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The Government should only make savings commitments if it knows exactly how it’s going to achieve them, economists have said after assessing the £120m ‘OneGov’ target.
The recommendation came in a report prepared for the new Government last week by the Fiscal Policy Panel (FPP), who regularly perform ‘health checks’ on the island’s economy and public sector spending and make recommendations to Ministers on how to address any issues.
In summer 2019, a goal of achieving £100m in savings by 2023 was first unveiled amid concerns of a looming £30m 'black hole' in the public purse.
It formed part of a Government Plan for 2020 to 2023 pledging millions of investment in schools, health, sports facilities and the creation of a sustainable transport network among other items.
A further £20m was then added to the savings plan last year, taking the so-called "rebalancing" target to £120m by 2024.
The target was supposed to by a mix of one-off and recurring "efficiencies", such as "reducing duplication", "headcount management" and reviewing contracts with suppliers.
However, exact details of how these would be achieved were not included in the 2020 Government Plan.
It wasn’t until months later that an accompanying ‘Efficiencies Programme’ was published, laying out how new charges, higher education course fee hikes and a clampdown on business trips would be used to save money in the first year.
In a report released last week, the Government's economic advisers – the Fiscal Policy Panel – assessed how well the Government had progressed towards this target.
They found that, of the £40m targeted for 2020 and £60m for 2021, £40m was achieved in 2020 "albeit some being through £15m one-off efficiencies".
"As some of these efficiencies were one-off, this increased the new amount of rebalancing needed in 2021, so the target changed from £20m recurring to £35m," the panel explained.
"Of the new target, £30m were delivered on a recurring basis with £5m of one-off which was again added to 2022. The Government Plan sets out a target of £22m of rebalancing measures in 2022, with detail set out in the Plan."
Overall, the FPP supported the idea of having a savings target, saying they should be "sought regardless of the stage of the economic cycle".
It noted, however, that "efficiencies can be difficult to deliver."
While the panel said it recognised that finding some "one-off" savings has been "necessary to achieve the challenging targets" over the past two years, the FPP noted that "it is likely the difficulty will increase as 'easy wins' have been completed."
On the topic, the FPP concluded: "Rebalancing measures should only be included in the Government Plan if it is clear how they will be achieved."
It went on to warn: "Including speculative measures may lead to pressures in later years if they are subsequently not found."
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