30 January 2015
The Fiscal Policy Panel (FPP) has published a report to assist the States in developing the next Medium Term Financial Plan (MTFP), which will be lodged in June 2015. This is the first report of its type to inform the development of the MTFP. The Panel have assessed the issues and uncertainties involved in understanding the trend rate of growth of the Jersey economy and the amounts of spare capacity in the economy.
Commenting on the report FPP Chairman Joly Dixon said “Our analysis suggests that there is a significant risk of a structural deficit although its size will depend on the decisions made for the next MTFP. It is important that the States in developing the next MTFP decide on the timing of measures to address any structural deficit while taking account of the economy’s performance.
"Care should also be taken to ensure that the range and timing of the measures proposed minimises the risk to the economic recovery, which, in the early stages, may involve using the States’ reserves.”
Commenting on the economic outlook Mr Dixon said “The Panel have seen some signs of a moderate improvement in Jersey’s economy and expect 2014 to have seen a return to growth for the first time in six years. Looking further ahead, the economy is expected to continue to grow modestly over the next few years as spare capacity is used up.”
Advice and recommendations
In their report the Panel have highlighted additional advice and recommendations, including:
- the Panel’s economic assumptions should be used to update the revenue and expenditure forecasts, and the expected position of the States’ finances in 2018/2019. This will give guidance on the expected underlying structural position
- once Jersey is on a sound path to structural fiscal balance, the States should aim to balance its tax revenues and current expenditure over the economic cycle, including an appropriate allowance for depreciation
- new public sector capital expenditure should be treated separately based on its economic costs and benefits, and its impact on the States’ net asset position. Financing issues should not be a reason to delay or postpone important investments, particularly those which support productivity improvements and competitiveness
- the States should develop a strategy for managing the fiscal consequences of an ageing population
- the States should act now and develop a clear strategy for raising productivity (in both the public and private sectors) and competitiveness in the Jersey economy