Treasury and Exchequer
Ministerial Decision Report
Reserve Funding for various GP22-25 pressures in 2021
- Purpose of Report
To enable the Minister to approve the allocation of up to £3,005,000 in 2021 from the General Reserve (DEL) to various heads of expenditure as detailed below.
- Background
As part of the Government Plan process departments have submitted applications for inclusion in the Government Plan 2022-2025. In light of the impact that Covid-19 has had on the public finances, the Council of Ministers, as part of its financial foundations, decided that additional funding would be restricted to initiatives that met the following criteria:
- Unavoidable – requests that were recognized to be unavoidable cost pressures
- Time-limited Covid-19 response and recovery – requests that do not lead to a permanent increase in Government expenditure and support the on-going Covid-19 response or will help to facilitate the Island’s recovery
- Commitments made in previous Government Plans – initiatives that were already planned to begin during the life of the Government Plan 2022-25 and have been identified in previous Government Plans
As part of the process to agree new revenue funding, business cases have been reviewed by the Investment Appraisal Team and the overall package of investment has been refined through ministerial challenge sessions led by the Chief Minister and subsequent Council of Ministers’ workshops.
The items to be included in the draft Government Plan 2022-25 were agreed by the Council of Ministers on 16 July 2021. The Government Plan 2022-25 initiatives listed below also requested funding for 2021 and now that the Council of Ministers has agreed the strategic imperative to provide additional funding in respect of these requests, this Decision seeks to allocate the associated funding from the General Reserves in 2021 consistent with the relevant business cases.
Liquid Waste Processing
Pumping stations are the mechanism by which the sewage and rainwater are transported from the source to the treatment plant, following which they can be processed and ultimately safely disposed of.
Jersey currently has 108 pumping stations across the Island that transport foul water to the sewage treatment plant in Bellozanne. In recent years, the volume of foul water that needs to be pumped and processed has increased considerably.
The main reasons for this are as follows:
- increase in the population which results in an a larger volume of foul water needing to be treated. On average, the population has increased by 1,000 people over the last 10 years each producing on average 58,400 cubic metres of sewage a year
- increase in the number of households connected to the mains and therefore needing the sewage to be removed. Currently 92% of homes are now connected to the network.
- increase in the volume of rainfall by 14.7% due to climatic change resulting in significant surface water ingress to the foul pumping network and increased pumping costs in the surface water drainage network. The increase in sustained periods of rain puts additional pressure on the network as high volumes back up throughout parts of the system.
This increase in the volume of liquid waste to be processed has two main consequences:
- an increase in the volume of foul water creates higher demand on the pumping stations which in turn leads to an increase in both maintenance and utility costs
- sudden large volumes due to substantial and continued rainfall results in additional pressure on the pumping stations. In order to avoid pollution incidents, the excess high-water influx is transported by tankers from the pumping stations, prioritising those which are both near capacity and in close proximity to either a natural water supply or coastal waters, direct to the sewage treatment works. This again incurs an additional cost.
The Department is unable to absorb the additional liquid waste processing costs and consequently requires increased funding to enable the processing of the additional volume of foul surface water and sewage produced, therefore there is a need to increase the funding to enable the processing of the additional volume of foul surface water and sewerage produced.
Housing & Food Licensing schemes
The Food Safety (Jersey) Law has been in place since 1966 and legislation on Housing Standards has been in place since 2018.
An updated food safety law is now in draft to reflect modern practices, which include provisions to introduce licencing of food operators. Similarly, the Housing Standards legislation makes provision to introduce a licencing scheme for rented dwellings.
The intention is that both schemes, if approved by the States Assembly and implemented, would be on a cost neutral basis. As a result, the cost of activities surrounding the enforcement of these laws would be recovered through a charge on regulated businesses. The intended charges were anticipated to give rise to income for the Department of £1 million. The additional incremental cost of administering the Law was forecast to be £200,000 so the expected additional income allowed the Department to propose a net-saving of £800,000 within the budget for the existing environmental health team. This saving was accepted by the States Assembly when it approved in the MTFP 2016-2019 and it was built into the IHE budget in Government Plan 2020-23 and Government Plan 2021-2024.
However, as recently as 20 July 2021 the States Assembly rejected Regulations as a mechanism to introduce a charge resulting in a need for an additional £1 million to enable the Department to successfully regulate the private rental market under the Public Health and Safety (Rented Dwellings) (Jersey) Law 2018, and to restore funding for the pre-existing environmental health team, which had previously been given up as savings on the assumption new charges would be approved.
This project will result in the Department being able to continue its current work which includes:
- Inspection of food premises
- Examination of food imports
- Provision of export health certificates for products of animal origin
- Continuation of the ‘Eat Safe’ scheme
- Essential inspection of rented dwellings to ensure that homes are safe
- Resolution of housing and tenancy related complaints
- The administration of the voluntary ‘Rent Safe’ scheme
- Seeking compliance on residential tenancy matters.
This project will deliver the following benefits to the Island:
- Prevention and reduction of food born illnesses
- Contact trace infectious diseases
- Improving the standard of living
- Thereby improving Islanders wellbeing and mental and physical health.
Defence Funding
The Government of Jersey (GoJ) contributes to the UK and Crown Dependencies’ Defence effort through the maintenance of the Jersey Militia in the form of an Army Reserve Squadron of Front-Line Engineers (Sappers), the Jersey Field Squadron. The budget for the unit is £1m a year. It is vital for the island to contribute to the UK defence budget and this is Jersey’s contribution.
This arrangement whereby the Government funds a specific unit and its activities rather than contributing to the general UK MOD or Army budget is unique. For example, Guernsey and the Isle of Man contribute through direct contributions under different arrangements. The agreement that governs this arrangement is the Intergovernmental Agreement (IGA) that was established in 1981 between the then States of Jersey and the UK Home Office.
The Officer Commanding of the Jersey Field Squadron reports to the Accounting Officer for JHA and to the Commanding Officer of the regiment in the UK. The budget is the responsibility under the Public Finance Law of the Accounting Officer. The States Assembly has a Minister and Assistant Minister for Justice & Home Affairs. The Officer Commanding is both a member of Her Majesty’s Armed Services and a member of the department of Justice and Home Affairs (JHA) Senior Management team.
Under this arrangement the Government provides certain facilities on the Island to the Squadron, and funds certain equipment and materials required for the training and operation of the unit. The Government pays for a complement of Regular Army staff to be stationed on the island and provides housing for such regular serving members of the Army. The Government pays the Army Reserve training day payments made to members of the squadron, the annual bounty payments due, the travel costs incurred by squadron members travelling to the UK for training and exercises, and for training specialists to come to the Island to provide training on the Island. Additionally, the Government pays the salaries of a small number of civilian staff, who provide administrative support and maintenance services.
The budget of £1 million has remained static for 15 years and not kept pace with inflation, increasing necessary costs and changes in operational requirements.
A review of the financial position has identified a structural deficit of £2,486,000 over five years (2021 to 2025) that cannot be met from within the JHA Department’s budget, therefore this business case is required to seek a permanent fix to the deficit and ongoing commitments.
Hazardous Waste
Waste activities and waste management businesses are governed by the Waste Management (Jersey) Law 2005. The Law aims to protect people and the environment from the potentially polluting impacts of dealing with waste.
One of the types of waste that needs to be dealt with is hazardous waste. The primary source of this waste is from the construction industry. The department has no control over the volume of waste produced as it directly correlates with construction industry activity on sites that involve hazardous waste. There is a charge levied per tonne of hazardous waste, which gives rise to significant fluctuations in the level of income generated by the department depending on the building developments that are proceeding.
As a result, it is difficult to budget for the significant swings in the volume of waste, which then has resultant impacts on the ability to effectively manage resources. Between 2017 and 2019 the volume of hazardous wastes ranged between 21,000 tonnes and 71,000 tonnes. Income budgets for Government Plan 2020-23 and Government Plan 2021-24 assumed high levels of waste would continue to be produced in the near-term. However, actual tonnage for 2020 and 2021 has been below 3,000 tonnes. This has left a significant budget deficit that cannot be absorbed by the department as it is not linked to any offsetting potential to reduce cost due to processing lower volumes.
It is now anticipated that hazardous waste volumes will remain low for the life of the Government Plan 2022-25 and accordingly additional funding is required to allow for lower expected income receipts. Should income exceed expectations the associated surplus income would be returned to the Treasury and thereby reduce Government’s overall net expenditure.
Hazardous waste processing will form part of a wider review of Waste Management arrangements that will culminate in a proposal to operate waste management as a trading operation, which will be included in Government Plan 2023-26.
- Recommendation
On the basis that the Council of Ministers has agreed that each of the investments outlined above should be included in the draft Government Plan 2022-25, the Minister is recommended to approve the allocation of up to £3,005,000 in 2021 from the General Reserve (DEL) to various heads of expenditure, as detailed above, to enable the implementation of these initiatives in line with their associated business cases.
- Reason for Decision
Article 15(3) of the Public Finances (Jersey) Law 2019 states that the approval by the States of a Government Plan authorises the Minister to direct how an approved appropriation for a reserve head of expenditure in the plan may be spent (including on another head of expenditure) in the first financial year covered by the plan.
The current Policy for Allocations from the Reserve, presented to the States Assembly as R.60/2021 sets the requirement that all allocations from the General Reserve (DEL) are recommended for approval by the Treasurer of the States, taking into account comments from the Principal Accountable Officer (PAO), prior to submission to the Minister for approval. Where a request for funding is made by Treasury and Exchequer, the Policy requires that the Principal Accountable Officer also recommends the request to the Minister.
This has been circulated to the Council of Ministers in accordance with the requirements of the policy.
The Investment Appraisal Team has reviewed the business cases for these requests as part of the Government Plan 2022-25 revenue investment workstream and recommends them for approval on the basis that they have been agreed as strategic priorities by the Council of Ministers as part of the Government Plan process. The future years effects of these business cases will be addressed and resourced in the Government Plan 2022-2025, subject to approval of the States Assembly. Following these reviews, the Treasurer, taking into account comments from the PAO, recommends that the Minister allocates funding from the General Reserve.
- Resource Implications
The General Reserve (DEL) to decrease by up to £3,005,000 and various heads of expenditure to increase by the same total as detailed in the table above.
The future years effects of these allocations are be addressed and resourced in the proposed Government Plan 2022-2025, and only subject to approval of the States Assembly will funding be available. This decision does not change the total amount of expenditure approved by the States in the Government Plan 2021-24.
Report author: Specialist – Business Cases | Document date: 19th November 2021 |
Quality Assurance / Review: Acting Group Director, Strategic Finance and the Head of Financial Governance | File name and path: L:\Treasury\Sections\Corporate Finance\Ministerial Decisions\DS, WR and SD\2021-0133 - Reserve funding for various GP22 pressures in 21 |
MD sponsor: Treasurer of the States |
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