A REPORT raising concerns over the sustainability of government finances have prompted a leading scrutineer’s call for a “clear and realistic plan” to address the matter, while the government has defended its Budget plans and said there are “no surprises” in the report.
Record levels of public debt, a deteriorating balance sheet and unsustainable spending are among the factors referenced in the annual report issued by the Fiscal Policy Panel in the run-up to next month’s Budget debate.
The report by the panel, made up of independent economic advisors and chaired by Sir Jon Cunliffe, notes that “the trajectory of day-to-day spending is unsustainable given Jersey’s revenues, and will need to be curtailed in future Budgets” and that “high levels of public spending, especially on services, is likely to add to existing inflationary pressures”.
Concerns are also expressed about the state of the Strategic Reserve, Stabilisation Fund and Social Security Fund, and the weakening of the Island’s balance sheet.
Deputy Inna Gardiner, chair of the Public Accounts Committee, said she had raised many of the issues cited in the report during a recent public hearing with government chief executive Andrew McLaughlin.
“[The report shows] Jersey is still spending more than we are bringing in,” she said. “We need a clear and realistic plan to control spending and also to ensure extra income – because we cannot just leave it to the future and rely on hope alone.
“Withholding over a quarter of a billion pounds from the Social Security Fund in the next four years, before we have up-to-date information on future pension costs, our liabilities and investment returns, is risky.
“The panel themselves say this is ‘not prudent’ – we simply don’t yet have the facts to make that decision safely.”
While declining to grade the level of his panel’s concerns, Sir Jon said he would described the recommendations being made to government as “urgent”.
“Jersey is not going to go bankrupt – it’s got big reserves, but also has big risks – it is very dependent on the financial sector, and we’re in an uncertain world, so it might need some of those reserves to deal with a shock to the world economy or the banking sector,” he said.
“But I think it’s come to a point, and this is where I would say the recommendation is urgent – this is the trajectory you are on, and if you continue increasing spending by more than you are increasing income, then it’s going to take us to a certain point.
“I try hard to stay out of saying whether that’s a good point or a bad point, but it means you can make strategic decisions based on that knowledge.”
Treasury Minister Elaine Millar thanked panel members for their work, saying the report provided “valuable insight in support of sound public finances and long-term sustainability”.
“The report does not contain any surprises,” she said. “This government recognises the difficult trade-offs between delivering essential public services, investing in infrastructure, and rebuilding reserves.
“Since taking office, we have taken decisive action through a series of measures to manage cost pressures and strengthen fiscal discipline – this includes a recruitment and consultancy freeze, which has already delivered significant savings.
Actuarial advice had helped to inform the decision to prioritise immediate investment needs in the Budget [through temporarily reducing the grant to the Social Security Fund], Deputy Millar added, with the government awaiting the outcome of the next actuarial review before making long-term decisions.
Ministers were committed to the panel’s recommendation to prioritise medium-term sustainability and resilience, she said.
“At the same time, we remain focused on protecting and investing in core public services – particularly healthcare, children’s services, and our ageing infrastructure – offering a clear and practical route to improving public services, supporting the economy, and maintaining Jersey’s quality of life,” she said.
