02 November 2005
Jersey’s Finance and Economics Committee has presented the Island ’s Budget for 2006 to the States.
It is an upbeat Budget, produced against the background of a return to economic growth, rising employment and clear signs that Jersey’s inflation rate is under control.
To ensure that the public sector supports this trend and to maintain the reduction in the cost of living in Jersey, the Committee promises that there will be no let-up in its determination to cut public spending.
The Committee also demonstrates its concern for supporting the new-found buoyancy in the economy by proposing a delay of one year in phasing out tax allowances for higher earners – the so-called ‘20% means 20%’ - agreed by the States last June.
F&E President Senator Terry Le Sueur said: ‘This is the most positive situation that Jersey has faced for years. The strategic decisions made by the States in the last 18 months are returning confidence to Jersey – we are seeing this in statistical evidence and we are hearing it from those who provide jobs for local people.’
‘This enables us to slightly alter the pace of fiscal change. Our consultations with individuals and interest groups has indicated that if we were to introduce the Income Tax Instalment System at the same time as phasing out allowances, there could be undesirable consequences for some individuals and possibly for the economy as a whole. There are clear signs that the economy is performing better and this means we have sufficient confidence to delay the introduction of this element of our fiscal strategy for one year. This does not mean that we are changing our minds. We still believe that people on high incomes should be asked to pay the full rate of 20% income tax; this is still a vital component of a progressive tax package.’
Senator Le Sueur made it clear that the improving economic situation would not be permitted to slacken the States resolve to rein in its spending. ‘For the first time, we have met the States’ inflation target. But there is no room for complacency and the States must keep its own expenditure under tight control and not spend more than its income. I am delighted to have overwhelming support of the States for further reducing expenditure for the period 2006 to 2010.Although the spending targets are challenging I believe they can be achieved if we are ruthless in driving out waste and inefficiency.’
A sombre note in this year’s budget is the small increase in the deficit predicted for 2006. It is £8 million, and is caused mainly by the decline in revenues from company tax and impôts duties. Senator Le Sueur said: ‘This decline in revenue from our traditional sources of tax demonstrates why new sources of taxation are needed to fund our essential services such as health, education, and social benefits.’