If Financial Transformation slips, tax hikes will be next
MUCH rests on the success of the Financial Transformation Programme.
MUCH rests on the success of the Financial Transformation Programme.
Designed to strip a recurring £31m. out of States spending, it is a key component in returning the island to a balanced budget.
If it fails to fulfil its goal, tax rises are inevitable.
And while there has been some progress, many signs point towards States members being uneasy with the impact it is having.
The fear must be now that the unease transmits into taking the pressure off and extending the deadline for achieving the savings beyond December 2014 – the Policy Council in its report for January's debate acknowledges as much.
It outlines several reasons why an extension to the deadline is not viable – although it was happy to give the two big-spending departments, Education and Health, more time to meet their bigger savings by switching around their targets in a move that cost taxpayers millions.
In his annual independent fiscal review, Professor Wood warned this represented 'slippage' and imperils delivery.
It is not the first signs of slippage in the programme.
The Policy Council had forecast being £7.7m. further into the savings than the States currently is.
A new structure for delivering the savings was instigated after a review in the spring of 2011 found a lack of ownership and a 'perverse incentive to delay delivery in order to postpone any budget reductions'.
The original fundamental spending review on which the FTP was based identified 107 opportunities for savings.
These were outlined in a report with the amount each could generate.
But concerns from department chief officers that they wanted more flexibility has shifted this.
Departments now have a set financial target to hit each year and have been given the chance to come up with their own programme of savings.
The Policy Council says the new portfolio of savings can still be 'mapped to the principles contained within the original 107 projects, but it now represents the voice of the organisation'.
Which is great, except that the public now have no idea what the voice is saying.
In October, departments submitted outline projects that they thought could make the required savings.
These were being reviewed before the Policy Council was due to sign them off this month.
It has now emerged that ministers will not discuss the projects until February – after States members are asked to endorse the FTP.
There has been an argument from the anti-FTP brigade that the public has never been asked whether it wants the inevitable service cuts or would prefer tax rises.
Well no one, except the department board members and the FTP team, now knows exactly what is on the horizon.
Look back on the October question time when the pressure was building from backbenchers about the FTP and the chief minister, Peter Harwood, batted away questions about the FTP on the grounds that the States report was coming out.
Deputy Scott Ogier had asked what total sum of savings had been identified by departments for 2013 and 2014 and what percentage of the total savings now are fresh initiatives not forming part of the original FTP Report of July 2009.
Deputy Heidi Soulsby wanted assurances that the January report would map the evolution of the 107 original opportunities to the current position so that States members could properly assess progress to date.
Those questions have not been answered in the January report and leave it vulnerable because of that.
It is also vulnerable because some simply do not like the way the consultants involved are being paid.
Capita is paid a flat fee for running a programme office, expenses and a reward rate of 6.5% of one full year's savings when they are banked.
But because of the restructure, they get paid that reward fee for projects in which they may not have had any involvement.
If the FTP is successful, Capita would have been paid a total of £3.8m. plus expenses, which are running at £145 a day.
Questions will also be raised by some deputies about the amount of civil service staff time being lost to the FTP, something which has not been calculated.
So far, £10m.-worth of recurring savings have been delivered – and then spent again on new services.
That spending approach cannot be taken by this States, especially as it is now clear the level of economic growth originally expected to help eliminate the deficit is just not going to happen.
But the Policy Council is going to face a tough ride when the FTP is debated in January – what remains to be seen is whether it is from just the vocal minority that has been rallying against the pace of the FTP or whether there is a more significant block.
If the latter is the case, then even if the report goes through unamended this time it would point to an unsteady and fractious ride ahead, particularly when the tough spending decisions come back to the States – whatever they may be.
