A BUDGET immediately before an election can tend to be a bit of a damp squib as Members, and in particular, ministers seek to limit any potential damage to their political stock with one eye on polling day.
The current Council of Ministers though may not have that luxury with much being made of the pressure on government finances and several high-profile plans in the offing which are currently unfunded.
How the Assembly looks to balance the books will be intriguing as political battlelines get drawn and ministers fight for their individual cuts from the States purse.
In what could be one of the most important Budget debates in recent memory, where will the Council of Ministers land and what previous finance-boosting initiatives may circle back around into the ministerial thinking?
HEALTH FUNDING
HEALTH Minister Tom Binet has not been shy about telling Islanders how strained his department’s finances are.
Against a backdrop of rising clinical costs, the Health Minister has been on the offensive – effectively laying the groundwork for some potentially difficult and controversial discussions about the future of the service.
In August, Deputy Binet admitted that he will be asking the Assembly to “sanction a major increase in funding for the health service” to cover three main areas: baseline funding for the department, preventative healthcare and digital development.
The minister has not given a clear indication as to where this additional funding will come from but has proffered several options including announcing a review of elective surgery procedures, charging people for missing Emergency Department appointments and charging for some “non-essential” services such as the homebirth service.
Health charges are not a new phenomenon. In 2015, a long-term care contribution was introduced – initially at a 0.5% rate. Currently, the maximum long-term care contribution rate is 1.5%, but most people pay less than this.
And during the 2016 Budget debate, then-Health Minister Andrew Green brought forward proposals for a new health charge which would have seen Islanders who pay the full 20% income tax rate charged an extra 0.5% from 2018, rising to 1% the following year.
The extra funding was earmarked for children’s welfare and mental health services but, in a blow to the ministerial plans, the vote was tied at 23 votes apiece meaning in did not pass.
Given the knife-edge nature of that previous vote, it is not impossible that the current crop of ministers may look to tweak past plans and hope they find the extra couple of votes needed to get it over the line.
EDUCATION
ANOTHER area that consistently features among the top spending departments each year is education.
Like Deputy Binet, Education Minister Rob Ward has been fairly open about the pressures he is facing.
Earlier this year, a JEP investigation revealed that the majority of the Island’s schools ended last year in the red.
And during a States sitting in May, the minister said that a sharp rise in the number of special education students requiring support had led to worsening deficits and had not been matched by enough funding in previous years.
He told Members: “School budgets are under pressure. Of course they are. In 2022/23, a report showed £13.1 million was needed just for special educational needs in schools. But only £6 million was agreed by the Council of Ministers. And so the inbuilt deficits and what was needed is now, lo and behold, come to roost.”
INVESTING IN JERSEY
AT the start of August, the Council of Ministers unveiled a flagship strategy to invest in the Island’s critical infrastructure.
The Investing in Jersey strategy outlined a 25-year programme to invest in roads, schools, housing and public services.
It came shortly after review by the Public Accounts Committee – the States spending watchdog – found that capital expenditure in 2024 was £64 million below the approved budget – including a £45 million underspend on new healthcare facilities.
The PAC said several projects lacked delivery updates and recommended clearer reporting on progress and spending.
Ministers said the programme will be underpinned by a new Capital Investment Fund, designed to ringfence the required funding over the coming years.
The fund is expected to feature in the next financial plans and, if approved by the States Assembly, will be supplied with £80 million from next year’s budget – rising to £90 million or £100 million in the following years.
The government said that the fund would utilise transfers from existing capital budgets, reprioritising some day-to-day spending, and using budget surpluses when available. But, given the burdens on other departments, there are questions hanging over how much will be available to reprioritise.
Chief Minister Lyndon Farnham attempted to reassure Islanders at the time that no new taxes would be needed to fund the strategy, instead suggesting that some existing income streams – such as a portion of fuel duty – could be repurposed to go towards the programme.
BORROWING
STATES borrowing levels are always a thorny issue given the Assembly’s historic adversity towards saddling the Island with debt.
Those days, however, are a thing of the past.
As little as 12 years ago, the Island had no public debt. But now, there is a £1.14 billion debt according to a recent PAC report.
Deputy Farnham and Treasury Department head of cost-benefit analysis and investment appraisal Phil Ashley have both admitted that borrowing is likely to form part of the 2026 Budget proposal.
When unveiling the Investing in Jersey strategy, Mr Ashley told the JEP: “Borrowing is something that we would be doing in line with our existing conservative policy.
“We know that Fort Regent is in desperate need of refurbishment, and it’s such a big project that borrowing is going to have to be a part of the funding mix for that so we can use the funds where there’s a strong case to borrow funds and enable that investment.”
Deputy Farnham added that it is occasionally “beneficial to leave our money in the bank and borrow at lower rates” and said that Fort Regent would be financed with “carefully managed, structured borrowing”.
However, little has been said at this stage as to the amount of borrowing that is being planned and what mechanism will be used.
WASTE CHARGES
MINISTERS are looking across the water at Guernsey for some Budget inspiration.
In 2019, our neighbours introduced a “pay-as-you-throw” scheme – charging islanders for throwing away non-recyclable rubbish.
Infrastructure Minister Andy Jehan is a fan of the initiative and said he would be in favour of rolling out a similar scheme in Jersey – although he did say this was his own personal view rather than a Council of Ministers consensus.
Still, the success Guernsey has seen since introducing the charge would mean that it would not come as a massive surprise should something similar form part of the 2026 Budget proposal.
According to the latest figures, almost 70% of household waste was recycled, reused or composted in Guernsey compared to 35% in Jersey. If a pay-as-your-throw-style scheme encourages more people in Jersey to recycle – thereby supporting the government’s environmental commitments – while increasing funds for infrastructure investment, then Jersey’s government may see that as a win-win.
Equally, liquid and solid waste charges have been a regular talking point for successive Assemblies. Commercial liquid waste charges were first brought forward in 2017 but faced fierce backlash from hospitality businesses and were subsequently delayed until 2019 before being scrapped completely.
Mr Jehan has previously hinted that he would bring proposals on this back to the States Assembly during this term of office, which could suggest they may feature in this year’s Budget.
The Jersey Hospitality Association is likely to campaign against any waste charges should they come forward again, with co-chief executives Ana and Marcus Calvani warning last week that the sector was facing a tipping point and further charges could cripple businesses.
He said: “Hospitality runs on very tight margins and with visitor numbers down this year here and in nearly all other destinations around the world, any base cost increases are not just painful to an already very small margin, they have a detrimental impact on product investment and direct inflationary cost to the end consumer.
“As an industry, we are bracing ourselves for even more cost increases as we wait for the Government to publish next year’s Budget. “
IMPÔT DUTY
ANOTHER cause for concern for the Hospitality Association is an expected hike in alcohol duty.
“Very little has been said about what they are planning to do, but we’re expecting a proposal to raise alcohol duty,” Mr and Mrs Calvani said.
Duty on alcohol was frozen last year, while ministers revised their 2024 impôt duty increase to 4.5% having initially proposed an 8.9% hike on alcohol.
It is expected that after several years of no or below inflation level rises, alcohol might see a spike in the Budget proposal.
Similarly, Deputy Millar told the Corporate Services Scrutiny Panel earlier this summer that her department is discussing the reintroduction of fuel duty next year.
Consecutive Budgets imposed an extended freeze on road-fuel duties into 2025 to ease cost of living pressures. However, the Treasury Minister told members of the scrutiny panel that reintroducing inflation-linked costs to petrol and diesel is on the cards for 2026, citing the benefit to government revenue streams.
It is also expected that a new tax on vapes will be included in this year’s government Budget to “dissuade” young Islanders from vaping.
LAND WINDFALL TAX
IN 2024, Deputy Raluca Kovacs successfully brought a proposition to the States to investigate a windfall charge to recoup some of the profits generated when a field is rezoned for housing.
Deputy Kovacs’s proposition called for Ministers to come forward with plans for new legislation by 31 March 2025.
However, this work was put on hold as ministers said they had not been able to go ahead with the proposals because the previous Government decided against funding it.
GST
A RECENT petition has brought the topic of GST back on the agenda, with fresh calls to remove it from food.
Having passed 1,000 signatures, the petition will receive a ministerial response. However, Treasury Minister Elaine Millar has already suggested that such a move was not forming part of the ministerial thought-process, given the impact it would have on States revenue.
Still, it is entirely possible that a backbencher may look to bring an amendment to the government’s Budget proposals to reignite the debate.
The likelihood of such a move getting through would be small – with a 2022 proposition from Reform Jersey Deputy Raluca Kovacs to remove the 5% sales tax rejected by 28 votes to 17. Reform Jersey have pledged to remove GST from food should it gain enough members to form a government after next summer’s election and the party may welcome the opportunity to remind Islanders of their stance beforehand.
