Wednesday 21 March 2018
Update on the Committee's Financial Position
Sir, thank you for allowing me to make this statement in which I will very briefly outline the financial position inherited by the new Committee for Education, Sport & Culture - and what the Committee is going to do about it.
In 2017 the previous Committee's expenditure exceeded its budget by nearly £2.2m. This variance was lower than it would have been without a handful of in-year savings which cannot be repeated.
The cash limit set for 2018 is lower than it was even in 2017. The difference between what the previous Committee calculated was necessary simply to maintain existing levels of service and the budget which was actually set was £3.8m. I will repeat that: the current year budget is £3.8m. less than what the previous Committee calculated was necessary to maintain existing levels of service. Following the budget proposed in October and agreed in November last year, no additional savings measures were put in place for 2018. Consequently, expenditure is currently forecast to exceed budget by - unsurprisingly - £3.8m.
Opportunities for in-year savings will be taken as long as they are not detrimental to front line services and do not make it harder to realise longer-term savings. Indeed the Committee and its new Chief Secretary have already taken actions which will reduce expenditure. However, such measures will have minimal impact on a budget deficit of this size. It should be noted that many routine operational savings were realised during the Financial Transformation Programme in the previous States' term. Taking the Committee's expenditure in 2012 and adding nothing more than inflation to it in the years since would result in expenditure this year of £8m. more than the actual 2018 cash limit.
Fortunately and wisely the States recognised that the Committee's 2018 cash limit was unrealistic and gave the Policy & Resources Committee the authority to increase it by the value of projects initiated in 2018 but which deliver savings in later years. This States' Resolution will at least avoid the need for the kind of huge cuts to public services which would otherwise be necessary to realise immediate reductions in spending of several million pounds.
Clearly the Committee's financial position is unsustainable. The scale of the problem means that the budget is not going to be balanced by making short-term, one-off tactical savings. This was acknowledged in a Statement to the States made by the President of the Policy & Resources Committee three weeks ago. The only credible and sustainable way forward is to accept that for the time being - in approximate terms - the present level of expenditure will be maintained while plans can be developed for the wholesale transformation of services and administration in order to reduce costs without detriment to services or outcomes.
The good news is that opportunities do exist to deliver such transformational change and indeed some have already been agreed. These opportunities include: reform of secondary education; reform of post-16 education; incremental reductions in States' funding of the grant-aided colleges; and restructuring the Office of the Committee for Education, Sport & Culture. But these are substantial challenges which will take some time to yield benefits and some of them will require additional funding during the transitional phase to a more efficient and effective model.
In addition, the Committee's financial reporting and control are now much improved; the Committee is supported by an extremely capable Finance Business Partner; and there should be no repeat of the kind of budget uncertainty which afflicted the previous Committee - through no fault of its own - until around the middle of 2017.
Meeting the considerable financial challenges which lie ahead will require four things: determination and leadership from the Committee; professional commitment from officers who serve the Committee; a constructive partnership with the Policy & Resources Committee; and support and patience from the States. Then, by the end of this term, there will be a clear timetable for bringing the Committee's budget back into balance without detriment to services or outcomes.
