User pays charges explained
Last year we set ourselves a target of finding £90 million in savings, efficiencies and user-pays charges. It became clear that meeting the target over this time frame would have a disproportionate impact on the community. So when we considered the better than forecast income in 2015 and the likely distributional impact of this plan’s proposals, we decided to extend the time frame. This means departments will have more time to find efficiencies and any impact on islanders will be minimised.
We will deliver £73 million of savings and efficiencies by the end of 2019, mostly through efficiencies, workforce modernisation and pay restraint. We anticipate that the next Medium Term Financial Plan will still need to find efficiency savings to continue to meet the rising costs of an ageing population. We are developing a culture of continuous improvement across the public sector to help this process.
We have already had some success. Since becoming Chief Minister in November 2011, through the Comprehensive Spending Review, successive budgets and public sector reform - £85 million has been taken out of department budgets. £38 million of that was permanently removed from budgets in 2016.
In 2015 we saw a net reduction of 165 full time equivalent posts, and 114 people have left the organisation through voluntary redundancy since the scheme opened in 2015. This helps our continued focus on reducing headcount as we restructure the public sector.
This plan supports our priorities. It invests in the health and social care we need as our society ages, and it funds improvements in our education system so all our children can reach their potential and develop the skills they need to achieve fulfilling lives and careers. It will keep Jersey special by improving our town, preserving our outstanding natural environment, and investing in our infrastructure.
The plan is proposing investment in priority services while also balancing the books by 2019 through a combination of savings, efficiencies, public sector reform, economic growth and some user pays charges.
The three main charges being proposed are: -
1. A Heath Charge
An income based charge similar to the current Long Term Care charge. It would raise £7.5 million by 2018, increasing to £15 million in 2019. It was originally through that this new charge would need to raise up to £35 million per year by 2019. Having reflected on the better than expected financial position in 2015 and improved income forecasts for 2016-2019 we believe we now need to raise less through this charge.
2. A Business Waste Charge
We have been looking at introducing user pays charges for waste disposal, as is done everywhere else. The intention is to raise up to £11 million to pay for services, improve environmental outcomes and manage demand. We are proposing to introduce charges for the disposal of commercial waste as these services have, up to now, been paid for out of general tax revenue, rather than by the companies themselves. This means individual taxpayers have been subsidising business costs.
3. Other User Pays Charges
There are a number of other charges that help to make up the proposed £4.6 million of user-pays charges.
Higher income families will receive less support for nursery places as access to 20 free hours of pre-school education will be means tested for households earning more than £85,000.
The Education Department will review the fee-paying sector to ensure value for money and that the service is in line with the Department’s key priorities.
Businesses will pay for the cost of their fire certification, a service that is currently subsidised by taxpayers, and the work of the explosives officer will be covered by charging those who use the service.
States Members face a critical decision in September on behalf of islanders – do we believe that investment in health, education and infrastructure is essential? And if so, how are we going to fund it in a fair way that avoids unintended consequences.
We have five main choices:
- Make efficiencies and savings – which we have already achieved and will continue to do
- Pay according to income – what we are proposing for the health charge, protecting lower earners and putting most of the burden on those earning over £100k, who currently pay the majority of tax
- Pay as you ‘use’ a service – what we are proposing for waste, for businesses only
- Pay when you spend – i.e. GST – which is not being proposed
- Decide not to fund the priorities
I do not believe option five is a realistic option as it would adversely affect islanders into the future. Over the next 20 years our community will face unprecedented changes. Like many other places, Jersey is seeing an ageing population; growing health challenges; increasing resource pressures; the need to respond to climate change; and rapid technological development that is already affecting the way we all live and work.
This week we published a report which examined the impact of the proposed measures on households of different income levels. It concluded that spending on health is generally progressive and investment in initiatives like the Pupil Premium and community health care will help the more vulnerable.
The analysis makes it clear that when making political choices there are also other considerations to take into account, including the efficiency of public services, the competitiveness of the economy, and the need to put finances on a sustainable footing to help secure economic growth and future prosperity.
We believe we have found the right balance of measures that enable us to make the required investment in health and education that will benefit less well-off islanders. This focus on the more vulnerable in our community, both young and old, will raise standards among pupils who need extra support and treat poorly patients in their homes for as long as possible.
(You can read the analysis here)
As we approach the States debate on this plan in September some may say we should cut costs more sharply. There will be others who say we should keep the status quo, ignoring opportunities for doing things differently.
We cannot stand still if we want to provide efficient services for islanders in the face of challenging global changes in demographics, technology and public expectation.
My hope is that the reasonable middle, those who accept that investment in our future is necessary and that you can only cut so far, will say ‘we need this investment’ and will see that the balance of how we have approached the proposals for savings, efficiencies, and user-pays charges is fair, appropriate, and in the best interests of our island.