Senator Maclean addressed a packed Chamber Lunch.

Friday 20 November 08:59

If you weren’t able to attend, read his speech here …..

Good Afternoon

  • Before I move on to talk about the future – our challenges and opportunities I’d like to take a moment to reflect on the atrocities in Paris almost a week ago
  • We are still reeling from the shock of the worst terrorist attack in Europe for a decade.
  • Our thoughts are with the friends and families of all those affected - 129 innocent people brutally gunned down by callous murderers.
  • Terrorists who thought they could destroy everything we stand for.
  • They could not have been more wrong.
  • An attack on France is an attack on the values we share - freedom, democracy, tolerance
  • Jersey has shown solidarity with our neighbours across the Channel
  • And we will continue to stand together to uphold the values we hold dear
  • How lucky we are to live in such a safe and beautiful Island – whatever challenges we face the traffic events in France put them into stark perspective

 

  • This COM is almost exactly a year into its term….it sometimes seems much longer!
  • I was appointed Economic Development Minister in 2008 at the onset of the global financial crisis and remember thinking it might not have been the best of timing!
  • When I arrived at Treasury last Nov there may not have been a letter awaiting me but I quickly got a similar feeling
  • What I was determined to do was set out a clear path to sustainable public finances
  • I wanted long term solutions not short term fixes
  • It meant dealing with some difficult issues and tackling a number of items in the  ‘too difficult to handle’ box
  • That’s why we arrived at a potential £145m recurring deficit by 2019 -  it caused some disbelief and much on-going debate
  • We could have taken the easy option and carried on as we were pushing the problem to the next generation
  • Let me be clear the £145m is only a ‘potential’ deficit
  • I say that because a significant portion, £63m, is investment in new and improved services
  • In addition we chose to recognise future expenditure and liabilities
  • For example a further £50m of the £145m is depreciation where for the first time we clearly recognise and prepare for future capital expenditure as assets wear out and need replacing
  • It’s a prudent, sensible and realistic approach – it’s about long term planning
  • It’s certainly not the disaster that some would like to paint it
  • Having identified the full extent of the funding required together with a prudent income forecast reflecting ongoing global uncertainty we developed the MTFP
  • Next June we will publish the ‘addition’ covering 2017-19 with all the efficiency and savings details
  • It’s a realistic plan that aims to return us to balanced budgets by 2019
  • But make no mistake the delivery is going to be challenging and will take political determination and courage to see it through - but see it through we will
  • Reform or modernisation of the public sector is at the very heart of the MTFP and is going to have to move at a scale and pace not previously envisaged– I’ll come back to that in a moment
  • Today I’m talking about the future our future and of course investment is critical to a successful future
  • Government has a key role in enabling investment and in certain circumstances ensuring the delivery of essential infrastructure

Waterfront development

  • So let me move onto a topic that gets some islanders very agitated
  • The building of offices on the waterfront or as it’s known….
  • The Jersey International Finance Centre
  • Let me remind you of some of the facts -
  • The States Assembly voted to establish a wholly State owned development company
  • To be clear this is not a bunch of civil servants having a bash at property development!
  • The Jersey Development Company was set up and resourced with property professionals to act on behalf of government to extract greater value from public assets
  • The board has extensive experience one, a Jersey resident, spent more than 40 years in the UK market and became chairman of the Berkeley Group, one of the UK’s largest developers
  • But why did the States agree to set up a development company?
  • A number of reasons: firstly, to deliver quality office space and infrastructure that wasn’t or couldn’t be delivered particularly in the depths of recession by the private sector
  • It was a counter cyclical investment to support the construction industry and ensure we were in the strongest possible position to benefit from the economic recovery with quality office space as multi-jurisdictional businesses started to expand, as others looked to consolidate into fewer jurisdictions and to capture new inward investment
  • We wanted to maximise the value of the land owned by the public of Jersey
  • We wanted to do this so that we could invest more in regenerating St Helier
  • We wanted better control over what our land is used for and the quality of what is built
  • Generous amounts of open space for community use are included -  more than 50% of the site
  • No private developer could afford to include such community space
  • Jersey is not the only government to use this model
  • The UK has an equivalent development company - called The Crown Estate.
  • All its profits are paid to the UK Treasury each year.
  • The Crown Estate has property worth £11.5bn and in 2014 delivered revenue profit to HM Treasury of £267million
  • JDC holds on behalf of the public land and investments that are currently valued at £54m
  • It has been paying a dividend to Treasury which this year will be £1m
  • No taxpayers’ money is being used to build the offices - JDC is borrowing from banks, like any other developer.
  • Those banks have done thorough, independent checks on the viability of the projects before lending.
  • To mitigate risk legally binding agreements for enough pre-lets to cover the cost of construction are a requirement agreed by the States Assembly……..
  • There have been three recent independent valuations commissioned by the bank funding the development, The Treasury and the Corporate Services Scrutiny Panel (using EY) and ALL concluded the first building will make a profit
  • The EY report commissioned by Scrutiny assumed lower rental figures and weaker yield than the bank’s report - but it still said that the current building under construction will make in excess of £3m profit.
  • That’s if its sold on completion
  • The JDC strategy is different it aims to sell 3 years after completion at the first review where they estimate a £7.5m profit
  • The project will continue to be updated as it progresses

MTFP/Budget

  • Turning to the Budget 2016 – due to be debated on 15th December
  • My interpretation of the last issue of Chamber Online is that your president came close to approving it!
  • Well, as close as any Chamber member can get to public approval for a budget
  • Kristina said that ‘on the face of it, there appears to be some stability for businesses which are operating within tight margins’
  • I’m glad this has been noted
  • I see Budget 2016 as a set of proposals that demonstrate longer term thinking
  • We are proposing to introduce new measures over a number of years, with no sudden changes to the tax system
  • At the heart of the budget is the principals contained within the long term tax policy namely that tax should be ‘low, broad, simple and fair’
  • It goes without saying that our tax system must also ensure we are internationally competitive.
  • On a few specific measures – we are proposing to phase out mortgage interest tax relief
  • The process started in 2004 when it was capped at £300,000 and in 2014 with an interest cap
  • We are avoiding any sudden changes by starting the final stage in 2017 and completing it slowly over a 10 year period – as the UK did and Guernsey are also doing
  • To support first time buyers we are reducing stamp duty on properties up to £450,000
  • The enhanced tax thresholds for older people will be maintained at current levels -  until the thresholds for the under-65s catch up over a period
  • Again senior citizens will receive other benefits as we invest more in health services especially care in the community
  • This budget is designed to raise modest amounts of revenue but nevertheless that will give us added flexibility over the MTFP
  • Budget 2016 raises £1.8m and by 2019 that translates into £7.5m
  • If our income forecasts hold up, this extra revenue will act as a safety net
  • We will use it to reduce the impact of planned charges, like the health and sewage charges
  • We are also toughening up and making sure that people pay the tax that is due
  • The new comptroller of taxes is redesigning the administration of tax collection
  • We have £9million for a new tax I.T. system
  • And we will be introducing self-assessment and online filing of tax returns
  • Our Medium Term Financial Plan and Budget 2016 will support the economy in the short term –  a clear recommendation of the Fiscal Policy Panel
  • By balancing the books at the right time we are providing the financial stability that both individuals and businesses need to thrive
  • We now need to work on our productivity and competitiveness – both areas have been the subject of separate reviews
  • Professor Sir John Vickers acted as an adviser on an independent review of our competition and regulatory framework.
  • He said it is just as important for markets in a small island economy to work well as it is for markets in larger economies.
  • He added that, to achieve this we should recognise that competition policy is not just the task of the competition authority but also that of Government.
  • He also observed that, while it is hard to conduct competition and regulatory policy well and that there are particular challenges in a small jurisdiction, the economic benefits can be substantial.
  • The report has set out 23 recommendations that require changes in legislation, can be implemented by the JCRA itself or require involvement from the Government.
  • Senator Ozouf’s team is now working with the JCRA to develop an action plan and implement the report’s recommendations
  • I’ve already mentioned the importance of public sector reform to the delivery of the MTFP – to give you some more details:
  • We are redesigning services to remove duplication and improve efficiency
  • We are analysing the services  that government should be delivering and considering those that could be delivered in a different or better way including outsourcing
  • We are reviewing staff salaries to ensure that they fairly reflect the jobs people are doing
  • We are also simplifying policies and have reduced them  down from 70 to 31
  • We are cutting costs through voluntary redundancy, close management of vacancies and pay restraint
  • We have reduced the headcount by 120 so far this year with 45 more to go by the end of December at a saving of £7.7m
  • We need to accelerate office consolidation and improve space utilisation
  • Jersey Property Holdings used to occupy 10,523 sq ft – we’ve reduced it down to 5,300
  • Customs occupied 12,200 sq ft which has been reduced by 3,000 sq ft
  • Home Affairs have relocated into CLEM freeing up their old offices at 23 Hill St
  • Government is getting smaller and more efficient but the pace of change needs to accelerate and it will
  • Our move towards great efficiency is being supported by e-government
  • It aims to put more of our services online
  • We are building a platform that will eliminate duplication, maximise our use of data, and allow teams across the States to work together with minimum fuss and maximum efficiency.
  • There are already many examples of this in action:
  • the Planning Department has created an easier online applications process
  • some Social Security contributions have moved online with more to follow
  • the Health Department is combatting non-attendance by moving its breast-screening appointments online
  • A redesign of the government website has made it easier for mobile and tablet users and people with disabilities to access our services.
  • We are accelerating this investment in e-Gov, so we can move more and more services online, cut costs and continue these real, measurable efficiencies across all departments.
  • So how is the future looking?
  • The MTFP proposes significant new investment in infrastructure, health and education
  • £96 million of extra funding for health and social services over the next 4 years – including key areas like children’s services and mental health
  • An extra £27million for education
  • £168 million for capital projects
  • And £20 million set aside for specific projects to be identified to boost economic growth and productivity
  • We are supporting the economy while it’s still recovering 
  • Recent statistics show our support to date is working
  • Staying visitors are up
  • Retail Sales are up on an annual basis by 2%
  • Employment is up
  • Unemployment is down
  • Financial services are growing – total net profit went up by 25% from 2013 to 2014
  • And we saw 5% economic growth in 2014 and almost all business surveys are more positive than since the downturn began
  • There are still uncertainties in the world economy – and no-one knows what the next economic crisis to hit our world will be, or when it will come.
  • That’s why we have also maintained the £14m of growth funding from the last MTFP to support BTW schemes and the economy
  • People talk emotively  about cuts, about deficits, about black holes and about austerity
  • I don’t call the investment that I’ve outlined contained within the MTFP as austerity!
  • Although we are cutting spending in some areas – we are spending more on our priorities
  • So we can ensure that the services people need and value are maintained and improved
  • So we can continue to support the vulnerable in a more targeted way through our benefits system
  • The action we are taking – through the MTFP and the budget – will avoid a deficit … as long as we make the agreed savings, maximise our use of technology and restructure our services to make them more efficient
  • If we do this – and I am determined that we will – our books will balance by 2019
  • How many other jurisdictions can say that?
  • Targeted investment - built on reform, restructuring and achievable savings.
  • Delivering economic security, opportunity to all and a positive future
  • Thank you

Treasury Minister – Senator Alan Maclean

Chamber Lunch – November 19th 2015 

 

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