The 2014 Budget, published today (8 October 2013), proposes a series of measures that form a package designed to support the Council of Ministers’ aims of creating jobs, improving health and providing more and better housing for Islanders.
The Minister for Treasury and Resources, Senator Philip Ozouf, commented:
“This is a Budget that cuts taxes, invests in essential infrastructure for the long-term benefit of the Island and gives something back to the hardworking people of Jersey, who have carried on through difficult economic times. It is a Budget that supports the Island’s needs for economic growth, job creation, better education and better healthcare.”
Tax Cuts to Support Growth
The 2014 Budget proposes three bold measures:
- A reduction in the marginal rate of tax, which reduces the tax liability of approximately 84% of the taxpaying population (around 40,000 households). This leaves £7.8 million in the pockets of taxpayers to spend as they wish in the local economy.
- An increase in the income tax exemption thresholds, which reduces income tax for approximately 84% of Jersey taxpayers and leaves £2.5 million in the pockets of taxpayers.
- An enhanced tax allowance for parents in the marginal tax band who have children in higher education, from £6000 to £9,000 per child, providing a benefit of up to £780 per child. This benefits more than 1,000 families and leaves £900,000 in the pockets of lower and middle income families.
Senator Ozouf, added:
“This is a Budget that provides direct financial relief to taxpaying islanders, and helps to get money back into the economy.”
Funding for Long-Term Infrastructure
In line with the recommendations of the Fiscal Policy Panel, the 2014 Budget also proposes funding for a significant Capital Programme, including investment in three major projects that are essential for the Island’s long-term infrastructure needs:
1. Funding to resolve the Island’s Housing requirements for the next 15 years, to enable Jersey to meet the Decent Home Standards.
2. Funding for significant improvements to Hospital Services and Facilities.
3. A budget for Funding of the development of a strategy to solve the Liquid Waste requirements.
The funding strategies proposed for each project are as follows.
It is proposed that Jersey’s strong balance sheet is used to borrow funds for the longer term at record low rates of interest. This borrowing will be used to fund new housing and to refurbish and improve the stock to meet “decent homes standards”. The debt will be repaid from the rental stream.
It is proposed that investment returns from the Strategic Reserve, be used to fund the estimated cost of £297 million for the Hospital scheme. In the last 3 years, following a change in the investment strategy for the Strategic Reserve Fund, the Fund has increased from £550 million to £720 million. Even if investment returns are a more modest %5 a year, the cost of the new hospital facilities can be fully met and the value of the Reserve will still increase. This delivers a new hospital, fully funded, with no debt and no tax increases. Through investment returns on the Strategic Reserve Fund gained over the 10 years, the Hospital project would be fully paid for by the time it is completed, meaning there will be no new cost to the taxpayer and no debt for future generations.
It is proposed that the Liquid Waste project will be funded without any new cost to the by:
1. Targeting the existing rolling capital vote (£12m);
2. Allocating funds within the traditional main capital programme (£34m); and
3. Investment from the Currency Fund allocation to infrastructure (£29m).
This funding route provides an affordable option for Transport and Technical Services (TTS), with new infrastructure, which is more energy efficient and cheaper to run, while ensuring there is no external debt.
TTS will repay the Currency Fund from existing resources and operational cost savings generated by the new infrastructure, reducing the borrowing cost and risk.
The Assistant Treasury Minister, Deputy Eddie Noel, said:
“The Island faces a need for major infrastructure investment in housing, hospital facilities and liquid waste infrastructure. This Budget brings forward cost effective ways of funding these projects that will minimise the cost, maximise the use of existing resources and safeguard our Island for the long term.”
The 2014 Budget is due to be debated by the States on 3 December 2013.
Category: Finance & Business