Scene set for further opening of public and corporate pockets
THE softening up process has well and truly begun.
When a government is so keen to emphasise how little it is collecting in revenue through taxes, charges and contributions compared with the size of the economy, and other jurisdictions, it does not take a genius to work out what will happen next.
The narrative in this Budget is very much about cost pressures from an ageing demographic coming through much quicker than was expected and that something will need to be done to meet this challenge.
What that something won’t be is any more major savings – and if you weave your way through the promises that this Assembly made at the start of this term to where we are now on that front, the stress on the States doing its part to ensure the public has to pay no more than it should, you would be rightly disappointed.
It is not an easy thread to navigate.
From one Budget to the next anticipated savings that haven’t been delivered are carried over, bumped down the line, some even reappear again, have been banked but never actually delivered – take a bow, Home Affairs, on that one.
Try to unravel, too, the pledges of spend to save – that X amount needed to be spent this year, but not to worry, because Y amount will be saved five years down the line. Do that often enough and not only does it become unfathomable what has been spent where, it is easy to forget how much was meant to be saved in the first place.
The big picture is that this States voted through a strategy to save £18.8m. between 2018 and 2020.
It will come up £7.1m. short of that.
No word on the £7.3m. that was meant to be saved in 2021.
And these were to be recurring savings. The Medium Term Financial Plan, as it is known, agreed to £26.1m. in savings from reforming public services, to be allied with £14m. extra coming in through revenue raising.
The States has failed to live up to its side of the deal here – in what should be a humbling moment, it has to vote on a proposal that the £26.1m. of savings projected in the MTFP will not be fully realised by the end of 2021.
It is against that background that a tax-and-spend debate will happen in January.
If you think this is deja vu, it is because it is.
This Assembly never resolved the island’s narrow tax base, shunting that unpopular decision down the line, and nor will it countenance any real debate on cutting services to suit its income stream.
The government collects about £700m. in revenues, 21% of GDP, each year.
About 63% of this is from individual tax and contributions related to income.
This Budget makes a point of saying that Jersey collects revenues equal to 26% of its GDP, the UK 38% and France 53%.
It is not doing this for academic enlightenment, but to set the scene for opening public and corporation pockets further.
The States is developing big policies beyond what it is already doing that will come at a significant cost, making sure enough funding is available to care for people into their old age, funding new drug treatments and introducing a secondary pension scheme.
All decisions made in isolation, all of which seem desirable, all unfunded.
‘The potential cumulative financial effect of these measures is large and cannot be met from existing resources. Therefore, there is a requirement for the States to carefully consider the level of public services which is affordable and realistic,’ the P&R president says in his Budget introduction.
He stresses that the existing tax base remains ‘exceptionally narrow’ and so the options for raising substantial additional funding within the current structure are very limited.
So in January P&R will submit its revised review of the fiscal policy framework, which sets out States spending rules.
This will include States long-term revenue raising limits – expect it to give itself much more spending leeway – and proposals for a fresh review of corporate taxes and the options for introducing new taxes – including a ring-fenced health tax and consumption taxes – so we are headed straight for another GST debate. And that needs to happen.
But given the savings background, this States has a long way to go to persuade islanders and businesses that they should be taking more and more of the burden here.
This is a public whose perception is very much that they are forever paying more for public services and some of it entirely unnecessarily.
States members might not like it, but if they talk of new taxes, those paying them will quickly remember the extra costs that have already been put on them recently, whether fairly or not, for example with charges for the waste strategy.
There is a long way to go in winning hearts and minds – indeed, the States was probably in a better position when it last chewed over the tax base issue, having shown through the financial transformation programme what it was, and was not, doing.
These are volatile times and the only way new taxes become tolerated is if their need is clearly identified, a line drawn between what is collected, why, where it is going and, eventually, what constitutes success.