Budget 2017 speech to States Assembly

Good Morning.

We are seeing unprecedented change across the world - change that will bring challenges but also opportunities. Global growth was 3.2% in 2015, the slowest since the financial crisis. The International Monetary Fund forecasts that global growth will remain modest. Advanced economies grew by 2.1% in 2015, while emerging economies grew by 4.0%. This was the fifth consecutive year that the growth in emerging economies slowed.

Growth in global trade has also slowed in recent years to a rate well below its pre-crisis trend. Jersey is not, and will not, be immune to the dramatically changing political, regulatory, social and economic trends emerging globally. But we are in a better place than most to respond and, unlike others, are prepared to take the difficult and sometimes unpopular decisions needed to plan ahead, for not only the medium but long term as well.

Jersey has a long, proud history with a culture for embracing change, for innovating and for encouraging entrepreneurship. This government has a clear plan to navigate through the uncertain times we face, and Budget 2017 builds on that plan as part of a longer term vision.

We know that a strong economy is essential to maintaining sustainable public finances and that a reformed and modernised public service provides the solid foundation to deliver quality public services in an affordable way.

The question for Members today is this -

Are we going to maintain the steady course we have started, that will secure our public finances and long term future? Or are we going to allow complacency and short term self-interest to divert us from our goals?

Jersey’s economic position

There has been much misinformation, doom and gloom about the state of Jersey’s public finances, the performance of this government and the economy. Today I stand to put the record straight.

Before the UK referendum result Jersey’s economy was performing much better than expected. Following 5% growth in 2014, which was higher than anywhere else in Europe, our economy grew in 2015 by 2.2%, more than double our forecasts - which is perhaps an indication of our more prudent approach to forecasting.

The Fiscal Policy Panel has stated that the impact of the BREXIT vote is still very uncertain and is likely to remain so, at least until negotiations are complete. The Panel said that the Jersey economy appears to have been relatively buoyant in the first half of 2016, but as a result of the uncertainty of BREXIT they downgraded their growth figures to show GVA growth for 2017 & 18 as flat.

The Income Forecasting Group, with its two independent members, have taken these updated economic assumptions, together with in-year data from the taxes office, and updated their June income projections.

They now estimate that income tax receipts will be £4 million higher in 2016, but £6 million lower in each of 2017, 18 & 19, falling to £9 million lower by 2020. To put that into context, it is 1.6% lower than the June 2016 forecast.

Productivity

Productivity fell slightly in 2015 by 0.2% mainly as a result of a fall of 4% in the financial services sector. This was mainly due to falling profitability in banking, largely as a consequence of the sustained low interest rate environment. However of positive note was that non-finance sectors saw productivity increase by 3% - continuing a trend for these sectors.

Raising productivity is the central long-term economic challenge for all governments, including Jersey, and is a core element of the Strategic Plan. Ministers are investing in improving productivity throughout the economy and are introducing policies to optimise economic growth.

To this end we are:

creating jobs in the technology sector with a focus on Fintech
working to remove barriers to running a business in Jersey
developing new and challenging strategies for Enterprise, Innovation and Inward Investment
developing a new Competition Framework to actively promote a more competitive economy
adopting environmental management principals to attract environmental businesses
enhancing and delivering the Financial Services Framework
reviewing and upgrading the Skills Strategy
targeting migration that delivers the greatest economic and social gain
investing in Jersey Finance, Jersey Business, Digital Jersey and Locate Jersey to support our economic objectives
investing in creating Visit Jersey and tourism is seeing improving visitor numbers
allocating £13.5m for the next 3 years to boost initiatives through the Economic and Productivity Growth Facility

Employment

A strong and growing economy supports jobs. Total employment in June was 60,320 – the highest on record and 2.1% higher than a year ago. We had 190 more people working in financial services in 2015, 320 more in construction - building new offices and homes - and 560 more in private sector health and educational services - providing care and related services.

As a result private sector employment was 3.1% higher than a year ago. By contrast public sector employment was 3.8% lower than in June 2015. This was the second consecutive annual fall in public sector employment and demonstrates the progress being made with public sector reform, as we reduce costs, redesign services and target expenditure to areas of most need.

But make no mistake - the pace and scale of this reform needs to continue, indeed it needs to accelerate.

Returning to the jobs market, unemployment is falling - last month 80 fewer people were out of work than the previous month and 180 fewer people were out of work than a year ago.

186 people started Back to Work supported jobs in November and 67% of the jobseekers who started work through Jobs Fest in October have been kept on by their employer. Just under half have been offered a permanent contract.

These people are having their lives turned around by meaningful employment opportunities, and the schemes we have invested in are helping more islanders into work.

And many workers are better off with their wages going further. Average earnings increased by 2.1% in the year to June 2016 – the fourth year in a row earnings increased faster than headline inflation. Indeed the low inflation we have seen since 2013 has contributed to the sustained growth in real earnings, as have lower prices for things like oil and food. However this period of very low inflation is probably coming to an end

As a result of BREXIT, the sterling exchange rate index, at the beginning of December, was nearly 20% below its value from the previous year. While this is good for exporters, if it continues we are likely to see imported inflation and with it, some higher prices of goods and ultimately services.

It should be added that commentators are not forecasting run-away inflation, more a return to more normal levels. With this return to low or moderate inflation, the drive to improve competition in the Island is essential. I am therefore greatly encouraged by the approach of the new regime at our competition regulator, CICRA.

Skills and Education

A successful economy needs a highly skilled workforce. We have increased by £2m the £10m of means tested funding for Higher education but recognise that there are more students wanting to access Higher Education than can afford to do so. We recognise the need to do more to support our brightest and most ambitious students, not least because of the benefits a highly skilled local workforce offers in managing migration and because of its positive effects on the economy.

There has been much comment on the lack of schemes in the Island to allow our students to mortgage themselves with £40,000 or more of debt, as they go through University. It is a heavy burden for any young person to take on.

Equally the cost for the States to replicate the UK loan scheme for example, would require sizeable budgets to write off the bad debts that would emerge.

Nevertheless as well as continuing to ensure that we have exhausted all possible avenues available for affordable loan schemes, we are working with the Education Minister and his department to explore a range of more affordable options. These include building on and expanding some existing initiatives, such as private and public sector bursary schemes. I hope to provide more detail in the coming weeks.

Public safety

Ensuring public safety is vitally important, so it’s very encouraging that recorded crime fell by 2% in the last year and by 23% in the last 5 years. This is testament to the hard work of the Home Affairs Minister and her drive for investment in our excellent police force and their hard work and dedication in fighting and deterring crime.

Next year the Police move to a new state of the art Police HQ that will lead to greater efficiency and increased productivity. The move coincides with transformed service delivery, including the use of hi-tech and mobile data, allowing records to be made at the point of incident, once and once only.

Health and Social Services

The largest area of public expenditure is in Health and Social Services, almost £208m in 2017. Increasing investment in our health services is critical, especially with an ageing demographic. There is a significant amount of specialist equipment to support the provision of care and this equipment has to be maintained and replaced.

As technology advances new equipment and treatments are also introduced to improve patient safety, care and efficiency. In 2017 £3.1m will be invested in replacing and maintaining essential equipment.

Health services are changing in many areas to improve efficiency and service delivery. Our ‘out-of-hospital’ services are avoiding unnecessary admissions and enabling faster patient discharge. More people are being treated at home and more staff are being recruited to run community services. Staff vacancies are also being filled with qualified ‘home-grown’ nurses.

We have reduced waiting times at the Child and Adolescent Mental Health Service, there has been a 50% drop in ‘no-shows’ at the physiotherapy department, our latest health profile found we have a high life expectancy and our average life satisfaction scores are higher than most countries.

After incredible dedication and unwavering determination by the Health Minister and his team we now have agreement on a site for development of a new hospital to deliver the quality healthcare that our community rightly expects, and we have a credible funding solution for building it - which I hope Members will support early next year.

Housing

Turning to another important area: Housing.

Our policies to increase and improve the affordable housing stock are helping islanders and the work goes on. Good quality and affordable housing is essential and the Housing Minister and her team, working collaboratively with Andium Homes, have been doing a superb job.

Deposits from more than 3,500 tenants have been protected in the first year of the States’ approved tenancy deposit scheme, a new landlord accreditation scheme is helping tenants, and we are transforming social housing:

Andium Homes have built 44 new homes at Lesquende
Caesarea Court is being refurbished
planning applications have been approved for La Collette Low Rise, Le Squez and Summerland site transfer
Andium is planning to build 1,000 new affordable homes by 2020 – and will sell 300 homes to first time buyers in the next 5 years
in just one development of 200 new affordable homes - at the Samares Nursery site in St Clement – forty, 3 bedroom houses will be available to first time buyers through the Andium Home Buy Scheme
160 social rented homes will be bought by Andium - to add to its portfolio
we are working with all the social housing providers, including Jersey Homes Trust and CHRISTIANS Together in Jersey to improve supply

Budget proposals

Turning now to the package of proposals in Budget 2017:

we are building on our long term tax policy of keeping taxes low, broad, simple and fair
we are cutting taxes on income for lower earners
we are helping working parents with the cost of child care
we are improving equity between families
we are encouraging investment, growth and job opportunities for our young people.

At the same time, in accordance with our policies, we are proposing to increase duty on tobacco, alcohol and fuel, which damage health and the environment and cost us money.

We want to increase stamp duty for homes costing more than £3 million and introduce a new, higher band for properties costing more than £6 million.

And we are asking for more information from all companies taxed at the 0% rate. This data will inform future policy-making and will help us find ways to broaden our zero-ten corporate tax base and potentially introduce tax on larger companies trading in Jersey.

Jersey’s taxation system

I’d like to spend a moment on the fairness of our tax system, about which there has been much debate. Fairness is one of Jersey’s five principles of taxation and I am aiming to achieve greater fairness for all Islanders. Some people have expressed concern that the tax burden is falling disproportionately on “middle Jersey” - however one fact is clear, tax data shows that the top 10% of highest earners provide more than half the personal taxes collected each year, to fund services for islanders.

Those on the lowest incomes pay no tax at all.
It is estimated that 30% of Islanders don’t pay tax.
It is also estimated that 45% of pensioners don’t pay tax.

Of those Islanders that do pay tax, 85% are benefitting from Marginal Relief and are mostly paying effective rates of tax between 7% and 15%. That is well below the standard rate of 20%.

Around 15% of our taxpaying households pay the standard rate of 20%.

Our generous tax free allowances mean that - in 2015 the 40% of lowest-earning households contributed just 3% of the £354 million of personal income tax raised to fund Jersey's public services.

Tax changes since 2005 have benefited lower-income households and increased the tax paid by higher earners.

We know tax statistics can be confusing. The Council of Ministers has therefore commissioned a Review of Personal Income Tax data. This will help explain how tax changes since 2007 have actually affected Islanders. The Review of Personal Income Tax has begun and is being overseen by a Political oversight group of Ministers and other members of this Assembly.

It will also look at how various tax changes - like GST, 20 means 20, increases in tax free allowances & the reduction in the marginal tax rate – have affected the income of different kinds of households.
We will use the information gathered to help us decide how we can generate a fair and more sustainable income to meet the growing cost of funding public services in the future.

In the meantime, I am proposing modest changes to improve fairness in the tax system; to improve administration; and to maintain and in some cases increase tax allowances and tax revenues.

Budget measures

Sir, I will turn now to the specific measures in this Budget, starting with the income tax exemption threshold, which might be more accurately called the tax free allowance.

I want working families to take home more of what they earn. Our tax free allowances are already more generous than in Guernsey and the UK. Taken together with Social-Security Contributions – and contrary to recent speculation – no taxpayer in Jersey is paying more than their counterparts in London.

Continuing on the course I set last year, the tax free allowance for single Islanders born after 1951 will increase from £14,350 to £14,550. For married couples and civil partners, from £23,000 to £23,500. This will allow these two allowances to catch up with the Age-Enhanced Allowances - of £15,900 and £26,100 respectively - which remain available to older individuals and couples who were born before 1952.

If we can continue with this approach in the next four budgets, I expect this Assembly to have achieved a common tax exemption threshold for all Islanders, regardless of their age or employment status, by 2021. I believe that is the right course to follow: one which is fundamentally fair.

Additionally, for the first time in 17 years, I am increasing the Second Earner’s Income Allowance for spouses and civil partners, from its current maximum level of £4,500 up to £5,000. This begins to remove the anomaly whereby two co-habiting earners can earn more income tax-free, than married working couples.

This effectively gives above-inflation benefits to around 12,000 households and particularly helps lower-income families.

Business tax

Jersey knows the value of a healthy and growing business sector and we will continue to maintain a tax structure which encourages investment, growth and job opportunities, particularly for our young people. We make legislative provision in this Budget to require companies taxed at the 0% rate to provide more information to the Comptroller of Taxes, to inform future policy-making and to support future work on international tax standards.

As I indicated when I lodged this Budget, now is not the time to be creating uncertainty for our business community. I remain committed to maintaining our zero-ten regime of corporate income taxation.

Zero-ten was introduced in 2008 across all the Crown Dependencies to protect our respective economies. It has not always been popular or indeed fully understood, but make no mistake zero-ten has been essential to maintaining the jobs and strong economy that ultimately pays for our public services.

Without its introduction Jersey, Guernsey and the Isle of Man would have seen their respective economies, communities and way of life devastated. Zero-ten has protected the 13,000 or more jobs currently in the finance industry and the income we receive by taxing the salaries of those employees.

Businesses in the financial services sector taxed at 10% contribute around £70 million in corporate tax and £10 million in ISE fees to the Treasury.

Tax Reviews

However, no system is perfect and we are reviewing the way 0-10 works. We want to see whether we can adjust the scope of the 10% and 20% corporate tax rates, to generate more income, by bringing more companies into those bands.

Like Guernsey and the Isle of Man, we need a zero rate to maintain tax neutrality and the competitiveness of our finance industry. To meet the requirements of the EU Code Group, this rate must apply equally too locally and non-locally owned companies – especially if we want to trade in valuable EU markets.

We are collecting more information from companies rated at 0% tax to inform future discussions about improving our corporate tax system. It is absolutely imperative that this information is collected before changes are made, but I assure members that Ministers, as well as representatives of the finance industry, are determined that change is delivered.

I will consider over the coming year the opportunity to ask some larger businesses to contribute through the corporate tax regime – following the example of the Isle of Man and Guernsey. We will also review the technical definitions that determine which finance sector companies pay tax at the 10% rate and explore the opportunities to extend the scope of those businesses that are taxable.

Pensions

Sir, turning to pensions. Many people are finding it increasingly difficult to satisfy the rules for drawing down some of their pension fund. We recognise that rules on Minimum Retirement Income can be difficult to fulfil in the current environment, even where people have built up considerable capital within their pension pot.

After consultation with the industry I am proposing the introduction of a Minimum Retirement Capital test that will make it easier to draw down a portion of a pension fund in these circumstances. This will still ensure people have enough resources to fall back on to avoid becoming dependent on the State in the future.

I do not believe that further relaxation available in some jurisdictions (notably the UK) is sensible for Jersey at this time, but we will keep the matter under review so we can learn from the experiences of others.

Other changes will ensure equity of treatment in the taxation of lump sums from overseas pension schemes, ensuring that they are taxed exactly the same as Jersey schemes.

Property / Rates

Turning to property matters - I have already mentioned the increases in stamp duties for high value residential properties, which we do not believe will impact on our prospects of continuing to attract high value residents to our beautiful Island. I also commt to examining in depth the duty applicable to commercial properties.

Furthermore this Assembly overwhelmingly voted to support the introduction of the States paying rates. Following that decision this Budget proposes the legislative changes to bring that decision into effect, and also to enable the Parishes to pay Island-Wide rates. It also gives the States the power to make regulations to reassess rateable values, which have been frozen since 2003.

It is unfair that rateable values have been frozen, especially in sectors such as retail where market conditions have deteriorated as opposed to the office market which has grown. A revaluation would not raise more revenue but would rebalance the level of rates chargeable, based on up to date market data. It is a matter of Fairness.

Arguably revaluation should have been included at sensible intervals of every 5 or 10 years at the outset.

Impôts

Sir - I will now turn to the duty measures proposed for 2017.

Before I outline them I would comment that it strikes me as difficult proposing duty increases after the Christmas lights have been turned on and so I will in future be considering an earlier date for the budget.

Jersey is not alone in increasing impôts. Guernsey’s States have agreed a 5.6% increase in duty on cigarettes, an increase of 8.1% for all other tobacco products, a 2% real-terms' increase in duty on alcohol and a 5p increase in duty on a litre of fuel. If our proposals are supported the retail price of all these products will still be cheaper in Jersey.

We are proposing a number of increases to duties for the coming year, all of which signal this Government’s ongoing commitment to health, social and environmental policies.

we are proposing that the duty on cider or beer should increase by 2p
we are calling for an 8p increase on a bottle of table wine
and the duty on average-strength spirits will increase by 72p per litre

These above inflation increases acknowledge that high levels of alcohol consumption damage people’s health and increase public disorder. Jersey has one of the highest levels of per capita alcohol consumption in Europe with one in four drinkers drinking at potentially harmful levels.

Let’s look at some facts:

If we use Jersey figures and UK modelling - the annual cost of alcohol related harm to Jersey is estimated to be £30 million. The duty in 2015 for alcohol was £18.2 million – that leaves a £11.8 million shortfall which has to be found from general tax revenue.

Furthermore as the price of alcohol has increased, consumption has fallen, a fact borne out elsewhere by numerous studies including the OECD and WHO.

These reports and local data demonstrate a clear link between higher prices and falling consumption

Likewise tobacco. The cost of dealing with the effects of smoking far exceeds the duty charged.
Based on a UK per capita cost of smoking, the annual cost of smoking to Jersey is estimated at £26.5 million.

The duty in 2013 for tobacco was £15 million - leaving an £11.5 million shortfall for us to make up. The economic burden that smoking places on our island society is significant. It includes the direct costs of smoking related illness, lost productivity and the cost of smoking related fires. Smoking remains the biggest cause of preventable illness and premature death - with tobacco killing around half of its users.

Price increases have been shown to encourage existing smokers to quit, more so among lower income smokers, as well as discouraging young people from ever starting. We are proposing to increase duty on a packet of 20 cigarettes by 45p including GST. Hand-rolling tobacco is even more damaging and will increase by 10% to align its price more closely with cigarettes.

And our new tobacco strategy aims to move Jersey towards a smoke-free generation and will build on the policy of increasing duties to reduce consumption.

Vehicle Emissions and Fuel Duty

Jersey remains committed to meeting Kyoto targets to protect our natural environment and keep Jersey’s air clean for future generations. Last year saw this Assembly agree to significant change and revaluation of our scheme of Vehicle Emissions Duty. Accordingly Duty is uprated to maintain the real value of revenue receipts and the current levels of incentive for buying newer, lower-emitting vehicles.

In addition a litre of petrol is proposed to increase by 2p per litre - including GST. Lastly in terms of impôts and duties, I draw Members' attention to a conclusion of the Corporate Services Scrutiny Panel’s Advisor CIPFA which concludes that, and I quote:

“The proposals for impôts and duty land transactions appear to match prevailing public policy considerations and along with modest Vehicle Emission Duty changes will provide additional net revenues’.

Administrative Measures

Sir, moving on to more practical administrative measures, the Taxes Office now receives more information from banks overseas about Jersey taxpayers’ income than it does from Jersey Banks about their domestic income. As I announced last year – and after consultation with financial institutions in Jersey - this Budget enables banks and other institutions to provide similar data to the Comptroller about interest paid by them to Jersey tax residents.

Undeclared bank interest was the most common error identified during the last disclosure opportunity which Jersey offered in 1998. This measure will help the Taxes Office spot both error and evasion sooner, so more people can get their tax affairs right first time.

In the longer run – as we further invest in our digital future – we will be able to provide better services to Islanders including, for example, the possibility of pre-populating tax returns with relevant data.

High-Value Residents

The Taxes Office has just published its report on how the High Value Resident regime has been working since the last changes were made in 2011. This regime is a longstanding part of our immigration, inward investment and tax policy. It encourages High-Net-Worth Entrepreneurs and other wealthy individuals to become Jersey residents; to bring their assets here; and to build businesses here.

In 2014: 34 high value residents paid approximately £4m of personal income tax, and the wider economic benefits of these residents was estimated in an independent report in 2010 to be conservatively between £50 million and £70 million.

I am pleased to say that this latest review has concluded that changes made in 2011 have been successful in attracting a much broader range of High-Net-Worth Individuals to Jersey. My predecessor, Senator Ozouf, should be congratulated on his work in introducing this new scheme.
The aim was to encourage more applications from people who could contribute to the strength of our economy through entrepreneurship, and by doing so help us to create more jobs for islanders, improving living standards for everyone.

These High Value residents not only contribute substantial amounts of tax towards our public services but increasingly support Jersey’s economic strength, and I remain struck by the significant contribution they make to Island life – especially in their support of charitable and Parish activities.

This review has shown that all the people who came here under the post-2011 regime are meeting their expected annual income tax contribution. Most of those people also contribute significantly to island life without necessarily seeking publicity for doing so.

However the review has also identified a number of areas for improvement. I want to see future high value residents commit to paying a minimum annual amount – regardless of the income they generate. And I believe it is time to increase the expected annual income tax contribution from £125K set in 2010 to £145K.

I have asked the Taxes Office to develop these ideas over the coming year for consideration by Ministers for Budget 2018.

Taxes Office Modernisation

This year I bring forward legislation to enable the Taxes Office and the Joint Financial Crimes Unit to exchange data and work more collaboratively, for example in tackling serious cases of tax fraud & evasion. Next year I will propose a new scheme of sanctions and penalties to improve tax compliance and to enable the Taxes Office to modernise other aspects of its working practices.

The Taxes Office remains on track to install new computers which will enable Online Filing & Assessment of taxes for personal taxpayers, probably in 2019. If feasible, we will integrate the collection of social-security contributions into the taxes system in 2020.

Tax Disclosure

Finally on tax measures, I signalled in my last Budget that the Taxes Office would provide a Tax Disclosure Opportunity in 2017. This will be a one-off opportunity for people to get their tax affairs in order before new data sources, new technology and new legislation make the detection of tax error and evasion easier, and before I invite the Assembly to strengthen the penalties and interest charges that may be levied on unpaid tax.

This Opportunity is available to all Jersey taxpayers who have made errors or omissions.

During 2017, the Comptroller of Taxes will begin to receive tax information from the first 40 or so jurisdictions (of over 100) that have joined the Multilateral Convention on Tax Matters. Any Jersey tax residents with investments overseas which have not been previously declared to the Taxes Office have a last chance to regularise their affairs in 2017. The disclosure opportunity will run from April to December.

After that, new sanctions, penalties and interest charges – which I shall ask the Assembly to adopt in Budget 2018 - will begin to apply.

Capital Programme

A Budget is not all about taxation matters and this Budget proposes £65m of vital infrastructure investment.

We use a 25 year planning horizon to formulate capital expenditure. The indicative medium term plan covering the period 2016-2019 was laid out in the Medium Term Financial Plan, and the total expenditure limits agreed for each year were agreed by this Assembly.

The detailed plan for 2017 is set out in this Budget. The largest item in the capital programme for 2017 is the £39 million for a much needed new Les Quennavais school, a project delivered with skill and determination by the Education Minister and his team.

Significant changes to the capital programme, highlighted just over a year ago, are the bringing forward of 2018 & 2019 allocations for the vital Taxes Office system renewal. This will transform the way the Taxes system operates and lead to full digital delivery of the personal taxes service.

This is made possible by phasing the work on redeveloping Grainville School, reflecting progress on delivery of that project. The plan retains £3.26m of funding for that project in 2017.

The other major adjustment is in the Department for Infrastructure, where a Commercial Recycling facility has been prioritised, to assist with the handling of materials that are inappropriately entering the Energy for Waste Plant and causing unnecessary running costs.

£6.8 million is also proposed for that Department’s Infrastructure Rolling vote and £1.6 million for replacement assets, mostly at the Energy from Waste plant.

The Corporate Services Scrutiny Panel makes some interesting observations on the capital programme and the need to revise the capital allocation process. The Treasury have asked that I record its thanks for a welcome and constructive dialogue with the CSSP CIPFA Advisor during this current review. It is unlikely that the Treasury and the Advisor will agree on all matters, however I know the Treasury has benefitted from the discussions regarding capital allocation in particular and will bring forward proposals accordingly.

Long term vision

Sir, this budget supports Ministers' long term vision for Jersey. The Council of Ministers recognises that building a successful future requires strategic direction and investment over many years, so we are introducing a new approach to long-term planning that reflects international advice and well established practice.

To inform this work a wide-ranging survey gathered views from more than 4,000 islanders, which showed that they value many aspects of living in Jersey but are concerned about issues such as affordable living, particularly the cost of housing, and increasing pressure on our natural environment. Their ambitions for the future often referred to a beautiful, safe and fair island.

Ministers will be using these insights to inform a long-term vision for Jersey that reflects the social, economic and environmental issues that are key to quality of life in Jersey. And that includes climate change. The impacts of severe weather will present a serious challenge and we must become climate-resilient.

This is critical both for our own population and to underpin our status as a sustainable economic center that attracts long-term inward investment. We will assess the risks posed by climate change and develop a costed programme of action. Additional funding will be required to ensure critical infrastructure – like our sea defenses and drainage services - are resilient into the future.

I am committing to supporting the Environment and Infrastructure departments with the necessary funding to outline the scale of the challenges we face in keeping Jersey a safe, resilient and attractive jurisdiction in which to both live and do business.

Sir, in conclusion
Islanders want a government which is forward-thinking, collaborative and innovative. This government has put a lot of work into developing a long-term vision that will set a path for Jersey to 2036 and beyond. I call that forward thinking

Jersey has little debt and significant reserves. Even if we borrow up to £400m to build a new hospital our debt to GDP ratio will be no more than 16%. That compares to the UK’s at a staggering 88%, the US at 104% and Germany at 71%. And we would be using excess income from our Strategic Reserve to fund the loan to build the new hospital - leaving the bulk of our savings in place for future generations.

At today’s very low interest rates, which we can lock in, it’s cheaper to borrow than to use our reserves to build the hospital. The funding model shows that the Strategic Reserve would be worth £3.6 billion by 2057 after the £400m capital and all interest has been repaid. To fund the hospital in this way doesn’t require any taxpayer contribution, provided we can secure borrowing, in the form of a fixed rate sterling bond, at current low rates.

Our investments have performed well. The Strategic Reserve has grown by 12% in 2016 and stands at £866m at the end of October. The most recent returns for our Common Investment Fund - where our cash is pooled and invested - were over 9%. The return on the fund so far this year has been 13.91%. This has significantly outperformed our long term expectations and reflects unusual market conditions.

We have a firm financial plan and a proven track record of fiscal discipline and remaining nimble in the face of rapid change. We will continue to draw on the expert independent economic advice as the local and global outlook changes and we will ensure we maintain enough flexibility in our plans.

Some of our decisions have been difficult – but they are all focused on keeping Jersey a great place to live and work.

This budget is in line with our priorities – investing in health, in education, in infrastructure and in improving housing for islanders.

It sustains our focus on reforming the public sector and maintains our aim to make our tax system simple and more equitable.

It helps provide the flexibility Jersey needs in an uncertain global economy.

This Budget will help to keep our island secure for future generations.

I commend this budget to the Assembly.