27 March 2007
The Chief Minister, Senator Frank Walker has presented a comprehensive update on the financial position of the States of Jersey. The update shows the Council of Ministers kept spending within budgets in 2006. Senator Walker today stressed the determination of the Council of Ministers to ensure the States continue to live within its means, with prudent investment, without cutting services and by sticking to their Strategic Plan commitment not to introduce any taxes other than those compatible with the Fiscal Strategy.
The provisional December 2006 figures show that Jersey’s income from taxation was higher than expected at £524m. This, coupled with a small under spend of £1.5m by departments, provides a strong starting balance. It is this strong starting point that means plans are funded to 2012 however to achieve this means continual control over spending and prioritisation of our resources. We still cannot do everything everyone might want.
But, the latest figures show the cost of protecting those with a low income has also increased. There is pressure on the Social Security budget, a trend that is expected to continue, because of the cost of benefits and an increase in supplementation (a process through which the States ‘top up’ the contributions of those with a low income). The 2006 increase in Social Security payments has been covered by transfers from other States departments.
Senator Walker commented: “I am greatly encouraged by the strong position we start from. Income from taxation is going up, and this helps to demonstrate the wisdom of current States policies and a new confidence in our economy. However, the cost of supporting those who need help in our society is also going up. Ministers have worked together to pay for the cost of supplementation in 2006 and will continue to do so in 2007 and beyond. Our priority is to look after the vulnerable members of our society and we are determined we are going to achieve this. We couldn’t have hoped to achieve this level of coordination with the previous committee structure – this is one huge benefit of Ministerial government.”
He continued: “Although it’s impossible to exactly forecast the 2007 figures, the combined effect of supplementation and benefits is likely to cost at least £4.5m more than originally forecast. We’re reviewing the system of supplementation and are likely to be bringing forward proposals for change. However the Council of Ministers therefore sees no alternative but to ask the Treasury and Resources Minister to ask the States to agree an increase in spending this year once the figures are more certain. This is the right course of action. We have the money from the positive figures from our tax revenues and this is exactly what the money is there for; to look after the people of Jersey who need it.”
A feature of current States finances is a bigger than budgeted pay award for public sector workers, backdated to June 2006. The repercussions of the increased public sector pay award mean that departments will have to absorb approximately £2.5m. In addition, during the past 12 months the States has also made commitments to fund projects for which budgets had not been identified. These include renovating the prison, introducing a 5th scrutiny panel, keeping a hold on inflation and introducing 3rd party planning appeals. The States priority is caring for the whole community; these projects will be delivered but they exert pressure on the existing budgets.
The States Strategic Plan promises balanced budgets over the next five year cycle and the revised forecasts indicate this is on track up to 2013, but we won’t know the potential for deficit until after the changes to corporate taxation in 2010. Treasury Minister Senator Terry Le Sueur said: “This means that, if we fail to be rigorous and prudent, we’re in danger of living beyond our means in the future. During the next few years we’ll see a fundamental change in the way we raise taxes. This, inevitably, means some uncertainty from around 2010 so we must take longer term projections with a degree of caution. We need to continue to review forecasts at least three times a year and we can’t let expenditure rise if we’re going to do what we’ve promised and live within our means.”
On the basis of the current forecasts the States have the funds in place which provide enough time to review the appropriate decisions.
He continued: “On the basis that we can, and will, contain spending we will deliver our commitment, in the Strategic Plan, not to introduce any taxes other than those covered by the fiscal strategy. This reinforces our policy of maintaining GST at 3% for at least three years.”
The priority for the States from 2008 to 2010 is clearly on supporting the vulnerable members of our society. The business plan shows no new cuts to spending or services and an investment in Health and Social Services, Social Security and Overseas Aid. Investment in the Health service will ensure we continue to have the highest levels, and quality, of care comparable to any modern country. The largest area of growth, and investment over this period, will be in Social Security. This will come in the form of support to those in the lower income brackets to protect them as GST is introduced, the establishment and maintenance of Income Support, addressing supplementation and absorbing the increased cost of support for the elderly, transferred from Parish welfare.
Senator Walker concluded: “The latest economic reports show that Jersey has a buoyant economy and the speed of turn around from recession to growth has exceeded our expectations. This is great news, but we aren’t going to be complacent and short term adjustments are what’s required in order to ensure the less well off in our society share in our success.”
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Notes to editors:
1) The States of Jersey has a number of funds from which to manage its finances. The Treasury and Resources Minister has authority to move money between departments but must request the approval of the States to move any money from any of the strategic ‘savings accounts’. One of these accounts is the Consolidated Fund, and Senator Le Sueur will be asking the States for approval to transfer funds from there for the additional cost of benefits and supplementation during 2007.
2) The 2006 accounts for the States are in provisional form, due to be finalised in May, but no substantial change is expected.
3) Supplementation – Anyone who earns above £685 a month and below an earnings ceiling of £3242, is supplemented up to that ceiling for both their employee and employer contributions by the States. This will ensure that they receive the same amount of benefits as if they had paid full contributions.
4) For further information please contact: Senator Walker on 440401
Please note that Senator Le Sueur is currently out of the Island
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