Falklands : Falklands Complete Appropriation Bill
Submitted by Falkland Islands News Network (Juanita Brock) 04.06.2008 (Article Archived on 18.06.2008)

Councillors have spoken about a difficult budget to balance.

THE REMAINING STAGES OF THE APPROPRIATION BILL 2008

The Financial Secretary the Hon Mr Derek Howatt (DH):

Mr Speaker, Honourable members, this report covers both the Appropriation Bill and the Finance Bill referred to the Sub-committee on the Estimates on Wednesday morning.  Following the detailed and lengthy considerations at the special budget meeting of Standing Finance Committee, the proceedings of the Select Committee completed on Wednesday afternoon.

The efficient way business was conducted within the time allocated was down to the effective chairmanship, ably assisted, of course, by the Officers present.  This was Councillor Clausen’s first budget meeting as Chair and she managed to keep everyone in control without the use of her predecessor’s gavel. 

The Committee made a small number of adjustments to the operating budget, which resulted in a reduction of £505,000.00 in the estimated surplus.  The approved budget surplus for  2008/09 is therefore £440,980.00.

The main adjustment was the transfer of estimated income of £500,000.00 from the planned sale of shares in Stanley Services Limited to a holding company from the Operating to the Capital Budget.

Reductions for the following two years for a further £2.5 Million in sales proceeds from the same source are estimated and also adjusted accordingly.  This means that the Capital Equalisation Fund, rather than the Consolidated Fund will be credited with the income.

Although this is a paper transaction, it was considered that this income is capital in nature and the inclusion of such large receipts in the Operating Budget distorted the trend of ordinary revenues.

Despite another tight budget round all essential services are maintained at existing levels.  For Example:

• The Public Works Department Continues to be allocated with the largest slice of the Cake at £8.7


• Next is Health and Social Services, which are allocated £6.7 Million


• Education and Training are allocated £5.5 Million


• Fisheries Department is allocated £4.9 Million.  This level of expenditure is necessary for the conservation and management purposes and continues to represent 37% of the estimated direct income to Government from the Fishery.


• £4 Million is allocated to Central Administration.  This includes the services provided by the Secretariat, Treasury and Computer Section.  The allocation includes a total central reserve provision of £883,000.00 consisting of funding for the proposed pay adjustment and contingencies for other areas, in particular to cover part of the increased costs of energy.


• Aviation, which covers Civil Aviation, Stanley Airport and FIGAS is allocated £2.3 Million

These are those Heads of Service where expenditure is over £1 Million. 

Details of the revenue and expenditure for all departments will be shown in the approved estimates document.  This will also include the full Capital Programme.  This document will be available in a few weeks from the Secretariat for members of the public to purchase or receive electronically free of charge.

No adjustment was made to the transfer payments budget of £4.9 Million.  The Transfer Payments budget includes the following important allocations in the form of assistance to non government organisations, Social payments and programmes.

• £412,000.00 as a contribution to the Tourist Board to support investment and the promotion and development of tourism.  This represents an increase of £192,000.00 – almost double the original estimate for the current year.


• £150,000.00 as a contribution towards Defence in the form of funding for the building of two houses at MPA.  This annual provision has been made for many years and continues to feature in the projections for the foreseeable future. 


• £243,000.00 for improved TV and Radio Services from BFBS.  This represents an increase of £150,000.00 on the original estimate for the current year


• £350,000.00 for the Holiday Credit Scheme.  This represents an increase of £50,000.00 on the original estimate for the current year.  The Select Committee agreed that accruals to the scheme should be suspended from 01 July 2008 and that any credits unused after 3 years from now should be forfeited.  But to encourage the use of credits before that deadline it was agreed that draw-downs in cash would be permitted at 50% of their value.  I can report that these changes in policy were approved by Executive Council this afternoon.


• £289,000.00 is allocated for Family Allowances


• £70,000.00 for donations and subventions towards youth, sports and other charitable donations.


• £170,000.00 to support the Falkland Islands Radio Station


• £109,000.00 to support the Pensions Board for the Falkland Islands Pension Scheme


• £70,000.00 to support the Museum and National Trust with £20,000.00 of this sum is subject to the Trust raising the equivalent additional income from other sources.


• £67,000.00 to support the work of Falklands Conservation


• £2.8 Million is allocated for direct and indirect support to the Camp Community in the form of assistance with coastal shipping and ferry services, meat company and wool company subsidies, energy grants, Agricultural business development, labour scheme, farm improvements,  and pension contributions.  This represents a net increase of £500,000.00 on the original estimate for the current year, mainly as a result of an increase in shipping subsidies due to the forthcoming new ferry service, partly offset by reductions in subsidies, for the wool and meat companies.


• It should be noted that there is no subsidy allocated for FIDC for the forthcoming financial year, since the Corporation is able to fund its operations from accumulated balances.  This represents a one-off saving and annual subsidy allocations of £420,000.00 are included in the projections for future years.

Turning now to the Capital Programme, the Committee increased expenditure marginally by £30,000.00 to increase the allocation for the replacement Category 2 Fire Appliance for Stanley Airport to £130,000.00. 

I can also report that the Capital Programme includes allocations for the following major schemes:

• £873,000.00 for continuing the building, capping and repair of Camp Roads both on East and West Falkland.  This includes £283.00 (I think he means £283,000.00) for roads to sites which form part of the Camp Telecommunications upgrade.


• £140,000.00 for completing a road to Mt Byron for the Ministry of Defence, for which recovery is included (inaudible)


• £250,000.00 for the third and final year of a programme for replacing culverts


• £200,000.00 for the construction of sea terminals and related infrastructure


• £200,000.00 for major repairs to roads in and around Stanley.


• £610,000.00 for the refurbishment of the police station and prisons


• £90,000.00 to improve the Tourist Reception Facilities at the Public Jetty


• £595,000.00 to start a new phase of development improvements to the Abattoir.


• A further £700,000.00 is included in the 2009/10 projections to complete the improvements.  The estimates for this project were not firm at this stage and are subject to approval by Executive Council following a cost-benefit analysis.


• £100,000.00 to allow procurement to begin on an expansion of the wind farm, subject to a cost-benefit analysis and approval by Executive Council.  The projections for the following two years include an allocation of £1.4 Million to complete the project.  It should be noted at this stage that the total estimated cost of £1.5 Million has not been fully costed.


• £750,000.00 for infrastructure development and a further £1.5 Million is included in the 2009/10 projections for this purpose.


• And finally, £100,000.00 to continue the major repairs to Stanley Airport Runway.  A further £300,000.00 is projected at £100,000.00 per year to complete repairs and resurfacing. 

This mix of Capital construction schemes and herewith the other more minor works should help to keep the in-house labour teams fully occupied to take up any slack in the private sector contracting business.

As well as construction schemes the Capital Budget includes the following investments:

• £230,000.00 to finance the shared equity scheme in the event it is decided there is a need to develop one


• £370,000.00 for the purchase of plant for the Public Works Department


• £200,000.00 for the replacement of other vehicles across the whole of Government


• £468,000.00 to complete the investment in the new Camp Telecommunications system.  A total cost of FIG share of this joint investment with Cable & Wireless is estimated at £2.2 Million, including the roads to sites I mentioned earlier.


• £156,000.00 for medical equipment for Hospital Capital Works


• And finally, £81,800.00 for the first phase of substantial investment in information and communication technology for the schools.  A further £85,700.00 is included in the projections for next year to complete this investment.

With the exception of the FIGAS charges the Sub-committee approved all of the proposals on revised taxes, fees and charges.  It was agreed that the proposed increase in FIGAS charges should await the outcome of a review.  The revenue targets inserted in the Draft Estimates were not amended so this will provide focus for some increase in charges or compensating reduction in expenditure.

Although the policy to re-introduce the employment tax has been agreed as mentioned in my presentation, the formal legislation will need to be reviewed and modified.  It will then be submitted to Executive Council for consideration of the detail and publication of the Bill before onward remission to this House for formal approval.

Revenue of £400,000.00 from this source is inserted in the draft estimates and this also represents a target.

There is also one point in the budget presentation that I made to the House on Wednesday that I would like to clarify.  In that report I referred to the Non Domestic Refuse Charge and the fact that there is a significant deficit with charges at the current level.

I should have mentioned that although it is referred to as a refuse collection chatge, it actually includes other community costs such as street lighting, town cleaning and plant maintenance as well as direct refuse collection and disposal costs.  This is the same principle on which the service charge, which is levied on domestic properties, is placed.  The deficit I referred to arises when all these costs are taken into account.

I am pleased to report that the Committee approved the proposals on:

• Revised pension contributions and benefits


• Social payments and allowances

All the provisions of the Finance Bill to implement those revisions were approved.

As well as striking a balanced budget, I believe we have also struck a reasonable balance between expenditure across the full range of service provision, social purposes, economic development and capital investment.

The Government is planning to spend more than £40 Million next year and it’s down to the private sector to determine how much of that money will circulate within the economy in order for it to benefit more than just the original payee. 

The estimates, once approved, and in support of the Islands Plan, form a series of promises in financial terms to the general public.  Starting on 01 July this year, the job of the Public Service is to do its utmost to deliver those promises and obtain the best value for money for the benefit of all residents by the time the finish line is reached on 30 June next year, while meeting the milestones and targets set on the way. 

As usual, Honourable Members will be able to monitor performance as the year progresses through the monthly meetings of the Standing Finance Committee.

A paper summarising the changes made to the draft estimates in Select Committee was presented to Executive Council earlier this afternoon.  I can now report that the Executive Council recommends to Legislative Council the amendments to the Appropriation Bill necessary to accommodate those adjustments.

Once again, I would like to thank all Officers and Honourable Members who took part in the budget process.  In particular I thank Keith and Nick for keeping me on track.  In addition, I am most grateful to all staff in the Treasury for their excellent work in maintaining the accounting and financial control systems leading up to and following the approval of the budget.

Mr Speaker, this concludes my report on the proceedings of the Select Committee on the 2008/09 Estimates.

Cllr the Hon Dr Andrea Clausen (AC):

 I beg to move that the report be accepted by this House and I would now like to speak to the report.

Firstly I would like to thank the Financial Secretary for his kind words about my chairmanship.  I think I have quite a lot to live up to from my predecessor but I will do my best to do that.  It was a tough process and we have come through it.

I would like to reiterate my thanks that I made on Wednesday to Derek and all of his team.  There’s a huge amount of work involved and I don’t think anybody could underestimate if and thank you very much for all of that.

Just a couple of words on the budget outcome itself overall:  I have to say that personally I feel quite disappointed with our outcome.  We might have achieved a balanced budget but the surplus that we have is quite small.  And, in fact, if you take into account the fact that the transfer payment to FIDC has been removed for this year, we actually don’t have a surplus at all because that will be back in next year.

We also failed to meet the medium term financial plan objective, which was to reduce our overall spending by £1 Million.  We didn’t have very long to reach that objective, it’s fair to say but I always prefer to remain optimistic about these things and I hope we might be able to do that.

Our Annual Operating Expenditure may meet our consolidated fund target but it also has risen by £1.8 Million.  And, I mentioned some of the key drivers for this earlier this week. And they are all entirely justified.  But of course, what we need to do is try and find reductions in expenditure in other areas.

I am pleased to see that we’ve moved the potential revenue from sale of “Hold-Co” shares out of the operating revenue and into the capital receipts as I think this makes everything far more transparent and more accurate.  And, so the public can see they are different and see it is outside the operating revenue.

I just want to reiterate again that we have a huge amount of work to do, I believe, on reducing expenditure whilst trying to maintain a good level of services to the community at large and that we have to start work on that immediately.  It can’t be left until the back end of this year coming before we start work.  So, we Elected Members as well as Heads of Department and budget managers need to work hard  together to come up with proposals.  There’s nothing stopping us introducing some of those measures throughout this year but we need to get on with it.

On Revenue Measures, I would just like to mention the Medical Services Levy/Employment tax.  I think members of the public might be interested to hear about the history of the Medical Services Levy.  It, in fact, was introduced in 1979 and, for legislative purposes it was referred to as an employment tax but Members of the Budget Select Committee of the day wanted it to be referred to as a levy and not a tax because it replaced medical service fees such as charges for in-patient stays and costs of medicines and so on.  Interestingly enough, during this budget process some of the options that we had from the table to reduce expenditure or to recover revenue were to do with some of those things – not the in-patients but the medicine charges and so on.  I feel that by re-introducing the Medical Services Levy it is so that we don’t have to mess around at the edges with small charges which are targeting the sick directly and that we all contribute to a service that is absolutely essential for us all.

And, I think that’s the other point to make.  It would merely be a contribution.  It would by no means cover the cost of providing medical services.  I do feel uncomfortable because it’s related to gross income and therefore is a tax and, particularly in the discussions that we had with members of the Chamber of commerce regarding awaiting a tax review before we did anything else.  But we cannot escape the ever increasing costs of Medical Services and we have to do something about it.  So I do support the re-introduction of that Medical Services Levy.

Sir, I support the Motion.

Cllr the Hon Mr. Michael Summers (MS):

Mr Speaker, Honourable Members, I probably have more reservations about this budget than any other budget I have been involved in., save, perhaps, for the one in 1997 when the outgoing Council voted £17 Million in the Capital Estimates.  Fortunately, there wasn’t a hope in Hell of spending it so it wasn’t really such a serious issue.  We have much greater capacity these days to spend money both in operating and capital terms.

All budgets are a question of balance and then getting the balance right between expenditure on services and savings, between money for development and money for other purposes, it has got to always be uppermost in your mind.

I think what we have been able to do in this budget is to address the revenue side of Government’s finances relatively successfully but we haven’t really been able to complete a number of deliberations on cost reduction issues.  There are a number of areas where work has commenced but is not yet completed.  And, it may well be necessary to have a “mini budget” in December to review where we are, having completed some of these issues.

• There is the FIGAS Review, which promises significant cost reductions and significant additional revenues


• We have a major review into health costings and the way that the health service budget is made up and delivered, which has the potential of delivering substantial savings.  We have to see how that will go


• We have promised a green paper on Education Fees and the way that Education Fees are currently provided and whether there are options for sharing the costs and the students through student loans.  That has a long way to go - a lot of discussion to take place.


• There is the issue of Fisheries Patrol, which is currently under review and will be going out for tender.  There is potential there to save significant amounts of money provided that we don’t over rate the process and decide if we have all this money we might as well get on and spend it.  What we need to do is what’s necessary to ensure proper stewardship of the fishery.


• I think in Public Works there are opportunities to save significant amounts of money but they will involve changes in the way that we do things. 

1. For the significant reduction in Capital programmes looking forward, I think we have to review the necessity for a partner in contract and whether that will continue to bring us value for money.


2.  We could sell the Quarry and save ourselves £150,000.00 tomorrow.  That involves quite a lot of discussion, not only about who would take it on, who would be responsible for it and would they maintain it and look after it.  But it also involves issues to do with control of prices, so it’s not a simple issue

And, I could go on but I think the most important thing for us between now and the end of this calendar year at least is going to be the review of Government.   It’s the review of Government and the structure that has the greatest potential, I think, to save us significant amounts of money and I will talk a little bit more about that later on.

So, I support this budget with a slightly heavy heart.  I have already talked about the Employment Tax and Medical Service Levy and the like.  There is another discussion to take place between now and a Bill coming to this House on that issue.  And, I think a significant part of that will be to do with how that money is branded – how it’s used and how effective that will be.  Now if it can be used for some kind of medical insurance scheme that then benefits the people that are ill then I think that is much more palatable for members of the public than simply having to pay another tax.

So we are half way there, I think, with this budget.  I think, having said that, I would like to stress, yet again,  that Government finances are actually in quite good shape.  We do have significant amounts of reserves.  I do not, in any way, shape or form, support the suggestion in today’s newspaper that actually, all we really need to do is spend a bit of the reserve and we will all be happy, Chay, I think that is thoroughly irresponsible.  I do not propose to go along that route.

But there is more to do and we will get there.  I beg to support the Motion.

Cllr the Hon Mr Richard Cockwell (RC):

Mr Speaker, Honourable members,  on rising to speak to the motion I feel I should make a few observations.

This budget, as already been said, has been a very difficult one. And I do welcome the Chair of Standing Finance Committee’s proposal that next year’s budget considerations should start much earlier.  I think this is important.

There is no doubt in my mind that this budget hits the lower paid person much harder than those on higher incomes.  It also creates extra costs for employers who may have to look at their staffing levels.  And, I regret this.

I believe that the “User Pays” concept should actually be “the user who can actually afford it pays” (concept).  Thus, for instance, while we are reluctantly accepting at this time the proposals for an employment tax, I believe that this all encompassing tax should be taken into consideration in any coming tax review and it is absorbed into the income tax system.  Thus those who are on low incomes are not penalised.  It is difficult enough for people on low incomes to survive now and we have to be very careful we don’t just try and take more money out and make their lives even more difficult because we do need these people.

It has been suggested that this tax should be termed a medical service levy.    In fact, this discussion has already gone ahead in order that people would accept it.  This sounds great but the fact is that it would and always has been part of another way of taxing everybody and the money has been absorbed into the Consolidated Fund.  The fact is that all tax goes towards costs of our medical services.  I would not support the sort of deception of trying to call it a medical service levy.

I also believe that although we need to ensure that all departments’ budgets are tightly controlled and we should spend time attempting ways to find ways of investing to save, as in the wind farm and investing to create income, we spend little effort in finding ways of earning more money from outside our economy.  As a Counsel we have spent many hours trying to find ways of making savings within departments and this is very good.  However, how much time have we spent trying to find ways of creating new income?  How much time do we spend in looking at ways of investing to save expenditure? 

We also need to try and encourage people and businesses to invest their savings within the Islands.  Many years ago it was proposed that the Falkland Islands Government should issue development bonds.  Should we not have another look at this concept? 

It’s easy for an individual to pick out projects that they would like to see scrapped in order to make savings.  However, we do need to continue to develop our Islands and move forward.  Otherwise we shall only stagnate into a situation it will be difficult for us to extract ourselves from.

I still remember the affects of the cut-backs in the early ‘90s, with redundancies and reduction in services resulting.  It is easy to forget that many of the capital projects that cause so much criticism also give employment to many islanders.  Much of their income in turn supports our retail businesses and our service industries.

It took some years for the Private Sector and Government to recover from the lack of confidence that the cut-backs in the ‘90s caused.

Sir, I reluctantly support the Motion.

Cllr the Hon Mrs Janet Robertson (JR):

Mr Speaker, Honourable Members, in speaking to the Motion I think that most of the points probably have already been delivered by colleagues and I don’t have anything terribly new to say to that other than to echo everyone’s sentiments about the general feeling that we have not achieved what we set out to do with this budget.  We have not achieved our medium term financial plan targets especially with regard to expenditure.  And, there is a big inflationary ingredient in that through fuel costs and, unfortunately, our wind farm, whilst a fantastic investment, cannot insulate us from the rising costs of that and we are subject to all those worldly inflationary issues.  And, on that we really don’t have any control.

I just wanted to say something a little bit about revenue.  Most of the measures that we put in place actually, really, are only circulating money that is already here.  It’s not really new money into the Islands.  And, that’s why the development of our industries is so critical because that is when your revenue comes in.  And that’s in all of them – that’s Agriculture – that’s tourism – and that’s fisheries.  So, FIG input to these industries through FIMCO, the ferry, port development and the Tourism Board will continue.  And, I think that it is important to bear that in mind  when criticising FIMCO that it is actually a source of new revenue into the Islands.  And, we would hope that it will eventually one day be greater than the expenditure.

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