Budget transfer from Central Contingency to Chief Minister's Department: Redundancy Provision

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A decision made 9 December 2016:

Ministerial decision reference MD-C-2016-0128

Decision summary title

Transfer of funding between the Chief Ministers Department and Central Contingencies to recognise the costs associated with the Voluntary Release and Redundancy Scheme in 2016.

Decision summary author

Finance Manager - Corporate Group

Is the decision summary public or exempt?

Public

Report title

Transfer of funding between the Chief Ministers Department and Central Contingencies to recognise the costs associated with the Voluntary Release and Redundancy Scheme in 2016.

Report author or name of

person giving report

Finance Manager - Corporate Group

Is the report public or exempt?

Public

Decision and reason for the decision

The Chief Minister accepted a non-recurring budget transfer of £252,966.11 to the Chief Minister’s Department revenue head of expenditure, as outlined in the attached report, from Central Contingency – Redundancy Provision for VR Applications approved and signed up to 19th November 2016.

The Council of Ministers approved the allocation of £2,000,000 from Central Contingencies to create a Redundancy Provision in 2015 to fund the first tranche of the scheme. The States Assembly approved a further £20,000,000 to be added to the Redundancy Provision across 2015 and 2016 to be funded by transfers from the Strategic Reserve Fund with £4,000,000 to be transferred in 2015 and £16,000,000 in 2016. Following the completion of the 2015 VR scheme the remaining money was drawn down for funding of new applications in 2016. In total this left £17.3 million available for VR funding from January 2016.

This Decision increases the Chief Minister’s Departmental budget to fund the next tranche of VR Applications to 19th November 2016. There will be a final MD in early January 2017 to capture any further applications signed before 31st December 2016.

Article 17(2) of the Public Finances (Jersey) Law 2005 states that the Minister for Treasury and Resources is authorised to approve the transfer from contingency expenditure to heads of expenditure of amounts not exceeding, in total, the amount available for contingency expenditure in a financial year.

Article 18(1A) of the Public Finances (Jersey) Law 2005 states that all or any part of the amount appropriated by a head of expenditure may, with the approval of the Minister, be transferred from the head of expenditure to contingency expenditure, within or after the end of the relevant financial year.

Resource implications

Chief Minister’s Department revenue head of expenditure, as outlined in the attached report, to increase by a total of £252,966.11 and Central Contingency – Redundancy Provision to decrease by an identical amount.

This decision does not change the total amount of expenditure approved by the States for the period of the current MTFP 2016 to 2019.

Action required

Research and Policy Officer to advise Finance Manager – Corporate Group that this decision has been approved.

Signature

Position

Senator I J Gorst

Chief Minister

Date signed

Effective date of the decision

Budget transfer from Central Contingency to Chief Minister's Department: Redundancy Provision

Chief Minister’s Department

Ministerial Decision Report

Transfer of funding between the Chief Minister’s Department and Central Contingencies to recognise the costs associated with the Voluntary Release and Redundancy Scheme in 2016.

Purpose of Report

To enable the Chief Minister to approve a non-recurring budget transfer of £252,966.11 from Central Contingencies – Redundancy to the Chief Minister’s Department, this is to recognise the costs associated with the Voluntary Release Scheme up to 19th November 2016.

Background

A voluntary release (VR) programme was run in 2015 closing at the end of July and re-opened in January 2016. As at the 19th November 2016 a total of 536 applications for VR had been received (329 in 2015 and 207 to date in 2016) and a total of 181 have been approved. The scheme remains open for the foreseeable future in order to support organisational change initiatives. In addition, a total of 46 employees have been made compulsory redundant to date in 2016.

International Financial Reporting Standards (IFRS) interpreted for the States of Jersey in the Jersey Financial Reporting Manual (JFReM) require termination benefits to be recognised as an expense at the point at which the entity can no longer withdraw the offer of those benefits. Accordingly, the full cost of all VRs must be recognised at the point a binding contract has been signed with the employee.

The release of these employees combined over the two-year period provides an estimated saving of approximately £7.48 million and 164.1 FTE at a one off cost of £8.56 million of which a cost of approximately £8.27 million to the central contingency fund.

The total cost of the approved VR packages for the Chief Minister’s Department is £252,966.11 for the period July to November 2016. The net recurring saving achieved as a result of releasing these employees will be £38,646.98.

Recommendation

The Chief Minister is recommended to approve a non-recurring budget transfer of £252,966.11 from Central Contingency – Redundancy Provision to the Chief Minister’s Department.

Reason for Decision

The transfer figure for funds from the central contingency fund to the Chief Minister’s Department in the amount of £252,966.11 is for the period from July 2016 up to the 19th November 2016.

A further redundancy decision panel is due in December 2016. Following decisions made if exit agreements are signed before close of 2016 a further transfer will be required under financial directions to cover all financial commitments made. If this should occur COM will be notified in January 2017 of additional transfer requirements.

Resource Implications

Chief Minister’s revenue heads of expenditure to increase by up to £252,966.11 and the Central Contingency – Redundancy Provision to decrease by the same amount.

This decision does not change the total amount of expenditure approved by the States for the period of the current MTFP 2016 to 2019.

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