Government Plan 2020-2023

22 July 2019

Ministers have published their first-ever Government Plan for Jersey. The plan brings to life the five strategic priorities that the States Assembly unanimously approved for this Government’s term of office, and it brings together the Government’s proposals for both income generation and spending.

The plan proposes a range of detailed, costed initiatives that will pave the way to fulfil Ministers’ collective ambition for the Island’s future. It brings together income and spending decisions, improves how funding decisions are made, and makes these decisions more transparent.

The Chief Minister, Senator John Le Fondré, said: “We want to make an enduring difference to Islanders’ lives and to our unique Island, to meet our five important pledges. We have considered every potential activity and the contribution that each will make to meeting our five strategic priorities.

“The Government is committed to ensuring the sustainability of our public finances and the long-term funds that are essential to supporting the economy in the event of a downturn and ensuring care in old age for those who need it.

“The Government is also committed to balancing the budget, after making transfers to the Stabilisation Fund, and to keeping taxes low and broad. While we are increasing spending in the Government Plan, our prudent planning, backed by sustainable efficiencies, keeps our forecast spend after efficiencies below what was originally forecast in Budget 2019. We are ensuring that what we do can be paid for, without placing undue burdens on islanders.

“We are also planning to invest £91 million in the fabric of our Island in 2020, and £349 million in capital investment over the next four years. This first Government Plan is a plan for action, for sustainable investment, responsible spending and for the long term. We are taking the important decisions now to tackle the future needs of our Island, creating a positive long-term legacy for Islanders.

“This is a plan that Ministers, the public service and, I hope, the States Assembly along with all Islanders, will join together in delivering for our long-term future.”

Headline initiatives

Children

implement the Children’s Services Improvement Plan
a new ‘Right Help, Right Time’ prevention and early intervention services for families
sustainable funding for early years, schools and post-16 education
improved standards in nurseries and schools
improvements in Child and Adolescent Mental Health Services
indirect incorporation of the UN Convention on the Rights of the Child

Health and wellbeing

a new model for health care, focusing on prevention and community partnership
a digital care programme and replacement of outdated systems
expanded 24-hour community nursing and primary care
a reduction in preventable disease
improved access to mental health services, and parity of esteem for mental health

Economy

a new migration policy
develop and fund a new post-16 education strategy
1% of government budget invested in arts, culture and heritage
global markets strategy to promote Jersey on the world stage
deliver the Future Economy Programme
increase Jersey’s overseas aid contributions to help those in greatest need.

Environment

establish a Climate Emergency Fund with initial allocation of £5 million
increase fuel duty to fund a new sustainable transport plan
consult islanders on development of Island Plan and improve public infrastructure
improve countryside access
protect habitats and species through better legislation and enforcement
change behaviours to reduce pollution and increase recycling

Inclusivity

implement the Disability Strategy
improve support and protection for tenants
develop proposals to improve financial independence in old age
modernise the personal income tax system
start to implement recommendations from the Housing Policy Development Board
£10 million earmarked for affordable housing

Modernising Government

deliver £100 million of sustainable efficiencies through an Efficiencies Programme
invest in digital public services and in developing a modern organisation
help to improve the electoral registration system

Funding the strategic priorities

This Government Plan shows how areas of new investment were required after the Medium-Term Financial Plan was agreed, for example to fund the recommendations of the Independent Jersey Care Inquiry.

Unspent budgets from previous years and contingency funds were used to increase the 2019 Budget of £735 million to £800 million to meet these extra spending pressures.

The Government proposes increased spending in every year of the Government Plan, with departmental spending of £924 million in 2023. However, after careful planning, backed by sustainable efficiencies worth £100 million a year by 2023, the forecast spend after efficiencies will remain below what was originally forecast in Budget 2019.

Capital investment

The Government has also allocated £90.6 million in 2020 and £349 million in total to capital projects over the period of the plan, to invest in the fabric of the Island.

Some of the main items in 2020 include:

£5 million for health service improvements, including technology
£3.9 million for improvements to mental health facilities
£2 million for improving school facilities
£1.7 million for prison improvement works
£2 million to continue work on finding a solution for Fort Regent
£2.3 million for Combined Control Room IT for the emergency services
£5 million to continue work on the new hospital project
£6.1 million for cyber security
£7.4 million to start work on an integrated back-office IT system
£1 million to continue work on an office strategy.
£16 million for replacing and refurbishing existing assets
£9.4 million to continue investment in new sewage treatment works and sewer extensions

Economic outlook

This Government Plan is set against a backdrop of the most uncertain economic environment for a decade, with uncertainty surrounding Brexit, and wider economic, trade and political uncertainties across the globe.

Economic forecasts for Jersey remain robust for 2019 and the economy is expected to remain buoyant over the next five years. While the economy slowed in 2017, it still delivered a fourth consecutive year of growth, after a period of decline from 2008 to 2013.

The Fiscal Policy Panel has estimated GVA growth of 1.6% in 2018. Employment grew by around 1.5% and earnings grew by 3.5%, although strong inflation meant that real wages fell.

Output of the financial services sector grew by 2.2% in real terms, the first year of growth since 2014.

Jersey’s non-financial sector saw a fifth year of robust growth, although the financial services sector contracted in 2017, mainly driven by falling profits in several banks with a relatively small presence in Jersey.

However, the wider global environment could have a significant impact on both the resources available to Jersey’s Government, and on the demand for the services it provides. This Plan allows flexibility to respond appropriately to any such changes in circumstances.

Sustainable public finances

The Fiscal Policy Panel recommended putting additional funds into the Stabilisation Fund, to rebuild it to an appropriate level.

The Government Plan prepares for future economic risks by investing £84 million over the next four years to replenish the Stabilisation Fund, with annual transfers from income and an additional £20 million from reserves in 2020.

The plan proposes balanced budgets, after allowing for transfers into the Stabilisation Fund.

The Government Plan also prepares for the rising cost of care in old age by increasing the Long-Term Care Fund contribution rate from 1% to 2%, and extending the income cap applied. This will raise around £24 million of ringfenced funds in 2020, which are not available for general Government spending.

Income forecasts

The latest income forecast shows an increase in general tax receipts for each year of the forecast, compared to the previous forecast produced in September 2018. This is mainly due to more income than previously predicted from corporate income tax and GST, and stronger economic assumptions provided by the Fiscal Policy Panel, particularly for the later years of the Government Plan period.

In addition, a change in accounting has brought forward the recognition of some personal income tax by one financial year.

Efficiencies programme

Delivering the Government Plan priorities requires substantial funding and investment over the next four years. To achieve this without significant increases in taxes, the Government will transform the way in which it delivers public services, and do more with less.

The Government has established an Efficiencies Programme, to deliver £100 million worth of savings over the four years of the Government Plan. More effective and efficient public services will help to fund both new commitments and ongoing initiatives, reducing the amount of additional revenue that the Government will need from taxpayers.

The programme will modernise, improve and transform services for the benefit of Islanders, and will help to instigate a culture change across Government, putting service transformation and value for money at the heart of all decision-making and planning.

This will be achieved through:

reducing duplication
streamlining processes and cutting waste
integrating services and functions
taking a smarter and more commercial approach to contract awards and management
reducing non-essential spend and developing lower-cost alternatives
improving compliance in revenue collection

The efficiency target for 2020 is £40 million, delivered through the new Government structure, improved collection of income, a review of 2020 spending and rapid reviews of processes.

The first £20 million of efficiencies have already been identified, and a plan will be presented to the Council of Ministers in October 2019, setting out how the full 2020 efficiencies will be delivered, including the proposed impact on departments’ budgets. The plan will also set out the approach to delivering efficiencies over the remaining Government Plan period. This will be made available for the States Assembly before the Government Plan is debated.

Long-term structural measures for consideration in 2020

examining the case for an Infrastructure Fund
refinancing of pension debt to achieve long-term savings
options for all personal taxpayers to pay income tax on a current year basis
review of future balance of Social Security contributions
review of fuel duty to deliver fairest and most sustainable taxation of vehicle use
a zero-based budgeting assessment of current spending

Budget 2020

The Government Plan also contains the Budget 2020 measures, which are summarised below:

Ring-fenced revenue measures

following an actuarial review, increase Long-Term Care contributions from 1% to 2% from 2020, plus an increase in the income cap from £176,232 to £250,000. This will place the Long-Term Care Fund on a long-term sustainable basis, preventing the need for further rate increases for the next 25 years. Due to marginal relief, most people will not have to pay the full 1% increase
increase in the employer and Class 2 Social Security contributions from 2% to 2.5% for earnings of more than £53,000, up to a new income cap of £250,000, to help fund a range of family-friendly benefits.

These contributions are not available for general government spending.

Income tax measures

inflation-linked increases in income tax exemption thresholds, benefiting lower and middle-income earners. This takes the personal income tax-free allowance for a single person to £15,900 and for a married couple to £25,550
£250 increase in second earner’s allowance, to help maintain parity between married couples and cohabiting couples, where both partners are earning

Duty measures

The Government is proposing targeted increases in alcohol, tobacco and road fuel duty, raising around £6 million in 2020, to encourage Islanders to drink and smoke less, and to consider how they travel and commute.

above-inflation increases in road fuel duty, to incentivise changes in travel in the Island and to provide funding for a new Climate Emergency Fund
above-inflation increases in alcohol and tobacco duties, to raise revenue while supporting the Government’s health objectives
a reduction from £240 to £135 of the ‘de minimis’ value of goods that can be imported before taxes become payable, to correspond with UK customs duties, following the Customs Arrangement signed with the UK in preparation for Brexit

Considering these increases, alongside increases in income tax allowances worth around £6 million in 2020, taxpayers would be paying similar amounts in extra duty as they would be saving through allowances.

Reserves

Strategic Reserve

The Strategic Reserve currently holds £848 million and is forecast to hold more than £1 billion by the end of 2023. This reserve forms a critical part of financial risk management and helps to protect the long-term financial sustainability of the Island.

In line with Fiscal Policy Panel recommendations, Ministers will review the appropriate balance to be held in the Strategic Reserve, and when this has been completed, the Government can consider transfers to the Strategic Reserve in future plans.

Stabilisation Fund

The Stabilisation Fund exists to support the Island through major economic shocks, such as the effects of the financial crisis. It currently holds £50 million and the Government is acting on the Fiscal Policy Panel’s advice to replenish the Fund. £36 million will be transferred into the fund in 2020, followed by £16 million annually for the remaining period of this plan. Further transfers will be considered in future if these are affordable.

Social Security (Reserve) Fund

The Social Security (Reserve) Fund currently holds £1.8 billion. This fund is used to manage the impact of an ageing population on future pension costs. Consideration is being given to changing the investment strategy of the Fund to allow it to invest in local infrastructure, providing benefits for the Island as well as a good return on investment.

Government Plan 2020-2023

Background - Common Strategic Policy

In the Common Strategic Policy, the Government and States Assembly pledged that:

we will put children first
we will improve Islanders’ wellbeing and mental and physical health
we will create a sustainable, vibrant economy and skilled local workforce for the future
we will reduce income inequality and improve the standard of living
we will protect and value our environment