Treasury and Exchequer
Ministerial Decision Report
Reserve Funding and use of additional income for UNAVOIDABLE pressures in 2021
- Purpose of Report
To enable the Minister to approve the allocation of up to £978,100 from the General Reserve (DEL) to the Infrastructure, Housing and Environment (IHE) head of expenditure and the use of additional income of up to £450,000 by the Justice and Home affairs (JHA) head of expenditure as detailed below.
- Background
There have been various unforeseen events during 2021, which have had an adverse impact on departmental budgets. Where possible these have been met by delaying or ceasing expenditure, but some of these pressures cannot be addressed without additional funding.
It is acknowledged that other departments may underspend against their approved budget at the end of the year and that this should be the first source of funding to address financial pressures across departmental revenue budgets. Consequently, should adequate underspends be available in other departments, the General Reserve will be replenished with up to the £978,100 allocated in this decision to ensure that appropriate reserve funding is available.
Justice & Home Affairs (JHA) – Additional use of income - £450,000
Justice and Home Affairs (JHA) have overachieved on their income budgets by approximately £500,000 within Customs and Immigration (JCIS), such as passport fees, work permits and immigration fees and have offset some of this to fund increased costs as a direct impact of achieving the income. The additional income is a result of a combination of Covid restrictions easing and the impact of Brexit. JHA are increasing income budgets from 2022 as part of their contribution to the Rebalancing Programme. The department is now requesting to keep and use the balance of the additional income (net of associated increase to costs) in 2021 as an alternative measure for a rebalancing target, as detailed below.
The JHA income budget includes a one-off target of £450,000 as part of the rebalancing programme to sell the domestic dwelling near the Western Fire Station. Due to delays in obtaining Ministerial sign off, it will now not be sold in 2021, creating a timing difference across two financial years.
This decision seeks to utilise £450,000 of the additional income as an alternative measure for delivery. The income from the sale of the house in 2022 will then be subject to a decision on its use by the Minister for Treasury and Resources.
Infrastructure, Housing and Environment (IHE) - £978,100
Premises expenses – £353,100
As part of the transition to the future estate the Government has been consolidating its property portfolio and relocating some teams. Consequently, some premises costs have been funded from temporary funding sources and projects within IHE. It was intended that IHE would meet these financial pressures by utilising underspends from elsewhere within the Department’s budget, but the latest financial forecast now projects that IHE will not able to meet the total deficit.
The current deficit on premises costs will ultimately be resolved as part of the OneGov Headquarters project. The budget transferred from temporary sources is insufficient to meet the costs. Additional costs have also been incurred due to occupancy of additional buildings and parish rates increases. The table below shows the additional costs.
Description | £ |
Utility costs | 142,300 |
Operational costs | 80,300 |
Additional rates | 130,500 |
Total | 353,100 |
Energy recycling facility - £325,000
In November 2021 cracks on the welding of the generator rotor were identified. Following a technical assessment to assess the cause and confirm whether it was safe to operate or not, the plant was turned back on at the start of December. However, by this time the domestic waste was stockpiling and needed to be processed, but without the turbine it is unable to generate electricity. The plant usually generates £150,000 income per month from external electricity sales. As the plant was shut down whilst the generator was inactive, the loss of income was estimated at £225,000. Also, power to run the plant (and La Collette) had to be bought in resulting in additional costs of £100,000.
Hazardous waste - £300,000
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.
The department submitted a business case for the 2022-2025 Government Plan for £1.25 million to cover the impact of reduced income from Hazardous Waste due to the difficulty in forecasting because of the income’s variable and unpredictable nature. The waste arises whenever there is excavation on the reclaimed land and at the time of the business case, it was expected that a reasonable level of income would be received in 2021. However, the department has recently been notified that the IFC3 development has been delayed and income from that will be received in mid-2022 at the earliest. The department has received only £85,000 of hazardous waste income this year against an original budget of £1.65m which had been reduced to £400,000 following approval of the business case on MD-TR-2021-0133 earlier this year. However, there is still a shortfall of £300,000 which needs to be covered.
- Recommendation
The Minister is recommended to approve:
- an allocation of up to £978,100 from the General Reserve (DEL) to the IHE head of expenditure as detailed above; and
- use of additional income of up to £450,000 by the JHA head of expenditure.
- 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.
Article 21 of the Public Finances (Jersey) Law states:
Article 21 – Power to allocate excess income
(1) This Article applies if –
(a) an approved government plan includes, under Article 9(8), the estimated income that will be earned by, or be attributable to, a States body or by an area of operation of a States body during the first financial year covered by the plan; and
(b) income in excess of that estimate is earned by, or attributable to, the States body or area of operation during that financial year.
(2) Despite the approved government plan, the Minister may direct that the excess income referred to in paragraph (1)(b) be allocated to a head of expenditure set out in 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. Following these reviews, the Treasurer, taking into account comments from the PAO, recommends that the Minister allocates up to £978,100 from the General Reserve (DEL) to the Infrastructure, Housing and Environment (IHE) head of expenditure and approves the use of additional income of up to £450,000 by the Justice and Home affairs (JHA) head of expenditure as detailed above.
- Resource Implications
The General Reserve (DEL) to decrease by up to £978,100 and the IHE head of expenditure to increase by up to the same amount.
The JHA head of expenditure will increase by up to £450,000 in 2021 – which is matched by additional income.
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: 14th December 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\2021-0148 - Reserve funding for various unavoidable pressures in 2021 |
MD sponsor: Treasurer of the States |
gov.je