Speech I made when the Annual Accounts were presented to the States.
Sir, there are a few points that I think deserve consideration and should be borne in mind when we debate the Medium Term Financial Plan next week.
Firstly, as the President of SMC has pointed out, there appears to have been no movement towards IPSAS. Note 2 gives a bit of history and possible implications. I should point out that Note 2i on page 29 is not strictly accurate when it says that the States re-affirmed its decision to move to IPSAS in 2015. The actual resolution, which arose from an amendment proposed by myself and seconded by Deputy Trott was that the then T&R should formally commence the phased implementation with effect from 1 January 2016. I do appreciate it is a big job, but am disappointed that no movement towards its introduction has yet been made.
So why does this matter? I’m sure there are some here who think this just an academic debate amongst accountants.
Well there is a lot of talk of structural deficits, indeed the P&R President mentioned that earlier, of the need either to save more and/or raise taxes because of it. But have we really? Perhaps its worse, perhaps better. Did we really have a surplus of £25m last year? We have a fiscal policy to spend 3% of our GDP on capital – why? If we had proper depreciation we would understand how best to replace our assets and when.
And talking about capital, the MTFP concerns itself with the allocation to the capital reserve, but it is clear the real issue is how much the capital reserve is used. Look at page 116 and whilst £31.5m is meant to have been spent last year, £25.2m was the recapitalisation of Aurigny. Actual bricks and mortar stuff was £6.3m. At the same time the pay costs to manage that was half a million pounds.
As an aside, those pay costs, as well as others hidden in various reserves, do not appear to form part of the analysis in note 7 on pay costs totalling £216m. We really need to see a consolidated figure here. Again, this is something that should be resolved once IPSAS is consolidated.
Back to capital. Whilst I appreciate work was done to move projects on, there does seem to be a problem in terms of having a smooth flow of expenditure, which I would not expect if we have enough staff to result in such an annual expenditure. What we need is greater accountability in this area and I think this is something that may well be resolved through I think is one of Deputy Yerby’s better amendments to the MTFP regarding the creation of a Chief Executive’s report.
Onto health and social care. I am pleased to see the amalgamation of the health and social care and ESS accounts in so far as they relate to health and social care and thank SMC for pushing these changes. I say an amalgamation as they aren’t really a consolidation. I think it is a start, but the analysis needs some refining and would request this is something passed through the 2 Committees before it is finalised in future.
Now, I have commented previously on the year end position as part of my general statement earlier this year. But I’m quite happy to mention it again. Being able to turn around a potential £4.7m deficit to a surplus of £600k at the end of the year has demonstrated the system grip that has been achieved. Here again, the accounts are misleading, or rather don’t give the full picture. The Treasurer’s report shows an appropriation of £1.15m to HSC from the budget reserve. However, that does not take account of the fact that HSC set itself a £1.9m savings target for last year. The reality is that we returned to the Treasury £1.35m as not only did we make the £600,000 surplus but also managed to clear an extra £750,000 of savings, hidden as an efficiency target against the authorised budget on page 87.
Now that is all in the past of course. I am pleased to report that the trend started in 2016 is continuing into this year as the full effects of obtaining system grip are being seen. However, we need to appreciate that medium to long term these savings are unsustainable and on that note I’d like to read the paragraph that the Committee has put into its narrative that didn’t make the final cut, and that reads as follows;
“However, while transformation of services may allow the costs of health and social care to be contained and managed more sustainably, the pressures of rising population demand and increasing medical inflation mean it is not possible for the Committee to commit firmly to achieving no real-terms growth in its budget in the medium term. “ Whilst it didn’t make it to these accounts, it is in the Committee’s Policy & Resource Plan and is something that we will develop further when we debate the MTFP next week.