The art of the possible - investing in our future and balancing the books
To ensure Jersey’s continued prosperity, we need to preserve our strong public finances and make sure we invest in all the right areas. The government has listened to islanders, businesses and independent experts, and has identified the priority investment areas as health, education and St Helier. The Medium Term Financial Plan is, in essence, about investment in our future, to ensure we have sustainable finances for the long-term. Yes, we must balance our books, but we must also make sure we are doing our best for all islanders. That is why we are investing in areas like health and education.
The post-Brexit reality is an uncertain one but our economy is in a very strong place to deal with any changes that emerge. With our considerable reserves, minimal debt and assets of nearly £6 billion, our public finances are more robust than those in most other places in the world. 2015’s out-turn was strong, with the public purse seeing £19 million of additional income, partly from an improved economy and partly due to changes in our accounting policy.
As we want to protect Jersey’s strong financial position we were concerned about the potential impact of Brexit on our finances. That is why I commissioned an update from the independent Fiscal Policy Panel (FPP) on what, if any, impact Brexit would have on our financial plans. They have advised us to maintain course until there are clearer indications of how Jersey is being affected and not to make ad hoc changes to the path of the MTFP. It’s important to highlight that flexibility had already been built into the MTFP to accommodate the uncertain global conditions that existed even before Brexit.
Although Standard and Poor’s put Jersey’s credit rating down one notch after downgrading the UK’s rating, the agency also gave Jersey a stable outlook after reviewing our MTFP.
We know the new health charge has not been without its controversy. Back in September 2012, a proposal to transform our health and social care was approved by the States Assembly. We want to improve our health service, prepare for an ageing population and treat people at home for as long as possible. That proposal made it clear that additional money would be needed to fund this transformation and to sustain services into the future. A range of funding options was then explored, and ministers agreed that the best way to fund health was to adopt the Long Term Care model: that is an income based charge used for a specific purpose.
The health charge will be based on income, like the Long Term Care charge. The standard rate will be 0.5% in 2018, rising to 1% in 2019. If your effective income tax is less than 20%, your effective health charge rate will be less than 1%. For example, if your effective income tax rate is 14% in 2019, you will pay 0.7% of your income in a health charge. The health charge is being capped at the upper earnings limit of £162,000, in line with the system used for the Long Term Care charge.
In this system, top earners will still be paying the most, and middle earners will contribute in line with their income.
The most important message I’d like to get across to you is that the MTFP isn’t about cuts, it’s about investment. This is a positive, future-focused plan. We’re going to see £68 million of investment by 2019, mainly in health and education, including £40 million to build a new Les Quennevais school. We’re going to see £160 million of investment in new social and affordable housing through Andium Homes. Significant investment is going into improving our infrastructure, particularly roads and transport. All of this investment is going to further grow our economy, create jobs and improve the living standards for all of us in Jersey.
To do this prudently however, we need to make sure that all departments are being run as efficiently as possible. We need to make sure public money is being used responsibly and we’re prioritising areas of spending in the most effective way possible. We have set our spending limits and prudently estimated our income. We need to make sure that it’s spent in a way that improves islanders’ lives now and future-proofs our economy.
This is how we’ve weathered the significant global shocks over the past decade and emerged with a strong economy, and I believe it is how we will continue to do so. I believe in Jersey and I believe that to build a sustainable future for our Island, we need to make sure we have an economy that works for everyone. That is the basis of our Medium Term Financial Plan.