Treasury and Resources
Ministerial Decision Report
COMPREHENSIVE SPENDING REVIEW - Initial Budget Requirement
- Purpose of Report
This report requests the Treasury and Resources (T&R) Minister to:
(a) Approve the initial budget requirement to deliver the CSR proposals in the sum of £2,455,000 to be funded from the Restructuring Provision; and
(b) Approve a budget transfer from the Restructuring Provision to Health and Social Services in the sum of £365,000 under Article 15(1)(a) of the Public Finances (Jersey) Law 2005.
- Background
Work is now progressing in delivering a robust delivery mechanism and programme to ensure the CSR outcomes are delivered on time. However, it is critical that resources are invested in this programme to ensure the probability of delivering the £65 million is maximised.
The 2011 Business Plan included a Restructuring Provision of £6 million, allocated to the T&R revenue head of expenditure, to support the CSR process. It was envisaged that this provision would provide funding for ‘invest to save’ initiatives, where departments required ‘up front’ funds to achieve a longer term saving (for example, voluntary redundancy payments,) as well as some central support to assist departments in delivering their savings and the corporate savings targets for procurement and terms and conditions.
Work on the Project Plan is identifying departmental resource requirements which may need funding from this provision. In the first instance, however, there is a requirement to fund the CSR Programme Office, the Procurement Transformation Programme, which commenced in 2010 following funding from the Article 11(8) request, as well as some Organisational Development (OD) and Employee Relations (ER) support and an actuarial review. This paper sets out this initial budget request – further requirements will follow when business cases have been prepared and scrutinised.
- Estimated Resources Required
- The initial budget required can be considered under 5 headings:
- The CSR Programme Office – a small central team providing project planning, monitoring and communications skills, support to departments and assurance to the CSR Programme Board, the CSR Political Steering Group and, ultimately, the Council of Ministers for the delivery of the savings programme.
- Organisational Development/Change Leadership – to achieve the level of savings required over the next three years, the organisation will need to change and this requires leadership, support and facilitation from experienced professionals.
- Employee Relations Support – there are a significant number of proposals which require changes in staff terms and conditions as well as reductions in staff numbers, the major one being the £14 million target for Terms and Conditions of States employees. This will require additional ER support and expertise to deliver on time and in the most effective and efficient way avoiding staff unrest.
- Procurement – the Procurement Transformation Programme requires the continuation of the funding provided in 2010 and there is also a specific ‘invest to save’ proposal for Health and Social Services which will deliver savings of £750,000 in 2011.
- Terms and Conditions Review – an actuarial report which will consider changes to the pension scheme in the future.
- Over the next month, it is envisaged that business cases will be developed for additional support in the OD/ER area – once the recently employed appointments have developed proposals – and also within the Treasury to support the finance change programme together with providing assistance to departments in developing financial appraisals and analysis for some of their CSR proposals. The business cases for these requirements will be progressed according to the process approved by the Council of Ministers for funding from the Restructuring Provision.
- In addition to these ‘central’ resources, departments identified a number of invest to save requirements when they submitted their 2011/12/13 CSR proposals. Some of these, which related to Voluntary Redundancies, have already been funded from the monies secured in July last year under the Article 11(8) request. The remaining bids totalled £1.1 million. All the remaining requests or new proposals that departments have identified, which might relate to genuine ‘invest to save’ initiatives or may be resource requirements required to deliver the savings, will be submitted through the approved process and it is known that several departments are currently preparing business cases for this reason.
- Funding Requested
A total of £2,455,000 is now requested for allocation from the Restructuring Provision. This can be summarised as follows:
| | £’000 |
(a) | Programme Office | 410 |
(b) | Organisational Development / Change Lead | 200 |
(c) | Employee Relations Support | 100 |
(d) | Procurement Transformation Programme: | |
| - Ongoing funding of procurement team, systems, training to deliver savings target
| 1,300 |
| - Invest to save bid to deliver H&SS 2011 procurement savings
| 365 |
(e) | Actuarial Review of the PECRS Scheme | 80 |
| TOTAL | 2,455 |
The detail of these requirements follows:
(a) A central Programme Office is required to ensure the project is effectively planned, managed and monitored and regular reports are prepared for the Programme Board, the Political Steering Group and the Council of Ministers. The team will comprise a Programme Director, a Project Manager and a Programme Office Support post as well as a Communications Manager, seconded from the Communications Unit, to co-ordinate all internal and external communications relating to both CSR and FSR. This is critical if the programme is to succeed.
This requirement, at a total cost of £410,000, is considered a minimum and will be reassessed after the initial 3 month period allocated to developing the Programme Plan which ends at the end of February. By then, requirements from departments for central support will have been received and analysed.
(b) The scale of change necessary within the organisation over the next 3 years requires a high level experienced Change Leader. An interim appointment has been made to this position as it’s crucial that this work starts immediately. The estimated cost in 2011 is £200,000.
(c) The CSR proposals indicate that there will be a significant impact on staff if the savings are to be achieved. This is unsurprising given the fact that staff make up over half of the States expenditure. In addition to the £14 million target for Terms and Conditions, there are many departmental proposals which affect staff. Given this, there is a requirement for additional Employee Relations expertise and a member of staff with relevant experience has been seconded from another department into Human Resources. The cost of this secondment in 2011 is £100,000.
(d) Procurement Transformation Programme
- The Procurement Strategy to deliver savings of £6.5 million was supported by the States during the debate in July last year for funding under Article 11(8). The relevant extract from the Report (P64/2010) is attached at Appendix A. This effectively brought forward £500,000 of the 2011 estimated cost of £1.8 million into 2010. The remaining £1.3 million is required to continue the project. This comprises, as explained at States members briefings last July:
| £’000 |
Staffing Costs | 811 |
Training | 144 |
Projects | 215 |
Systems | 130 |
TOTAL | 1,300 |
- A procurement saving in Health and Social Services in 2011 will save £750,000 a year. However, an investment of £365,000 is required, mostly comprising project management time to change current processes and procurement routes. This represents a pay back period of 6 months which is exceptionally favourable. This requirement was identified by procurement and H&SS in their 2011 CSR submissions and is now requested so that the saving of £750,000, already taken as part of the 2011 Business Plan, is delivered. The business case for this investment has been submitted and challenged by the CSR Programme Office.
(e) A CSR target of £14 million has been agreed by amending terms and conditions of all States employees following a review undertaken by Tribal. The Steering Group on Terms and Conditions of employment made a number of recommendations in relation to pensions – including a proposal to close the existing schemes to new entrants. This was based on recommendations from Tribal who specifically proposed that the employer should carry out its own actuarial review of the schemes. Tribal indicated significant savings to be made from changes to the pension schemes. The cost of this actuarial review, following a tender exercise, is £80,000. Given the cost of pensions within the States and the potential saving in the future should pension arrangements be changed, the States Employment Board has agreed that this review should be undertaken and that this work is undertaken as soon as possible.
All these requests, except the £365,000 for Health and Social Services procurement project, require budgets within the Resources division under Treasury and Resources Department so do not require the Minister to transfer budgets between heads of expenditure under Article 15(1)(a) of the Public Finances (Jersey) Law 2005. These requests will need a budget provision transferred from the Restructuring Provision to individual sections. However, the H&SS request will require a transfer and necessitates a Ministerial Decision authorised by the Health and Social Services Minister which is being progressed.
- Conclusion
This initial request of £2.455 million represents a sizeable proportion of the £6 million budget. However, bids previously received from departments as part of the 2011 CSR process (excluding those for Voluntary Redundancies and procurement which have already been funded or are included in this request) total only £1.1 million. That said, it is recognised that additional support for delivering the savings is required by departments and this is currently being assessed. In addition, central requirements for enhanced HR, OD and ER support will be required along with finance change resources. The Business Cases supporting any future requests will be scrutinised and challenged once finalised and follow the procedure for allocating funds approved by the Council of Ministers. This request has been approved by the Council of Ministers.
The Council of Ministers, at its meeting on 27 January 2011, agreed the process whereby funds would be allocated from the Restructuring Provision. Following the submission of a sound Business Case by a department and challenge from the CSR Programme Office, approval of the Council of Ministers will be required, except in exceptional circumstances, prior to the T&R Minister signing a Ministerial decision. At that same meeting, the Council approved this initial request of £2.455 million.
- Recommendation
The Minister is recommended to:
(a) Approve the initial budget requirement to deliver the CSR proposals in the sum of £2,455,000 to be funded from the Restructuring Provision; and
(b) Approve a budget transfer from the Restructuring Provision to Health and Social Services in the sum of £365,000 under Article 15(1)(a) of the Public Finances (Jersey) Law 2005.
- Reason for Decision
The States recognised the need to invest funds to achieve savings as significant as £65 million over 3 years when it approved a Restructuring Provision of £6 million in 2011 and earmarked £10 million in each of the following two years. This current request for £2,455,000, which is supported by the Council of Ministers, will ensure key elements of the CSR programme are provided such as the Programme Office, OD and ER support, continuing the Procurement Transformation Project including an investment in Health and Social Services which will yield £750,000 savings per annum and providing key actuarial advice relating to the pension fund.
The 2011 Annual Business Plan (page 31) states: “For the allocation of the Restructuring Provision each initiative will require a full business case to be prepared by the department demonstrating, where appropriate, the payback in terms of future savings within the required 3 year period. This would then be reviewed by the Corporate Management Board and if agreed would be recommended to the Council of Ministers. The decision to allocate funding will therefore be made by Ministerial Decision of the Minister for Treasury and Resources but only after consultation with the Council of Ministers”.
Article 15(1)(a) of the Public Finances (Jersey) Law 2005 states that all or any part of the amount appropriated by a head of expenditure may, with the approval of the Minister for Treasury and Resources, be used for the purposes of another head of expenditure.
- Resource Implications
The T&R revenue head of expenditure to decrease by £365,000 and the Health and Social Services Department revenue head of expenditure to increase by an identical amount. Within the T&R revenue head of expenditure £2,090,000 to be reallocated from the Restructuring Provision to other revenue Business Units.
This decision does not change the total amount of expenditure approved by the States for 2011.
Report author : Comprehensive Spending Review Team Leader | Document date : 27/01/2010 |
Quality Assurance / Review : Head of Decision Support | File name and path: l:\treasury\sections\corporate finance\ministerial decisions\dss, wrs and sds\2011-0010 - csr allocation restructuring provision transfer hss - ca\wr - csr allocation restructuring provision transfer hss - ca.doc |
MD sponsor : Treasurer of the States |
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