Treasury and Resources Department
Ministerial Decision Report
Transfer of funding from Central Contingencies to various departmental budgets to recognise the costs associated with the Voluntary Release and Redundancy Scheme in 2017.
- Purpose of Report
To enable the Minister to approve the non-recurring budget transfer of £204,313.36 from Central Contingencies – Redundancy Provision to various departmental budgets, as outlined below. This is to recognise the costs associated with the Voluntary Release Scheme for 2017 from 30th September to 31st December 2017. In addition to enable the Minister to approve the non-recurring budget transfer of £707.58 from Central Contingencies – Redundancy Provision to various departmental budgets, as outlined below, to fund the uplift of the 2017 pay award on Compulsory Redundancy payments previously made in 2017.
- Background
A voluntary release (“VR”) programme was run in 2015 closing at the end of July and re-opened in January 2016. As at 30th September 2017 a total of 589 applications for VR had been received (329 in 2015, 226 in 2016 and 34 to date in 2017) and a total of 189 have been approved. The scheme remains open for the foreseeable future in order to support organisational change initiatives. In addition, a total of 57 employees have been made compulsory redundant and 12 employees have received a transfer payment to date in 2017.
The Council of Ministers approved the allocation of £2,000,000 from Central Contingencies to create a Redundancy Provision in 2015 to fund the first tranche of the scheme. The States Assembly approved a further £20,000,000 to be added to the Redundancy Provision across 2015 and 2016 to be funded by transfers from the Strategic Reserve Fund with £4,000,000 to be transferred in 2015 and £16,000,000 in 2016. Following the completion of the 2015 VR scheme the remaining money was drawn down for funding of new applications in 2016. In total this left £17.33 million available for VR funding from January 2016.
A transfer of a £3.67 million was made for VRs and Compulsory Redundancies (“CR”) agreed in 2016 up to the 31st December 2016. Savings of £864,227 were transferred from the departments to the Redundancy Provision as a result of VR approvals earlier than anticipated in 2015. Funding for adjustments made to CR payments following the agreement of the 1% pay rise in 2016 required an additional transfer of £8,404.
It was agreed to transfer £6.88 million of the Redundancy Provision to the Restructuring Provision. This decision was taken by the States Assembly following an estimate of funding requirements for redundancy for the remaining years of MTFP.
CR and VR agreed to be centrally funded by the redundancy decision panel for the period October to December 31st 2017 amounts to a commitment of an additional £204,313.36 of which agreements have now been formally signed, leaving a balance of approximately £6.9 million remaining to fund redundancy for the remainder of the MTFP period to December 2019. The following transfers to departments totalling £204,313.36 are now required:
- Chief Minister’s Department £105,763.05
- Education £ 22,656.52
- Health and Social Services £ 24,129.44
- Social Security £ 13,021.54
- Treasury and Resources £ 38,742.81
In addition, on conclusion of the 2017 pay award negotiations, an uplift would be required totalling £707.58 for any employees awarded a Compulsory Redundancy payment in 2017 as follows:-
- Department for Infrastructure £ 62.77
- EDTSC (Sports) £ 239.43
- Health and Social Services £ 405.38
- Recommendation
The Minister is recommended to approve a non-recurring budget transfer of £204,313.36 and of £707.58 in 2017 from Central Contingency – Redundancy Provision to departments as outlined above.
- Reason for Decision
Article 17(2) of the Public Finances (Jersey) Law 2005 states that the Minister for Treasury and Resources is authorised to approve the transfer from contingency expenditure to heads of expenditure of amounts not exceeding, in total, the amount available for contingency expenditure in a financial year.
The current Contingency Allocation Policy (published as R.110/2017) sets the requirement for all allocations from Contingency over £100,000 to be considered by the Council of Ministers prior to submission to the Minister for approval.
International Financial Reporting Standards (IFRS) interpreted for the States of Jersey in the Jersey Financial Reporting Manual (JFReM) require termination benefits to be recognised as an expense at the point at which the entity can no longer withdraw the offer of those benefits. Accordingly, the full cost of all VRs must be recognised at the point a binding contract has been signed with the employee.
The Council of Ministers approved the allocation of £2,000,000 from Central Contingencies to create a Redundancy Provision in 2015 to fund the first tranche of the scheme. The States Assembly approved a further £20,000,000 to be added to the Redundancy Provision across 2015 and 2016 to be funded by transfers from the Strategic Reserve Fund.
On 9th December 2015 the Council of Ministers agreed that approvals for funding of VR and CR would be delegated to a Central Panel comprising the Chief Executive Officer, the Treasurer of the States and the Director of Human Resources.
MD-TR-2015-0141 approved funding of £4,666,119 to fund the Voluntary Release Scheme in 2015 in line with the allocation of funding approved by the States Assembly in P.72/2015 Medium Term Financial Plan 2016 – 2019 (as amended).
MD-TR-2016-0058, MD-TR-2016-0082, MD-TR-2016-0114, MD-TR-2017-0010 and MD-TR-2017-0087 approved funding of £3,677,954.05 to fund applications approved and signed up to 31st December 2016 and also transferred savings of £864,227 from the departments to the Redundancy Provision as a result of VR approvals earlier than anticipated in 2015.
It was agreed by the States Assembly as part of the MTFP Addition debate in 2016, following an estimate of funding requirements for redundancy for the remaining years of the MTFP, to transfer £6.88 million of the Redundancy Provision to the Restructuring Provision for 2018 and 2019.
MD-TR-2017-0125 approved funding of £508,974.60 to fund applications approved and signed up to 30th September 2017. This decision funds the next tranche of VR applications to 31st December 2017 and will leave a balance of £6.9 million in Contingency for future applications.
The Council of Ministers approved this funding allocation at its meeting on 10th January 2018.
- Resource Implications
Various departments’ revenue heads of expenditure, as outlined above, to increase by £204,313.36 and £707.58 in 2017 and the Central Contingency – Redundancy Provision to decrease by the same amount.
This decision does not change the total amount of expenditure approved by the States for the period of the current MTFP 2016 to 2019.
Report author : Financial Performance Reporting Manager | Document date: 11th January 2018. |
Quality Assurance / Review : Head of Decision Support | File name and path: L:\Treasury\Sections\Corporate Finance\Ministerial Decisions\DS, WR and SD\2018-0008 - C19 Contingency funding for VR |
MD sponsor : Director of Financial Planning and Performance |