance; Property Valuations; the PECRS Pre-1987 Debt; and the Taxes Transformation Project. The Pre-1987 Debt is a corporate issue but the States' contribution is held within the Treasury.[71]
2. In the draft MTFP, the Department has one successful growth bid. Growth funding would therefore be provided to Jersey Property Holdings for property maintenance of non-acute Health and Social Services buildings. The Department advised us that this allocation reflected previous growth bids for increases in the base budget for property maintenance.[72] The draft MTFP allocates growth' funding of £630,000 in 2013; £700,000 in 2014; and £700,000 in 2015 (i.e. the bid is being funded through growth and not through contingency or restructuring). Jersey Property Holdings is not responsible for all H&SS buildings. This is due to some of the very specialist requirements relating to some property, for example the network of oxygen

supply has to be maintained by people with the relevant expertise. At our public hearing with the Assistant Minister, we were advised that H&SS would retain maintenance responsibility for 40 properties; JPH would have responsibility for 137 and responsibility for a further 23 had yet to be decided.[73]

3. There was one unsuccessful growth bid from the Department. The States is committed to comply with International Finance Reporting Standards which require professional valuations of assets every 5 years and interim ones every 3 years. A full valuation will be undertaken in 2012. However, the Department made a growth bid for an interim valuation in 2015 (amounting to £170,000) but this will now be funded from within the Department's existing resources. In its written submission to us, the Department advised that this funding would come through efficiencies within the Department.[74]
4. There could feasibly have been a growth bid for the Taxes Transformation Project. However, "in the interest of efficiency" the Department had identified funds from Carry Forwards from 2011 to enable progress to be achieved and, as we have described, fund the remaining years of the Project from existing resources. Capital funding for the Project had also been secured.[75]
5. At the Public Hearing, the Assistant Minister confirmed that there were no further spending pressures of which he was aware and which were not addressed in the draft MTFP. He stated, "if our income levels fall short of what we predict we will still spend the same amount of money, that is what we are doing now, we are setting limits for the next 3 years. It will mean that we will potentially run a deficit and we will not get back to balanced budgets and that would have to be addressed in the Medium Term Financial Plan that comes after this one."[76]

5. Other Allocations

1. Beyond the growth allocations, we looked at the Department's other sources of funding, including Restructuring provision; access to Contingency funding; and Departmental income.
2. No provision is currently made within the draft MTFP for the Department to access Contingency funding.
3. The Department will access Restructuring Provision, however. In 2013, it will receive £800,000 for the Procurement Transformation Programme and £20,000 for the Finance Change Team (albeit this has transferred to the Taxes Transformation Programme). It had already received

Restructuring Provision in 2011 and 2012 for both of these matters as well as for Architect Voluntary Redundancies and the Energy Project.[77]

4. In terms of income, the Department advised us that Jersey Property Holdings had an income budget of £5.4 million in 2012: £2 million from rental and Facilities Management charges to Departments; £2 million from charges for the same to third parties; and £1.4 million from fee income and general recharges (the majority of which comes from professional fees charged to capital works such as architects or project management). A project is underway to reflect rental charges for office space at an approximate level to market rents. This would increase the JPH income figure as well as other Departments' costs; applied for the first time in 2013, this would have a net nil impact on the States where the tenant was a States Department.[78] At the Public Hearing, we were advised that the increased income would therefore come from the effect of increasing rents for third party occupiers and other measures referred to in Paragraph 3.5 above.[79]
5. The Department confirmed that it received no funding from charitable sources.[80]
6. We were advised that some income streams did not form part of Treasury's cash limit, for example income from the sale of the £100 note (which went to the Currency Fund).[81] Income generated through investment of the Consolidated Fund (as part of the Common Investment Fund), however, was considered to be income for the Department.[82]
7. The Treasurer also explained that funding could feasibly be made available from the Insurance Fund. For example, £5 million of the Fund would be available for payment of claims arising from the Historic Child Abuse Enquiry. This would leave approximately £6 million in the Fund.[83] We were subsequently advised that funding for such matters could also potentially be made available from the Criminal Offences Confiscation Fund and the Drug Trafficking Confiscation Fund. There is £14 million in the COCF.[84] However, we understand that there are clear policies regarding the use to which the COCF and the DTCF may be put and care must be taken to ensure that funding from those sources is in accordance with those policies.

8. In terms of the Insurance Fund, we were advised that it had arisen from States' decisions to set up a fund rather than pay premiums to a third party with "nothing to show from it." It had not been established because insurers had refused to cover the States in certain areas.[85]

6. Capital Allocation

6.1  The Department has provisional capital allocations for the Taxes Transformation Programme Information Technology Systems and the demolition of Fort Regent Pool. For IT Systems and the Taxes Transformation Programme, this is essentially for the implementation of a Procure to Pay system and the development of Income Tax IT respectively and funding of £500,000 would be provided in 2014 for these matters. For the demolition of Fort Regent Pool, £750,000 would be provided in 2014. The Department advised us that no capital projects had been delayed or not provided for.[86] Capital funding for the Taxes Transformation Project had already been assigned for 2012.[87]

7. Savings

1. The Department advised us that it had over-achieved its CSR savings, the main contributor to which had been the effective management of insurance risks. Insurance savings had reached £1.2 million – beyond the initial target of £586,000. Furthermore, the Department had carried out more pensions accounting work in-house, thereby cutting contract costs. It had also seconded staff to other Departments to lead on projects, thereby reducing the reliance upon interim appointments.
2. All the Department's CSR initiatives were shown as green in the Department's RAG rating, with three exceptions: first, £100,000 from savings to be achieved through User Pays for non-core Estates Management; secondly, £400,000 through increasing rents to market levels that are subsidised and rationalising office space in 2013; and, finally, £180,000 for new ground lease charge to the JEC.[88]
3. In terms of the insurance savings, we were advised that "re-tendering of the States insurance contract successfully delivered ongoing savings of £210,000 a year on the Corporate contract (covering public liability, water, property). In addition, [the Department has] restructured the changes made to Departments delivering a total saving in excess of £1 million per annum."[89]
4. We were advised that £3.1 million of Corporate Procurement savings had been achieved. These had been agreed by Departments and removed from their cash limits. The Assistant

Minister was confident that the remaining £3.4 million would be delivered by the end of 2013 (a target of £6.5 million had been set as part of the CSR).[90] We were further advised that each Department would be responsible for delivering its share of Procurement savings, with co- ordination coming through the CSR Team. The Assistant Minister stated, "Individual Departments are responsible for making procurement savings but how each element is built up there is room for negotiation there between Treasury and those Departments."[91] We understand that the MTFP Sub-Panel was subsequently advised that the Treasurer of the States was responsible for delivery of the procurement savings, at which time the Sub-Panel was also advised of concerns regarding £1 million of the savings to be found.

5. The Department advised us that it would not introduce any new User Pays charges.[92]

States of Jersey Draft Medium Term Financial Plan (MTFP)

http://www.gov.je/SiteCollectionDocuments/Government%20and%20administration/R%20Medium%2 0Term%20Financial%20Plan%2020120718%20APC.pdf

States of Jersey Annex to the Draft Medium Term Financial Plan

http://www.gov.je/SiteCollectionDocuments/Government%20and%20administration/R%20annex%20t o%20draft%20Medium%20Term%20Financial%20Plan%202013-2015%2020120808%20JS.pdf

Record of Public Hearing with Minister for Treasury and Resources dated 17th September 2012

http://www.statesassembly.gov.je/ScrutinyReviewTranscripts/2012/Transcript%20%20Medium%20Te rm%20Financial%20Plan%20Review%20- %20Minister%20for%20Treasury%20and%20Resources%20-%2017%20September%202012.pdf

Record of Public Hearing with the Chief Minister dated 3rd September 2012

http://www.statesassembly.gov.je/ScrutinyReviewTranscripts/2012/Transcript%20%20Medium%20Te rm%20Financial%20Plan%20Review%20-%20Chief%20Minister%20- %203%20September%202012.pdf

Response to Scrutiny questions

http://www.statesassembly.gov.je/ScrutinyReviewSubmissions/Submission%20%20Medium%20Term 2Financial%20Plan%20%20Treasury%20and%20Resources%20%205%20October%202012.pdf

States of Jersey 2012 Annual Business Plan http://www.gov.je/News/2011/Pages/2012AnnualBusinessPlan.aspx Letter from Treasury and Resources dated 20th June 2012

Half Year Corporate Report

Economic Affairs Scrutiny Panel

Review of the Medium Term Financial Plan (MTFP)

Department of Economic Development

Contents

1. Conclusion  1
2. The MTFP In Relation to the 2012 Annual Business Plan  1
3. Departmental Services  2
4. Growth Allocations  3
5. Other Allocations  8
6. Capital Allocation  9
7. Savings  9
8. Bibliography  12

Review of the Medium Term Financial Plan ("MTFP") Economic Development ("ED")

Conclusions

• ED will continue with their CSR savings in 2013, and will save £950,000 during the year.
• ED will continue with a restructuring programme during the life of the MTFP.
• ED appears to be able to "carry over" monies with relative ease, especially when measured against the ability of other Departments to do the same.
• ED has a policy of "spend now to save later" rather than the opposite.
• Monies are being invested in new offices (Jersey Finance) overseas in order to serve the Middle East and BRICs (Brazil, Russia, India and China) countries.
• ED will continue to invest in the development of "international finance" during the MTFP.
• ED will develop a new Tourism Strategy during the MTFP.
• ED will employ more people as a result of "Locate Jersey", and encourage more high value inward investment during the MTFP.
• In order to invest' in diversifying the economy during the MTFP, ED will increase their budget by around 25%.
• This budget increase is as a result of growth bids that are proposed in the MTFP.

1. The MTFP in relation to the 2012 Annual Business Plan ("ABP")

1. The following table outlines the expenditure limit for 2012 and proposed increases (see section 3) in expenditure limits contained within the MTFP for 2013, 2014 and 2015:

2. Differences between the Departmental cash limits proposed in the MTFP and the limits approved in  the  2012  ABP  relate  to  the  areas  of  Comprehensive  Spending  Review  savings,  central procurement savings, inter-departmental transfers, inflation allowances and growth bids.

2. Departmental Services

1. The services delivered by the Department are structured as follows:

2. It is noted that Enterprise & Business Support' changes its name to Economic Growth & Diversification', whilst Marketing' is re-organised as Tourism, Destination & Marketing'. At a more detailed level, the following changes in service delivery have been outlined to the Panel by the Department:

• International Finance

Following a review of the organisational structure for the support of financial services across the States it has been decided to consolidate all responsibility under a Director of Financial Services who would act as Accounting Officer for all aspects of the financial services budget within EDD. The Director would be located  within  Economic  Development  Department  with  responsibility  to  the  Economic  Development Minister and working with three other Ministers. The Director would operate alongside the Chief Officer for ED, will be treated in a similar manner to Chief Officers and be accountable to the Chief Executive of the States for management matters.

• Jersey Finance

The additional funding provided to Jersey Finance will enable them to establish two additional offices and

undertake further market development in the BRICs countries and the Middle East.

• Tourism

A new strategy for tourism is being developed and a Green Paper is out for consultation with a deadline of 30th September 2012. The way government support for tourism is directed and managed will be reviewed

and will include establishing a new Shadow Board to provide advice and expertise to the Minister across a wide range of areas.

• Locate Jersey

There will be a step change in the delivery of our inward investment and high value residency team, Locate Jersey, in order to achieve our key objective of creating new businesses and employment in high value sectors. This will involve both increased manpower resource and an increase in promotional and marketing activity.

• Skills and Workforce Development

Increased States funding for a new model of Apprenticeships in Jersey based on new sectors/trades/skills, closely linked to vocational training already underway or proposed in Jersey schools. New style Graduate Internships providing Jersey Graduates a full years post-graduate supported internship with companies operating within Economic Growth Strategy ("EGS") target sectors or the Finance industry, conditional upon full time employment being provided thereafter.

3. Growth Allocations

• Growth Bids:

1. At a Public Hearing held with the Assistant Minister for Economic Development, the process that was undertaken to establish its funding requirements and associated growth bids for the MTFP was explained to the Panel. The Department undertook its usual process of zero-based budgeting, preparing 5 scenarios that looked at how it might deliver the objectives contained in the States approved EGS within the existing cash envelope, i.e. the 2012 cash envelope played out to 2013. That 2012 and 2013 cash envelope included making the full CSR savings, which the Department has achieved, assisted by the fact that approximately 75% of ED's spend is discretionary (grants etc), with the remaining 25% more fixed in its allocation predominantly to staff and premises costs. A recommendation was made to the Minister that the only way to deliver the EGS within the existing cash envelope would be to make material reductions in the budget allocated particularly to tourism and the rural economy.
2. The scenarios that indicated the magnitude of those reductions were not acceptable to the ministerial team. In response, an additional scenario was developed which looked at what incremental funding would be required to enable ED to sustain funding for tourism, which is directly related to the Minister's decision to protect tourism funding throughout the MTFP period

and link funding for the rural economy to the States-approved Rural Economy Strategy. That translated into an initial growth bid of approximately £4 million, which translates to about 25% increase in the Department's base, the majority of which has been retained in the MTFP as lodged. The unsuccessful bid related to £250,000 for Tourism funding having been unsuccessful. Essentially the growth is directly related to incremental funding required to deliver the EGS over and above the ongoing activity of the department.

3. The table below shows the successful bids and the proposed funding source in the MTFP:

4. The Panel notes with a degree of concern a recurring dependency on central contingency and carry forwards (see table above and funding pressures table below) to fund a number of areas particularly in 2013 and 2014. The matter was addressed by the Assistant Minister:

I think the bids are about future vitality of our economy and I think that one has to accept it is not just a short-term Band Aid on an economy that is finding it harder than it has previously been. It is a way of engineering a more robust economy and it is an investment (it is not grant) and therefore, by definition, there will be a return to the Island. There will be a return to Islanders, to taxpayers, and I think that when one looks that that is how the money is being spent it is a clearer strategy.[93]

The Connétable of St. Brelade :

Would you admit, though, that if this economic way forward fails at any particular stage eating up huge amounts of contingency could be particularly dangerous to the Island's future?[94]

Assistant Minister for Economic Development:

I would argue the polar opposite. I would say that not taking proactive steps to ensure that we have an economy that we are proud of and is supporting us all in 5 years or 50 years' time would be a huge oversight and negligent of us in the current climate.'[95]

5. The Panel's work also raised concern over the definition carry forwards, and how they are being interpreted across the States. The Panel asked the Chief Officer to explain how his Department interpreted a carry forward and the process with the Treasury to sanction their use:

The carry-forwards are naturally occurring underspends because something has either cost us less or something that we planned to do is no longer required or indeed, in the case of income we receive from Ofcom, which is related to a rebate to us related to T.V. licensing, greater levels of income that we have over and above what we had forecast.[96]

The Deputy of St. Martin :

I was always under the impression that a carry-forward was where monies were allocated in year one to a specific project which was not completed and then that project moved to the second year and the money was carried forward, which is different from an underspend[97]

Chief Officer:

There are elements of underspend in-year that arise because of exactly what you just said, the project that are delayed. There are other elements of underspend that arise because projects are no longer required, so what we plan to do is no longer required, or indeed sometimes forecasted income that we have is exceeded. So we have more money than we thought we were going get, either through reduced expenditure or increased income. That is used for carry-forwards. Some of it is carried forward for the purpose that it was originally intended but a lot of it is carried forward as a numerical sum and then we justify to the Treasury and this has to be fully justified to the Treasury.'[98]

6. With regard to Department contingency, the Panel asked the Chief Officer how this was being dealt with under the current MTFP. He explained:

I think it is fair to say that in the past we have retained an element of contingency. Given the pressures and the nature of the investment that we have make, I think we are running as forecast with a very low level, if any, contingency at all.[99]

The Deputy of St. Martin :

So you would not naturally just allocate 5% to contingency before you start the year?[100]

Chief Officer:

We have not done that in this year, no, because of the demand on spend. What we did not want to do was to put in any larger growth bid than we absolutely needed to. Of course, if there had been any contingency in previous years we used that up to get to our previous cash limit before looking above that growth.'[101]

• Funding Pressures:

7. Funding pressures facing the Department are illustrated below firstly in a table with relevant additional  information  from  the  Department  following.  They  are  attributed  primarily  to  new initiatives and regulatory requirements:

• Tourism:

8. The only element of the Department's original MTFP bid that was not successful was the recurring increase in revenue funding on the tourism-based budget of £250,000. It remains something that the Minister would like to achieve, predominantly to further bolstering marketing activity in the German market.

• Single European Payments Area Project:

9. This is an ongoing issue, and was originally a fiscal stimulus project. Due to delays outside the Department's control delays, this is again further delayed. It has not been catered for in the base budget or indeed the MTFP and therefore remains a future funding pressure. The legislation is required from a financial services perspective, to alleviate potential barriers relating to trade within the single euro area with a common payment system.

• Copyright Tribunal:

10. This is related to the new intellectual property legislation and the Financial Ombudsman Service Ombudsman Service.
    1. Locate Jersey (2013 promotional programme):

12. The funding pressure relates to the 2013 Inward Investment Conference and a Financial Times insert.
    1. Business Development: Retail:

12. There has been considerable pressure on the retail sector. The Department has an existing retail strategy which it does not intend to revise, but it intends to work jointly with the Chamber of Commerce on a retail business development strategy which will have both a physical bricks and mortar element and an online element.
13. The Chief Officer explained the approach to these pressures at the MTFP Public Hearing:

We monitor our exact spend on a monthly basis versus plan. What happens because of changes to need or opportunity or things get deferred or brought forward, we would hope to be able to fund all of these through cash managing without our existing limit. So they represent funding pressure that . we would hope, through underspends that occur or indeed carry-forwards that we can bring forward from underspend this year, to be able to fund that. In the first instance we will be making a submission to deal with this from any underspends that we have, particularly monies that we receive from outside our

cash limit. But, if not, we will do what we always do and to the greatest extent possible; we will try and manage that by redistributing funds in-year.'[102]

4. Other Allocations

• Restructuring provision:

1. The  Economic  Development  Department  received  a  restructure  bid  of  £205,000  to  establish  the independent and confidential business information, advice and support service, Jersey Business. This body represents the outcome of the Integration of Jersey Business Venture and Jersey Enterprise's On- Island operation.
2. As outlined in Section 2, there is currently consideration for a restructure bid of £156,551 for the reorganisation of the financial services within the Department. In addition, there may be a restructuring requirement  for  the  transfer  of  rural  responsibilities  to  the  Environment  Department  and  the reorganisation of Tourism.

• Departmental Income:

3. The Economic Development Department has a 2012 income target of £1.7m. The only proposed change (other than RPI or 2.5% per annum), is that from 2013 onwards responsibilities from the Enterprise Awards will transfer to Jersey Business Ltd. and the Business Incubator has now closed, the net result being that the loss in revenue (which will be received in future directly by Jersey Business) is essentially balanced out by the transfer of responsibility for costs (to Jersey Business). The Income streams (for 2012) are outlined below:

4. The income is generated by:

• Enterprise & Business Development - Enterprise Awards & Business Incubator rent.
• Marketing – Advertising received for tourism brochures etc. (£401,000), Jersey Pass (£114,000), Visitor Services sales and Central Reservation commission (£196,000).
• Policy & Regulation – Regulatory licence fees such as liquor licence fees, shipping registry etc. Also income received from Ofcom in respect of spectrum licence refund (£303,000).
• Skills – Enterprise Education sponsorship.

5. The Panel has been informed by the Department that the area of greatest pressure in meeting income targets is joint marketing, relating directly to the contribution that the tourism sector is able to make given the current economic situation and the impact this has had on liquidity within the sector.
6. There is additional uncertainty relating to the ending in 2013 of the current arrangements surrounding the BBC licence fee and the associated Ofcom refund of just over £300,000. The potential loss of income has been budgeted for. The Minister recently visited the U.K. Government regarding the BBC licence fee and the current proposals for how the issue will be arranged from 2014 onwards.

5. Capital Allocation

5.1 There are no capital projects proposed directly for ED. Whilst the Ports of Jersey do have capital projects planned, these are handled as separate Trading Entities.

6. Savings

• CSR:

1. The Department has met its 2011 and 2012 CSR savings commitment of £1,039,000. The table below outlines the nature of those savings and proposals for 2013:

2. As previously indicated, the ability of the Department to meet its CSR targets is helped by the fact that approximately 75% of Economic Development's spend is discretionary (grants etc), with the remaining 25% more fixed in its allocation predominantly to staff and premises costs, reflected in the table above. However, the Panel does note with some concern the reduced spending on the Financial Services Ombudsman ("FSO") during a crucial development year ahead of its planned introduction in 2014. We will be examining the issue as part of its full Review of the FSO.

• User Pays:

3. As part of the Licensing Law development process, it had been the intention to increase liquor licence fees by approximately 60% (£175,000 additional income) as part of CSR user pays. The Minister has indicated that the Department should not seek to increase fees more than the RPI, although the actual outcome may be determined by changes to the final legislation. The Panel has been informed by the Department that consultation and discussion with other relevant Departments (notably Home Affairs and Heath and Social Services) on this cross cutting draft legislation has been has been extensive. It is anticipated that the new licensing law, which will release the potential to realise some of this income, should be coming to the States in 2013.

Bibliography

States of Jersey Draft Medium Term Financial Plan (MTFP)

http://www.gov.je/SiteCollectionDocuments/Government%20and%20administration/R%20Mediu m%20Term%20Financial%20Plan%2020120718%20APC.pdf

States of Jersey Annex to the Draft Medium Term Financial Plan

http://www.gov.je/SiteCollectionDocuments/Government%20and%20administration/R%20annex %20to%20draft%20Medium%20Term%20Financial%20Plan%202013- 2015%2020120808%20JS.pdf

Record of Public Hearing with Assistant Minister for Economic Development dated 19th September 2012

http://www.statesassembly.gov.je/ScrutinyReviewTranscripts/2012/Transcript%20- %20%20Incorporation%20of%20Ports%20of%20Jersey%20-%20Minister%20for%20ED%20- %2019%20September%202012.pdf

Response to Scrutiny questions

http://www.statesassembly.gov.je/ScrutinyReviewSubmissions/Submission%20- %20Medium%20Term%20Financial%20Plan%20-%20Economic%20Development%20- %205%20October%202012.pdf

HSSH Scrutiny Panel

Review of the Medium Term Financial Plan (MTFP)

Department of Education, Sports and Culture

Contents

1. Conclusion  1
2. The MTFP In Relation to the 2012 Annual Business Plan  2
3. Departmental Services  3
4. Growth Allocations  4
5. Other Allocations  6
6. Capital Allocation  8
7. Savings  9
8. Cross Cutting Matters   10
9. Other Matters  10

9.  Bibliography  11

Conclusion

• MTFP growth funding supports the major role played by the Department in Getting People into Work (Strategic Priority 1) through provision for increased numbers at Highlands, the introduction of an entitlement for vocational training for 14-16 year olds, the development of a modern apprenticeship scheme which incorporates training allowances. The MTFP base budget includes an allocation of £1.9m for skills and training to support ongoing work placement schemes, although £950,000 a year has been transferred to Social Security to support the Advance to Work and Advance Plus schemes.
• Provision for a new ICT strategy (£3m capital funding over three years plus £240,000 carry forward from 2011) is a crucial element in a programme to realign the education and training of the current workforce with needs of employers (priority 4.1 of the Economic Growth and Diversification Strategy). However the Panel notes that previous growth funding for ICT was delayed for one year to meet the Comprehensive Spending Review ("CSR") savings shortfall.  
• The other main challenges for the Department, funded by the MTFP growth allocation, relate to higher than expected numbers in the primary and nursery sectors and university fee increases in the UK. Growth funding for the latter has been deferred until 2014 on the grounds that any underspend in 2012 is carried forward in order to manage increased demand.
• The MTFP recognises that ESC has been unable to meet the original CSR savings target for 2011-2013 (£11.1m) and that there is a shortfall in savings of £6.3m by 2013. The Council of Ministers has agreed to reduce the ESC target savings to £7.6m and to extend the period for realising these savings until 2016 when the shortfall will be reduced to £3.5m. To account for this the MTFP proposals include an increase in the ESC cash limit in 2013 of £6.3m reducing to £4.6m in 2015 as the savings are realised.
• The savings programme includes increased sports income, through a combination of increased participation and price rise slightly above inflation, and a review of grants to clubs and associations. The Scrutiny Panel is concerned about the impact of proposals

to increase the cost to the public of participating in sport and to restore budget cuts to clubs and associations and intends to examine the Department's strategy for promoting sport at all levels including disabled sports.

• The Panel is seeking clarification of the funding for Jersey Heritage Trust asset renewal given the low returns from the CI summer lottery.

• The MTFP in relation to the 2012 Annual Business Plan ("ABP")

1. How do the Department's cash limits in the MTFP compare with those in the 2012 ABP?

The net expenditure limit for ESC for 2012 was £101,655,000; the indicative spending limit for 2013 is £104,334,000 (an overall increase of £2,719,000) which includes an ongoing allocation of £1.9m per annum for skills and training to support work placement schemes (Highlands, Advance to Work, Advance Plus, Careers strengthening etc) and an adjustment of £6,303,000 for the CSR savings shortfall. The CSR adjustment reduces to £4.6m in 2015. £950,000 of the skills and training monies has been transferred to Social Security to run the Advance to Work and Advance Plus schemes

2. What commitments from the 2012 ABP have been taken forward? Growth funding was provided in 2012 for

1. the development of a new ICT Strategy to respond to curriculum development. Implementation of this strategy was deferred for one year in order to meet the CSR savings shortfall - £652,000.
2. Higher Education (student finance) in response to expected increases in UK university fees. This funding was returned to Treasury & Resources ("T&R") as proposed changes in the UK were deferred for a year - £800,000.
3. Teachers' terms and conditions of service – to implement agreed changes to lunch supervision and protected time for planning, preparation and assessment - £800,000.
4. Skills Strategy – development of vocational options for 14-16 year olds as an alternative to traditional teaching methods and to meet local employer demands – £200,000

The 2012 ABP contained indicative growth proposals for 2013 for

1. the ongoing development of the Skills Strategy - £50,000
2. the early release of funds to allow employment of staff on a temporary basis to prepare for the 2015 Island Games - £100,000.

3. What developments have there been?

A larger than expected increase in school age population as a result of both the birth rate and net migration (net 400 increase in student numbers in the last 5 years), which will present a significant challenge for the primary sector in 2014/15 (numbers are expected to increase by 200 by 2015) and will require new accommodation particularly in the town area. Nursery Education is similarly affected by rising numbers.

The current recession and subsequent high unemployment has resulted in higher student numbers in post 16 education, impacting principally on Highlands College.

• Departmental Services

1. What service changes, if any, will the Department implement?

Vocational training for 14-16 year olds is being developed following successful pilot schemes.

The development of a modern apprenticeship scheme to support young people in progression from school to work.

Closer collaboration between Highlands and Hautlieu is being explored through the appointment of an Interim Executive Principal for both institutions

£950,000 has been transferred from the ESC budget to Social Security for employment schemes (Advance to Work and Advance Plus). Careers strengthening remains with Education.

Service reviews are being undertaken on the provision for special needs including educational psychology.

2. What policy changes within the Department are imminent?

No major policy changes are envisaged in the life of the MTFP; however, the Department is potentially exposed to further developments in the UK on higher education fees and curriculum changes.

The recent consultation paper, Learning for Tomorrow's World', did not indicate any strong public demand for fundamental policy change in the system of primary and secondary education. The ESC Department is working on a number of issues raised in the consultation and further Green or White papers may be issued as appropriate. A Sports Strategy is under development for consultation in 2012/2013. This will address funding for sports development and facilities. A strategy for the Youth Service is also in preparation for 2013.

3. How does the Department address the Strategic Plan priorities?

The Department is playing a major role in Strategic Priority 1, Getting People into Work, through provision for increased numbers at Highlands, the introduction of an entitlement for vocational training for 14-16 year olds and the introduction of a modern apprenticeship scheme.

4. What increases in staff numbers does the MTFP propose?

The MTFP allows for an increase of 60 full time equivalents ("fte") by 2015 which reflects increased numbers at Highlands including additional support for the apprenticeship and 14- 16 vocational schemes (23 fte plus 23 zero hour contract conversion; 6 fte for Higher Education) and in schools (9.6 fte in primary partially offset by a decrease of 8 fte in secondary plus 2.8 fte holiday conversion), the requirements of the ICT strategy (2 fte) and project management (1 fte). Two fte posts have been lost through CSR.

• Growth Allocations

1. Which of the Department's growth bids were successful? Are they justifiable?

Three successful growth bids are directly related to Strategic Priority 1, Getting People Back to Work. Two further successful bids are related to increased numbers in nursery and primary schools (statutory provision). Its bid relating to Higher Education ("HE") fee increases was also successful but is not funded in year one of the MTFP.

A further growth bid relating to a commitment by the States to underwrite the renewal of Jersey Heritage Trust visitor assets was also successful but its funding was due to derive from the CI Summer Lottery, not from central contingencies or growth funding.

• Vocational training for 14-16 year olds: £355,000 in 2013 rising to £500,000 in 2014 &
  15. Pilot schemes have indicated that vocational schemes encourage engagement with the curriculum and participation in further training.
• Highlands College – provision for increased numbers (circa 1000 students in total) as a result of the recession. £549,000 in 2013 rising to £610,000 in 2014 & 15. The trend in numbers is expected to continue for the foreseeable future. 90% of 16-18 year olds in Jersey are staying on in education or training.  The Scrutiny Panel is seeking assurance from the Department that the College is sufficiently resourced to cope with the increased rolls of students.

• Training allowances and apprenticeship schemes – vocational learning support for 120 young people: £380,000 per annum for three years of MTFP. A modern scheme developed in partnership with the Skills Board, based on research on best practice in jurisdictions such as France and Germany. The Scrutiny Panel intends to examine the Department's plans for apprenticeships and has requested access to this research.
• Increased demand in the primary sector - To cope with latest demographic information two new forms will open in September 2012 with consideration of two additional forms each year up to 2015. £345,000 in 2013; £600,000 in 2014; £631,000 in 2015
• Nursery Education Fund – Increasing student numbers are affecting nursery provision. This funding will provide for 500 places a year (instead of original estimate of 440). £230,000 in 2013 rising to £240,000 in 2014 & 2015
• Jersey Heritage Trust – rolling programme of asset replacement and refreshment. £288,000 in 2013 rising to £320,000 in 2014 & 2015. The CI Summer lottery was expected to provide the funding to meet this ongoing requirement; however, it is clear

that the proceeds will not be sufficient. The States has committed to underwriting this funding (P.75/2010) in the event of this shortfall; the source of funding now is uncertain given the low returns from the Summer Lottery and the Scrutiny Panel

has requested clarification.

• Higher Education – UK Government fee proposals. The Department predicts a requirement for the grants budget to rise by at least £2m by 2015. No growth in 2013 following provision of £800,000 carry forward in 2012; £1.49m in 2014; £2.3m in 2015

2. Which bids, if any, were unsuccessful and what will the impact be?

The Department's unsuccessful bids relate to discretionary matters.

• Extension of Professional Partners – Private schools will not have the benefit of the system. Performance evaluation and change management for these schools will continue to be provided in alternative ways. The Scrutiny Panel has requested an assessment of the impact of not funding this proposal.
• Higher Education grant – increase threshold on parental income to 2001 level – families on low and middle incomes will struggle to support their children through university.
• Higher Education – increase maintenance grant back to 2001 levels – the real value of the student maintenance grant will continue to decline.

3. Did any spending pressures not lead to growth bids?

• Skills and training - A commitment in the 2012 ABP to continue £1.9m fiscal stimulus funding has been provided from reducing the Restructuring Provision. Advance to Work and Advance Plus have been transferred to Social Security. Careers Strengthening remains with ESC.

4. Have all previous spending pressures been addressed?

The Department identified increasing costs of entry fees for UK examinations awarding bodies, special needs provision (particularly UK placements) as funding pressures which are being addressed by other means (by service reviews and efficiencies, not through growth bids).

The indicative growth proposal in the 2012 ABP for the Island Games features in the MTFP.

• Other Allocations

1. What access to contingency funding will the Department have?

The Department's growth bids relating to vocational training, increased numbers at Highlands College and the training allowances/apprenticeship schemes will be funded from central contingencies for the first two years of the MTFP. Its bids relating to demographic numbers, and nursery provision will also be funded, in year one only, from central contingencies. Its bid to cover for increases in HE fees is not funded in the first year. Subsequent years will be funded from growth

The Department maintains its own internal contingency reserves to manage teacher absence and to address one-off unforeseen pressures. The Department is seeking to carry forward any under spend in 2012 in order to manage any increases in higher education fees for 2013 as there is no provision in the MTFP for that year (growth funding commences in 2014). £800,000 was also carried forward from 2011 for this purpose.

2. What access to restructuring provision will the Department have or be asking for?

ESC has carried forward (a) restructuring reserve of £195,650 from 2011 to leverage staff changes in secondary education consequent on falling numbers and (b) a provision of £60,000 for restructuring the framework for teaching assistants.

A commitment in the 2012 ABP to continue £1.9m fiscal stimulus funding for skills and training has been provided from reducing the Restructuring provision. There are no current requests into the central restructuring fund.

The department has updated its management structure and introduced a new data management team and strengthen project management.

3. What impact is expected on the Department's sources of income?

The main sources of income to the Department in 2012 are (a) school fees (£9m); (b) course fees and other income from Highlands College (£3m); (c) Sports centres and playing fields (£3.7m); (d) other, including nursery hours, school lunches, facilities hire and property rental. Charges may be increased above the States 2.5% anti-inflationary rate to reflect increased costs, subject to approval of a business case.

Increased sports income of £144,000 is to be achieved by 2016 as part of the revised programme of CSR savings. As total income from sport in 2013 amounts to £4.3m, the Department does not expect the impact to be significant.

The introduction of charges for instrumental music are part of the CSR plan but would be subject to approval by the States.

The property occupancy charge for fee paying provided schools (Victoria College and JCG) will rise.

4. What access to carry forward funding has the Department received? ESC carried forward £3,353,660 from 2011 to be utilised as follows:

• Delegated financial management – balances belonging to individual schools who may carry forward up to 3% of their budget
• Fee paying schools – surpluses accumulated in fees
• Higher Education – underspend on university fees in 2011 will mitigate uncertainty in fees levels for 2012/13 and beyond
• Healthy Eating School contract – balance of funds to complete the project
• Departmental restructuring reserve – to leverage staff change as a result of smaller numbers in secondary school
• Lunchtime supervision shortfall – to increase funding available to schools
• Teaching assistant restructuring – to introduce a new framework for teaching assistants
• Nursery Education Fund Growth – increasing numbers going into nursery education
• Sports Advisory Council grant – reinstatement of part of 2012 cut.
  • ICT – to implement the Department's ICT strategy. The MTFP proposes additional capital funding for a new ICT strategy which will respond to curriculum development, initiatives such as Digital Jersey and Gigabit Jersey and the requirement better align education and training with the demands of employers. The new strategy will also involve the retraining of teachers to be able to deliver a more sophisticated curriculum. The new strategy should be available by Easter 2013 and curriculum change is anticipated for September 2014. The Scrutiny Panel will closely monitor this strategy which is a crucial strand of the recently approved Economic Growth and Diversification Strategy (Priority 4.1)

• Capital Allocation

1. What are the Department's capital projects? 2013: School ICT - £1m; St Martins School - £7.7m

2014: Autism Support Unit - £1.066m; FB fields running track - £810k; Les Quennevais artificial pitch - £650k; St James Centre -£2.5m; Replacement primary school - £15m; School ICT - £1m

2015: School ICT - £1m

2016: Les Quennevais School refurbishment and extension - £7.5m 2017: Grainville School Phase 5 - £9.7m

2018: Le Squez community centre - £2m

2016 -20: Jersey Heritage: refurbishment and improvement of facilities at Elizabeth Castle - £10m (£2m per year over five years)

2. Which capital needs, if any, are not being addressed?

The proposed commencement of Les Quennevais and Grainville Schools projects has been delayed.

Construction of Skills Centre, redevelopment of Crabbé Activity Centre and refurbishment of St Mary's school not included in the capital programme.

• Savings

1. Has the Department met its CSR savings for 2012 and 2013 and, if not, what contingency plans have been put in place?

The original target for CSR savings of £11.1m will not be met due to the States decision in P.72/2011 not to support the reduction of subsidies to fee paying schools. The Council of Ministers has agreed to reduce the savings target for ESC to £7.6m and to extend the period for achieving these savings to 2016. An adjustment of £6,303,000 has been made to the ESC budget to cover the CSR savings shortfall for 2013 reducing to £4.6m in 2015.

2. What savings proposals, if any, will the Department implement in 2014 and 2015?

The Department has agreed to a programme of savings totalling £4,466,000 to be achieved between 2013 and 2016. The savings arise from:

• Non - fee paying sector – managing demographic change - £1,086,000
• Fee paying sector – introduction of property occupancy charge for VC and JCG; ceasing grant to independent preparatory schools (St Michael's and St George's); aligning funding formula for all fee paying primary schools - £810,000
• Student Finance – return of 2012 growth money to Treasury and introduction of household assessment for fees (following a White paper consultation) - £1.9m
• Special Needs – new model of vocational education - £250,000
• Library – removal of funding for trainee librarian - £23,000
• Youth Service – restructuring of management team - £40,000Sports Division – restructuring of management team; increased sports income, reduction of grants to clubs and associations, devolved pitch management - £199,000. The Scrutiny Panel is concerned about the impact of increasing the cost to the public of participating in sport and the restoration of budget cuts to clubs and associations. The Panel intends to examine the Department's strategy for promoting sport at all levels including disabled sports.
• Arts and heritage – 5% savings on grants - £59,000
• Charges for instrumental music - £90,000

3. What user pays charges have been considered and which are proposed in the MTFP?

The following new charges were described in the 2012 ABP: (a) Nursery education – payment for additional hours in school nurseries and (b) introduction of charges for instrumental music

4. What plans for outsourcing, if any, does the Department have?

None

• Cross-cutting Matters

1. What proposals within the MTFP will impact upon the work of other Departments? Transfer of skills and training schemes to Social Security
2. What proposals within the MTFP are dependent upon the work of other Departments? Skills strategy – partnership with EDD and Social Security

8.  Other matters

Procurement savings in 2013 - £700,600

States of Jersey Draft Medium Term Financial Plan (MTFP)

http://www.gov.je/SiteCollectionDocuments/Government%20and%20administration/R%20Medium%20T erm%20Financial%20Plan%2020120718%20APC.pdf

States of Jersey Annex to the Draft Medium Term Financial Plan

http://www.gov.je/SiteCollectionDocuments/Government%20and%20administration/R%20annex%20to% 20draft%20Medium%20Term%20Financial%20Plan%202013-2015%2020120808%20JS.pdf

Record of Public Hearing with Minister for Education, Sport and Culture dated 26th July 2012

http://www.statesassembly.gov.je/ScrutinyReviewTranscripts/2012/Transcript%20- %20Medium%20Term%20Financial%20Plan%20Review%20- %20Minister%20for%20Education,%20Sport%20and%20Culture%20-%2026%20July%202012.pdf

Response to Scrutiny questions

http://www.statesassembly.gov.je/ScrutinyReviewSubmissions/Submission%20- %20Medium%20Term%20Financial%20Plan%20-%20Education,%20Sport%20and%20Culture%20- %205%20October%202012.pdf

HSSH Scrutiny Panel

Review of the Medium Term Financial Plan (MTFP)

Department of Health and Social Services

1. Conclusion  1
2. The MTFP In Relation to the 2012 Annual Business Plan  3
3. Departmental Services  3
4. Growth Allocations  4
5. Other Allocations  6
6. Capital Allocation  7
7. Savings  8
8. Cross Cutting Matters  9
9. Other Matters  10
10. Bibliography  12

Conclusion

As a result of the work undertaken, the following matters in particular should be noted:-

• Report and Proposition  

A fundamental part of the future of the Island's Health & Social Care relies on the Proposition being approved. The hospital is listed in the MTFP as a marker to say "it is happening" and if a key area does not obtain funding, the future of the Island's health will start to unravel. The Department has told the panel that it is not an area that can be cherry picked.

• Health Insurance Fund ("HIF")

The States agreed that funding from the HIF would continue until the end of 2012. The Council of Ministers has asked that a proposition be considered for HIF funding to continue until 2015.

• Information Services

Funding has not been allocated in the MTFP for the development of significant IT systems. Funding has been identified within Phase II of the Health White Paper ("HWP"), although this will not be until post 2015.

• Nursing Staff

The inability of a population the size of Jersey's producing sufficient qualified nurses means recruitment is normally done off Island and predominantly in the British Isles. At times it has been difficult to recruit and retain nursing staff and the Department has been working with the States Employment Board ("SEB") and in partnership with the nursing trade unions to carry out an Equal Pay for work of Equal Work review for nursing staff. This scheme has involved looking at a basket of nursing jobs currently on the Nurses and Midwives pay structure in Jersey and comparing them with similar posts in other pay groups within Health & Social Services ("H&SS") and with the National Health Service ("NHS"). The Panel have been informed that findings showed that there was a substantial difference in pay of jobs with equal weighting, depending on the grade of post. The results of the findings have now been taken back to the SEB seeking agreement to do some additional research on how to close

the gap within the existing resource. The H&SS Finance and Human Resource Directors ("HRDs") are working with Treasury and Employment Relations - Chief Ministers Department on looking at a way forward how to address the issues the work to date has identified.

Certain initiatives that have been put in place are under review but it does not necessarily mean that nursing staff will remain in Jersey.

• 2% Business As Usual ("BAU") Growth

The Department has been allocated 2% real growth for BAU items. The Department reported that expenditure relating to new drugs and the increase in inflation on drugs is a significant demand on this 2% growth. The Department has links with Guernsey and the NHS and can achieve discounts through collective purchasing however it is presently unclear whether there is a contingency in place should the increases exceed the growth allocated within the MTFP.

• Capital – The Hospital

Funding (approximately £300m million in the MTFP) is required for a new hospital. There is a budget of £350,000 for a feasibility study in 2013 and £2,000,000 for planning in 2014. These proposed costs are listed within the Capital Programme for 2013 – 2015. The Capital Programme does not list the £332 million of funding for the hospital and hospital ward extensions and states "this position excludes an estimated £300 million for hospital works and £32 million for hospital ward extensions – future funding options are being actively pursued".[103] Further reference has not been made as to which further options are available and what avenues are being pursued for funding. There is also significant investment required to deliver Phases 2 and 3 of the Health reforms which is still to be determined. The Hospital Pre-feasibility study is due to report in October 2012. This will provide greater clarity regarding the size of hospital required. The States Members briefing prior to the Report & Proposition debate will provide additional information.

• Residential Care

There are several key areas that require addressing within the special needs service. The Panel and an expert Advisor earlier this year published a review of respite care services for children and young people with complex and challenging needs. The

sums allocated respond to some of the recommendations made in that report but more detail is required. A budget of £4 million has been allocated for a care home for adults with complex needs with £2 million allocated for children's homes.

• The MTFP in relation to the 2012 Annual Business Plan ("ABP")

1. The 2012 ABP provided the Health Department with a net expenditure limit of £171,211,800. The net expenditure limits proposed in the MTFP are £184,262,400 for 2013, £190,621,400 for 2014 and £197,981,400 for 2015. We were advised that the reason for the difference was "the draft MTFP includes funding for the implementation of the White Paper, vehicle replacement and a reduction relating to procurement savings."[104]
2. The 2012 ABP included real growth funding of 2% for BAU issues, Nursing establishment and recruitment and medical staffing, all of which have been taken forward.
3. Cumulative growth allocations within the MTFP amount to £5,370,000 for 2013, £10,180,000 for 2014 and £14,180,000 for 2015 and are committed to supporting strategic priorities as outlined in the HWP. Growth commitments of £7,320,000 for 2013, £2,130,000 for 2014 and £16,130,000 for 2015 have been committed from the 2012 ABP. An additional £1,447,000 for 2013, £744,000 for 2014 and £223,000 for 2015 have also been included as growth commitments from the 2012 Business Plan[105] but do not directly support strategic priorities.
4. A Sub-Panel has been set up to oversee the entire HWP process. Public Hearings took place throughout July and early September with the Minister from Social Security, the Minister for Treasury & Resources and the Minister for Health and Social Services. Public Hearings also took place during this time frame with various stakeholders. The Sub-Panel have appointed three advisors. One advisor has produced a draft report with the other two providing advice to the Sub-Panel. The Health & Social Services Department went to Public consultation with their HWP which finished in July. The Report & Proposition, which is the result of the HWP and consultation, has been lodged and is to be debated on 23rd October 2012.

• Departmental Services

1. The Department has plans to implement significant service changes in the near future, all of which is detailed within the Report & Proposition.
2. The Department has a number of delivery plans in place to address the Strategic Plan "Promote Family and Community Values". These are highlighted in the Outline Business Cases ("OBC") within the Report and Proposition and the Children and Young People's Strategic Framework which is being overseen by the Children's Policy Group[106]. At the Public  Hearing  with  the  Assistant  Minister  for  Health,  we  were  advised  that  ".as  a Department  we  do  not  lead  on  the  actual  Children's  and  Young  People's  strategic framework, but a lot of the work that we do contributes to that framework, to the Children's Policy Group, which I think has 6 or 7 streams of it"[107] The Children's Young People's Framework is overseen by the Children's Policy Group of which the Minister for Health & Social Services is the Chair.

3. Funding for  the  H&SS  side  of  the  development  of  the  services  for  children  which  are contained within the Services for Children Early Intervention OBC are included within the Report & Proposition for the first MTFP period (2013 – 15). The Report & Proposition and the HWP also outline the services for children that should be developed from 2016 onwards. It should also be noted that the OBCs only identify the strategic service investments. Services will continue to develop operationally to meet the needs of Islanders.
4. Staff levels are due to be increased by 120 full time equivalents ("fte") in 2013, 100 fte in 2014 and 60 fte in 2015. There is an increase of 66 additional fte in 2013 which relate to the implementation of the white paper.

• Growth Allocations

1. The  table  below  shows  growth  commitments  from  the  2012  Business  Plan  supporting strategic priorities as listed in the ABP.