3rd March 2004
Economic Paper
From the
Jersey Hospitality Association
States of Jersey
Fundamental Spending Review -
2005
In anticipation of the current
Fundamental Spending Review for 2005, Senator Le Sueur, as President of the
Finance & Economics Committee, recently announced the need to save a
further £20 million in the next budget.
The Jersey Hospitality Association would be grateful if the following views of
the Association could be taken into consideration by the participating
presidents during the course of this Review:
1 Cutting capital expenditure
back further than it has already been cut would be a most unsatisfactory
approach to resolving the deficit problem because:
a) It would severely harm the Island's construction industry, which is already
greatly depleted following the previous substantial capital expenditure cuts of
the last two years; and
b) Cuts in capital expenditure are merely “one-off” savings that do
not address the long-term problem of over-expenditure by States
departments.
What is needed are annual savings on revenue expenditure which, once saved, are
effectively a saving annually in perpetuity, so long as no subsequent return to
similar revenue over-spending is permitted in the future.
2 In considering where revenue expenditure cuts might be made, no committee's budget should be deemed sacrosanct. This particularly includes those committees that have, until now, been treated as relatively “untouchable”. Presidents might bear in mind that a ONE percent cut in the budgets of either of the two major spending committees (Health & Education) equates to a cut of between 12% and 15% in the budgets of such departments as Tourism and Agriculture. We are not necessarily suggesting here that there should be a reduction in healthcare services or in teaching provision. However, in talking to doctors, nurses and teachers (ie the people working at the “sharp end”), we are constantly being told of wastage of money, that could and should be cut back, particularly in the administrative areas of these huge departments.
3 There are, of course, two major ways of balancing an economy; the first being to raise more in taxes and the second being to cut governmental expenditure. However, the recent “Imagine Jersey” event, closely followed by a demonstration of almost 3,000 people in the Royal Square on the morning of the latest Budget, have surely sent a clear message that increasing taxes is by far the people's lesser preferred option.
4 On the other hand, there is an
important way of raising more in taxation revenue, without the money coming
directly out of the pockets of current taxpayers. This is simply to have
MORE taxpayers. Yet over the last two years, the number of people in
work in Jersey has been reducing, whilst the numbers of those in the
“dependant” segment of the population have been increasing.
Essentially, this is the result of the aging nature of Jersey's population, in
that people who live longer have to be paid pensions for longer and require
substantially more public expenditure in healthcare.
Whilst more people have been brought into the Jersey tax net, as a result of
little or no increase in personal tax allowances during the last 5 years, these
new taxpayers are inevitably the less well off in our society. Anecdotally, on
the other hand, the number of people in the Island's workforce, has actually
fallen by some 2,000 during the last two years. This includes the loss of some
700 to 800 workers who have left Jersey, some 400 or more school-leavers who
have been obliged to go into further education because they could not find jobs
and between 800 and 1,400 former workers who are presently unemployed (but not
all of whom register with the Social Security Department).
In order to maintain a balanced and buoyant economy, it is essential to
maintain the proportion of tax contributing workers to pension-drawing
dependants. Because of the recent reduction in the number of workers and the
increase in the number of senior citizens, this proportion has already begun to
fall seriously out of balance. Furthermore, Jersey's economy still appears to
be moving towards recession; so, even though the Island must continue its
vigilance in seeking to prevent an inflation rate of more than 2.5% p.a., a
budget or political regime, which generally stifles business, cannot possibly
be in the best economic interests of the community as a whole.
5 Most business interest
representatives in the Island consider that a major element of the Island's
current economic problem is our continuing to operate a primarily
population-controlling measure (the Regulation of Undertakings Law) at a time
when the population is actually declining naturally. This decline is a
consequence of the present economic downturn and the economy clearly needs a
boost in numbers now in order to maintain the economic population balance
referred to earlier. Accordingly, the Jersey Hospitality Association would urge
Presidents to adopt two important measures:
a) To abandon immediately the 5-year rule under the Regulation of Undertakings
Law on the grounds that it is no longer necessary or appropriate in the present
economic climate. This is not to suggest repealing the entire law, which may
well continue to serve a purpose as regards the reasonable control of the
number of new undertakings or large-scale developments permitted in the Island.
In any event, the retention of this Law will probably be helpful as regards
continuing to collect manpower statistics on a twice-yearly basis, unless they
can be obtained via the Social Security Department; and
b) To set aside a reasonable degree of funding to be used specifically for the
purpose of regenerating our existing industries where they are struggling, and
for evolving new industries where potential for meaningful economic profit can
be envisaged. Investment in this way will help to ensure future employment for
Islanders, future tax revenues for the exchequer, from the profits generated by
those businesses, and further tax revenues from the pay of the people employed
by those businesses. The Jersey Hospitality Association will appreciate
consideration of this paper by members of the States and would be glad to
receive such observations as may be thought appropriate.
Robert Weston President
3rd March 2004
tel: 766366
fax: 768330
weston@itl.net
Last updated: 5th of March 2004 by JerseyWeb.