The Right Plan at The Right Time
This week the Fiscal Policy Panel (FPP) published its 2016 Annual Report, which gives the panel’s views on the draft Medium Term Financial Plan (MTFP) Addition. The panel members have considered how the plan takes into account the current economic outlook and the impact of the UK’s Brexit vote. This kind of independent assessment is extremely important; it sense checks our plans against the bigger picture of the world economy and gives us a chance to make adjustments if they are needed.
This year, the FPP has largely endorsed our approach to the MTFP. Our plan sets out a number of measures over the next three years, designed to fund investment in health and education as prioritised in the Strategic Plan. The FPP’s guidance has been invaluable as we developed our plan and I’m delighted that this report confirms how we took their advice on board.
However, despite this good news in terms of our approach, we need to remain flexible in terms of the wider economy. Economic growth is now expected to be less than 0.5% in 2016, mainly as a result of the UK Brexit referendum, and over the full term of the plan the forecasts are more uncertain. Because of this, the FPP have now advised that there may be a need for further measures to balance budgets during the next MTFP.
All States departments have been working to understand the potential implications of Brexit for some time. Before these revised forecasts the Treasury and the Economics Unit have been working to understand what impact Brexit might have on States’ income over the MTFP period. Now that updated economic assumptions have been produced, we will finalise revisions to the income forecasts and continue to monitor its potential impact on our plans. Most importantly, with continuing uncertainty over the nature of the UK’s relationship with the EU, we need to make sure that Jersey has flexibility.
The panel’s additional recommendations focus on the longer term. In particular, they have highlighted the need to continue with our efforts to make Government more efficient, rather than seeing redesign as a finite project for reform. This way of thinking needs to be embedded into everything we do. The panel has also observed that our strategies to support the ageing society need to be more joined up. While we have strategies within health, education and housing (to name a few), we will make sure they are better connected.
Finally, the panel has highlighted that if we can help raise productivity, we will also help to increase the rate of economic growth.
Despite the surrounding uncertainty, this independent panel has confirmed that our approach remains appropriate in the light of Brexit and that we should avoid any knee-jerk reactions to global events. It is important that we continue our efficiency drive and deliver on our plans, while remaining flexible and reactive to what is happening around the world.
Our task now in the Treasury is to work closely with other departments to take these longer term recommendations into account in every way possible.
As we approach this important debate in the States Assembly I will be working to ensure that States Members understand why this plan has been independently deemed appropriate, and why ministers believe it is the right plan for Jersey for the next three years.