Chief Minister, Senator Ian Gorst, made the following speech to the States Assembly:
This debate is an important one for our island. The decisions the Assembly makes this week will set the direction of the island’s public finances for the next four years. It’s vital that we get this right.
Now that we can now see the economy recovering this Assembly is turning its attention to investing more in priority areas, especially health, education and infrastructure. Departments are working to modernise essential services as we strive for maximum efficiency across the public sector. We are continuing to do all we can to boost our economy as it becomes increasingly competitive, innovative and technology-driven, striving to provide the extra revenue that will help us balance our budgets by 2019.
Our decisions this week will determine how effectively the Island manages the challenges, and seizes the exciting opportunities, that are emerging across the world. Economic power is shifting from traditional developed economies to the new emerging powerhouses in Asia, Africa and elsewhere. Rapidly changing technology is having an impact on every business and every government, however small. The population is ageing and working people are having to shoulder an increased burden.
This medium term financial plan proposes how Jersey should respond to these challenges. It follows the advice of economic experts, who say we should support the economy in the early stages of recovery while also ensuring we balance the books at the right time.
Strategic priorities
We want to keep government costs under control. The Corporate Services Scrutiny Panel added sustainable finances to our strategic priorities and Ministers fully support that. We also need to invest in health, education, infrastructure and economic growth, and we want to regenerate our capital, St Helier.
That’s why we are reprioritising, finding efficiencies, making sure our organisation is working as well as it can for our long term future.
Every department does important work. Every department is doing its bit for Jersey.
We have a new Housing strategy out to consultation and we have a scheme to protect tenants’ deposits. These measures improve the lives of vulnerable islanders.
Our latest report on the States of Jersey police shows another 2% drop in the overall level of recorded crime. And our customs officers continue to protect the borders for both Jersey and the UK beyond.
Social Security is getting islanders back into work, with Jobs Fest, the Community Jobs fund and industry training schemes.
Transport and Technical Services is investing in a new sewage treatment works, as the existing plant is old and in constant need of repair. And the Planning and Environment Minister is reducing planning restrictions.
That’s what reform means – making changes, doing things more efficiently - so we can use the money we save to invest in priority areas. That’s where the money should go, on front line services for Islanders, not on out of date, inefficient processes and back room duplication.
We are refocusing the work of the public sector to improve services for islanders and to do more for less. We don’t want to undermine our strong public finances by employing any more people than we need or by spending unnecessarily. Someone has to pay for the services we provide and I don’t want that burden to fall on my children, or on their children.
So we are using technology, reducing staffing, looking after our infrastructure and putting funds into education, health, economic growth and essential infrastructure. With a lean, nimble government, we can deliver more for less and I believe that’s what taxpayers want.
Economic advice
We employ a panel of world class economic advisers. Its members have advised the Bank of England on monetary policy, and held senior positions at the European Commission and the UK Civil Service. They advised us to keep 4 principles in mind when developing our plan for Jersey:
- balance the budget over the economic cycle
- aim for long-term fiscal sustainability
- be realistic in assuming future income and expenditure
- plan spending, but be flexible
The panel looked at our plan for Jersey and agreed we have followed their recommendations and kept these important principles in mind. It is this kind of financial prudence that led to Jersey receiving one of the best possible credit ratings from Standard and Poors. AA+ with a stable outlook.
Our global reputation is built on a history of making the right decisions. We are continuing to plan ahead, aiming to return to balanced books at a pace that suits our economy.
Health
One of our main priorities in this plan is health and social care. We are living longer and that’s great news. We all want to remain healthy throughout our lives. But as the working population is not growing as fast as our older population, that comes with substantial cost.
That’s why we are allocating £96 million of extra funding for health and social services over the four years of the plan. That includes:
- £46 million to meet rising costs of drugs, improved standards and ageing demographics
- £11 million on early intervention services for children – improving the life chances of our youngest and most vulnerable islanders
- £850,000 on healthy lifestyle programmes – investing to reduce spending further down the line
- £4 million to improve mental health services
- £15 million on community healthcare – keeping people in their own homes for as long as possible
- £20 million on acute services - keeping hospital treatment safe and sustainable as more older people need these vital services
This spending is in addition to more than £60 million additional investment agreed in our first Medium Term Financial Plan. When we debated the proposal for restructuring health services in 2012 the Assembly recognised that this level of investment would need a new funding mechanism. As the economy is beginning to recover and we are planning sustainable finance measures we are now proposing a new health charge.
We plan to introduce it from 2018, by which time our economy will be more robust. The detail of this charge will come to the Assembly for debate alongside the MTFP Addition in June 2016. What we are asking for today is agreement on the principle of introducing a charge to fund continued extra investment in health.
If Members cannot agree to this principle the extra funding we are proposing for health will not be sustainable into the future.
Education
Investing in Education has been one of our main priorities since our Strategic Plan was launched. Even so, all departments are looking for efficiencies. We can always improve the way we do things and every area of the public sector is contributing to our reform programme. Education is no exception.
But over the four years of the plan Education will receive an extra £27million:
- £14 million to raise standards and fund the ICT strategy
- £13 million to cater for the predicted increase in school age children
As well as this £27 million there’s an extra £55million for capital investment:
- £40 million for Les Quennevais
- £15 million for Grainville and St Mary – and we already have a fantastic new school building for St Martin
Economic growth
All the investments we are making will support the economy through the associated economic activity and the benefits that come from the investments. We have also set aside an extra £20 million for specific projects that boost economic growth and productivity.
Economic growth touches all areas of our economy. For instance, skills development provides qualified employees for our main industries and helps our young people into high quality jobs.
And our financial services industry continues to lead the way among international finance centres in the global move towards greater cooperation and transparency. We enjoy close working relations with major international bodies, such as the OECD. And as we are involved in the process of change we are informed in advance of announcements like the one made yesterday by the OECD concerning base erosion and profit shifting. The announcement gives us no undue concern for the future success of our increasingly diverse finance industry.
My department is working closely with Economic Development and External Relations to attract new business and to encourage innovation in our existing firms. The first £5 million of the £20 million provision is proposed in 2016.
This funding will support initiatives that will generate extra tax revenues in the future and contribute to our priority of sustainable finances. It will be closely managed, using similar governance to that used successfully for fiscal stimulus.
Infrastructure
As well as investing in health, education and economic growth, we are setting aside £168 million for capital projects over the next four years. That includes:
- £55 million for school buildings
- £43 million for sewage works
- £21 million for IT systems
- £8 million for the prison – if funds are available in Criminal Offences Compensation Fund
- £41 million on a number of other important projects
Our investment in new and refurbished housing is transforming areas of St Helier. Through Andium more than £200 million is planned for the coming years, much of it in St Helier. The Jersey Development Company has plans to invest more than £150 million over the same period, including in the new Finance Centre.
Savings
To manage this investment we are redesigning services, maximising efficiency, making savings and reprioritising spending. This work has involved looking carefully at the benefit system. I understand that some of these proposals are emotive, but it is right that we promote financial independence, target benefits for those who most need them, and minimise the impact of any changes on individuals.
We are keeping the interests of older people at the forefront of our thinking. In fact we are investing more in services that will benefit older islanders. Effective health services are essential for an older population and we are providing more funding for the 65+ health scheme, which is open to older islanders on a low income.
We are maintaining our benefits budget at the 2015 level throughout the four year period. It is right that every area of public spending makes a contribution to our long term plan for Jersey.
Sustainable public finances
One of the most important aspects of this medium term financial plan is its vision. it proposes our overall finances for four years, setting the spending limits for 2017, 18 and 19 as well as the detail for 2016.
This is a sensible way to approach public finances. It maintains our important principles of medium term financial planning and avoids a return to annual budgeting and short-term thinking. It is vitally important that we have time to work with departments to develop a detailed plan for 2017 and beyond.
It is also important that we have time to assess those detailed plans, their distributional impacts and their impact on public services. We will present detailed department plans in the MTFP Addition next June.
For now we are asking the Assembly to agree caps on spending for 2017, 18 and 19 so we can maintain control of our finances. We are not asking for approval to spend these funds – this is not a blank cheque. In fact the cheque hasn’t even been signed. The decision on how to spend the funds will come in June next year.
In line with advice from our economic panel of experts we remain committed to balanced budgets,
to sustainable public finances and to continuing this Assembly’s long held approach to dealing with potential problems as soon as they appear on the horizon.
Taxes
Our plan addresses the challenges ahead without changing the fundamental building blocks of our tax system. We want to maintain our internationally competitive personal income tax regime, a corporate income tax regime which delivers tax neutrality in a transparent and internationally acceptable manner and a low, broad and simple GST regime.
Maintaining these key building blocks creates the stability and certainty that business – especially the financial services sector – needs in order to invest in the Island. Attracting new business and keeping existing business should result in greater employment and correspondingly greater tax revenues.
We know we need to increase our income to tackle the growing costs of healthcare for an ageing population. We have been open about how we propose to raise an extra £35 million per year by proposing a new health charge. In this, and all our proposals, we will be guided by the long term tax policy principles that were agreed by the States as part of the Strategic Plan debate.
In conclusion – we think this is the right plan. It recognises the strategic challenges we face:
- an ageing population
- income rising at a slower rate than in the past
- the after-effects of the global recession
It proposes sustainable, long term solutions. It aims to deliver a balanced package of measures, encouraging independence, ensuring people are always better off in work than on benefits.
It enables us to invest in priority areas, like Health and Education; to deliver a modern, efficient public sector; to support economic growth and achieve balanced budgets by 2019.
It proposes:
- an extra £168 million for capital projects over the next four years
- £96 million more for Health
- £27 million more for Education
- £20 million for projects that boost economic and productivity growth
This is vital investment, reflecting our strategic priorities.
It is targeted investment – built on reform, restructuring and achievable savings. We know it won’t be easy, but it’s the right thing to do.
Draft Medium Term Financial Plan 2016 to 2019
gov.je