10 November 2022
Good afternoon, everyone.
When I sat down with advisors to think about what I would like
to say to you in this speech to grab the headlines, I reached the
conclusion that success from here on would be to bore you with
stability, affordability and sustainability, all virtues in short supply
in today’s global economic environment.
Instability and uncertainty are not good for business and equally
are not good for economies or public finances. With all the
threats in today’s geopolitical order, we all need an accountant
to stand up and be counted!
That is not to say that I will shy away from difficult decisions, but
that I will ensure at all times, we are asking ourselves how we add
stability, enforce affordability and keep a keen eye on
sustainability.
For those who want to understand the consequences of not
having a plan that adds up and one that changes with each week,
I invite you to go and reread the headlines in the UK national
press over the last few weeks or look at the rise in mortgage rates
over the same period.
Words, What's in a word? Previous Collins’ words of the year
include lockdown, fake news, Brexit, binge-watch, photobomb
and geek.
The world in which we live in today is of such volatility that Collins
2022’s word of the year, is “Perma crisis” "an extended period of
instability and insecurity, especially one resulting from a series of
catastrophic events.
The global economy has been under greater and more
prolonged strain than at any time I can remember. The global
pandemic, a major European war, and an increase in political
flux away from historic international norms have led to
instability and reduced market confidence in what comes next.
In western Europe we have the added issue of Brexit and the
fallout that continues today and will continue for some years to
come.
Global growth is in decline and a global recession is now highly
likely. Inflation is high across many national economies, often
for different reasons and international interest rates are now
once again rising from their historically low levels in most
jurisdictions in an attempt to stem the tide.
With the UK soon to announce a new budget and the Bank of
England increasing interest rates at each and every meeting, the
only certainty we have is for more uncertainty in the world
around us.
The end of very low interest rates, high rises to the cost of living,
accompanied by full employment is a set of circumstances that
has stood some economic orthodoxy on its head.
But what it has not stood on its head is the reputation gained by
Jersey over decades for prudence, stability, affordability and
sustainability in the management of public finances, something
that is often absent elsewhere.
Strong public finances do not happen by accident, and at their
heart lies a strong economy that has proven resilient in the face
of many challenges over the last few years and decades.
That long term strength in our economy and public finances has
allowed the new government to hit the ground running with
options to address the consequences of the crises that Islanders
are currently facing.
Whilst government can sometimes seem to take a long time to
consider and take stock and evaluate the options, we acted
quickly and decisively to address the issue of rising prices, as
indeed we did with the measures to support people and business
during the pandemic.
The Covid Review Panel concluded that support to business was
bold, thoughtful and well rolled out.
The Mini-Budget was a key priority in the Chief Minister’s 100-
day plan. All but the highest 10% of earners will have received
support with the greatest benefits arising for those on the
lowest incomes. We put almost £15 million back into Islanders’
pockets this year and will return almost £42 million to them in
2023. Much of which will find its way into the tills of local
businesses.
That response to the cost-of-living crisis was delivered in a
pragmatic, credible and in some ways understated manner
working with colleagues across government to deliver a package
of measures that has addressed the cost-of-living crisis on a
timely basis, by putting money back into Islanders pockets rather
than interfering with market forces.
We delivered these measures in the mini budget, rather than
waiting till the government plan, to ensure that money got into
Islanders pockets quickly.
That means the tax elements of the Government Plan are
absent this year, the headline grabbers being for measures of
no change, in the form of freezing alcohol and road fuel duty.
The Mini – Budget was focused on helping households, but I
am mindful of the needs of our businesses. I want to do more
to foster innovation and enterprise in Jersey and I shall be
working closely with Ministerial colleagues to prepare for a
budget for innovation and enterprise in 2023. Innovation and
enterprise means different things to different people, and we
will be engaging widely with Islanders and business groups
such as chamber, to better understand your priorities for this
important agenda.
Turning to matters of international taxation, in October 2021,
Jersey joined the international political consensus on OECD
Pillars 1 & 2 alongside 136 other jurisdictions. The Government
subsequently published a Tax Policy Reflections paper on the
matter in April 2022 and this Reflections Paper has supported our
industry engagement since – both in Jersey and beyond. This is
a significant OECD tax reform project that is aimed at the largest
multinational groups.
Both this Government and the last have invested significant
resources in ensuring that Jersey’s priorities are well represented
at the OECD table in the development of the rules. We are also
actively monitoring the implementation plans of other
jurisdictions which is so important to any final decision that will
be taken on implementation of Pillar 2 by Jersey.
No final decision on Pillar 2 implementation has yet been made
– that will be a decision for the States Assembly to take, probably
in 2023. The outcome and timing of that decision will be guided
by the actions of the critical mass of jurisdictions that impact in scope Jersey groups.
Only yesterday the EU indicated that if the global consensus
didn’t hold together, they would revert to an EU approach. And
of course, the counting of votes state side which is occurring as
I speak will have a direct bearing on that consensus.
We continue to work in hand in hand with Isle of Man and
Guernsey on this agenda, ensuring that we preserve our
commitment to global tax standards and maintain our
international tax competitiveness. Again, Jersey is an Island of
stability.
An area of particular concern is the high mortgage costs facing
some Islanders. The good news is that many are sheltered from
rising interest rates through having fixed rate deals. Whilst none
of us would have wanted to see the rapid and destabilising rise
in interest rates, it will be taking the heat out of the unsustainable
runaway market.
But that is of no comfort to those Islanders who are not sheltered
from fixed rates and those who have had to borrow at high
earnings multiples in recent times, just to get their foot on the
housing ladder.
Officers are in conversation with Island banks who have assured
the Government that they will work with their customers to keep them in their homes wherever that is most appropriate
and achievable.
We will continue to monitor the situation and are considering the
current phasing of the mortgage interest tax relief.
On one specific tax issue, a number of you have already asked
me where I stand on the zero-rate food and to do that quickly by
adopting the UK’s VAT schedules lock, stock, and barrel. I remain
opposed to departing from our policy of keeping GST (Goods
and Services Tax) low (5%), broad (little by way of exception) and
simple – to keep business costs low as well as Government’s
administration costs. I stand by those longer-term tax policy
principles. We always recognised that GST (Goods and Services
Tax) on food needed to be offset for people and it has been
offset ever since GST was introduced through increased tax
allowances; increased income support; and through the GST
Food Bonus which is now called the Community Cost Bonus.
Whilst I understand and respect the motives of those that
would propose this it would put more money into the pockets
of well-off islanders then those on the lowest incomes.
Furthermore, the complexity of administration for islands
businesses and government means this measure adds to red
tape but more fundamentally cannot be delivered on a timely
basis to help islanders with the current cost of living crisis.
We must shape policies which deliver a strong and sustainable
economy and ensure that the benefits of economic success can
be shared across our community.
As I said in my foreword to the Government Plan, Islanders are
rightly concerned at the increase in borrowing that occurred
under the last Government. We have committed to too much
public debt, and we need to return to prudence and live within
our means. We will start to pay down our debts beginning with
those accrued during COVID, which can be fully repaid in 2022.
Who would ever have thought that through the strength of the
economy and careful financial management we would be free
from Covid debt so soon.
Speaking to islanders during my election campaign housing
remains a high priority for many people. I want to work in
lockstep with the housing minister to commit to building more
affordable housing and working with our ALO’s to identify new
sites for development.
However, addressing these immediate challenges, should not
divert our attention from the longer-term challenges, threats and
opportunities Over the next four years, we will need to focus on
the many challenges facing our community.
We must not lose sight of the issues arising from an ageing
demographic, in particular the associated rising health costs;
nor indeed the existential danger we face from climate change. I share the Uk Prime Ministers view that “there is no long-term
prosperity without action on climate change".
These, along with financing the hospital, epitomise the
importance of balancing affordability today with sustainability
for future generations and the costs to the wellbeing and lives
of those future generations if decisive action is not taken.
I will continue – as I have always done - to set a high bar for
placing taxpayers’ money at risk, while ensuring that our shortterm fiscal policy decisions continue to promote sustainable
growth in the long-term.
I turn to our plans for the next step in delivering a more
affordable solution for fit for purpose health facilities.
The current Our Hospital plans for a single mega site
overlooking the old hospital have not been without significant
challenges and I pay credit to the team that delivered a plan
that gave us planning permission and a way forward.
But, due to many contributing factors, in particular Covid, that
plan didn’t form quickly enough, and the world has moved on.
The supply chain issues became insurmountable in the face of
the consequences of the conflict in the Ukraine and the
associated hyperinflation in materials required has pushed the
cost of delivery to an eye watering level.
As a single site, it would require us to commit to putting all the
eggs, the chickens and the farm in the same basket. Don’t start
a project that you don’t know that you can finish or pay for in
today economic climate.
The new plan, if supported by the States Assembly, would give
us more flexibility and resilience. We can proceed on a phase
at a time and use long term debt only where necessary and at a
time when markets are more favourable.
I am determined that we only proceed with each phase when
we know that we are well on the way to delivering the previous
one, so that local resources can be used and local companies
see the benefit, But critically, I will also support each phase
when I know we can afford it, and will relentlessly be looking
for income above forecast and unspent sums on other projects,
to reduce the level of debt we take on.
Future Islanders will see the benefits of improved healthcare,
but it is important that they can afford to pay for it also.
In the last hour the Jersey Fiscal Policy Pannel has released its
2022 Annual Report.
Dame Kate Barker, the Panel’s Chair, said: “Whilst the global
macroeconomic outlook has worsened, Jersey’s economy is in a
good position to weather global shocks.”
For decades Jersey has been resilient, we have run our public
finances carefully, balancing budgets over the economic cycles,
acted affordably and sustainably.
I commit to continuing in that tradition, call it boring if you like,
but by continuing on this tach we can be confident of
supporting a strong and growing economy, which in turn will
deliver a positive future for us al
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