| This article from |  |
| Better, simpler, cheaper
| IAN BLACK
Treasurer of the States |
The move to the zero-ten tax structure, which is essential in order to maintain Jersey’s international competitiveness, adds significantly to the challenges facing the island’s public finances.
Over the last 20 years the trend has been for States expenditure to grow faster than its income, so it was only a matter of time before the States moved into deficit. This has now happened. In addition demographic changes over the next few years, will lead to a declining workforce, hence fewer taxpayers, while there will be an increasing number of retired people who will add to the costs of the island’s healthcare and benefit systems. If the loss of £80 – 100m in tax revenues, from the move to 0/10%, is factored in, the task of achieving sustainable public finances appears Herculean. In its Fiscal Strategy, soon to be debated by the States, the Finance and Economics has proposed a three pronged solution to these challenges:
To increase States income by encouraging economic growth To increase personal taxation primarily through a goods and services tax and the phasing out of tax allowances for those on higher incomes.
To reduce public expenditure in real terms. This article will concentrate on initiatives to contain public expenditure, where real progress has already been achieved in recent years. The Fundamental Spending Review (FSR) has been the mechanism by which the growth in revenue expenditure has reduced from 10% in 2002, to 2.5% in both 2004 and 2005. Perhaps we should remind ourselves that a 2.5% rise in expenditure is actually a spending cut, after allowing for inflation. The spending targets for 2004 and 2005 have been achieved by a number of committees experiencing reductions in their budgets in order to fund growth in the essential services of health and education. Without necessarily singling out these two committees, there is likely to be a continuing pattern of ceasing or curtailing lower priority services in order to fund growth in higher priority services in the coming years, with relative priorities being informed by the new States Strategic Plan. The Finance and Economics Committee has also continued the progress made by its predecessor committee in restricting the use of the General Reserve to its true purpose, which is as a contingency for emergencies and unforeseen items rather than to top up committees’ budgets. This discipline has seen the annual allocation to the General Reserve reduce from over £20 million to £8 million in the last few years and, as a result of the current unspent balance, no allocation was proposed to the Reserve in 2004. In 2005 only a small provision for urgent and unforeseen items is to be made and, moving forward, it is intended this approach will continue. This will demand continued financial discipline and better forward planning from all committees. Once cash limits are approved, Committees will be required to manage emerging issues and service pressures within their resources.
As regards capital expenditure, the budget was reduced by £10 million in 2004 to an annual allocation of £48 million, and further to £45 million in 2005.
These reductions could not have been achieved without the full co-operation of the major committees and their willingness to phase the delivery of projects in the best interests of the States and the Island. Delivering value for money from the States capital works projects is an important element of the Finance and Economics Committee’s overall aim of ensuring that funding is used effectively, and it is now some years since there has been an overspend on a major capital project.
Despite reduced capital allocations the States has still managed to continue the substantial investment of recent years in our core infrastructure – schools, healthcare facilities and housing – and obtained better value for money from that investment. This is in accordance with the feedback consistently received from the public: what they really want is for their taxes to be spent wisely on providing capital projects and services as economically, efficiently and effectively as possible.
Accordingly the 2005 budget will have built into it a target of £6m in efficiency savings which will be delivered without any reduction in services. It is unlikely that ambitious targets on this scale can be achieved without a radical reform of the public sector and a complete change of culture. This is exactly what is being proposed in the vision for the public sector which was recently endorsed by the States.
The three fundamental principles of this five-year vision are . . . Better, Simpler, Cheaper. But what do these three words mean to the general public, and how will these fundamental principles affect them?
One of the overarching aims of the vision is to provide better, more customer focused services that the general public and the business community will find easier to use. Access to services will be organised around the customer in a consistent manner and at times and places that suit.
A large number of these services will be brought together under one roof, in a ‘one stop shop’ type environment. This will be reinforced with a call centre and a single transactional web site which will offer convenient alternatives to visiting in person. Unlike the current trend among many financial institutions, the States of Jersey recognise that this call centre has to be on-island and staffed by well trained Jersey residents, and not in an offshore location. The public sector currently has many different ways of working, which results in duplication of processes and customer frustration. By undertaking an exercise known as business process re-engineering (BPR), the States will adopt just one method of working and ensure that the selected process is based on best practice. This will reduce the amount of bureaucracy that is often encountered, and help to make the States a simpler, more efficient organisation. The other overarching aim of the vision is to achieve a £20 million reduction in costs by 2009. Several methods of achieving this have been highlighted, but in order to make the savings, a £9 million investment mainly in training and integrated IT will be required. This level of investment will ensure that the new processes are built around up-to-date technologies and modern ways of working, and that all staff are trained to adopt and support the improved processes. Evidence suggests that typical performance improvements of 40% to 60% can be made from the re-engineering process alone. The proposals within the vision are very similar to an efficiency review of UK central government, carried out by Sir Peter Gershon. This document was published in April, two months after the States of Jersey Vision, and proposes savings of £15billion, with job losses of up to 80,000 by re-engineering government processes.
Gershon’s report, like the States of Jersey Vision, was labelled as ‘radical’ and ‘dramatic’, yet many of the ideas in both reports are already tried and tested, and not just by the private sector. Sections of the UK government have also successfully adopted some of Gershon’s recommendations with councils from Liverpool to Tower Hamlets reaping the benefits of ideas such as common forms and data sharing across departments. The vision was unanimously supported by the States in May. Since then a dedicated Change Team, consisting of individuals with project management, BPR, human resources, communication, information technology, finance and performance management skills, has been put in place to take responsibility for the Vision and to make sure that the change is implemented and the savings achieved by 2009.
In summary, then, the States has worked very hard in the past couple of years to listen to the public’s concerns about controlling expenditure before raising taxes.
There is much greater financial discipline – committees are having to work within their allocated budgets rather than asking for more money from the General Reserve.
The rise in day-to-day spending, has fallen from 10% in 2002 to 2.5% in 2004 and 2005.
The capital expenditure allocation has fallen from £60 million a year to £45 million a year and better management has led to no recent overspends on capital projects and improved value for money from projects.
Efficiency savings, driven by the public sector five-year vision, will be £20 million a year within five years.
There is now a clear medium and long-term commitment, in the Fiscal Strategy and Strategic Plan, to keeping the increase in States spending below the rate of inflation – that is to cut spending in real terms.
Combined with the other elements of the fiscal strategy these initiatives constitute an ambitious, but achievable, package aimed at ensuring sustainable public finances, a high performing public sector and a prosperous economy.
| |
|
|
