Treasury and Resources
Ministerial Decision Report
Establishment of Income Forecasting Group
- Purpose of Report
To enable the Minister for Treasury and Resources to approve the establishment of an Income Forecasting Group, including Terms of Reference as attached at Appendix 1.
- Background
The forecasts of States income are a critical component of the States medium and long term financial planning. They are also required as part of an annual Budget, alongside forecasts of States expenditure, to assess the projected balance on the Consolidated Fund. This is a requirement of the Treasury and Resources Minister as part of the Public Finances (Jersey) Law.
The largest single component of States income is income tax revenues. For several years an Income Tax Forecasting Group (ITFG) has been responsible for advising the Treasurer in respect of the forecast for income tax revenues.
The ITFG has comprised officers of the Treasury, Taxes Office and Economics Unit together with the Adviser, International Affairs. The group has tended to meet annually and the forecasts have been used to inform the MTFP and annual Budgets and generally been the basis for the forecasts in these documents.
The meetings of the group have not been formally recorded but a report has been produced by the Economics Unit which records the tax data, economic assumptions and outcomes from an income tax forecasting model.
The Treasurer of the States is ultimately responsible for advising the Treasury and Resources Minister and the Council of Ministers of the States income forecasts to include in the MTFP and annual Budgets.
- Proposals for a new Income Forecasting Group
The recent Corporate Services Scrutiny Report S.R.12/2014 on the draft 2015 Budget recommended that ‘the membership of the ITFG is formalised within a structured reporting framework and with formal minutes being made available to the Council of Ministers.’
The Treasury and Resources Minister’s response to S.R.12/2014 indicated that the principle of the recommendation was accepted and that as part of a review of the Fiscal Framework with the new Council of Ministers any appropriate changes to the ITFG would be considered.
The report of the States’ Economic Adviser, ‘Updating the Fiscal Framework, (R102/2014) concludes that ‘Jersey’s fiscal framework could be enhanced by clearly defining the frequency, role and responsibilities around income forecasting’. The report also suggests that the role and independence of the current forecasting group could be improved. Formalising the income forecasting process and making the forecasts more transparent is also consistent with the views of the Fiscal Policy Panel in their annual reports.
The Interim Treasurer of the States is determined to provide the new Council of Ministers with the most up to date information in preparation for the new Strategic Plan and MTFP and is proposing that a new Income Forecasting Group (IFG) is established.
The proposal is for the new IFG to have a wider remit than the existing ITFG and to cover all States income from taxation and, in time, to potentially be extended to include forecasts of the contributions managed by Social Security department. Draft Terms of Reference for the Group have been prepared by Treasury and considered by the Corporate Management Board. The Terms of Reference are now proposed for approval by the Treasury and Resources Minister.
The arrangements for the IFG would form part of a revised Fiscal Framework to be developed alongside the new Strategic Plan and MTFP.
- Recommendation
The Minister is recommended to approve the formation of a new Income Forecasting Group to advise on the forecasts of all States income from taxation. The Minister is also recommended to approve the IFG Terms of Reference as attached at Appendix 1.
- Reason for Decision
The proposals for a new IFG will establish a process through which all States tax and duty forecasts are reviewed. The proposals will also formalise the reporting of States tax and duty forecasts as recommended by the Corporate Services Scrutiny Panel SR12/2014 and by the Economic Adviser as part of R102/2014.
- Resource Implications
There are no financial or manpower implications as a result of the approval of this Ministerial Decision.
Report author : Head of Financial Planning | Document date : 15th December 2014 |
Quality Assurance / Review : Head of Decision Support | File name and path: L:\Treasury\Sections\Corporate Finance\Ministerial Decisions\DSs, WRs and SDs\2014-XXXX - Establishment of the Tax Forecasting Group\WR - Establishment of the Tax Forecasting Group.docx |
MD sponsor : Treasurer of the States |
Appendix 1
Terms of Reference for an Income Forecasting Group
Purpose
The group is established as an advisory function on the forecasts of all States income from taxation and social security contributions which will be informed by economic assumptions produced by the Fiscal Policy Panel.
Objectives
To produce an absolute minimum of two forecasts each year
- A full review of states tax, social security contributions and duty revenue forecasts will take place following the provisional outturn and no later than March of each year.
- A further forecast to inform the Budget debate, no later than September, including any revised economic assumptions and experience form the current year actual revenues.
- In an MTFP year, a further update will be considered between the full review in March and the actual lodging of the MTFP.
To produce reports on the forecasts of states income from taxation and social security contributions, including:
- Forecasts for income tax revenues
- Forecasts for goods and services tax and ISE Fees
- Forecasts for impots duties
- Forecasts for stamp duties
- Forecasts for social security contributions
- Economic assumptions used; and
- Factors and risks that should be considered
The forecasts will cover a period of at least four years and include a range within which a central forecast can be applied
Reporting
The reports will be presented to the Treasury and Resources Minister in advance of the Council of Ministers consideration.
Once a report is approved by the Treasury and Resources Minister it will be published alongside the Medium Term Financial Plan and the Budget.
Other reports can be prepared on the request of the Treasury and Resources Minister.
Administration
All meetings will be minuted with agreed actions.
Quarterly review meetings will also be held.
Quorum – at least six of the nine members be present for the meetings to be considered quorate.
Any variations to the group membership once established to be agreed by the Treasury and Resources Minister or Chief Minister.
It will be the responsibility of the Chief Executive and Treasurer of the States to ensure that the group has sufficient resources to fulfil its responsibilities.
Group Membership
The members of the group are:
- Interim Treasurer of the States of Jersey (Chair)
- Comptroller of Taxes
- Director of Financial Services
- Chief Officer, Economic Development
- Chief Officer, Social Security
- Adviser, International Affairs
- Deputy Director of Tax Policy
- States Economic Adviser
- An external person appointed by the Treasury and Resources Minister
The meetings of the group will be attended by the following officers in a supporting role
- Head of financial planning (secretary)
- Finance director, Income Tax
- Economist
The group will invite other officers and external advisers to attend as appropriate which will be documented.
The group will operate independent of any political influence.
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