How has replacing the Housing Department with Andium Homes benefitted the public?

Replacing the Housing Department with the independent and wholly-owned States company, Andium Homes, has benefitted the public by providing a more efficient and flexible organisation that is focused exclusively on meeting the housing needs of Jersey residents.

Since Andium Homes was established in July 2014, the company has invested in the refurbishment of existing homes as well as building new affordable housing for rent and purchase. Andium Homes built nearly 100 new homes in 2015 and it aims to deliver more than 1000 affordable homes over the next 5 years. 300 affordable homes a year will be sold to first time buyers who need help getting onto the property ladder.

One of the biggest challenges that faced the former Housing Department was the backlog in maintenance of existing homes. Now, with loan funding provided through a housing bond issued by the States, Andium Homes is able to refurbish existing homes to ensure they will all achieve the Decent Homes Standard by 2020 - 4 years earlier than originally planned. These loans are repaid with interest, in addition to the annual return.

Establishing Andium Homes has also enabled better client engagement and more online services such as Choice Based Lettings. The companies opening hours are longer, enabling clients to access services on Saturdays and a new IT system will soon offer clients online services 24/7.

Older clients benefit from a dedicated support service to ensure they can live safely in their homes for longer, and an independent living service helps those with complex needs by providing support to maintain independent lives.

The public also benefits from an annual £27.5 million return to the Treasury, which is used to fund essential public services. Over the coming years, Andium Homes will meet objectives set by the Minister for Housing in the Jersey Housing Strategy, these include extra care requirements to support Jersey's ageing population and clients with medical conditions and disabilities, and providing homes for key workers such as nurses.

Why has the Government transferred £10m from the Long Term Care Fund to the Common Investment Fund?

£10 million of the cash balance in the Long Term Care (LTC) Fund is not expected to be required to meet operational needs over the next few years. This has been invested through the Common Investment Fund to generate more income for the Long Term Care Fund than would otherwise be achieved if it was held in cash.

Is the Health Charge really a progressive tax given it’s capped?”

The health charge is being proposed in order to meet the rising costs of health and social care. Spending on health care is generally considered to be progressive. Assessing the distributional impacts of an increase in health expenditure is complex but the Institute for Fiscal Studies conclude:

“……..the largest item of public spending in kind, health, also benefits most strongly lower income groups in which ill health is most strongly concentrated.”

The distributional analysis of the Medium Term Financial Plan (MTFP) found that a 1% income based charge, mirroring the Long Term Care (LTC) charge, would be broadly progressive across the whole income distribution but would have the following distributional impacts between different parts of the distribution:

  • there would be no impact on those people with incomes below the exemption limits (30% of islanders)
  • for those on the marginal tax rate the effective rate would gradually rise to 1% as income rises (progressive for these income levels)
  • for those on the standard rate of 20% the effective rate would be 1% for all incomes, below the cap. (Proportional for these income levels)
  • for those on the standard rate and above the £162k cap used for the LTC contribution the effective rate would gradually fall as a proportion of income as income rises (regressive for these income levels).

If GST were used rather than a Long Term Care type charge, the impact would be different. GST is considered to be mildly regressive, mainly due to the effect on those households on the lowest incomes, which spend a larger proportion of their income on essential items such as food and domestic energy. Those on higher incomes tend to save more and GST therefore represents a lower proportion of income/expenditure because they do not spend all their income in any one year.

You can read the full distributional analysis of the financial plan here – http://www.statesassembly.gov.je/AssemblyPropositions/2016/P.68- 2016Add(2).pdf?_ga=1.54457832.1950764748.1460451859

Why don’t you tax high earners and/or corporations more rather than middle earners?

Jersey adopted the 0/10 corporate tax regime to support its economy. The zero rate was necessary for Jersey to remain attractive as an international finance centre. As a result the number of people employed by the finance industry is now the same as it was at the start of the financial crisis in 2007/8 and the taxing of their incomes at 20% is making a very important contribution to Jersey’s tax revenues . 

Taxing financial institutions at 10% has also been necessary to stay competitive - all the more so with the U.K now considering reducing its corporate tax rate to 15%.  
Jersey's financial services expertise has become the key driver of economic growth in our island. Investing in this industry is essential for safeguarding the jobs and growth it creates.  After 8 years of global financial turmoil, Jersey has retained a buoyant financial services industry, which now employs 12,600 people and makes up 42% of economic activity. Its performance continues to have an important impact on the rest of the economy. 

You can find out more here - 

Alternative business taxation regimes were considered as part of a review in 2012. The resulting report summarised 0/10, the alternative options considered and the risks they pose.

This is a time for stability not for changes in a tax structure that has kept Jersey in a good position in attracting business and maintaining employment, in contrast to the experience of other economies.
The Island’s financial services sector needs stability and certainty in order to thrive and government will not make changes to the business tax regime that could jeopardise its internationally compliant status.
The top 20% of taxpayers pay 60% of total income tax received. The bottom 60% pay 20% of total income tax. And 30% of households are below the threshold and do not pay any income tax.http://www.gov.je/Government/JerseyWorld/StatisticsUnit/BusinessEconomy/Pages/index.aspx

What progress has been made on reducing spending in the public sector?

We have already begun the process of saving. Since November 2011, through the Comprehensive Spending Review, successive budgets and public sector reform £85 million has been taken out of department budgets; £38 million of that in 2016.

From 2016-2019 we will make £73 million of savings and efficiencies.

Will the Christmas bonus for pensioners on low incomes take account of savings? Will the threshold be the same as for pensioners’ tax allowance?

If the proposed Christmas bonus is approved by the States, the plan is that pensioners will be able to apply if they:

  • Are ordinarily resident in Jersey
  • Are 65 or over
  • Do not pay Income Tax because their income level is below relevant tax limits
  • Have capital assets less than £30,000
  • Receive either a Jersey Old Age Pension or have Entitled status

Capital assets do not include your own home or personal possessions under £10,000 but do include:

  • Other properties you own
  • Savings and investments
  • Pension bonds
  • Items of value such as jewellery and paintings

How does this health charge work? I’m taxed on the marginal rate rather than 20%...

The health charge provides a contribution towards the rising costs of drugs and other treatments as our population ages and as health care becomes ever more complex.

The charge is based on income, like the Long Term Care charge, and is being introduced in 2018 with a standard rate of 0.5%, rising to 1% in 2019.

If your effective income tax rate is less than 20%, your effective health charge rate will be less than that. As an example, if your effective income tax rate is 14% in 2019 you will pay 0.7% of your income in health charge, rather than 1%.

This contribution will ensure we can fund complex new health technology, drugs and treatments to keep islanders healthy. As our population ages we will need to spend more on helping people to stay well, and more on the early years of life which are important to lifelong health and well-being. We are also investing more in mental health services as a person’s quality of life is about more than their physical health.

I pay for private health insurance so why should I contribute towards the health charge?

As tax payers and citizens we are all responsible for contributing towards the cost of services that benefit the population as a whole.  Everyone who can afford to do so pays taxes that fund local schools, even if they don’t have children.  The health charge will be paid by people who never need hospital treatment as well as by those who need to have a major operation and complex ongoing treatment. The health charge is income based so those with higher incomes are expected to make a contribution. Our impact analysis shows that this charge is a progressive step as the income it generates would be spent on health services. While spending on health and social services is generally considered to benefit all, the Institute for Fiscal Studies concludes that it most benefits lower income groups as that is where ill health is concentrated.

Individuals are free to decide to buy private health care but everyone still has access to the health services funded through the health charge and through the general tax revenues that fund health costs.

Why is the health charge being capped at £162,000?

The health charge has been established using the same criteria as for the Long Term Care charge.

It is based on income, paid by those who pay income tax, and capped at the upper earnings limit for Social Security contributions of £162,000.

This means all standard rate taxpayers would pay 0.5% of their income in the first year and 1% in the second. If your effective tax rate is less than 20% you would pay a smaller percentage than that.

People earning more than the upper earnings limit would pay 0.5% (then 1%) of their income up to £162,000.

Why do we still have zero-ten when it is part of the problem?

A rate of zero was necessary for Jersey to remain attractive as an international finance centre. As a result the number of islanders employed by the finance industry is now the same as at the start of the financial crisis in 2007/8 and the taxing of their incomes at 20% is making a very important contribution to our tax revenues.

Taxing financial institutions at 10% has also been necessary to stay competitive - all the more so with the U.K now proposing to reduce its corporate tax rate to 15%.

The main impact on bank profits has come from the very low interest rates.

This is a time for stability, not for changes in a tax structure that has kept Jersey in a good position to attract business and maintain employment, in contrast to the experience of other economies.

Is the health charge to pay for the new hospital?

No. the health charge will fund complex new health technology, drugs & treatments to keep islanders healthy as the population ages.

A funding solution for the new hospital has not yet been decided. The Treasury Minister has said it is likely to come from a combination of methods - which could include the use of reserves, selling assets, issuing a bond and introducing a charge to pay back the bond over a period of years.

Why do the States want to invest in more office space?

The States of Jersey Development Company is building Grade A office space to meet the demands of expanding businesses in Jersey and to help attract inward investment to the Island. Additional office space is needed in St Helier to answer the needs of businesses and to free up older offices that are no longer fit for purpose. Once these older offices are free to develop we will encourage their re-use or redevelopment into new uses, such as the provision of new homes and shops, to support the regeneration of St. Helier. This is something that has already begun in some areas of St Helier, for example office conversions have already taking place on the corner of Grenville Street and Colomberie, where there is a Co-op store with apartments above in a former office building, and also at the corner of Philips Street and Bath Street, where a former bank building now provides urban apartments.

Why are we planning all of this spending when Jersey is in a financial ‘black hole’?

This investment is already accounted for and is part of the Medium Term Financial Plan, which invests in priority services like health, education, St Helier and our essential infrastructure.

The States of Jersey issued a bond of £250m to fund new and improved social housing - delivered by Andium. This work is already underway, as they explain in their annual report which you can read here - http://www.andiumhomes.je/publications/Documents/Annual%20Report%202015%2012.06.16.pdf

The States of Jersey Development Company is funding the building of grade A office space to meet the demands of expanding businesses and to help attract inward investment.

How are the States of Jersey preparing for internal and external economic changes following the result of the UK referendum?

Jersey’s Government believes that Jersey’s best interests lie in preserving the substance of the current relationship with the EU (as set out in Protocol 3 of the UK Treaty of Accession), and of Jersey’s relationship with the United Kingdom.

Immediately after the result of the UK referendum the Treasury Minister asked Jersey’s independent economic advisers, the Fiscal Policy Panel (FPP), to assess the impact that Britain leaving the EU would have on Jersey. The FPP produced a report which stated that the sensible approach at this stage is to not make ad hoc changes to the MTFP until we have a clearer indiction of how our economy is being affected. This will allow us to support the Island’s economy in the short term and balance the books by 2018/19.

However, the government acknowledges that the Island is likely to be affected and will remain flexible in order to adapt to any changes in economic conditions. Jersey has significant reserves to draw on in the case of an economic downturn.