Making the most of savings

This achievement, which has seen some departments underspending by more than £3 million, demonstrates that the necessity of controlling costs in the public sector is, at least in this respect, being taken as seriously as it should be – although the growth of the sector as a whole still appears to be relentless.

In total, the underspends amount to £27.6 million and £22.1 million of this will be returned to departments as funds carried forward to finance a great many projects. In addition, £5.5 million will be retained centrally to meet contingencies.

Although the savings that have been made will be generally welcomed, questions arise. For example, some might inquire why what amounts to a windfall of almost £30 million will not be used to reduce forecast deficits.

There are at least two major reasons why the Council of Ministers has not chosen this course of action.

Firstly, if departments are aware that underspends – or at least significant parts of them – can be carried forward, they will be far less inclined to exercise restraint and to avoid the old and wasteful practice of a last-minute spend to exhaust of budget for fear of the surplus being taken away. Three-year budgeting has also been instrumental in abolishing the end-of-period spend-fest.

Secondly, the sums now available offer a precious opportunity to spend in ways which will inject money into the economy and help get people back into work. The underlying notion is that spurring growth could be a better tactic for addressing the deficit than the retention of funds.

Meanwhile, the list of departmental projects which will benefit from carry-forward spending is long and encompasses everything from back-to-work schemes to spending on the emergency services. We are assured that each and every one of these initiatives has been assessed and approved by the Treasury Minister, the States Treasurer and the Council of Ministers. That, in itself, qualifies as a major undertaking.

If, however, there is anything to regret about the underspend picture it is that revenue is still so tight that nothing can yet be spared to rebuild the Stabilisation Fund, the reserve designed to even out the highs and lows of the economic cycle.