PROPOSITION
THE STATES are asked to decide whether they are of opinion -
In accordance with Article 11(8) of the Public Finances (Jersey) Law 2005 to amend the expenditure approval for 2007 approved by the States on 13th September 2006 -
(a) in respect of the Health and Social Services Department head of expenditure, to permit the withdrawal of a maximum of an additional £2,200,000 from the consolidated fund for its net revenue expenditure in order to fund preparations for pandemic flu; and
(b) in respect of the Social Security Department head of expenditure, to permit the withdrawal of a maximum of an additional £2,649,800 from the consolidated fund for its net revenue expenditure in order to fund the additional costs of supplementation.
MINISTER FOR TREASURY AND RESOURCES
REPORT
Background
Under the Public Finances (Jersey) Law 2005 heads of expenditure for departments are, in the normal course of events, approved as part of the Annual Business Plan approval process by the States. The sum of such approvals is known as the “expenditure approval”. The Public Finances Law, does, however, state in Article 11(8):
“ … the States may, at any time, amend an expenditure approval on a proposition lodged by the Minister on the grounds that –
(a) there is an urgent need for expenditure; and
(b) no expenditure approval is available.”
Two such spending pressures have emerged in 2007 meaning that the existing expenditure approval is no longer adequate. In accordance with the Law the States are therefore requested to amend the 2007 expenditure approval in respect of the Health and Social Services and Social Security Departments’ heads of expenditure. This would result in these departments being permitted to withdraw additional amounts from the consolidated fund for their net revenue expenditure in 2007. This will, in itself, not increase the base cash limits of those departments in subsequent years.
Health and Social Services
In January 2006 the Council of Ministers allocated the sum of £936,000 to the department to make preparations to protect the Island against an anticipated outbreak of pandemic flu. These funds have now been fully utilised as follows:
50 profile beds | | | £142,500 |
Stocks of gloves, masks & aprons | | £20,000 |
Lab materials for tests | | | £2,200 |
Strip Thermometers | | | £17,900 |
Replace ageing crematorium components | | £7,800 |
| | | |
2006 Total | | | £190,400 |
| | | |
Tamiflu vaccine (antiviral) | | | £330,500 |
Set up a population database | | | £60,000 |
Drugs and IV fluids | | | £60,000 |
1 Bariatric bed | | | £7,500 |
Continuity of supply of Oxygen from Oxygenators. | £150,000 |
Lab materials for tests | | | £19,800 |
Staff training for IV & cannulation | | | £9,800 |
Pneumococcal vaccination programme for over 65’s | £108,000 |
| | | |
2007 Planned | | | £745,600 |
| | | |
Total | | | £936,000 |
In April 2007 the Council of Ministers considered a further report from the department. This highlighted the need to act urgently if the recommendation of the Island Pandemic Flu Steering Group to protect the entire Island population was to be accepted. The Council of Ministers accepted this recommendation, requesting that initial costs be met from within existing cash limits but agreeing that, in the event of existing cash limits proving to be insufficient, the Minister for Treasury and Resources would take a proposition to the States in order to secure the necessary funding.
The funding required is as follows:
Preparation | |
Additional antivirals (Tamiflu) | £502,400 |
Additional antibiotics | £25,000 |
Pre-pandemic H5N1 vaccine | £913,460 |
Protective clothing & consumables | £60,000 |
| | | |
| | | £1,500,860 |
Upon Outset | |
Pandemic specific vaccines | £479,570 |
Additional supplies for oxygenators | £150,000 |
Additional indemnity insurance | £50,000 |
| | | |
Total Non Recurrent Cost | £2,180,430 |
| | | |
Due to uncertainty over the timing of a pandemic flu outbreak in Jersey, this funding may not all be required in 2007. If this is the case it may be drawn down in subsequent years as required under the relevant procedure within the Finance Law. £2,200,000 (rounded from £2,180,430) is a maximum figure. This sum will only be utilised for this specific purpose and Treasury officers will validate all requests from the department to draw down from this sum.
The Council of Ministers requested that, in the first instance, costs be met from within existing cash limits. The department is currently predicting an overspend of £2.017 million in 2007 although it is putting measures in place to reduce this to an underspend of £19,000. It will be apparent that the likelihood of the department being able to meet the costs of pandemic flu preparation from its existing 2007 cash limit is minimal. Hence the States are requested to approve this additional allocation. This would increase the 2007 net revenue expenditure of the Health and Social Services Department from £137,095,000 to £139,295,000.
Due to the limited “shelf-life” of the drugs to be purchased, there will be additional recurring costs to replenish stocks on a periodic basis (until such time as the pandemic occurs). These costs are not currently budgeted for and will be considered in the resource allocation processes for 2010 onwards.
Social Security
“Supplementation” is the payment required under the Social Security (Jersey) Law 1974 whereby the States “tops up” social security contributions for those “earners” whose earnings are not sufficiently high for them to pay the full contribution.
If these contributions were not “supplemented” in this manner then current benefit and future pension entitlement for those who currently earn less than £38,904 p.a. would be reduced. The benefit and pension entitlement of those earning more than this would not be affected.
Hence supplementation ensures that the benefit and pension entitlement of the low and middle earners is protected at the same level of the higher earners in society.
Supplementation is not “spent” as such, but is paid into the Social Security Fund to meet current and future benefit and pension payments.
Supplementation is required by statute. Its payment does not lie within the Department’s discretion and thereby once parameters for the scheme are approved, its costs can not be controlled without changes to that statute. In 2006 supplementation costs exceeded the budget of £53,200,000 by £3,366,578.
This situation was partly due to the Budget for 2006 being based upon the most current information available at the time of submitting the budget requests for 2006. That information was for the first quarter of 2005, however supplementation for 2005 remained at the same level as 2004, despite growth in contributions of 6.2% and thereby the forecast for 2006 was understated.
In 2006, supplementation as a proportion of total contributions returned to levels more consistent with that experienced during previous years.
Whilst the growth in supplementation for 2006 over 2005 was in part due to the cost for 2005 being below (and inconsistent with) the growth in contributions and employment for 2005, this is only part of the explanation.
The additional rise is entirely consistent with the growth in jobs experienced in 2006 and actual earnings not rising by as much as the increase to the Earnings Cap for the same year. The combination of these two factors will have contributed to the increase in the number of people requiring their contributions to be supplemented, from 30,439 in December 2005 to 31,444 in December 2006, an increase of 3.3%.
The growth in supplementation for 2006 was not fully apparent at the time of preparing estimates for the 2007 Annual Business Plan. For 2007 the currently projected additional requirement for supplementation is £5,399,800 against a budget of £54,657,800.
In 2006 the extra supplementation costs were to be met from residual balances and underspends by other departments. These balances are now exhausted and it would appear inequitable to expect other departments to meet the additional cost again in 2007. In any case, indications as at the end of March are that no departmental underspends will be available. Hence the States are requested to grant an additional expenditure approval for 2007 in respect of the Social Security Department. The Council of Ministers is aware of the situation and supports this course of action.
The projected overspend of £5,399,800 will be partially offset by funds not required in 2007 for Income Support due to the scheme’s introduction in January 2008. The funds available to offset are £2,750,000 leaving an additional funding requirement of £2,649,800. As with the Health and Social Services approval, this sum is a maximum. It will only be utilised for this specific purpose and Treasury officers will validate all requests from the department to draw down from this sum. This would increase the 2007 net revenue expenditure of the Social Security Department from £102,828,200 to £105,478,000.
Additional supplementation in 2008 is provided for in the draft Annual Business Plan at £3 million. This is intended to be a cash limited sum pending the outcome of the ongoing review to examine forecasting and present options to minimise costs in the future. Action is likely to be required to contain the costs within the extra £3 million in 2008.
Further work is being currently being undertaken to further validate initial findings in respect of the increase in the cost of supplementation, to explore opportunities to improve forecasting and to identify options to contain the cost of supplementation for 2008 within the budget allocated.
Financial and manpower implications
There are no additional manpower implications arising from this proposal. The financial implications are as set out in this report. They would increase the 2007 expenditure approval from £559,574,000 to £564,423,800.
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