Speech to Jersey Society in London

I am delighted to be here in the centre of London to update you on how things are going back home.

So how is Jersey?

Well, we are still one of the smallest places in the British Isles, but you all already know that. Jersey has suffered from the global recessions – as you would expect. But as the UK and USA have become more optimistic about the future, so have we in Jersey.

This year’s budget illustrates this.

It is in sharp contrast to the last five budgets – which demonstrated some extremely difficult decisions on tax and spending

This year we have produced a budget which gives something back to hardworking islanders who have been going through difficult economic times.

We have produced a budget that supports economic growth, job creation, more homes, better education, better healthcare and investment in infrastructure.

2014 budget

I’ll just run through a few headlines from the budget we proposed to the States Assembly earlier this month.

income tax exemption thresholds will be increased. This means for a single person the tax free exemption amount will be £14,000.
some really positive news, we are proposing a cut in the marginal rate of tax by 1%. This will cut taxes for approximately 84% of Jersey’s taxpayers – that’s around 40,000 households.
and some good news for lower and middle income parents of young people in full time further education. We are proposing to increase their child tax allowance from £6,000 to £9,000

Capital spending

This year’s budget has an ambitious £90 million capital programme.

£1 million for IT projects to help with e-government – so islanders can interact with us online, as well as by phone and face to face.

We are extending six primary schools to deal with an increased demand for primary school places.

The Education department will receive more than £2.5 million for their Sports Strategy – and to help prepare facilities for the Island Games in 2015.

Our environmental service will benefit from more investment in the countryside – to maintain the coastal national park and improve our network of footpaths.

Transport and Technical Services will receive significant sums to maintain our roads and drainage system, plus more than £10 million to upgrade the Sewage Treatment Works and replace the Clinical Waste Incinerator.

And one more thing you may notice during a future visit to Jersey – we have allocated £750,000 to demolish the old Fort Regent pool. This is part of a detailed plan for the Fort which is due to be published later this month.

Funding for long-term infrastructure

We are also putting money into long term infrastructure projects.

In line with the recommendations of Jersey’s Fiscal Policy Panel – a group of 3 independent economists who advise us on tax, spending and economic policy – we are proposing funding for three major projects, for Health, Housing and Liquid Waste.

Identifying funding for these significant investments has been a challenge at a time when the Council of Ministers wants to reduce the burden of taxation on Islanders rather than increase it.

Future hospital

I am excited that we have found a way to fund a radically redeveloped hospital that will meet islanders’ needs for the future. We need to redesign our health services because, just like other developed nations, our community is changing.

Over the next 30 years the number of over-65 year olds living in Jersey will more than double. Older people use hospital services much more than younger people, so this will put pressure on our hospital.

Significant medical advances also mean we need new equipment and improved facilities. To provide the best care, our health system needs to adapt.

We have spent some years investigating how we can redesign all our health services to provide more community-based care.

Consultation with the public told us that this is what islanders want, so we can keep people out of hospital for longer.

Even with this refocusing of services, we still need to replace some of the hospital’s older buildings and upgrade others to meet modern health care standards.

So we are proposing to take £297 million from the investment returns of the Strategic Reserve. This means the hospital redevelopment would be fully paid for by the time it is completed, there would be no new cost to the taxpayer and no debt for future generations.

We believe this level of spending is affordable and sensible in the current economic climate – and it would fund an important project which will improve every service in the hospital.

So what are we planning to do with the hospital? We want to redevelop it on two sites.

The General Hospital will be used for all emergency care and operations, while most day care and hospital appointments will be carried out at a new health centre at Overdale.

The money will pay for much needed new operating theatres, a new emergency department, critical care unit and children’s department.

The maternity unit will be extensively refurbished and all patients will have single rooms with private bathrooms.

Modern equipment will help make quick diagnoses and we will be able to minimise the need for islanders to travel for treatment

If you want to find out more, you can watch a video on the States of Jersey YouTube channel.

Housing

We have proposed to borrow up to £250 million to provide more social housing, and to upgrade the housing we already provide. We would issue a public rated bond, locking in low interest rates for the benefit of the Island.

The States have already agreed that the Housing Department should become incorporated into a new entity.

This new Company would then be able to borrow to refurbish and build, and repay the debt using rental income

Liquid waste

We also need to replace the sewage treatment system at Bellozanne. This is vital if we are to protect our surrounding waters and keep the Island safe to live in.

We need to do this for three main reasons:

the current Sewage Treatment works are breaching consent condition
the infrastructure is failing, leading to high maintenance costs
we need to comply with the Water Framework Directive

The total cost of replacing the treatment plant is estimated at £75 million, and while the detailed proposals for liquid waste will be the subject of another States debate, the budget has proposed ways to fund the work through a combination of the existing capital budget and an investment from the Currency Fund.

The new system will be more energy efficient and cheaper to run.

This will enable TTS to repay the loan from the infrastructure fund, reducing both the internal borrowing cost and the risk.

Economic outlook

So how have we been able to afford to do this?

There has been positive news on the global economic front - but the OECD’s advice is to continue to support demand, to reduce the risk of derailing the recovery. That is why we have carefully constructed a package of measures that tackle the reality that Jersey’s economy is still under pressure.

In 2012, our economic activity fell as measured by GVA

Our GVA is heavily influenced by interest rates set by the Bank of England, so when interest rates are low, our GVA level will also be low. Inevitably, interest rates will rise and so will our GVA.

It is important that we look at the performance of the Jersey economy as a whole:

actual tax receipts remain resilient and better than forecast
the number of people in work remains close to a record high
the average earnings increase in June 2013 was 2.2% - this is an early indication that economic trends in 2013 have changed
and there are improvements in the business activity indicators

Recovery is now in sight and our latest budget aims to support it.

That said, as far as the labour market goes, despite continuing high employment levels, the ILO unemployment rate of 5.7% is unacceptably high for Jersey and we continue to do more to help unemployed islanders through our Back to Work initiatives.

We have invested 10’s of millions of pounds in helping the unemployed back into work and we have developed award winning back to work schemes.

Value to Britain

You have probably seen and heard a lot of media coverage this year about tax avoidance and tax cooperation between jurisdictions.

Earlier this year I met the UK Prime Minister to support his G8 initiatives on tax, trade and transparency. David Cameron welcomed the Island's position and highlighted the importance of tax competition as a vital driver of economic growth and prosperity for all.

Mr Cameron has since said that he doesn’t think it is fair any longer to refer to any of the overseas territories or Crown Dependencies as tax havens.

We have committed to enhanced information exchange with the UK and have supported the G8 on improving transparency on beneficial ownership – particularly among those countries that don’t yet hold a central register of beneficial ownership of companies, as Jersey does.

We have agreed to join in the OECD Multilateral Convention on Mutual Administrative Assistance in Tax Matters and are sharing in the G20 initiatives on tax transparency.

We are also close to completing the negotiation of an enhanced tax information exchange agreement with the USA.

There is no conflict between compliance with international standards and continued success as an international finance centre.

Independent analysis

We commissioned some independent research to look into Jersey’s relationship with the UK.

We know it dates back more than 800 years – what we didn’t know were the detailed benefits that our relationship brings. Some commentators have suggested that Jersey provides no benefit to the UK and in fact is a drain on it. This research tells a different story.

This independent analysis of Jersey’s value to Britain comes to the overwhelming conclusion that Jersey is of significant benefit to the UK – as a trading partner providing capital and inward investment.

It also shows that the majority of capital inflows to Jersey come from outside of the UK, but that the majority of the investment from Jersey goes into the UK.

It is our strong belief that Jersey is able to attract global investment because we are a high quality international financial centre with a strong commitment to transparency and to combatting tax evasion.

We will continue to grow our banking business so deposits can be upstreamed to the UK; and we will focus on new opportunities for inward investment to fund growth and investment in UK infrastructure – with a particular focus on the emerging economies of the world.

We will work to build stronger relationships with the City, and the wider financial services sector, to secure a competitive and globally compelling UK/Jersey proposition – so we can compete with other large finance centres, like Hong Kong, Singapore and New York.

Jersey is in a unique position to support jobs and investment in the UK and this is where we see our long term contribution to a historic partnership.

I could now talk about the States Assembly, but we’ve been talking about reform of that for 15 years and still haven’t seen any change. I think that would take another full night!

In my job I spend a lot of time talking about Jersey. It’s also my opinion that Jersey men and women overseas do the same.

I hope that tonight I’ve given you much to keep talking about, so you can become more effective ambassadors that any PR campaign could ever be.

Thank you.