The MTFP outlines the Council of Ministers’ spending plans until 2019 and a key aim is to fill a predicted black hole of £145 million in Jersey’s finances by the end of the period.
Proposals to achieve this target include £90 million of cuts to the public sector, new health and sewage charges to raise £45 million and cuts to welfare to save £10 million.
But the MTFP also includes plans to increase spending on health, education and infrastructure.
Many of the proposals have met opposition with 15 amendments to the MTFP lodged, many of which are attempting to block the savings plans.
Members say no to income tax increase for high earners
PROPOSALS to increase Jersey’s top rate of income tax in an effort to prevent planned welfare cuts including scrapping pensioners’ Christmas bonus and free TV licences to the over-75s were rejected by the States yesterday.
Deputy Geoff Southern proposed amending the draft Medium Term Financial Plan so that those earning more than £100,000 a year in Jersey would pay more tax.
He said that the increase in tax revenue should be used to stop cutbacks, including axing the £83.73 annual Christmas bonus for pensioners, freezing income support and not issuing free TV licences to over 75s for those who are not already on the scheme.
He also called for changes to the rules determining the amount of income support received if a claimant receives a private pension.
The proposals were taken in eight votes, all of which were heavily defeated.
- Three Members were absent at the start of Tuesdays sitting.
- Deputy Richard Rondel was ill, Deputy Richard Renouf was excused, and St John Constable Chris Taylor was declared en défaut – absent without excuse.
- The Bailiff, William Bailhache, was presiding.
Deputy Southern said: ‘This amendment is to protect the poorest and most vulnerable in our society. I cannot believe that anyone in this Chamber would not want to do that.
‘Our opinion is that the tax burden should fall on the shoulders of those most suitable to bear the increase.’
He pointed out that his proposed taxation plans could produce an additional £17.2 million of revenue, which could be used to prevent cuts of £10 million proposed by Social Security Minister Susie Pinel.
Fellow backbenchers Deputy Monfort Tadier and Deputy Judy Martin both accused the Council of Ministers of having ‘no mandate’ for making the cuts to benefits, as they had not outlined any such measures in their election manifestos last year.
Deputy Pinel defended her plans, saying that she focused on delivering cuts that were fair, well targeted and were designed to ‘encourage financial independence’.
She said: ‘As Social Security Minister I have had the difficult task of identifying £10 million of savings by 2019.
‘We have assessed our options and put together a package of measures which will have the least impact on claimants.’
The minister said that she felt the money saved by axing the Christmas bonus and over-75s TV licence could be better allocated elsewhere.
And she also said that the changes to the pension rules for income support were designed to nurture financial independence as Islanders would be encouraged to save for their retirement.
Treasury Minister Alan Maclean warned that increasing the top rate of income tax in the Island would undermine Jersey’s international business competitiveness.
He said: ‘The 20 per cent tax rate forms the bedrock of Jersey’s tax system and it has been unchanged for 60 years.This has sent out a message that Jersey provides certainty and stability.
‘Our tax rates must be internationally competitive. It is already higher than competitive jurisdictions like Hong Kong, the British Virgin Islands and the Cayman Islands.’
He added: ‘A higher tax rate would make it much more difficult to attract investment.’
Voting rule change proposal defeated
A PROPOSAL to vote on the income targets set in the Medium Term Financial Plan year by year was defeated in the States yesterday.
States Members will now keep to the original plan of voting on income targets up to and including 2019 when they are asked to approve the draft Medium Term Financial Plan later this week.
For (23): Senator Cameron, Constables Crowcroft, Le Sueur-Rennard, Le Maistre and Taylor, Deputies Martin, Southern, Carolyn Labey, Hilton, Le Fondré, Kevin Lewis, Tadier, Higgins, Maçon, Mézec, Andrew Lewis, Doublet, Russell Labey, Wickenden, Bree, McDonald, Johnson and McLinton.
Against (24): Senators Routier, Ozouf, Maclean, Gorst, Farnham, Bailhache and Green, Constables Norman, Refault, Mezbourian, Gallichan, Paddock, Pallett, Le Troquer and Le Sueur, Deputies Pryke, Noel, Vallois, Pinel, Luce, Bryans, Moore, Norton and Truscott.
The Assembly voted 24-23 against the amendment lodged by the Corporate Service Scrutiny Panel, which suggested that the MTFP’s income forecasts are ‘too optimistic’ and pointed out that more detail needs to be presented to the States before Members approve four years of financial planning.
He pointed out that forecasts in the MTFP indicating a £165 million shortfall in income compared to expenditure and uncertainty over the nature of the new health charge meant that the MTFP was not ‘fit for approval’ as a four-year-plan.
His scrutiny panel colleague Deputy Simon Brée said: ‘This amendment is totally logical, totally sustainable and prudent.’
Treasury Minister Alan Maclean pointed out that the MTFP had already been split into two and more details on income including the health charge would be provided in June 2016.
Senator Philip Ozouf said approving the plans on a year-by-year basis would mean the MTFP was a ‘short term not a medium-term plan’.
THE States will begin paying parish rates on properties it owns in Jersey from 2017 if Members approve the Medium Term Financial Plan later this week.
An amendment to the MTFP proposing that the States should start paying rates next year, rather than 2017, was rejected 26-17 by the States on Tuesday.
Included in the failed amendment, lodged by the Corporate Services Scrutiny Panel, was a request that as funding for the rates payments was ‘still to be identified’, contingency monies should be used to fund the payments starting in 2016.
St Helier Constable Simon Crowcroft, who supported the amendment, said: ‘It was put forward that in the next Medium Term Financial Plan the States would have to pay rates on properties.
‘The Council of Ministers agreed to pay it in the Strategic Plan and they should bring it forward to 2016.’
St Clement Constable Len Norman was opposed to the amendment and pointed out that only St Helier would benefit from the measure.
He said: ‘The only parish likely to benefit is St Helier, which is already the parish with the highest amount of rates collected.
‘Most of the other parishes don’t have many States properties.’
Treasury Minister Alan Maclean said that the rates payments should not be introduced until 2017 because changes to the law needed to be considered to ‘avoid unnecessary consequences’.
He added that the use of contingency funds to make the rates payments would be short-sighted and ‘not prudent financial planning’.
Threat to lone parent benefit
AN element of income support that provides extra money to lone parents will be scrapped if the States four-year financial plans are approved.
An amendment to the Medium Term Financial Plan, lodged by Deputy Sam Mézec, to retain the extra £40 income support paid to single parents each week was rejected by the States yesterday.
The Deputy had proposed to fund the benefit, which is to be cut as the Social Security Department targets £10 million of savings, through increasing tax on those in Jersey earning over £100,000.
The amendment to retain the lone parent component was defeated 32-12, while the proposal to raise tax on high earners was defeated 35-9.
Outlining the case for reforming Jersey’s personal tax system, Deputy Mézec criticised remarks from Treasury Minister Alan Maclean earlier in the day suggesting the Island’s low tax rate was the ‘bedrock’ of its success.
He said: ‘There are a whole host of other reasons why Jersey is an attractive place other than the tax rate.
‘Jersey is an excellent place to live.
‘The tax rate is not the defining feature of this Island.’
Several backbenchers also backed Deputy Mézec’s call for a review of Jersey’s personal income tax system, including Deputy Simon Brée and Deputy John Le Fondré.
Deputy Brée said: ‘We have not had enough time to consider how a new progressive tax system might work.’
Also in support of Deputy Mézec, Deputy Geoff Southern strongly criticised the level of research that had been carried out on assessing cutting the lone parent component.
He said: ‘This is one of the worst examples I have seen of not doing proper research.
‘One of the real advantages that income support has brought is providing £40 a week to single parents.
- Deputy Mézecs amendment to retain the lone parent component payment in the MTFP was defeated 32-12.
- Those supporting this part of the amendment were: Senator Cameron, Constable Crowcroft, Deputies Martin, Southern, Hilton, Kevin Lewis, Tadier, Higgins, Maçon, Mézec, Doublet and Bree.
- Deputy Mézecs amendment to raise tax on high earners was rejected 35-9.
- Voting in support of the proposal was: Senator Cameron, Deputies Martin, Southern, Hilton, Kevin Lewis, Tadier, Higgins, Mézec and Doublet.
‘The one good uplifting, creative thing that income support has done is lifting children out of poverty.’
Social Security Minister Susie Pinel defended cutting the lone parent component, saying that it was a ‘poorly targeted’.
She said: ‘Under the current system the single parent gets £40 per week, while parents in a couple do not.
‘I do not believe that this component is well targeted and we seek to remove it gradually during the course of the MTFP.’
Under the MTFP, the Social Security Department also plans to introduce measures which will entitle lone parents to claim more income support if they receive maintenance payments from ex-partners.
The move is intended to encourage maintenance to be pursued to make up for the loss of the lone parent component.
Deputy Southern called for the Social Security Department to provide support for claimants to chase such payments.
The minister explained, however, that the cost of her department helping to pursue maintenance payments would be too high.
‘The decisions the Assembly makes this week will set the direction of the Island’s public finances for the next four years’
Chief Minister Ian Gorst
‘We consider the income forecasts to be too optimistic’
Deputy John Le Fondré on the States income and expenditure plans for the next four years
‘Public sector reform has been painfully slow’
Deputy Andrew Lewis on continuing cuts to Jersey’s civil service
‘Ten per per cent of Islanders pay 51 per cent of the income tax’
Senator Alan Maclean on the contribution Jersey’s high earners make to tax revenue
‘I would rather see pensioners see, eat and walk properly’
Deputy Susie Pinel on the reallocation of funding from the pensioners’ Christmas bonus towards health-care needs
‘They have gone for the easiest targets’
Deputy Judy Martin on proposed benefits cuts
‘None of these promises were outlined before the election’
Deputy M ontfort Tadier on proposed cuts that were not mentioned in pre-election manifestos last year
