Budget 2010 – Jersey plans for future challenges

27 October 2009

The Treasury Minister has announced proposals for his first Budget. Senator Ozouf outlined the fiscal background and clarified the tax and spending measures he is proposing in order to meet the expenditure decisions made during the Annual Business Plan 2010 debate.

Senator Ozouf said: “I am presenting the Draft 2010 Budget against a backdrop of the worst global economic downturn for 60 years. Jersey was well prepared for the economic turmoil, and took prompt action. The Fiscal Stimulus and Business Plan are now helping to get people back into work quickly, and are supporting businesses and Islanders. We are also making significant investment in front line services, but we need to prepare for the future.

“I recognise that 2010 will be a difficult year for Islanders. I am not proposing any tax changes except for impots duties. In fact many lower income families will benefit in 2010 from the 5% increase in income tax exemption limits agreed last year.

“As part of the 2010 Business Plan, the States agreed to more spend on Health. I am proposing to pay for this by increasing duties on alcohol and tobacco. I have listened to the Health and Home Affairs Ministers, who are both concerned about the effects of alcohol on our society. It is therefore appropriate to raise extra funds by increasing the duty on alcohol and continuing the policy of discouraging tobacco use. I am also proposing an increase in fuel duty to pay for environmental initiatives.”

2010 Budget proposals 

Income tax:

• maintain income tax exemption limits at current levels
• abolish Article 115(g) and 115 (ga) removing tax breaks for UK Superannuation Funds as a first step in the Blampied proposals
• close loopholes and improve interpretation of the 0/10% provisions within the Income Tax (Jersey) Law 200-

Impôts Duty:

• increase alcohol and tobacco duty to recover £0.7 million and £0.9 million respectively which is equivalent to the £1.6 million additional funding allocated to Health and Social Services in the 2010 Business Plan
• align tax and duty rates on tobacco with those in the UK over a three to four year period
• re-introduce a tax on car purchase. A low level Vehicle Emissions Duty (VED) is proposed, with similar exemptions and discounts to the previous Vehicle Registration Duty. This would be introduced from September 2010, raising £0.5 million in 2010 and £2 million in a full year
• increase fuel duty by 4 pence per litre, including 3 pence to provide funding for environmental initiatives ahead of the proposed introduction of VED from September 2010
• the increase in duty to give effect to these proposals represent:
  • 58p on a litre of spirits
  • 7p on a bottle of wine
  • 2p on a pint of ordinary beer
  • 30p on a packet of 20 cigarettes
  • 4p on a litre of petrol

Goods and Services Tax:

• extending GST exemption to higher education
• strengthened anti-avoidance measures

Senator Philip Ozouf has also announced that the marine sector will contribute £200,000 in 2010, through a financial return from Harbours. Senator Ozouf says this is equivalent to about a third of the marine fuel duty concession, and is a first step. 

The Draft Budget 2010 will be debated by the States on 8 December 2009. 

Draft 2010 budget

Fiscal background to the budget

In setting out the the fiscal background to the budget, Senator Ozouf added: “There is a real risk that the downturn will open up a structural deficit in States finances because the tax base will shrink and take many years to recover, while spending continues to rise in real terms. The latest forecasts for this budget show the deficit risk is in the region of £40 - £50 million.

“I am determined to correct the deficit forecast for 2011 before it materialises. I hope the Comprehensive Spending Review and Fiscal Strategy Review will identify ways to help me achieve this. I am proposing this budget as the way forward for Jersey, and as the best means of tackling the challenges ahead.”

The Fiscal Policy Panel will be providing an update ahead of the budget debate which will take account of developments in the global economy.