Customer and Local Services: Allocation of Reserve Funding for additional income support costs and the reduction of fees and charges income due to the impact of Covid-19

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A decision made on 30 September 2020

Decision reference: MD-TR-2020-0128
Decision Summary Title:	Allocation of Reserve Funding to CLS in 2020 for additional income support costs and the reduction of fees and charges income due to the impact of COVID-19		Date of Decision Summary:	30 September 2020
Decision Summary Author:	Specialist – Business Cases		Decision Summary: Public or Exempt?	Public
Type of Report: Oral or Written?	Written		Person Giving Oral Report:	N/A
Written Report Title:	Allocation of Reserve Funding to CLS in 2020 additional income support costs and the reduction of fees and charges income due to the impact of COVID-19		Date of Written Report:	30 September 2020
Written Report Author:	Specialist – Business Cases		Written Report: Public or Exempt?	Public
Subject: The allocation of up to £7.9 million in 2020 from the General Reserve to CLS (Customer and Local Services) for additional income support costs and the reduction of fees and charges income due to the impact of COVID-19.
Decision(s): The Minister approved a non-recurring allocation from the General Reserve in 2020 of up to £7.9 million to CLS for additional income support costs and the reduction of fees and charges income due to the impact of COVID-19.
Reason(s) 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 agreed by the Minister for Treasury and Resources (published as R.80/2020) sets the requirement that all proposed allocations from the General Reserve (Covid-19), once recommended for approval by the States Treasurer (taking into account comments from the Principal Accountable Office), are referred for review to either the Council of Ministers or the relevant Competent Authorities Ministers prior to submission to the Minister for approval. The Investment Appraisal Team has recommended this request for approval and further to these reviews the States Treasurer recommends this allocation to the Minister for approval on the basis that:- a refined business case is received by Investment Appraisal by 15th October; and claimant numbers and income forecasts will continue to be reviewed by CLS and a review will take place early in Q4 to enable the forecasts to be updated. The Principal Accountable Officer and the Council of Ministers have also been consulted.
Resource Implications: The CLS head of expenditure to increase by up to £7.9 million in 2020 and the General Reserve to decrease by the same amount. This decision does not change the total amount of expenditure approved by the States in the Government Plan 2020-2023.
Action required: The Head of Financial Governance to advise the Specialist – Business Cases and the Heads of Finance Business Partnering of CLS that this decision is approved.
Signature:		Position: Deputy S J Pinel Minister for Treasury and Resources
Date Signed: 30th of September 2020		Date of Decision: 30th of September 2020

Customer and Local Services: Allocation of Reserve Funding for additional income support costs and the reduction of fees and charges income due to the impact of Covid-19

Treasury and Exchequer

Ministerial Decision Report

ALLOCATION of Reserve Funding to CLS for additional income support costs and the reduction of fees and charges income due to the impact of COVID-19

Purpose of Report

To enable the Minister to approve the allocation of up to £7.9 million in 2020 from the General Reserve to the Customer and Local Services (CLS) department for the additional income support costs and the reduction of fees and charges income due to the impact of COVID-19.

Background

Funding provisions were made in the Government Plan 2020-2023 in the General Reserve for funding needs that cannot be met from existing heads of expenditure in 2020. The Minister has increased the amount available in the General Reserve by transferring £65.3 million from the Treasury and Exchequer head of expenditure (MD-TR-2020-0035) and approving an additional £99.99 million of expenditure (MD-TR-2020-0047) and approving the transfer of £28 million and £50 million from the Stabilisation Fund, with associated authority to spend from the General Reserve (MD-TR-2020-0055 and MD-TR-2020-0112).

Additional Income Support – up to £7.2 million

The impact of Covid-19 and associated lockdown and restrictions on trade and business have resulted in an increase in Income Support claims and costs. The increase commenced in late March 2020 and was a result of individuals losing their jobs or suffering reduced hours / pay and income. The number of income support claimants increased from 5,636 in February 2020 to a peak of 6,559 in May 2020. The numbers have slowly declined but remain well above the previous normal baseline level. The particular challenge is that the increase relates to individuals who are out of work and these now require to be managed appropriately to minimise the risk of long-term unemployment. This request is seeking budget to cover for the payment of statutory benefit entitlements and funding to enable the significant spike in cases to be managed appropriately by CLS throughout 2020. The additional cost experienced in April 2020 was circa £1.2m above trend and £1.3m above trend in May and has now settled at close to £900k - £1m above trend per month.

Income Support provides financial support for Islanders with a low income with the level of support depending upon a range of circumstances including marital status, number of dependents and housing arrangements. The rates and eligibility criteria are set in legislation. It’s an in-work and an out-of-work benefit. Claims tend to increase in recessionary times as people lose their jobs or suffer reductions in wages. Covid has created an unprecedented economic crisis resulting in around 1,400 Islanders losing their jobs and registering as ASW. Additionally, a significant number of people have suffered a reduction in their income which has resulted in increased payments to existing income support claimants.

The number of claimants will continue to be monitored by CLS and a review will take place early in Q4 to enable the forecasts to be updated.

Reduction of Fees and Charges Income – up to £0.7 million

The impact of Covid-19 and associated lockdown restrictions on trade and business and closure of the Library service has resulted in an unanticipated reduction in income. This income largely depends upon individuals and businesses making payments in respect of licenses and fees relating to immigration, housing and employment. Additional sources of income include Registrars and Library fees and charges which are have reduced to nil during the lockdown and Library closure period.

CLS Income	2020 Budget £'000	Revised Forecast £’000	Forecast shortfall £’000
Contribution from CLS Funds – HIF / SSF / LTC	7,660	7,660	0
Business Hub License & Registration Fees	1,102	702	400
Service Hub – Licenses & Fees	415	251	164
Library Service	42	24	18
Superintendent Registrar	200	130	70
Other Income	67	69	-2
Total	9,486	8,836	650

This level of reduction assumed that restrictions would be in place for 3 months and although restrictions have been reduced income levels have not returned to normal yet, therefore there is a risk that the reduction in income experienced will fall short of the revised forecast.

The income forecasts will continue to be monitored by CLS and a review will take place early in Q4 to enable the forecasts to be updated.

Recommendation

The Minister is recommended to approve the allocation of up to £7.9 million from the General Reserve to the CLS head of expenditure in 2020 for the additional income support costs and the reduction of fees and charges income due to the impact of COVID-19.

Reasons 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 agreed by the Minister for Treasury and Resources (published as R.80/2020) sets the requirement that all proposed allocations from the General Reserve (Covid-19), once recommended for approval by the States Treasurer (taking into account comments from the Principal Accountable Office), are referred for review to either the Council of Ministers or the relevant Competent Authorities Ministers prior to submission to the Minister for approval.

The Investment Appraisal Team has recommended this request for approval and further to these reviews the States Treasurer recommends this allocation to the Minister for approval on the basis that: refined business case is received by Investment Appraisal by 15th October; and

claimant numbers and income forecasts will continue to be reviewed by CLS and a review will take place early in Q4 to enable the forecasts to be updated.

The Principal Accountable Officer and the Council of Ministers have also been consulted.

5. Resource Implications

The CLS head of expenditure to increase by up to £7.9 million in 2020 and the General Reserve to decrease by the same amount. This decision does not change the total amount of expenditure approved by the States in the Government Plan 2020-2023.

Report author: Specialist – Business Cases	Document date : 30th September 2020
Quality Assurance / Review: Group Director, Strategic Finance	File name and path: L:\Treasury\Sections\Corporate Finance\Ministerial Decisions\DS, WR and SD\2020-0128 Reserve Funding to CLS – for Income Support & Reduced Income
MD sponsor: Treasurer of the States