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States accounts show costs and expenditure under control and improvements in investment returns - but continued worries over revenue
Guernsey's Treasury & Resources Department published the 2013 accounts today. Guernsey's Minister for Treasury and Resources, Deputy Gavin St Pier, commented:
"We are controlling expenditure and making our assets work harder. We are continuing to make progress across the board, but we do need to stay focused on closing the deficit, and we have concerns over the sustainability of our revenue. Overall we are in pretty good shape, but we need to continue to get into better shape. In particular, moving towards zero-based budgeting is an important step in further improving our financial management; developing a Government Service Plan and a process for prioritising services are essential disciplines; and HSSD, as our largest department, is making progress on its 'financial improvement' actions arising from various reports commissioned last year, but still has work to do which will require time, support and resources to complete this as soon as practicable. There is no cause for complacency, but we can be optimistic that we are moving in the right direction."
Headlines in the accounts include:
Net revenue expenditure
The total net revenue expenditure by Departments and Committees decreased by 0.2% in real terms from 2012.
The Minister for Treasury & Resources, Deputy Gavin St Pier said:
"I am pleased to be able to report that the expenditure was well within the States' policy of no real terms growth. This was despite incurring one off costs in the year associated with voluntary severance which totalled £4.1m but will lead to recurring savings from 2014 onwards of some £1.5m per annum."
Overall, the accounts show that expenditure on staff rose by only 0.2% in nominal terms from 2012 after removing the one off cost of voluntary severance and that, on average, the total number of full time equivalent staff employed fell by 1.6% to 4,319. The accounts also disclose the number of senior employees who cost the States in excess of £70,000 per annum which has risen in the year to 437.
Deputy St Pier said:
"It is important to note that the cost of senior employees relates to the full cost of employment which includes social insurance and pension contributions and, exceptionally in 2013, also included any severance costs, which has distorted the picture by artificially inflating the number of people in the over £70,000 band. Also the numbers in this category will increase a little each year anyway as additional pay bands fall within the criteria following pay awards. What is pleasing is that the overall full time equivalent numbers have fallen, and should fall again in 2014 as the impact of the severance scheme is realised, which demonstrates that the States is tackling its largest overall cost."
Two Departments - Health and Social Services and Housing - overspent their authorised budgets. The Housing Department overspend was £37k, arose as a result of declining Housing Control fees and has been sanctioned by the Treasury and Resources Department under its delegated authority. The Health and Social Services final overspend was £306k after in-year budget increases totalling over £2m. The overall increased expenditure of £2.3m compared to the original budget came about as a result of delays in identifying and initiating Financial Transformation Programme projects during the year and cost pressures in respect of Looked After Children, Off-Island Complex Needs and Acute Off Island treatment.
Deputy Mark Dorey, the Minister for Health and Social Services said:
"During 2013 the Health and Social Services Department successfully banked £3.26m of FTP savings, just £30k short of the 2013 target which included £0.9m outstanding from 2012. I am therefore pleased with the results of the significant efforts made to identify efficiency savings.
The pressures of exceptional costs and demand led services, particularly off-island treatment, continued to have an impact on the Department's expenditure in 2013. As a consequence the Department overspent its authorised budget by £306k. Those pressures continue into 2014, although positive effects are being seen as a result of completing FTP initiatives in earlier years, strengthened financial management and improved consistency and quality of financial reporting. Throughout 2013, information was shared regularly with the Treasury & Resources Department however, unavoidable off-island placements and a need to fund an exceptional situation relating to Looked After Children contributed to HSSD's final outturn position for 2013. The Department will continue to work closely with T&R on initiatives such as reviewing budgets using zero-based budgeting or related methodologies."
States revenues
Revenues decreased by 0.3% in the year to £361m which was some £10m lower than anticipated. This was partly due to the continued subdued economic conditions which fed through to some income tax receipts and document duty. In addition, there was a temporary shortfall in the anticipated additional income tax receipts from the extension of the 10% rate to fiduciary and insurance business.
Deputy St Pier said:
"Our deficit position in 2013 is largely as a result of the deterioration in revenues. This underlines the responsibility this States has to ensure that its tax base is as resilient as possible. The accounts show that 80% of our income taxes come from individuals and that 78% of general revenue income comes from income tax. This reinforces the need for the Personal Tax, Pensions and Benefits Review which the Department is undertaking with the Social Security Department."
Investment and managed deficit
The combination of the better than anticipated expenditure position along with lower revenues meant that the overall deficit in 2013 totalled £24.8m. This is after allowing for a one off transfer of £3m to establish the Strategic Development Fund and compares with £17m in 2012.
The deficit continues to be funded by a transfer from the Contingency Reserve which, at the end of last year, had a balance available to fund future deficits of £65m. The approach adopted by the Treasury and Resources Department to investing the Reserve, and the other balances of the States and its depositors through the General Investment Pool, saw an investment return of 7.4% in 2013.
Deputy St Pier said:
"The change in investment strategy in recent years for the Contingency Reserve and other funds has made a marked difference to the returns generated for the States from near cash returns to substantial real returns. This approach has undoubtedly extended the life of the Contingency Reserve and allowed the States to get better value out of the funds set aside for capital investment. This underlines the importance to us of these reserves accumulated over many years. It is absolutely vital that we preserve their real value and we hope to lay recommendations to the States in this October's Budget Report which will ensure that the role of the Contingency Reserve as our 'core capital' is recognised. "
