Government Plan 2022-2025 Scrutiny Review ( Corporate Services Scrutiny Panel) (S.R.20:2021): Joint response of the Chief Minister and the Minister for Treasury and Resources

Findings

Comments

1

The  Government  Plan  does  not adequately  clarify  the  rationale  and purpose of policy, analytical context, economic  and  policy  implications  to ensure that it is possible to see how spending, taxation, borrowing and asset accumulation has happened in the past and where it will go in the future is not clear.

The  Council  of  Ministers  believe  that  the Government  Plan,  as  a  forward-looking document,  and  accompanying  documents  do provide  sufficient  information  to  allow  the Assembly to consider and agree the Government Plan. However, they are committed to continually improving the document.

2

The  cost  of  living  and  household survey, a key indicator of inequality, has not been published since 2015. This has  significantly  restricted  the measuring of metrics to household and individual  income  and  wealth.  The Government Plan is therefore unable to adequately present how taxes, transfers and  spend  reduces  the  dispersion  on income  and  wealth  or  confirm  how sufficient  measures  to  achieve  the

Statistics  Jersey  explain  the  situation  with  the Living Costs and Household Income Survey on the website Living Costs and Household Income

The Living Costs and Household Income Survey (LCHIS - formerly the Household Spending and Income Survey) collects information on income and spending and allows for the production of income distribution statistics as well as enabling updating of the weights for the RPI basket of goods'. The last income distribution analyses was

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inequality  policy  objective  will  be accomplished.

Statistics Jersey started the 2021/22 LCHIS in September 2021 and this will run for a year. The survey  runs  for  a  year  to  ensure  capture  of different spending patterns throughout the year – for example spending is typically higher in the build up to Christmas. However, Statistics Jersey provisionally expect a preliminary report from the 2021/22 survey to be released in August 2022.

3

The Government Plan appears to be set on a course where taxes will need to rise in future years even if the ambitions to make  spending  more  efficient  are realised.  However,  no  plan  has  been

Major tax reviews are announced in the annual Government Plan. The Government will continue to  keep  the  need  for  further  revenue-raising measures under review in the light of the reports it receives from the Income Forecasting Group.

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proposed  even  though  this  is  due  to current  spending,  capital  investment and borrowing.

At present, the Government Plan is forecasting healthy surpluses for future years.

4

The  Panel  has  undertaken  a  separate review of the proposed changes to the GST de minimis and have made various recommendations for the Minister for Treasury  and  Resources  to  consider prior to the debate of the Government Plan.

 The Treasury Minister will make her response to the Panel shortly.

5

The Panel has lodged an amendment to the Government Plan to include a level increase  in  alcohol  duty  which,  if adopted, will aid in keeping taxes low, broad, simple and fair. The amendment is sympathetic to the potential impact upon  the  hospitality  sector  of  any increase in alcohol duty as it recovers from the pandemic and is a reasonable compromise between revenue raising, public health and economic support.

The States Assembly approved the amendment on 14 December.

6

The  Panel  has  brought  forward  an amendment to the Government Plan to place  additional  stamp  duty  upon properties purchased as a "Buy to Let" investment property, second home and holiday  home  to  help  alleviate  the continuing demand for property in the Island and allow owner-occupier and first-time buyers preferential financing when buying their own home.

The  Government  is  preparing  to  develop  this proposal  following  its  adoption  by  the  States Assembly. The work will take priority over other aspects of the Stamp Duty Review.

7

There is no clear justification in either the Government Plan 2022-2025 or the Draft Finance Law to support either the current Commercially Let Property Tax Relief  regime  or  the  proposed amendments  to  it.  In  addition,  no reporting  was  provided  during  its introduction as part of the Income Tax (Amendment  No.23)  (Jersey)  Law

It is a fundamental and long-standing principle of Income Tax, as it relates to business activities, that profits  are  taxed  net  of  legitimate  business expenses incurred wholly and exclusively in the course and furtherance of that business. This has been  a  feature  of  Jersey's  tax  system,  to  one degree or another, since its inception in 1928. Various  adjustments;  qualifications;  and enhancements have been made over the years, as

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2004, and the minutes of the respective debate on this proposition provide little insight into its justifications.

the Panel notes. (The 2004 changes were simply restrictive in nature.)  

Borrowing to buy property for commercial letting (offices  and  dwellings)  is  widespread  in  the economy. And tax deductibility of related debt interest is admissible. Rents are tax deductible where  wholly  and  exclusively  incurred  by businesses for business purposes.

Adjusting this position for most sectors of the economy is probably undesirable and could have significant impact on Jersey's economy.

Some jurisdictions have limited interest relief on borrowing related to the letting of dwellings (for example, the interest on "buy to let" mortgages).

8

Fiscal rules in relation to borrowing do not  take  account  of  controls  for spending.

The  Fiscal  Framework  and  Financial  Strategy cover more than just borrowing. Combined with FPP recommendations and the requirements of the Public Finances Law these provide a framework that covers the balance of expenditure and revenue raising  to  achieve  long-term  sustainability  of public finances.

Control of spending should be considered in the context of the level of revenues being raised, as both  of  these  aspects  are  within  the  remit  of government.

9

The Council of Minister's acceptance of a BBB Standard and Poor rating is a significant change in policy and would be a diminution in Jersey's credit status. If such a point was reached it would have a significant impact on the island's economic future.

There are no statements within this Government Plan which reference acceptance of a BBB credit rating. The Panel may be referring to one of the several reporting metrics in the Debt Framework (R.132/2021)  published  in  August  2021.  This refers to a minimum rating requirement which reflects  a  rating  for  "investment  grade"  debt issuance thus ensuring that the States of Jersey's bonds  are  attractive  to  the  widest  range  of investors.

There are several stages between the current rating of AA- and BBB- which afford opportunities to re-consider Jersey's approach to economic growth and debt issuance to mitigate any negative effects on the credit rating.

Findings

Comments

10

Allowing the Government to utilise a further  £20  million  for  the  Fiscal Stimulus Fund is unjustified. The Panel has  lodged  an  amendment  to  the Proposition  to  remove  the  borrowing and require the Minister for Treasury and Resources to come forward with a new  proposition  to  the  Assembly  if further  funding  is  required  to  meet timely,  targeted  and  temporary objectives.

Ministers followed the advice of the Fiscal Policy Panel to retain flexibility to allow for future fiscal stimulus, due to the ongoing uncertainties as a result of Covid. However, there are no plans to allocate  funds  to  new  projects,  and  existing projects will be completed within the approval of £29,641,000.  Consequently,  the  Council  of Ministers have accepted the Panel's amendment.

This reduces total approved borrowing for fiscal stimulus by £20.4m. Actual forecast borrowing will not be affected.

11

There is no detail in the Government Plan in respect of the calculation of the actual  savings  figures  and  actuarial assumptions  in  relation  to  the borrowing for the Past Service Pension Liabilities.

The  technical  calculations  involved  were  not included  in  the  Government  Plan,  which  is intended to be an accessible document.

These  detailed  calculations  could  have  been provided if requested by scrutiny.

The assembly have agreed the principles of the re- financing of the pre-1987 pensions debt.

12

Article 6 (2) of the Public Finance Law (Establishment  of  other  funds)  states that  when  establishing  a  Fund,  the States must specify the purpose of the fund,  the  fund's  terms  and  the circumstances in which the fund may be wound  up.  By  not  providing  this information within the proposition for the  Technology  Fund  the  Panel concludes that the Council of Ministers may not have adhered to the intentions of Article 6 (2) or Article 9 (4) (b) of the Public Finance Law which states that the Government Plan must include any other information that the Council of Ministers believes that the States may reasonably be expected to need to order to  consider  matters  mentioned  in paragraphs  (2)  and  (3)  and subparagraph  (a)".  Paragraph  (2)  (b) states  it  as  being  for  the  proposed amount of any transfer of money from one States fund to another during the financial year.

The  Government  Plan  clearly  states  that  the Council of Ministers will bring

a proposal to create this fund, which would be under Article 6 of the Public Finances (Jersey) Law 2019.

It  remains  entirely  appropriate  to  signal  the intention  to  create  this  fund  to  invest  in Technology in the Government Plan, and to ring- fence  the  extra-ordinary  dividend  from  Jersey Telecom to achieve this purpose.

If the assembly do not approve the creation of the fund when the proposition is bought, the transfer to the Technology Fund will fall away. No money can be spent without that approval. The Assembly did  not  support  part  (a)  of  the  amendment  as amended.

Findings

Comments

13

The extent to which Jersey manages to strike an appropriate balance between capital  and  current  revenue  spending should be reviewed.

Levels  of  Capital  and  Revenue  spend  are considered  in  each  Government  Plan  in  the context on the Fiscal Framework, Public Finances Law requirements and the financial strategy of the Council of Ministers.

The  balance  is  likely  to  vary  based  on circumstances in each plan - for example where significant  investment  is  needed  in  a  new Hospital.

14

The Government of Jersey is proposing a number of revenue programmes and capital  projects  that  relate  to Information  Technology  across  the departments, with the total expenditure equivalent to £65.4 million in 2022, and £161.1  million  over  the  life  of  the Government Plan 2022 – 2025.

The Government Plan sets out the detail of the Information  Technology  expenditure,  including which Department is accountable. The figures represent incremental growth over and above the 2019  baseline,  a  year  when  virtually  no investment was made in Information Technology.

As such, the figures quoted not only include the costs of current ongoing projects and programmes but  the  revenue  impact  of  those  projects  and programmes completed since 2019 e.g. licenses, additional staff costs, contracted services as well as  the  anticipated  costs  of  future  projects  and programmes expected to commence by 2025.

15

The  budget  of  Modernisation  and Digital requires greater oversight by the Assembly.  As  seen  with  previous Government  spending  on  technology projects there is a clear risk of costs of programmes and projects escalating or being duplicated if spending discipline is not enabled.

The  Modernisation  &  Digital  budget  has considerable  oversight  and  is  reported  upon monthly. The overall budget is overseen at an officer level by the Principal Accounting Officer and the Accountable Officer for M&D (The COO) and at a political level by the relevant Assistant Chief Minister. Budgets are managed in line with the  Public  Finance  Manual  and  are  subject  to external audit as part of the year end process.

On the major technology programmes monthly results are prepared, validated and compared to anticipated  budget  spend  each  month  by  the designated GoJ Finance Business Partner. Once the month end results are drafted these are shared with  the  respective  Programme  Managers  for review and discussion. Final results are circulated to  the  Accountable  Officer  and  the  respective Programme Boards.

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All the above of which are reported in the Annual Report  &  Accounts  and  the  6  Month  Update report as required under the Public Finances Law.

16

Detailed,  realistic  and  time  bound efficiency targets for all years should be built  into  the  four-year  Government Plan to support departments to plan how they will achieve sustained efficiencies.

The  rebalancing  programme  covers  the  whole period of the plan, and delivery plans for delivery of rebalancing on a recurring basis continue to be developed and refined.  

17

Information  about  unit  costs  and exploration  of  different  means  of service should be explored further for efficiencies.

Government  continues  to  work  to  drive efficiencies  through  the  Rebalancing  and efficiencies  programme  for  which  specific departmental targets have been established over a number  of  years.  Measures  to  delivery  these efficiencies  are  based  on  available  data  and projections.

In addition, a programme of departmental Zero- based  budgeting  reviews  is  in  progress  which explores these lines of enquiry. However, data quality and availability remain challenging. This issue will only be addressed with investment in systems infrastructure and the development of a data strategy, which in turn will require focussed resource and culture change.

18

The  Target  Operating  Model  of  the Modernisation and Digital Directorate may not be fully met until 2025, with a need expressed to add additional roles as gaps and shortages are identified.

The  Target  Operating  Model  has  been implemented  and  recruitment  continues. Following implementation of the 2020 operating model, there have been substantial changes as a result of ITS, and integration of areas such as Health, Education and Police.

19

It is forecast that the Staff Costs of the Modernisation and Digital Directorate will have underspent by £4.4 million over 2020 to 2021, however it is still anticipated that staff budget will remain the same. The Panel holds concern that this bolsters the Chief Operating Office Head of Expenditure unnecessarily.

There have been challenges in recruiting to areas of the Target Operating Model where specialist skills  are  required  such  as  architecture  and programme and project management. In these areas  there  has  been  a  requirement  to  bolster substantive  staff  with  external  resources,  and underspend in staff costs has been re-profiled to hired services.  

Attempts  to  recruit  continue  and  the  ambition remains to fill all substantive roles within M&D. In 2022 staff expenses will increase compared to 2021  as  a  result  of  annualization  of  recent

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recruitment and an expectation to fill vacant posts and subsequently a reduction of Consultancy.  

For 2021 the revenue outturn for M&D was £22m against  a  budget  of  £22m,  there  was  no underspend.

20

There has been a significant movement of  circa  £10  million  from  proposed allocation  to  the  revenue  programme "Technology  Transformation Programme"  to  capital  projects.  By 2024 the Project's funding bid will rise to a similar level of that prior to the transfer of this funding, and additional funding bids can be expected.

Under the updated PFL it is possible to record the total  cost  of  projects  on  a  single  head  of expenditure,  rather  than  splitting  capital  and revenue  elements.  This  change  ensures  that revenue costs related to the implementation of a project  are  captured  alongside  the  associated capital costs to show a more transparent view of a project's  implementation  cost.  The  ongoing revenue consequences of projects (e.g. licences) are then reflected in the departmental Head of Expenditure  given  that  they  form  recurring revenue requirements.

 The transfers made in respect of the Technology Transformation Project (TTP) allow the budgetary allocations  to  better  reflect  the  intended  split between  project  implementation  costs  and  on- going  revenue  consequences.  They  do  not increase the overall funding allocated to the TTP.

21

The Chief Minister has not committed to  providing  evidence  of  monetary benefit  of  the  Technology Transformation  Programme,  it  is therefore difficult to ascertain value for money.

The major technology investments between 2020 and  2023  have  always  been  described  as foundational and established largely to address the significant  technology  debt  built  up  over  the previous decade or so. Whilst some programmes will  deliver  quantifiable  financial  savings,  risk reduction,  service  improvements  and  avoided future costs are a significantly bigger driver. For example:

The existing finance system dates back to 2005 is no longer subject to a formal support agreement. Were a significant issue to arise, then there is no guarantee that it could be fixed and that could leave  the  Government  without  any  financial records or ability to receive or make payments.

Similarly, the direct cost of a successful cyber- attack could be many millions of pounds but the indirect  costs,  reputational,  environmental  and

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potentially to human life could be significantly greater.

The  MS  Foundations  Programme  has  enabled staff to work more flexibly during the pandemic and indeed allowed the Assembly to continue to meet virtually. Had this programme not been underway when the pandemic struck, the impact on government and on the services it delivers to islanders would have been considerable and the costs of lost productivity substantial.

Whilst  the  Electronic  Document  Management System  will  deliver  some  financial  savings, principally related to the costs of moving vast amounts of paper around the hospital, it will also avoid  the  costs  of  building  a  store  for  paper records  in  the  new  hospital  and  in  the  new Headquarters building.

22

It is proposed the Capital Project MS foundations receive a transfer of £4.4 million  from  the  "Technology Transformation  Programme"  (GP20- OI3-14) and that further funding will be required  for  ongoing  revenue  costs which  will  require  resubmission  in subsequent plans.

As described in 20, the transfer of £4.4m took place as a result of an internal budget reallocation from the Technology Transformation Programme (TTP)  Head  of  Expenditure  (HoE)  to  the  MS Foundations HoE. There is no overall impact on the financial position as a result of this transfer.  

Evolving technology requirements may result in a requirement for additional monies which would be requested through the standard business case process.   The  driver  on  this  is  related  to  the headcount (internal staff and consultants) which is directly attributed to the support required on all GoJ department projects and will fluctuate over time. The original funding was based on internal staff only which has resulted to a shortfall in order to cover cost for the additional support required.

See  previous  comment  (18)  of  integration  of business  areas  such  as  Health,  Education  and Police creating additional demand.  

23

The Integrated Tech Solution is now estimated to cost £63 million compared to  £29.4  million  agreed  through  the Government Plan 2021-24.

Details  of  the  proposed  expenditure  on  the Integrated Technology Solution are set out in the Full Business Case which was approved in Q1 2021. This included a reconciliation to the initial estimates set out in the Outline Business Case (approved in Sept 2019) which was the basis for

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the Government Plan 2021-24 (carried forward from the 2020-23 Government Plan). The process of moving from Outline to Full Business Case was undertaken in line with the principles of the HM Treasury Green Book.

24

The  Capital  Project  Electronic Document  Management  Solution Additional  will  receive  a  transfer  of £1.2 million from revenue expenditure in 2021.

Work was due to commence on the capital project Electronic  Document  Management  Solution' (EDMS) in 2021 but was delayed to 2022. The £500,000 allocated in the Government Plan in 2021 has been moved to 2022. A transfer of £700,000 has been moved from the TTP HOE to EDMS HOE in 2022, as described in 20 above. This is not an increase in overall expenditure, but a reallocation of funding.

25

The  completion  of  the  Cyber  capital project is  predicted  to  be  delayed  to 2023, costing a stated £14.97 million. It is anticipated that additional funding in 2023 will be required.

The underlying capital cost of the Cyber Security programme remains unchanged at £13.8m with a target  completion  date  for  end  of  2022.  The additional cost of £1.17m has been moved from the TTP HOE to Cyber HOE in 2022, as described in 20 above.

26

Additional funding has been proposed for Revenue Jersey to meet backlogs for transformational  work  and  the pandemic.

Improved performance has been achieved during the course of 2021 and is expected to continue during 2022 as backlogs of work reduce which arose over 2020 and 2021 (when Revenue Jersey assisted  thousands  of  taxpayers  in  financial distress).  Telephone  service  improved  against 2020 performance thanks to additional resourcing with over 66% of calls answered first time with an average  waiting  time  of  just  under  8  minutes (comparable to HMRC performance in the UK) and  an  average  time  to  serve  of  just  over  6 minutes.  A  "once  and  done"  approach  to answering  tax  enquiries  has  been  very effective. 2020 tax assessing was completed in the autumn of 2021 – a significant improvement on 2019 assessing in 2020. This was assisted by increased take-up of online filing (in its second year of availability) by personal taxpayers – rising to 43% in 2021 from 32% in 2020. Additionally, Revenue Jersey's work to refresh and improve its compliance  programmes  has  yielded  over  £20 million in additional tax revenues arising from taxpayer  error  and  omissions  when  filing  tax returns.

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27

Additional funding has been required to meet  further  increase  of  insurance costs, as new growth included in the Government  Plan  2021-24  did  not match  requirements  following  more hardening of the insurance market and a claim made during the pandemic.

This is correct and reflects a growing trend of higher insurance premiums that are anticipated in coming years. A further transfer of funds from the Consolidated Fund to the Insurance Fund has been approved  in  2022  to  assist  towards  these additional costs.

28

Funding  to  the  previous  revenue programme "Building Revenue Jersey Team"  (GP20-OI3-01)  been reclassified  to  the  capital  project Revenue  Transformation  Programme (Phase 3)'.

See response to Recommendation 19.

Recommendations

To

Accept/ Reject

Comments

Target date of action/ completion

1

The Council of Ministers should  review  and consider  amendments  to the Government Plan to ensure  it  delivers  a strategic  plan  which provides  greater  clarity about  the  rationale, purpose  and  analytical context of policy making which  will  ensure  the Assembly  holds sufficient  information  it needs  to  agree  the Government Plan as per the  requirements  of  the Public  Finances  Law (Jersey) 2019.

Co M

Neither accept nor reject (already in place)

The Council of Ministers believe that the Government  Plan  and  accompanying documents  do  provide  sufficient information  to  allow the Assembly  to consider and agree the Government Plan.

However, government regularly reviews the plan and any lessons learned, with the  aim  of  delivering  continuous improvements  to  the  plan  and  the information provided.

2

The Council of Ministers must deliver results from an updated cost of living and household survey, a

Co M

Neither accept nor reject

As explained in response to finding 2, the Chief Statistician aims to publish the analyses  from  the  2019/20  LCHIS dataset during Q1 2022.

Recommendations

To

Accept/ Reject

Comments

Target date of action/ completion

key  indicator  of inequality,  to  the assembly  by  the  31st March 2022.

It  is  simply  not  possible  to  publish analyses from the 2021/2022 LCHIS by 31 March as there will be insufficient achieved  sample  to  provide  reliable results.  As  explained  in  response  to finding 2, Statistics Jersey provisionally expect  a  preliminary  report  from  the 2021/22 survey to be released in August 2022.

It  should  be  noted  that  under  the Statistics and Census (Jersey) Law 2018 the  Chief  Minister  is  prohibited  from influencing  or  instructing  the  Chief Statistician in the collation of data or on the  form,  timing  or  methods  of dissemination of statistics. The Council of Ministers are therefore not permitted to  instruct  the  Chief  Statistician  to publish the LCHIS. Further information is  available  in  the  responses  to WQ.145/2021,  WQ.184/2021  and OQ.192/2021  in  which  the  Chief Minister expressed his desire to have the data  published  but  noted  the  legal constraints  preventing  him  from compelling Statistics Jersey from doing so.

3

The Minister for Treasury and  Resources  must deliver  fiscal  discipline and confront the direction of  travel  of  the  fiscal arithmetic  that  arises, from  the  spending, capital  investment  and borrowing plans laid out in  the  Proposition  by addressing  the  revenue raising measures over the medium term to provide transparency  on  the

Min T& R

Neither accept nor reject (already in place)

The Government Plan followed the FPP advice not to raise revenue measures in the short-term.

The Fiscal Framework, Public Finance Law  requirements,  and  the recommendations  of  the  FPP  already provide  financial  discipline:  for example, with requirements for balanced budgets in the medium term and not to overdraw the Consolidated Fund.

Recommendations

To

Accept/ Reject

Comments

Target date of action/ completion

consequential impact for taxpayers.

4

The Council of Ministers should  accept  the proposed  amendment  of the  Panel  to  provide  a level increase in alcohol duty to keep taxes low, broad, simple and fair.

Co M

Neither accept nor reject

The Council of Ministers notes that the States  Assembly  supported  this amendment,  and  the  Finance  (2022 Budget)  Jersey  Law  has  been accordingly adjusted and adopted by the States Assembly.

17/12/20 21

5

The Council of Ministers should  accept  the proposed  amendment  of the  Panel  to  place additional  stamp  duty upon  properties purchased as a 'buy to let' investment  property, second home or holiday home  and  specifically assist  owner-occupiers and  first-time  buyers  to purchase property.

Co M

Neither accept nor reject

The Council of Ministers notes that the States  Assembly  supported  this amendment  and  plans  are  being developed  to  bring  proposals  to  the States  Assembly  in  time  for implementation  from  1  January  2023. This work will take precedence over the wider review of the Stamp Duty regime.

31/12/20 22

6

The Minister for Treasury and  Resources,  mindful of the removal of interest relief  on  main  resident mortgages,  should  bring forward  a  proposal  to implement  a  phased removal of Commercially Let Property Tax Relief by 31 December 2022.

Co M

Reject

It is impossible to calculate the economic impact  of  this  recommendation  on Jersey's  economy  without  significant work and stakeholder engagement. The Government  has  no  plans  to  conduct such work in the near future. Revenue- policy officials are now giving priority to the delivery of the Panel's Amendment 22 relating to Stamp Duty.

N/A

7

The Minister for Treasury and  Resources  should produce  a  set  of  fiscal rules which take account for spending and focus on the  accumulation  of financial  assets  rather than  primarily  focusing on  the  sustainability  of debt and borrowing.

Co M

Reject

The Government Plan already includes a Financial Strategy based on the Fiscal Framework which is designed to take account of the long-term sustainability of  public  finances.  The  Fiscal Framework will be reviewed before the lodging of the next Government Plan. This will be a fundamental input in the next plan, and is a matter for the next government. It is not appropriate to pre- empt the outcome of the review.

Recommendations

To

Accept/ Reject

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Target date of action/ completion

Given  that  this  Government  Plan included new borrowing it was entirely appropriate that there was a focus on ensuring  that  the  borrowing  was sustainable  and  that  strategies  for repayment was in place.

The  Minister  continues  to  note  the advice  of  the  FPP  in  terms  of  the appropriate level of Reserves, but also that now is not the time to be taking action. The strength of Reserves remains an important pillar of our finances and will continue to be a part of future plans.

8

The Council of Ministers should  set  higher expectations  and reconsider its acceptance of a BBB Standard and Poor credit rating as the minimum  standard.  A higher  rate  should  be used instead to minimise its business and financial risks.

Co M

Neither accept nor reject

There is no reference to acceptance of a BBB  credit  rating  in  the  Government Plan  2022-25.  The  Debt  Framework (R.132/2021) published in August 2021 sets the States of Jersey's credit rating as a reporting metric' which forms part of the  wider  Debt  Strategy.  The  "BBB" rating referred to is not an acceptance of a  lower  rating,  it  simply  sets  the boundary by which bonds are considered "investment  grade",  above  which  the States bonds will remain attractive to the widest  possible  range  of  investors.  In reality, the Council of Ministers aspire for  Jersey  to  have  the  highest  credit rating possible, noting that the setting of such a rating is undertaken by an external body and is dependent on several factors. There  are  several  stages  between  the current rating of AA- and BBB- which afford  opportunities  to  re-consider Jersey's approach to economic growth and  debt  issuance  to  mitigate  any negative effects on the credit rating.

The Debt Strategy is due to be updated in 2022 once new debt has been issued and consideration will be given by the new  Minister  for  Treasury  and

End Q3 2022

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Resources  whether  to  re-assess  this metric.

9

The  Minister  should provide  a  report  to  the Assembly  by  the  31st March  2022  which confirms  the  impact  of the Fiscal Stimulus Fund. It  should  consider process, value for money and  provide  learnings against  the  Fund objective of being timely, targeted and temporary.

Min T& R

Reject

There are regular reporting deadlines set out in the Fiscal Stimulus proposition which cover the progress of the projects against the objectives of the Fund. This will consider the 3T criteria and value for money. As part of the final review it is intended to consider the process and the learnings over the time of the Fund.

The final report will be presented at a time  appropriate  to  provide  complete information to the Assembly.

10

The Council of Ministers should  accept  the proposed  amendment  of the  Panel  to  reduce  the borrowing capability for the  purpose  of  Fiscal Stimulus Fund.

Co M

Accept

Ministers had followed the advice of the Fiscal Policy Panel to retain flexibility to allow for future fiscal stimulus, due to the ongoing uncertainties as a result of Covid. However, there are no plans to allocate  funds  to  new  projects,  and existing  projects  will  be  completed within  the  approval  of  £29,641,000. Consequently, the Council of Ministers accepted the Panel's amendment.

This reduces total approved borrowing for  fiscal  stimulus  by  £20.4m.  Actual forecast borrowing will not be affected

11

Detail  in  respect  of  the calculation of the actual savings  figures  and assumptions for the Past Service  Pension Liabilities  refinancing must be provided to the Assembly  prior  to  the debate of the Proposition.

Min T& R

Reject

Due to the timing of the release of this Scrutiny Report it was not practical to provide  the  information  prior  to  the debate.

If the information had been requested earlier  the  Minister  would  have  been happy to provide more detail.

12

The Council of Ministers should  accept  the proposed  amendment  of the Panel to remove the

Co M

Reject

The Council of Ministers amended this amendment.

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To

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Comments

Target date of action/ completion

Technology  Fund transfer  from  P.90/2021 pending  further information.

Council  agreed  that  the  purpose  and terms of the Fund will come back to the Assembly in a proposition, which was always intended.

Council were pleased that the Assembly agreed to maintain the Transfer to the Technology  Fund  (subject  to  the agreement of the creation of the fund) to signal our support for this important area of the economy.

13

The Minister for Treasury and  Resources,  prior  to the  next  Government Plan, should carry out a review  of  the  extent  to which Jersey manages to strike  an  appropriate balance  between  capital and  current  revenue spending, the findings of which should be included within  future Government Plans.

Min T& R

Reject

Levels of Capital and Revenue spend are considered in each Government Plan in the  context  on  the  Fiscal  Framework, Public Finances Law requirements and the financial strategy of the Council of Ministers.

The balance is likely to vary based on circumstances in each plan - for example where significant investment is needed in a new Hospital.

The  Minister  does  not  accept  that  a separate review would be a good use of resource in advance of the Government Plan.  The  balance  will  however  be considered in GP process.

14

The  Chief  Minister should  review  use  of funds  within  the  Chief Operating  Office, including  the Modernisation  and Digital  Department  and provide the Assembly, by May  2022  with  a breakdown of and reason for  spends  within  that Department,  with particular prominence of any  divergence  of

CM

Reject

The  Chief  Minister  and  the  relevant Assistant  Chief  Minister  regularly reviews the financial performance of the Department, as part of the established financial reporting process. With regards to the specific query around the transfer between the TTP and Projects – in the original  Government  Plan  Revenue elements  of  various  IT  projects  were included in the TTP. These have been transferred to better show the total costs of  projects  -  this  is  fundamentally  a change  in  presentation,  rather  than  a change of use.

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previously  stated budgets.

Reporting on departmental expenditure is  already  included  in  the  half-yearly report to the States, the Annual Report and  Accounts  and  Departmental Performance Reports. It is also reported in  the  regular  corporate  financial monitoring reports, which are available to scrutiny. Given these well-established reporting  mechanisms,  the  Chief Minister does not accept that providing an  additional  report  on  M&D  to  the Assembly by May 2022 is the highest priority  and  so  cannot  accept  the recommendation.  However,  we  will continue to work with Scrutiny to help them understand the breakdown of spend within M&D.

It is considered that the level of financial detail included in the Government Plan and  Annex  are  appropriate  for  the approval funding – being in line with Accountability  at  the  top  tiers  of Government. However, we will continue to review how Departmental Business Plans and Performance Reports present financial  information  to  improve  the links between finances, the delivery of services and performance.

15

Before  the  end  of  this political term, the Chief Minister  must  deliver outcome-based accountability of Digital and IT investment across Government. This should include  quantifiable baselines  and  public communications on how this  expenditure  is making a tangible benefit to  the  operation  and deliverance  of  public services  to  avoid  any double  spend  for  the incoming  Council  of

CM

Reject

Accountability  for  Information Technology  spend  is  set  out  in  the Government  Plan  which  shows  which Department  and,  therefore,  which Accountable Officer is accountable for each project and programme for which funding  has  been  requested. The progress and outcomes of these projects and programmes are reported in the half year report and in the Annual Report and Accounts.

However, work is already underway to highlight  how  the  Government's investments, more generally, are making a tangible benefit to the operation and deliverance of public services and this

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Ministers  to  understand what has been achieved.

will  include  the  investments  in Information Technology.

16

The Council of Ministers should  provide,  in  the next  Government  Plan, information  about  unit costs  of  public  services and  exploration  of different means of service to  the  public,  this  may include  active benchmarking, comparison  between  the public service and private sector,  to  aid  in transparency.

Co M

Reject

Unit costing:

The  GoJ  does  not  currently  have  a system in place to support activity-based costing across all its services. There are specific business areas for which more granular  information  can  be  provided, for example HCS PLICS (Person Level Information & Costing System).

Such  costing  systems  require  the collection  of  both  non-financial  and financial data, as well as processes and systems  in  place  to  maintain  the appropriate data.

This is an area which requires further consideration and development in terms of  a  wider  GoJ  Data  strategy. Logistically  and  practically,  any  step change  would  be  delivered  after  the implementation of the ITS and through a data maturity plan, which will require specific resources and potentially pump- priming funds.

In  the  meantime,  Departments  can provide  income  and  cost  analysis  at service-line  level  as  supporting information  to  the  Government  Plan. This level of detail is not appropriate for the  published  Government  Plan document,  as  it  would  become  an extremely large document.

Bench-marking:

Benchmarking  comparisons  are  often challenging  to  undertake  consistently across  all  services,  e.g.  Accurately comparable services whether private vs. Public  or  across  public  sectors  in different jurisdictions, as such they can be used as indicative tools rather than absolute  indicators.  Historically organisation  such  as  CIPFA  have  run benchmarking clubs for public services, however,  recent  investigations  have

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confirmed that these services no longer exist.

Benchmarking against Private providers is not often possible unless undertaken as part of a procurement exercise, and such information  is  commercially  sensitive and therefore could not be included in public documents.

Alternative Public Service Delivery: Private  vs.  Public  sector  provision should  be  a  consideration  for  the Government,  where  it  is  deemed appropriate  to  outsource  Government Services.  Dependent  of  the  size  and nature  of  any  service  under consideration, for example, outsourcing a fundamental and core service may be both a political (ideological), strategic and  operational  decision  and  one  that requires consideration for a medium to long-term shift in delivery in order to take account of, for example, the lead-in investment and mobilisation of services under third parties.

17

The  Chief  Minister  and Minister for Treasury and Resources  must  ensure, in future, that the transfer of revenue expenditure to capital project budgets is clearly and transparently outlined.

CM / Min T& R

Accept

The  new  Public  Finances  Law  has moved  away  from  the  historic  split between revenue and capital, allowing total  project  costs  to  be  captured  on project  heads  of  expenditure,  and  the embedding  of  this  change  has  caused some of these movements.

Whilst  these  should  reduce  moving forwards, future plans will include more information to ensure that any transfers are outlined clearly and transparently.

18

Ministers  must  ensure that  figures  included  in the Government Plan are accurate and provide the assembly with the option to deny funding should a

Co M

Partly Accept

Ministers and Officers work to ensure that all figures in the plan are as accurate as  possible  given  the  information available. The nature of the development of Business Cases from OBC to FBC means that estimates may change, and

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bid  need  to  be  updated following  agreement  of that Government Plan.

generally these will be updated in the Government Plan.

In some cases where it is necessary to make  decisions  outside  of  the Government  Plan  cycle,  the  Minister would manage allocations in line with the requirements of the Public Finances Law, and ensure that updated figures are included in the next Government Plan.

Members already have mechanisms to amend  proposed  funding  through  the Government Plan process.

19

The Minister for Treasury and  Resources  should, within  her  response  to this  report,  provide greater reasoning for the removal  of  the  revenue programme  "Building Revenue  Jersey  Team" (GP20-OI3-01)  and justify  why  its  funding now  forms  part  of  a capital  project,  namely the  Revenue Transformation programme (Phase 3).

Min T& R

Accept

Core  to  the  Revenue  Transformation Programme  is  the  replacement  of  the obsolete ITAX system with the Revenue Management System. The new System introduced modern, more efficient ways of  working, giving  rise to  an  internal reorganisation of the Tax Office, which the  "Building  Revenue  Jersey  Team" programme was designed to support. The reorganisation is largely complete obviating  the  need  for  a  separate programme.   However,  the  taxation regime is subject to continual change due to both the domestic reforms required by the States and in response to the latest international requirements. The focus now  is  essentially  on  modifying  the Revenue Management System to meet these requirements, although to comply with  accounting  standards  certain elements  do  have  to  be  classified  as revenue.   Nevertheless,  having  all expenditure being assigned to a single project  provides  greater  clarity  in monitoring  the  total  costs  of  the Programme.

N/A