States likely to miss its own savings target of £10m. a year minimum
THE States is likely to miss its own minimum cost savings target of £10m. a year.
Senior politicians have admitted that there is a two-thirds risk of the savings not being made over the next decade.
Policy & Resources has submitted three tax and spending plans for debate by the States next month.
Each one assumes cost savings of £10m. by 2029, but P&R’s own supporting policy letter has warned deputies that it was unlikely to hit this target.
‘Historically, the States do not have a good track record of successfully delivering savings targets, and there is a significant risk that the £10m. real terms savings – £13m. in 2032 because of inflation – built into the three scenarios will not be fully realised,’ said P&R.
Although it continues to describe the States’ £10m. a year minimum savings target as ‘challenging but realistic’, P&R has also published a table of key risks and opportunities, in which it stated that there was a 66% likelihood of the cost savings not being realised between 2024 and 2032.
Earlier this year, the Assembly directed P&R to set up a savings sub-committee and create a plan for cost reductions of at least £10-16m. a year over five years.
In its current policy letter, P&R said savings exceeding £10m. a year could not be achieved ‘without considerable changes to public services’ and warned that there was only a 10% chance of achieving the higher savings target of £16m. a year.
It also provided an update on progress being made by its cost savings sub-committee.
‘It is well under way in its work and engagement with committees is ongoing.’
Analysis of 2,000 suggestions from public and staff surveys is being analysed.
The next step is to discuss the ideas with relevant committees.
‘Initial feedback is that there is plenty to look at, but a lot of the ideas were around taxation or increasing or introducing other charges rather than cost savings.’
P&R intends to present the States with its cost saving plan by next summer, with proposals included in the 2025 Budget.
It admitted its efforts to contain spending before then were faltering, including a wish to avoid real terms growth in budgets next year.
‘The terms of the 2024 pay award for States staff have already been agreed, which is set at RPIX-1%, giving rise to a pay award of 5.8%. This presents a significant challenge... with the inflation forecast for the 2024 Budget for expenditure set at 5.5% overall.
‘Therefore, to contain overall budget growth within 5.5%, committees have been asked to prepare their budgets on a real terms reduction of 2.5%, except Health & Social Care, which has a target of no real-terms growth overall, given the known demand pressures in that area.
‘At the time of writing, only two committee budget submissions have met or improved upon the target, with other committees requesting budgets higher than the proposed cash limits.’
P&R is asking deputies to back a goods and services tax of 5% to help plug a hole in States finances projected to reach £100m. a year by 2040, as well as a range of other tax changes to assist the less affluent half of islanders and additional borrowing of £350m. to fund a list of capital projects with a total estimated cost of more than £500m.