Income tax receipts this year from the entire island workforce are £35m. lower than originally estimated, and there are signals that the finance sector is being impacted.
States Treasurer Bethan Haines said that no industry was immune from the pandemic.
‘The latest renumeration data shows signs of stress in the finance sector and this has been built into our income forecast.’
Deputy Mark Helyar, the lead on treasury at Policy & Resources, was also concerned about the statistics.
‘A fall in tax revenues from finance sector jobs is a worry. We are seeing signs that the tax take from that particular sector has slowed. It’s too early to say, because of the way the data is collected, whether that is due primarily to reconstruction and cutting of jobs or whether it’s due to, for example, profit shares being restricted or to bonus pools being stopped.’
In 2019, the island’s finance sector was by far the largest component of GVA, which is a measure of economic output.
It made up 40% of GVA, and almost quadrupled the value of the next most important sector, which was professional, business, scientific and technical activities.
On 30 June this year the finance sector employed 5,987 islanders, but data compiled by the States shows growing declines in the number of people employed by the finance sector for the last successive four quarters.
Over April, May and June this year, which covered the first wave of the pandemic, there was a 4.9% reduction in the finance sector workforce.
Other States data also supports the suggestion that the local finance sector has been in contraction for the past two years.
A measurement called ‘factor income per worker’ has been dropping. The figures underline the importance of the review of the island’s tax base, which has been described as a ‘key priority’ by the new Policy & Resources.
The island’s spending list is long, and Deputy Peter Ferbrache, the committee president, said it was impossible to ‘squeeze any more juice from the lemon’.
Covid-19 means a black hole in the States coffers is estimated to reach £59m. this year and £23m. next year.
The new committee largely inherited the Budget from their predecessors, but they did add their own stamp by cutting back on the level of proposed tax increases.
The usual rises in petrol, alcohol, cigarettes and property taxes had been planned, but they were cut back to be in line with inflation at 1.5%.
There was also a potential turning on of the spending taps with regards to capital projects, the new P&R wants construction to be a catalyst for economic growth.