- Chamber chief urges ministers not to let one sector of society bear the brunt
- Council of Ministers announced in July plans to tackle a predicted £145 million black hole in Jerseys finances by 2019
- Read how the Council of Ministers propose to fix the Islands finances below
THE burden of Jersey’s financial problems needs to be shared across the community and ministers’ proposals on tackling the Island’s forecasted deficit need more detail, the head of the Chamber of Commerce has said.
Chief executive James Morris today said that the States needed to ‘exercise caution’ to ensure that the proposed measures within the draft Medium Term Financial Plan do not impact upon just one sector of the community.
His comments come after the Council of Ministers announced in July plans to tackle a predicted £145 million black hole in Jersey’s finances by 2019.
Last week the Fiscal Policy Panel presented a report on the MTFP – which outlines States expenditure for the next four years – and largely backed its general objectives, although it voiced concern over the lack of detail provided on proposals such as public sector cutbacks and a new health charge.
Mr Morris also called for greater detail for the proposals.
He said: ‘Chamber’s members drew some comfort from the FPP’s endorsement of the approach that the Council of Ministers has adopted.
‘However, we also note that the FPP expressed certain cautionary words in relation to the detail of how and when the proposals contained within the MTFP are to be implemented.
‘The underlying principles of what they are striving to achieve, the FPP has effectively questioned and it has challenged the ability of the States to deliver on its stated objectives.
‘In particular, the FPP’s report notes that the details in respect of the proposed expenditure savings have not been fully identified, and warns that if the proposed level of savings is not first identified and then realised, the structural deficit is unlikely to be addressed.’
Mr Morris said that ‘careful and skilful management’ would be needed in outlining more detail within the plans.
He added: ‘Any significant programme of capital expenditure will need to be carefully managed in terms of timing in order to manage the impact on the wider economy.
‘Furthermore, we would wish to see any such programme being underpinned by a determination to use local resources, local contractors and local labour wherever possible.’
Mr Morris also called for the burden of resolving the financial deficit to be borne across Jersey’s community.
‘The States needs to exercise caution to ensure that the proposed measures, and particularly those relating to cost savings and additional taxes and charges, do not inordinately impact on one sector of the community or on one segment of society,’ he said
‘The scale of the Island’s deficit requires a concerted and combined effort from all sectors and from all with an interest in the sustained and future prosperity of our Island.’
He added: ‘The Council of Ministers have set out the intended direction that they are seeking to pursue – now they need to provide detailed proposals.’
IN APRIL this year the States predicted that Jersey would have a £125 million budget shortfall by 2019. Just three months later, the release of the Medium-Term Financial Plan (MTFP) for 2016 to 2019 has seen that figure rise to £145 million.
The additional £20 million shortfall has been caused in part by the expected loss of £13 million in company income tax – with revenue expected to fall by £10 million from one business alone – as well as changes to forecasts for inflation, interest and tax revenues.
Today, within the MTFP, the States have announced a package of measures to make up the expected deficit, with cuts to the public sector being the key target, as well as the imposition of new taxes and levies such as health and sewage charges to bolster the public purse.
How is the shortfall to be made up?
Depreciation
The largest chunk of the deficit is expected to be caused by depreciation – the reduction in value of States’ assets such as buildings and vehicles – which will account for £55 million in 2019.
Additional investment
Much of the deficit will be created by additional investments planned by the States, in particular on health and education, with an additional £40 million and £9 million planned to be allocated respectively.
Of the additional £40 million funding being set aside for the Health Department, £19 million is planned to meet increased demand for services, more than £3 million on early interventions to support vulnerable families and £2 million for mental health services.
An extra £4 million is also planned to be invested each year to maintain Health Department property.
Expenditure on Health and Social Services is expected to continue to rise as Jersey’s population ages. By 2035 the States predict that there will be 70 per cent more over the age of 65 living in the Island than there are today, and twice as many people over 85 as there are today.
Funding will therefore need to be found for new health technology, drugs and treatments if Islanders are to remain healthy throughout their lives.
Of the £9 million funding for the Education Department, the States have indicated that they will allocate an extra £3 million a year for information technology education and students who need extra support.
They also plan to continue investing in developing school infrastructures, including at Les Quennevais, Grainville and St Mary’s Primary School.
The States claim that Jersey’s academic performance has ‘plateaued’ over the last ten years and say that investment is a priority.
As well as spending on health and education, additional funding for other departments is forecast to contribute £13 million towards the shortfall.
Base budget
Aside from the planned additional investments, current spending commitments are expected to see a £28 million shortfall by 2019.
How will the States plug the financial black hole?
Cuts to the public sector
The States plan to save £90 million by 2019 by cutting back spending on Jersey’s public sector, with several measures already underway such as voluntary redundancies and renegotiation of existing contracts.
After announcing £60 million of cuts in April, the States has already increased its target by £30 million.
Public sector employees will bear the brunt of the proposed cuts, with staff costs now targeted to be reduced by £70 million by 2019. Proposed measures include redundancies, cutting back services, outsourcing work, pay freezes, reducing recruitment levels, performance management initiatives, departmental mergers, restructuring and the introduction of technology such as e-gov to reduce reliance on staff.
So far 7,000 States employees have been offered voluntary redundancy packages and all public sector employees have been forced to take a pay freeze this year with the exception of nurses and midwives who will receive a 0.4 per cent increase.
Compulsory redundancies are expected to follow once the voluntary programme has finished.
Health charge
The States aim to raise £35 million to offset against the expected deficit through the introduction of a health charge by 2019, but details of the exact nature of the charge are not yet known.
The health charge could be levied in the form of a flat user-pays charge, which would hit middle and low-income earners in particular – Health Minister Andrew Green was unable to confirm last month what form it will actually take.
If Jersey’s population remains at around 100,000, the proposed health charge will cost Islanders about £350 each per year on average.
Sewage charge
A further £10 million is planned to be raised through the introduction of user-pays charges for the disposal of liquid and solid waste – again the exact nature of this charge has not yet been confirmed.
Cuts to benefits
The States intend to freeze benefits spending until 2019 to save £10 million – they have said that they intend to minimise the impact by spreading cuts across a large groups of claimants.
Measures will include most elements of income support being frozen next year, one-off income support payments being replaced with loans, lone parents being treated the same as other adults for income support, pension and maintenance income being taken fully into account for income support calculations and under-25 jobseekers being treated in the same way as students of the same age for welfare purposes.
SERIOUS concerns were raised earlier this year about how ministers propose to pay for plans to put four key areas at the heart of government policy at a time when States departments are already under increasing pressure to save money.
The unveiling at the end of January of the Council of Ministers’ proposed strategic aims, which include making healthcare, education, economic growth and St Helier priorities in the next three and a half years, received a lukewarm response from backbenchers, some of whom criticised a ‘lack of meat on the bones’.
They also questioned how ministers planned to fund the policies required to see the priorities through, particularly at a time when departments have been told to find savings of two per cent – around £12 million in total annually – in 2015 and future years.
Reform Jersey, the Island’s only political party, said that spending would have to be cut further or taxes raised to fund the plan and tackle the ‘black hole’ in public finances.
Islanders were asked for their feedback on the proposals before ministers lodge the Strategic Plan, which sets government policy for the next three and a half years, with the States on 6 March.
It will then be debated by Members the following month. Deputy Jackie Hilton, who topped the poll in St Helier 3 and 4 at the last election, said: ‘I don’t think we can argue with anything they are saying but the nub of the problem is going to be, how are we going to be paying for that?
I will be very interested when the Medium Term Financial Plan comes forward in June – actually how the Council of Ministers plan to pay for everything they are suggesting they are going to do.
‘We need more meat on the bones at the moment.’
Reform Jersey chairman Deputy Sam Mézec, who is also a St Helier Deputy, said that the fact that Jersey would not have a Strategic Plan agreed and in place until at least six months into the new political term showed how inefficient the States system was and why party politics was needed.
He added that the proposals made ‘all sorts of unachievable promises’ at a time when public finances are already stretched.
‘Saying “we want to improve the wellbeing of Islanders” is all well and good, but they haven’t even attempted to explain how they will do it,’ he said.
