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Jersey Chamber of Commerce

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Category: States of Jersey

Minister for Treasury & Resources Speech to Chamber of Commerce

Nov 10, 2022


Good afternoon, everyone. 

When I sat down with advisors to think about what I would like to say to you in this speech to grab the headlines, I reached the conclusion that success from here on would be to bore you with stability, affordability and sustainability, all virtues in short supply in today’s global economic environment. 

Instability and uncertainty are not good for business and equally are not good for economies or public finances. 

With all the threats in today’s geopolitical order, we all need an accountant to stand up and be counted!

That is not to say that I will shy away from difficult decisions, but that I will ensure at all times, we are asking ourselves how we add stability, enforce affordability and keep a keen eye on sustainability.

For those who want to understand the consequences of not having a plan that adds up and one that changes with each week, I invite you to go and reread the headlines in the UK national press over the last few weeks or look at the rise in mortgage rates 

over the same period.

Words, What's in a word? Previous Collins’ words of the year include lockdown, fake news, Brexit, binge-watch, photobomb and geek.

The world in which we live in today is of such volatility that Collins2022’s word of the year, is “Perma crisis” "an extended period of instability and insecurity, especially one resulting from a series of catastrophic events. 

The global economy has been under greater and more prolonged strain than at any time I can remember. The global pandemic, a major European war, and an increase in political flux away from historic international norms have led to instability and reduced market confidence in what comes next. 

In western Europe we have the added issue of Brexit and the fallout that continues today and will continue for some years to come.

Global growth is in decline and a global recession is now highly likely. Inflation is high across many national economies, often for different reasons and international interest rates are now once again rising from their historically low levels in most jurisdictions in an attempt to stem the tide.

With the UK soon to announce a new budget and the Bank of England increasing interest rates at each and every meeting, the only certainty we have is for more uncertainty in the world around us. 

The end of very low interest rates, high rises to the cost of living, accompanied by full employment is a set of circumstances that has stood some economic orthodoxy on its head.

But what it has not stood on its head is the reputation gained by Jersey over decades for prudence, stability, affordability and sustainability in the management of public finances, something that is often absent elsewhere.

Strong public finances do not happen by accident, and at their heart lies a strong economy that has proven resilient in the face of many challenges over the last few years and decades.

That long term strength in our economy and public finances has allowed the new government to hit the ground running with options to address the consequences of the crises that Islanders are currently facing.

Whilst government can sometimes seem to take a long time to consider and take stock and evaluate the options, we acted quickly and decisively to address the issue of rising prices, as indeed we did with the measures to support people and business during the pandemic. 

The Covid Review Panel concluded that support to business was bold, thoughtful and well rolled out. 

The Mini-Budget was a key priority in the Chief Minister’s 100-day plan. All but the highest 10% of earners will have received support with the greatest benefits arising for those on the lowest incomes. We put almost £15 million back into Islanders’ pockets this year and will return almost £42 million to them in 2023. Much of which will find its way into the tills of local businesses. 

That response to the cost-of-living crisis was delivered in a pragmatic, credible and in some ways understated manner working with colleagues across government to deliver a package of measures that has addressed the cost-of-living crisis on a timely basis, by putting money back into Islanders pockets rather than interfering with market forces. 

We delivered these measures in the mini budget, rather than waiting till the government plan, to ensure that money got into Islanders pockets quickly.

That means the tax elements of the Government Plan are absent this year, the headline grabbers being for measures of no change, in the form of freezing alcohol and road fuel duty.

The Mini – Budget was focused on helping households, but I am mindful of the needs of our businesses. I want to do more to foster innovation and enterprise in Jersey and I shall be working closely with Ministerial colleagues to prepare for a budget for innovation and enterprise in 2023. Innovation and enterprise mean different things to different people, and we will be engaging widely with Islanders and business groups such as chamber, to better understand your priorities for this important agenda. 

Turning to matters of international taxation, in October 2021, 

Jersey joined the international political consensus on OECD Pillars 1 & 2 alongside 136 other jurisdictions. The Government subsequently published a Tax Policy Reflections paper on the matter in April 2022 and this Reflections Paper has supported our industry engagement since – both in Jersey and beyond. This is a significant OECD tax reform project that is aimed at the largest multinational groups. 

Both this Government and the last have invested significant resources in ensuring that Jersey’s priorities are well represented at the OECD table in the development of the rules. We are also actively monitoring the implementation plans of other jurisdictions which is so important to any final decision that will be taken on implementation of Pillar 2 by Jersey. 

No final decision on Pillar 2 implementation has yet been made – that will be a decision for the States Assembly to take, probably in 2023. The outcome and timing of that decision will be guided by the actions of the critical mass of jurisdictions that impact inscope Jersey groups. 

Only yesterday the EU indicated that if the global consensus didn’t hold together, they would revert to an EU approach. And of course, the counting of votes state side which is occurring as I speak will have a direct bearing on that consensus

We continue to work in hand in hand with Isle of Man and Guernsey on this agenda, ensuring that we preserve our commitment to global tax standards and maintain our international tax competitiveness. Again, Jersey is an Island of stability. 

An area of particular concern is the high mortgage costs facing some Islanders. The good news is that many are sheltered from rising interest rates through having fixed rate deals. Whilst none of us would have wanted to see the rapid and destabilising rise in interest rates, it will be taking the heat out of the unsustainable runaway market. 

But that is of no comfort to those Islanders who are not sheltered from fixed rates and those who have had to borrow at high earnings multiples in recent times, just to get their foot on the housing ladder. 

Officers are in conversation with Island banks who have assured the Government that they will work with their customers to keep them in their homes wherever that is most appropriate and achievable. 

We will continue to monitor the situation and are considering the current phasing of the mortgage interest tax relief. 

On one specific tax issue, a number of you have already asked me where I stand on the zero-rate food and to do that quickly by adopting the UK’s VAT schedules lock, stock, and barrel. I remain opposed to departing from our policy of keeping GST (Goods 

and Services Tax) low (5%), broad (little by way of exception) and simple – to keep business costs low as well as Government’s administration costs. I stand by those longer-term tax policy principles. We always recognised that GST (Goods and Services Tax) on food needed to be offset for people and it has been offset ever since GST was introduced through increased tax allowances; increased income support; and through the GST Food Bonus which is now called the Community Cost Bonus. 

Whilst I understand and respect the motives of those that would propose this it would put more money into the pockets of well-off islanders then those on the lowest incomes. 

Furthermore, the complexity of administration for islands businesses and government means this measure adds to red tape but more fundamentally cannot be delivered on a timely basis to help islanders with the current cost of living crisis. 

We must shape policies which deliver a strong and sustainable economy and ensure that the benefits of economic success can be shared across our community.

As I said in my foreword to the Government Plan, Islanders are rightly concerned at the increase in borrowing that occurred under the last Government. We have committed to too much public debt, and we need to return to prudence and live within our means. We will start to pay down our debts beginning with those accrued during COVID, which can be fully repaid in 2022. 

Who would ever have thought that through the strength of the economy and careful financial management we would be free from Covid debt so soon.

Speaking to islanders during my election campaign housing remains a high priority for many people. I want to work in lockstep with the housing minister to commit to building more affordable housing and working with our ALO’s to identify new sites for development.

However, addressing these immediate challenges, should not divert our attention from the longer-term challenges, threats and opportunities Over the next four years, we will need to focus on the many challenges facing our community.

We must not lose sight of the issues arising from an ageing demographic, in particular the associated rising health costs; nor indeed the existential danger we face from climate change.

I share the UK Prime Ministers view that “there is no long-term prosperity without action on climate change".

These, along with financing the hospital, epitomise the importance of balancing affordability today with sustainability for future generations and the costs to the wellbeing and lives of those future generations if decisive action is not taken.

I will continue – as I have always done - to set a high bar for placing taxpayers’ money at risk, while ensuring that our short-term fiscal policy decisions continue to promote sustainable growth in the long-term. 

I turn to our plans for the next step in delivering a more affordable solution for fit for purpose health facilities.

The current Our Hospital plans for a single mega site overlooking the old hospital have not been without significant challenges and I pay credit to the team that delivered a plan that gave us planning permission and a way forward.

But, due to many contributing factors, in particular Covid, that plan didn’t form quickly enough, and the world has moved on. 

The supply chain issues became insurmountable in the face of the consequences of the conflict in the Ukraine and the associated hyperinflation in materials required has pushed the cost of delivery to an eye watering level.

As a single site, it would require us to commit to putting all the eggs, the chickens and the farm in the same basket. Don’t start a project that you don’t know that you can finish or pay for in today economic climate. 

The new plan, if supported by the States Assembly, would give us more flexibility and resilience. We can proceed on a phase at a time and use long term debt only where necessary and at atime when markets are more favourable. 

I am determined that we only proceed with each phase when we know that we are well on the way to delivering the previous one, so that local resources can be used and local companies see the benefit, But critically, I will also support each phase when I know we can afford it, and will relentlessly be looking for income above forecast and unspent sums on other projects, to reduce the level of debt we take on.

Future Islanders will see the benefits of improved healthcare, but it is important that they can afford to pay for it also.

In the last hour the Jersey Fiscal Policy Pannel has released its 2022 Annual Report. 

Dame Kate Barker, the Panel’s Chair, said: “Whilst the global macroeconomic outlook has worsened, Jersey’s economy is in a good position to weather global shocks.”

For decades Jersey has been resilient, we have run our public finances carefully, balancing budgets over the economic cycles, acted affordably and sustainably. 

I commit to continuing in that tradition, call it boring if you like, but by continuing on this tach we can be confident of supporting a strong and growing economy, which in turn will deliver a positive future for us all.

Minister for Treasury & Resources, Deputy Ian Gorst

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