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ANALYSIS: As the next budget looms... What should we expect?

ANALYSIS: As the next budget looms... What should we expect?

Tuesday 19 September 2023

ANALYSIS: As the next budget looms... What should we expect?

Tuesday 19 September 2023


Today, Ministers are due to reveal their spending plans for the next four years... But how much money do they have to play with? What are the key areas they'll have to spend on? And where might spending be reined in?

Express takes a closer look at what might crop up in the key document...

What money do we have to spend?

It wouldn’t be a surprise to see somewhat of a ‘buckle-up’ budget – after all, we’re still not long out of the health crisis which entailed hundreds of millions-worth of spending, and there’s also the many millions written off for previous iterations of the hospital project. A watchdog report published in May found that £130m had been spent on the project – with just shy of £40m being "abortive" costs.

Giving an indication of the island’s financial health earlier this year was a key report by the team responsible for estimating how much money will flow into Government coffers, the Income Forecasting Group.

The team of senior civil servants headed by the Treasurer predicted the island would be £23m better off than originally expected. Why?

The key reasons were three-fold:

  • Rising interest rates boosting the profitability of financial services companies and their consequential corporate tax contributions; however, this is expected to diminish this year as interest rates plateau and fall.
  • Higher prices for goods and services, with inflation predicted to peak at 12.8%, increasing GST receipts.
  • Personal income tax receipts are also forecast to increase this year, though some modest falls were expected between 2024 and 2026.

Looking ahead, Treasury Minister Ian Gorst has also previously teased that taxing the profits of hundreds of Jersey-based companies at 15% from 2025 as part of an international deal will provide a financial shot in the arm for the island that could be worth in the high hundreds of millions – but no official estimate has been provided.

While this all might sound good, remember that the Government will also be feeling the pain of inflation (latest stats showed that during the 12 months to June 2023 the overall RPI for Jersey was 10.9%) – like us! Just as islanders will be budget-balancing to manage rises in the cost of food, fuel and the other services they consume, so too will Government.

What big ticket items do we need to spend on?

We've already been warned by Infrastructure Minister Tom Binet that the Government is having to look at doing things "a little less expensively", given that the island is in what he described as a "long-term period of difficulty" – and that means, potentially, fewer 'big ticket' capital items. That being said, there are still some essentials to sort.

We’ll give you three guesses… Oh, you got it in one.

The sickness in Health

Yep, our multi-site hospital project. We all know what needs to be done. A spade in the ground would be a start. The less said on that, the better. There's also repairs needed to the current premises, as a recent flood in one clinic demonstrated...

hospital-flood.jpg

On a Health-related note… it’s likely special attention will be paid to the department in this year’s budget. After all, last year it needed a £13.3m emergency bung to deal with "unavoidable pressures", partially due to missing a £6.5m savings target. Then earlier this year, holder of the purse strings Treasury Minister Ian Gorst made a firm public statement that it would have to live within its means this year and not ask for more money. 

Last year, Ministers had hoped to fund some of the shortfall by using the Health Insurance Fund – a pot of money ring-fenced to subsidise the cost of primary care – but States Members roundly rejected that proposalduring the last Government Plan debate. Chief Minister Kristina Moore described the rejection at the time as “a full-blown massive nosebleed”.

Think of the children?

Some areas of the island’s education estate are far past their best, as the recent rush to clear up the fire risks before the start of term showed, and making touch-ups where needed will no doubt figure in the plans.

Among projects seemingly growing dusty on Ministerial shelves since first being announced some years ago now are moving VCP students out of decades-old portacabins, a new premises for the Jersey Music Service, a Further Education campus. A therapeutic unit to avoid sending vulnerable young islanders off-island also remains on the ‘to-do’ list – last year, more than £3.5m was spent on this.

However, plans to develop a much-needed new town primary school (or two) are expected to be helped along with some funding.

Food for Fort

Fort Rotunda 1972.jpg

While we always live in hope that the Fort issue will finally be resolved, we’re unlikely to see any showstopping commitments on this front, after the Infrastructure Minister recently confirmed that the destiny of the beloved leisure spot may hinge on how much it will cost to repair its iconic, historic sweeping white roof and rotunda. 

A structural assessment of the leisure centre’s distinctive roof and dome has found them to be safe – but its cladding and rubberised skin is in need of repair in various places, and the cost of that is still being worked out.

Sustaining our struggling sewers

Back in May, we were told that £34m would need to be poured into the island’s sewerage network to avoid “catastrophic failure”.

In particular, the network of 109 sewage pumping stations and rising mains – which carry sewage under pressure – were found to be at “a critical point” because they were designed when the island’s population was a fraction of its current 103,000.

Upgrades are also needed to ensure that key affordable housing developments can go ahead.

Express reported earlier this year that plans to build 179 affordable homes in St. Peter had to be put on hold because the drains in the area cannot cope. Then it emerged in July that St. Ouen needed £1m to help it connect to the mains network to unblock another first-time buyer home development. <

What is it likely to look at?  

Easing cost-of-living pressure for islanders

money.jpg

Islanders are continuing to be battered by rising costs, with food the second largest contributor. Motoring, fuel and light also remain pinch points, even though escalation in prices has appeared to slow in these areas more recently.

As we saw with last year's mini-budget, the Gorstian school of economic thought tends to lean towards leaving more money in islanders' pockets, rather than giving to them directly, so we may see some playing with tax thresholds and allowances to help out.

Dealing with the housing crisis

While the latest figures indicate the housing market is slowing down, it remains a struggle for many islanders to get on the ladder. It's possible the Government could examine levers like stamp duty to help.

And while we're on the topic of making housing more affordable... We're still awaiting details of how £10m ring-fenced for this very purpose by John Le Fondré's team will translate into a tangible affordable home access scheme.

Where could spending be reined in?

Kristina Moore population.jpg

Government headcount remains an area of continual scrutiny, with staffing having ballooned by more than 1,000 people in the past five years.

Early on in her term, Chief Minister Kristina Moore told business leaders that the Government "cannot carry on recruiting more people".

Released last year, her Council of Ministers' first Government Plan pledged that focus would be put on delivering a 'Value for Money' regime, with all departments asked to make savings and/or find new revenue-raising masures – albeit not to the same ambitious extent as her Charlie Parker-driven predecessors.

So far, we haven't seen much in the way of detail of that programme – other than a suggestion from a senior civil servant that the hospital could look at monetising its laundry facilities. Perhaps that will change with the new Government Plan...

The Government Plan is due to be published late this afternoon. Follow Express for updates...

READ MORE...

IN NUMBERS: What's the budget plan for the next four years? (2022 plan)

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