States Meeting Transcript - 07/12/2010

STATES OF JERSEY OFFICIAL REPORT

TUESDAY, 7th DECEMBER 2010

PUBLIC BUSINESS - resumption................................................................3

1. Expenditure Proposals for 2012 and 2013 and Draft Budget Statement 2011 (P.157/2010)...............................................................................3

1. Senator P.F.C. Ozouf (The Minister for Treasury and Resources):.......................3

2. Expenditure Proposals for 2012 and 2013 and Draft Budget Statement 2011 (P.157/2010): ninth amendment (P.157/2010. Amd. (9))................................12

1. Deputy D.J.A. Wimberley of St. Mary:.................................................12
2. Senator P.F.C. Ozouf :..................................................................22
3. Deputy A.K.F. Green of St. Helier:.....................................................23
4. Deputy R.G. Le Hérissier of St. Saviour:...............................................23
5. Deputy M. Tadier of St. Brelade:.......................................................24
6. Deputy P.V.F. Le Claire of St. Helier : ..................................................26
7. Senator S.C. Ferguson:.................................................................27
8. Deputy G.P. Southern of St. Helier:....................................................27
9. Deputy M.R. Higgins of St. Helier:.....................................................29
10. Senator T.A. Le Sueur:..............................................................31
11. The Deputy of St. Mary:.............................................................31

LUNCHEON ADJOURNMENT PROPOSED..................................................35 LUNCHEON ADJOURNMENT................................................................35 COMMUNICATIONS BY THE PRESIDING OFFICER .....................................35

PUBLIC BUSINESS - resumption..............................................................35

3. Expenditure Proposals for 2012 and 2013 and Draft Budget Statement 2011 (P.157/2010): eighth amendment (P.157/2010.Amd. (8)) ...............................35

1. Deputy T.A. Vallois of St. Saviour:....................................................35
2. Senator P.F.C. Ozouf :..................................................................36
3. Senator S.C. Ferguson:.................................................................38

4. Deputy P.V.F. Le Claire: ...............................................................38
5. Senator T.A. Le Sueur:.................................................................38
6. The Deputy of St. Mary:................................................................39
7. Deputy J.A. Martin of St. Helier:.......................................................40
8. Senator F. du H. Le Gresley:............................................................41
9. Deputy I.J. Gorst of St. Clement:.......................................................41
10. Deputy M.R.Higgins:...............................................................42

11. Deputy T.A. Vallois:................................................................42
12. Senator P.F.C. Ozouf : ...............................................................43

4. Expenditure Proposals for 2012 and 2013 and Draft Budget Statement 2011 (P.157/2010): second amendment (P.157/2010.Amd(2) - Paragraph 1)................44

1. Senator F. du H. Le Gresley:............................................................44
2. Deputy E.J. Noel of St. Lawrence:......................................................46
3. Deputy P.V.F. Le Claire: ...............................................................46
4. Deputy J.A. Martin:....................................................................47
5. Senator S.C. Ferguson:.................................................................48
6. Deputy A.K.F. Green:..................................................................48
7. Senator P.F.C. Ozouf :..................................................................48
8. Senator T.A. Le Sueur:.................................................................50
9. The Deputy of St. Mary:................................................................51
10. Deputy M. Tadier :...................................................................51
11. Deputy J.A.N. Le Fondré of St. Lawrence:..........................................52
12. Senator P.F. Routier:................................................................53
13. Deputy G.P. Southern : ..............................................................53
14. The Deputy of St. John:..............................................................54
15. Deputy I.J. Gorst :....................................................................55
16. Deputy J.G. Reed of St. Ouen : ......................................................56
17. Senator A.J.H. Maclean:.............................................................56
18. Senator F. du H. Le Gresley:........................................................56

5. Expenditure Proposals for 2012 and 2013 and Draft Budget Statement 2011 (P.157/2010): amendment (P.157.2010 Amd.)..........................................59

1.5.1 Deputy G.P. Southern :..................................................................59

6. Expenditure Proposals for 2012 and 2013 and Draft Budget Statement 2011 (P.157/2010): amendment (P.157.2010 Amd.) - Amendment...........................63

1. Connétable A.S. Crowcroft of St. Helier:...............................................63
2. Deputy E.J. Noel: ......................................................................66
3. Deputy P.V.F. Le Claire: ...............................................................67
4. Deputy J.A. Martin:....................................................................68

ADJOURNMENT................................................................................70

[09:32]

The Roll was called and the Dean led the Assembly in Prayer.

PUBLIC BUSINESS - resumption

1. Expenditure Proposals for 2012 and 2013 and Draft Budget Statement 2011 (P.157/2010)

The Bailiff :

Very well, we come to Public Business and the first matter on the Order Paper is Expenditure Proposals for 2012 and 2013 and Draft Budget Statement 2011 - Projet 157 - lodged by the Minister for Treasury and Resources and I will ask the Greffier to read the proposition.

The Greffier of the States:

The States are asked to decide whether they are of opinion (a) to agree that total States net expenditure for 2012 and 2013 should not exceed £694.2 million and £688.3 million respectively, as set out in Summary Table A on page 50, with these sums including a minimum of £65 million of savings proposals  by 2013;  (b) to approve the estimate of total taxation revenue  in 2011 of £521.319 million as set out in Summary Table B on page 74 of the Budget Statement, with the sum to be raised through existing taxation measures and the proposed changes to income tax, goods and services tax, impôts duty, stamp duty and land transactions tax for 2011 as set out in the Budget Statement; (c) to agree that the sum of £31 million be transferred from the Stabilisation Fund to the Consolidated Fund in 2010, in addition to the amount of £37 million agreed on 19th December 2009 in P.179/2009, resulting in a total transfer of £68 million; (d) to agree that the sum of £46 million be transferred from the Stabilisation Fund to the Consolidated Fund in 2011.

1. Senator P.F.C. Ozouf (The Minister for Treasury and Resources):

I think it is probably quite appropriate that we have a group of young people in the gallery for such an important debate. The world is slowly emerging from what the history books will call, I think, the great recession. We have heard a number of countries have suffered significant financial problems; many face unsustainable deficits in their public finances. While we have not been affected as dramatically as some, the recession has left us with a deficit. The decisions that we are now called to make need to inspire trust and confidence and need to deal with this deficit but also lay the foundations for a strong economic recovery to meet Jersey's agreed long-term objectives. We have approved the Business Plan and these proposals which we will debate over the next few days now set out a 3-part budget plan that deals with the challenge that we face. It strikes a sustainable balance between making savings and efficiencies while maintaining our essential services. If we, the leaders of the Island, do not act now we face a deficit of £89 million in 2011, £107 million in 2012 and £112 million in 2013. Approving this budget will ensure that this does not happen and Jersey remains a stable and successful jurisdiction. We have already agreed savings of £12 million in 2011 and we are now proposing further savings of £35 million by 2012 and £65 million by 2013. These are tough savings targets and will require significant changes in the States in the way the States works. While I can report that we have made a good start in delivering savings, cuts in spending alone are not enough to balance our books. For this reason this budget proposes tax changes which will raise £22 million in 2011. The remaining shortfall will be funded over the next 2 years from the balance of the Stabilisation Fund. This means that by the end of next year we will have spent £158 million of our savings to cushion the effects of the recession. The budget proposals are based on significant expert research and wide consultation, their impact is well quantified and it is understood. They have the support of the Council of Ministers who are all united in taking a longer term view for the benefit of future generations. The International Monetary Fund points out that the recovery in the global economy remains fragile, uneven, and downside risks have risen. Although a double-dip is still a risk it is not considered now to be the most likely outcome. Larger economies such as the United Kingdom and France have returned to growth this year, although their recoveries are slow. The view of Jersey's highly regarded independent Fiscal Policy Panel is that significant uncertainties remain around the strength and the durability of the global recovery. They say, therefore, it would be prudent for Jersey to continue to plan on the basis that the recovery will be fragile and drawn out. So the downturn has had a significant impact on the Island economy. Many businesses have been affected and unemployment numbers have risen by nearly 300 over the last 12 months. More than a quarter of those seeking work are aged between 16 and 19. Behind every statistic is a person, and it is our duty to assist every Islander who is seeking work. However, at 3 per cent our unemployment level is still one of the lowest of any developed country in the world and this budget aims to keep it that way. G.V.A. (gross value added), a measure of economic activity - broadly the sum of wages and profits - fell by 6 per cent in 2009. Falling profits in our banking sector have been caused by the impact of low interest rates which are expected to persist for some time to come, together with lower employment numbers, lower pay increases, lower interest rates, poor investment returns. These have all combined to reduce our tax revenues. So I continue to hear some say that the current deficit has been caused by the introduction of Zero/Ten. This is not the case. The drop in tax revenue was clearly identified prior to Zero/Ten being introduced and it was then filled by G.S.T. (Goods and Services Tax), 20 Means 20 and efficiencies. The deficit we now face is structural and arises for these 2 reasons: first, the impact of the global recession influence on our tax revenues; and secondly, the continued rise in States spending in recent years. A structural deficit can arise from a recession. This occurs when such is the severity of the downturn it causes a permanent reduction in economic activity and associated wealth.

[09:45]

Even after the budget measures are in place, a deficit of £55 million is expected in 2011, which equates to around 1.5 per cent of G.V.A. and a further deficit of £18 million in 2012. Of course, uncertainty remains in our income tax forecasts which have a range of plus or, importantly, minus £35 million by 2013. The advice of the Fiscal Policy Panel is that we should act in a responsible and prudent manner. They advise that our focus should be on a credible medium-term plan and that we should act now. They cautiously remind us that even if the budget proposals are implemented the fiscal position we face is extremely tight. I will explain during these introductory remarks that not doing enough now would pose greater risks for our economy in the longer term. The biggest dangers are complacency and the temptation of delay. Thanks to the prudence and the foresight of our predecessors we are in the fortunate position that we have no public debt and we have savings. I have already stated that we will spend £158 million of our savings. Some have suggested that we should spend even more. However, we should recognise that the independence of a jurisdiction is in many respects dependent on its financial strength. Members only have to look at the recent example of Iceland, Ireland and other places to see how a lack of financial strength has resulted in them ceding some of their sovereignty. That is why I believe that we need to protect our Strategic Reserve so that we can maintain our hard-fought independence for our successors. At the start of the savings review each department was asked to find savings of 10 per cent. Five reviews were conducted of the major spending departments and 2 looked at the significant areas of staff pay and court and case costs. This Assembly owes a debt of gratitude to the 7 independent reviewers who gave of their time and expertise freely for the benefit of this Island. I believe that the involvement of non-executive board members could play an important part in our future Government structures, helping Ministers and their Chief Officers in the implementation of policy. All departments, without exception, have played a proactive and positive part in the Comprehensive Spending Review but it is not just about savings. It is about reallocating resources to deliver better value services more effectively and more efficiently. We also need, I think, to develop capacity in the Third Sector. The States is not necessarily the provider of every service in every circumstance that Islanders require. The C.S.R. (Comprehensive Spending Review) has highlighted many innovative areas. Staff from across the States have been thinking differently and getting involved in changing the services that they provide, from those on the front line of our caring services and those

employed in backroom roles which are equally essential in the smooth running of our public services. More than 370 savings ideas have been submitted by staff and they are being considered by departments as opportunities for making savings. These suggestions have included reviewing management structures and pay scales, specific ideas for the reduction of high value land, using energy more efficiently and encouraging the private sponsorships of areas such as parks and gardens. We are, as a direct result of I.T. (information technology) staff suggestions, now making savings of more than £750,000 by harnessing new technology to reduce the cost of business processors, rationalising data centres more effectively. I would like to take this opportunity to thank all staff involved in proposals for the C.S.R., for coming up with ideas and for the whole public sector's continued dedication in serving the public of the Island. [Approbation] As well as savings, all departments were also asked to look at their user pays charges. There are cases where it would be appropriate for the beneficiary of a service that uses it, for those services to be funded by the user rather than taxpayers as a whole. After careful consideration the Council of Ministers is bringing forward £2 million of specific user pays charges. These include charging more to grant liquor licences, charging anybody who uses the General Hospital as their doctor's surgery, and charging businesses for technical fire safety and building control consultation work. A review of procurement has identified savings of £6.5 million which we will deliver by 2013. Court and Case Costs are another area where significant savings are being made by strengthening procedures and improved negotiation. It would be unrealistic in any organisation that spends more than 50 per cent of its budget not to have looked at employment costs. Following the Assembly's approval of the Article 11(8) request funding in July the first phase of the voluntary redundancy programme has been finalised. More than 70 staff applications have been accepted. These alone will reduce expenditure next year and every year thereafter by more than £3 million per annum. The Council of Ministers has set an initial target of £14 million to be delivered from changes in staff terms and conditions with the intention of making greater savings beyond 2013. Some commentators have questioned why the Council of Ministers has not undertaken to deliver greater savings from terms

and conditions. As a fair and responsible employer, staff and unions need to be consulted first. They will be given the opportunity to shape the future savings. For example, in areas like pensions, which could deliver additional savings of up to £10 million per annum, I accept that these are going to take longer to deliver. During the course of preparing this debate I have held a significant number of meetings with different groups and organisations and I am grateful for all of those many individuals who have spent their lunch times and their evenings meeting me to discuss the budget proposals with Ministerial colleagues. I can assure the members of the public that I have met that I have taken account of many of the views that they have expressed. The next stage of the C.S.R. is for departments to deliver. To achieve this, a small C.S.R. Programme Team has been drawn together to plan, co-ordinate and monitor the C.S.R. effort across all departments. This is a significant change programme. While the task ahead is significant I believe we are ready to ensure that the 2012 and 2013 Business Plans contain robust deliverable proposals which will deliver the savings targets and that are within the spending envelope that is incorporated in this budget debate. We have developed longer-term planning, both as an organisation and within departments. In future departments will have greater certainty. By extending their budgets over 3 or 4 years departments will have more flexibility to manage their budgets. But in order to manage Government spending within the proposed limits we do need contingencies to manage forecast variations and deal with unpredicted expenditure. Any large organisation plans for the unforeseen events. I recognise the intention of Deputy Vallois' amendment to establish an appropriate process for managing and accessing these contingencies, and the Council of Ministers has been persuaded that a broader approval process is required to provide further assurances to this Assembly that contingencies will be allocated appropriately. Also over the coming months the Treasury will be consulting on changes needed to the Public Finances Law required to introduce the principles of 3 or maybe even 4-year budgeting. All departments were asked also to submit their investment and growth needs as part of the Comprehensive Spending Review. The Council of Ministers has accepted that a number of growth requests are valid and these have been included in the indicative expenditure limits which were published a number of weeks ago. Taken together the proposals for savings, user pays, investment and growth mean that the net reduction in department budgets ranges from 3-13 per cent. Spending will have fallen by more than 12 per cent in real terms between 2010 and 2013. We will have covered inflation, provided some growth as well as making significant savings. Just as other central banks and governments across the world have acted to prevent a replay of the 1930s depression, this Assembly commendably has played its part too. I want to thank Members again for their foresight in supporting the careful use of the Stabilisation Fund to support local employment and businesses: £44 million funded important and valuable projects which helped us compensate for lower demand in the private sector. It supported business and kept Islanders in work. The skills and training initiative Advance to Work has helped more than 100 unemployed teenagers secure permanent employment during the downturn and is helping many other adults gain the skills and confidence they need to find jobs too. Jersey Enterprise has delivered additional support programmes for local businesses, including the Jersey Business Angels Network, small exporter grants, States Meet the Buyer' events, enterprise grants and off-Island trade opportunities. This fiscal stimulus money was allocated in a timely, targeted and temporary manner and it is working. We should be proud that our past prudence has enabled us to fund the fiscal stimulus measure from savings. The second part of the plan is to deliver economic growth. The Council of Ministers wants to see the spirit of enterprise driving our economic recovery. It is clear that while we cannot rely on a swift rebound in the global economy there are reasons for cautious optimism. The latest forecast from the International Monetary Fund is that the world economy will return to pre-crisis levels of growth and expand by 4.2 per cent in 2011. Interest rates are expected to rise at the end of the next year, albeit at a later stage and at a slower pace than previously anticipated. This should help alleviate some of the pressure on banking profitability. Having fallen by 2 per cent this year we have factored in moderate growth in Jersey's G.V.A. of 1 per cent in both next year and 2 per cent in 2012 and 2013. New businesses and jobs have already been created. Retail sales volumes have begun to stabilise and while the numbers of visitors fell since the onset of the crisis, these numbers are also now stabilising. In the first 9 months of this year 791 entities were granted new Regulation of Undertakings and Development licences and 802 additional staff licences, mainly qualified, have been approved. These new entity approvals will, I am confident, also lead to many more jobs being created. For example, Waitrose

alone plans to create in excess of 200 new jobs. Again, the majority of these jobs are for Islanders. Significant retailers have plans to open branches in St. Helier and next year will be meaning more opportunities for Islanders in the jobs market. The September Business Tendency Survey gave some cause for encouragement. Finance firms report a further rise in business activity and they are more optimistic about future business and employment. The Minister for Economic Development and his team are determined to continue to improve the support to all businesses, importantly tourism, agriculture, finance, construction and retail; they all play an important part in the Island and the Island economy. Last week the States approved the first phase of the new intellectual property legislation, designed to encourage inward investment and provide new opportunities. But more than this, the Minister for Economic Development will publish and consult on a new economic growth strategy in the first part of next year. In addition to the budget proposals, the States will be asked to approve a change in our Income Tax Law to exempt funds. This is intended to provide long-term confidence in the tax-neutral treatment of Jersey investment funds. It is essential that we continue to diversify the markets in which our financial services sectors are active. We need to focus on the growth area of the world, in the Asia/Pacific and the Middle East. The recent signing of a tax information exchange agreement with the People's Republic of China is an important step in developing that market for Jersey. Jersey Finance continues its excellent promotional efforts and I am pleased that this Assembly has overwhelmingly agreed to support these efforts to support future growth. I now turn to the tax proposals. In making these proposals I have listened to the views of more than 1,000 people, businesses and interest groups who responded to the consultation on personal tax. A whole range of valuable comments were received which highlighted the need to find a sustainable balance between fairness on the one hand and what is best

for the economy on the other. After consultation and very careful consideration the Council of Ministers supported my conclusion that a higher rate of income tax would have negative consequences. This budget, I hope, will send out a strong and powerful message that we support maintaining the foundation of our economic success, our 20 per cent tax rate. Based upon expert advice and consultation the Council of Ministers has proposed 2 main revenue-raising measures, one of which is the increase in social security contributions of 2 per cent on those of higher incomes above the social security cap.

[10:00]

The Minister for Social Security will, of course, bring a separate proposition on this proposal. However, I do want to say this. The Social Security Fund is separate from general taxation and making this change will mean that higher paid employees and their employers will pay more into the Social Security Fund and help balance the budget. The Minister for Social and Security and I will continue also to explore ways in which the social security system can be restructured so that it generates the revenue needed while allowing business to flourish and remaining competitive. The second measure proposed in this budget is, of course, the increase of G.S.T. from 3 per cent to 5 per cent on 1st June 2011. This increase in G.S.T. will raise £15 million in 2011 and £27 million in 2012 after allowing for G.S.T. compensation. This is a necessary and important part of the overall package that will put our finances back on track. Even at 5 per cent we are lower than most other places and this is designed to protect the competitiveness of the economy. Everybody pays G.S.T. Better-off locals pay more than those not so well off. Business visitors and visitors to the Island also contribute. I have heard that there are Members in this Assembly who believe that indirect taxes like V.A.T. (value added tax) and G.S.T. are regressive or even very regressive. I would encourage Members to look at the evidence. The Institute of Fiscal Studies concludes that V.A.T. is progressive. This is also supported by the Office of National Statistics. If we use a similar approach to assess the impact of G.S.T., bearing in mind the differences between G.S.T. and U.K. (United Kingdom) V.A.T., the evidence shows that it is closer to being a proportional tax rather than a regressive tax. Notwithstanding the evidence that G.S.T. is closer to being proportional and regressive, we do understand the need to protect the most vulnerable. The question is not whether to protect the less well off but how to do it with the best effect and the least administrative cost. A recent review of taxation in the U.K. headed by the Nobel Laureate Sir James Mirrlees recommended that the U.K. itself abandons its system of U.K. V.A.T. exemptions and differential rates and instead move to a broad-base system. Introducing exemptions does not just target the groups that are most in need, it benefits all Islanders and particularly those on higher incomes far more than it does those on lower incomes. The cost of exemptions would be, in total, if approved, around £8 million a year but only £3 million would go to the less well off, while £5 million would go to the better-off. The Council of Ministers believes it is important to protect those on lower incomes from the effect of G.S.T. and it is therefore intended that all people on income support and those who earn less than the tax threshold will be compensated, just as we did when G.S.T. was introduced. We are not alone in considering raising consumption taxes, 14 European countries have recently or are in the process of increasing their V.A.T. rates, albeit from significantly higher basic rates. Many other governments around the world, such as New Zealand, have used consumption taxes to correct their fiscal deficits. Exemptions benefit those who can afford to pay,

they are administratively burdensome and countries are envious of our G.S.T. structure, a low- based tax with a broad base. Our G.S.T. model is sound and efficient and I believe that it is essential that whatever the differences in terms of the rate we need to keep it that way. There are a number of other proposals for income tax. I am proposing the last year of the withdrawal of allowance under 20 Means 20 and that that takes place as planned. Although  it depends on household circumstances, 20 Means 20 only affects taxpayers with higher incomes. I am proposing that the profits of the exploitation of land and importing oil are also subject to 20 per cent tax. This extends the number of businesses that pay income tax on their profits and, as I committed in October, I will seek to extend this further after the code group process. I am proposing that income tax exemption thresholds increase in line with average earnings growth helping taxpayers on lower incomes. The budget proposals of an earnings-linked increase ensures that those on lower incomes do not see a real drop in their disposal incomes but does not put too much pressure on tax revenues. Finally, I have been advised that we should collect more information to allow a proper audit of income tax returns, and to improve administration and collection of tax there are a number of changes proposed. Last year I said that I would ensure that all taxes are efficiently collected and paid and I would like to thank Members for approving the investment in additional tax investigators. As a result of the investment made we have already collected £2 million of back taxes and penalties. I believe that we can do more. A review of the States tax function has now been carried out. The review has confirmed that we do have a cost-effective tax office whose cost per pound of tax revenue raised compares very favourably with other similar tax jurisdictions. It has, however, also highlighted the complexities of Jersey's personal tax system. We have a wide range of allowances on top of tax exemptions, 2 different tax rates, some Islanders paying the tax in the current year and some - the majority - paying for the previous year. Most taxpayers find it difficult to understand how their effective tax rate is calculated. Consequently, the Tax Office receives a large number of queries and spends a great deal of time dealing with queries from Islanders. Around a quarter of tax returns are incorrect when they are first submitted. Even more staff time then has to be spent on correcting these for unintentional errors rather than being able to investigate omissions which might not have been unintentional. It is essential, I believe, that we move towards a simpler personal tax system so that individual taxpayers can understand their own tax position and fewer incorrect tax returns can be submitted. I have also questioned why we expect almost all Islanders to submit tax returns when other jurisdictions only require returns from those with more complex affairs. For these reasons next year I intend to propose simplifying Jersey's tax systems. Improvements in I.T. will in future allow online filing of tax returns but also automated self assessments. Where individual taxpayers still need to submit tax returns, we plan to make the tax collection process more straightforward, providing automatic assessments of the tax payable. Where individual taxpayers no longer have to submit returns, online access will provide details about how their effective tax rate has been calculated. We will improve revenue sharing data with Social Security, Customs and the Tax Office and this will enhance efficiency and help to reduce the loss of tax revenue. I have also been looking at how we can strengthen our tax policy arrangements. At the moment we supplement the very limited internal resource with external consultancy advice; however, the increasing range and complexity of international tax development, such as Zero/Ten and T.I.E.A.s (Tax Information Exchange Agreement) means that it makes much more sense in future to build capacity in a stronger in-house team. There are also a number of opportunities where we can boost revenue. So that Jersey has a modern efficient and effective tax collection system, I can announce today that a new tax policy unit will be formed from 1st January with a specific remit to raise more tax revenues. The combination of a strengthened tax policy team, a simplified and more automated tax system and efficiencies from sharing information

could, I believe, result in an annual net benefit of between £5-10 million within the next 3 years. All these revenues I have referred to will be required in order to balance our books in the medium term. Last year I was disappointed that the States approved an amendment to remove all increases from duties. I understand the rationale for this action but it increased the deficit and we have now got to deal with that. That decision was also not supportive of our health strategies. I have also noted that some price increases were made despite no duty increases. In this budget I am proposing that alcohol duty should be raised by 6.7 per cent, the same rate that was proposed in last year's budget. In price terms this is equivalent to 58p on a litre of spirits, that is 3 per cent on the retail price; 7p on a bottle of wine, that is about 2 per cent on the retail price for an average bottle; 2p on a pint of beer, less than 1 per cent on a pint of beer. For tobacco duties I propose a high rate of increase of 11.1 per cent equivalent to an extra 35p per packet. Together these measures will not only raise revenue but they will also support the Health Department's policy to improve Islanders' health by reducing alcohol and tobacco consumption. I am also proposing that fuel duty should rise by 2p per litre, which is half the rate that I proposed last year, with the appreciation that for many

the use of a vehicle is less discretionary than the purchase of cigarettes or alcohol. The impôts proposals, if approved, will come into force on 1st January 2011. Stamp duty as a whole and its level was reviewed as part of the fiscal strategy review and I am proposing in the budget that the rates of stamp duty and land transaction tax on properties valued over £1 million, and specifically new measures for properties over £1.5 million, £2 million be increased by 3.5 per cent, 4 per cent and 5 per cent respectively, these changes deferred to take place from 1st June 2011. The majority of our housing market has seen stable prices over the last few years and this proposal will only affect those buying property with a value over £1 million and therefore most Islanders will be unaffected. Judicial fees for using the court have also been reviewed to reduce difficulty in collecting payments in some instances and to increase the fees in line with inflation. Senator Breckon has lodged an amendment to increase probate duties to the levels applied for stamp duty. I am concerned that if this amendment were to be approved we could see a significant reduction in bank deposit and investment in Jersey funds by international investors. We will, of course, come to Senator Breckon's amendment in due course but let me say it is an important competitive issue. As disappointing as it is to say, I will be arguing that the most likely effect of Senator Breckon's amendment would be to reduce the total probate income. Last year I committed to look at ways of increasing the contribution from the 1(1)(k) regime. Since then the 1(1)(k) regime has been the subject of a lot of discussion in this Assembly, some of which has been negative. The very small population of around 130 taxpayers contributes in the region of £13.5 million every year to the Exchequer, which if we did not have it would mean that G.S.T. would be 1 per cent higher. I estimate that the indirect tax contribution that 1(1)(k) residents make through their spending and investment is conservatively between £50-70 million per annum. In the last 2 years new applicants have also paid on average more than £3 million on their house purchases, contributing over £5 million to stamp duty revenues. In addition millions have been spent by this group on

refurbishing their properties, using local businesses, builders, architects and interior designers. Our 1(1)(k)s also attract high-spending visitors to the Island. I am told that that number alone is hundreds. Their contribution for charities runs into millions. I welcome our existing and prospective 1(1)(k) residents and their families to Jersey and I hope that a majority of members in this Assembly will believe, and continue to believe, that they make a substantial [Approbation] financial and economic contribution to the Island. More than that, we continue to need to create the right environment which attracts and maintains our high-value residents. Other countries, our competitors, are doing this and I think we can do more. I did say that I committed that I would be looking at ways of increasing the revenue from 1(1)(k)s and as a first step I believe that we can increase the minimum contribution for all future applicants without harming our competitive position. For that reason, I have asked the Minister for Housing to increase the minimum tax contribution for future 1(1)(k) category consents to £125,000 for all new entrants with immediate effect. I also intend to develop a new high-value residents regime for new residents. If we were to welcome 15 new 1(1)(k)s a year, this policy could bring around or in excess of £2 million of additional tax and significant other contributions to the economy. One issue which I have considered is that the current policy encourages current and prospective 1(1)(k)s to structure their investments outside Jersey, quite legitimately, before they move to the Island. Jersey loses investment business, even if they have been persuaded to come here. Other places do quite well out of this and that is something that I would like to change. We need a simple and competitive tax regime that encourages high net worth individuals to bring their investment and businesses to Jersey. Some of our competitors have a tax cap on liabilities but this actually limits the contributions to the Exchequer.

[10:15]

In future, in addition to the change that I have already requested I plan to propose that all future high-value residents will be taxed on their worldwide income at 20 per cent on the first £625,000 and only 1 per cent thereafter. This is a different and innovative approach [Approbation] which does not limit the financial benefits to Jersey but is more beneficial and competitive and lucrative to Jersey. There also must be an increased focus on marketing. We need to send a message out throughout the world that Jersey is open for business. People in businesses who want to invest in our Island are welcome and we need to do everything that we can to make them feel so. So I move finally to business tax. Members will be aware that the Code Group met last month to consider our business tax regime. Based on feedback we have had from the Code Group members and the U.K. we understand that concerns surround the interaction of deemed distribution with the Zero/Ten regime. Although we do not, of course, agree with this conclusion, if the Code Group and ECOFIN (The Council of Economics and Finance Ministers of the European Union) decide that this is the case we are prepared to change the rules. I believe that we can do this without a loss of tax revenues. There are other ways of achieving the same effect as deemed distribution. This could include taxing residents on shareholder loans as we do within the existing rules and ensuring that if somebody enjoys the profits of their company in any way that can be subject to tax. We understand that ECOFIN will today decide whether there should be a review on the scope of business tax, that is should it include personal tax measures such as this deemed distribution provision. Assuming that the review goes ahead, we are not expecting to hear further from the Code Group until February. We will, however, be engaging with the United Kingdom and the Code Group. The business tax review continues and I am taking account of the results of the consultation. I do not intend to go today into the detail but suffice it to say that the overwhelming response from that consultation was that Zero/Ten should be maintained. The review will carry on in terms of business tax but obviously the final outcome of the Code Group assessment is an important element of any future decisions. I am committed in the business tax consultation review to looking at the way that businesses that actively trade in the Island contribute to tax revenues. I have already brought proposals in this budget, as I have said, to extend the 20 per cent rate to oil and excavation companies and I have noted the Deputy of Grouville 's amendment. While I appreciate the reason for bringing this amendment I unfortunately cannot support it in the currently drafted form. But I have committed to look at this issue and I am also considering, during the course of today - even though it is late - to lodge an amendment to the Deputy of Grouville 's proposal that will allow the underlying principle but flexibility in the intent that she wants to achieve. As the Deputy rightly says in her report, but is not reflected in the proposition, the measure could be by tax or a charge of another name. Whatever is introduced, we must ensure the integrity of our tax regime is maintained. If the Code Group concludes its assessment in February and we have clarity on any concerns that they have, I will commit, both in that debate and in the potential amendment, to consult on a proposition by the end of June for measures to be introduced in 2012. I will continue to keep States Members informed on all of these aspects with the Chief Minister in the coming months. Following consultation on company fees the Minister for Economic Development and I have listened to the responses from local businesses. Given the challenges that local companies are facing, annual company fees will not be increased. I have proposed an increase in the basic I.S.E. (international service entities) fee from £100 to £200 charged to international companies. This will raise approximately £3 million per year. I have also been advised that the current structure for other I.S.E. fees, such as those charged to banks and trust companies, could be improved and I am reviewing this to make sure that this happens. The increases already included in the budget will result in the finance industry contributing over £8 million a year. I want to aim to do further increases to a total of around £10 million following the consultation. I hope that this might persuade Senator Le Gresley to withdraw his amendment to increase fees without consultation immediately. The budget I am proposing to Members is as the result of very careful research and consultation. I am sure Members will know the level of planning, research and detailed analysis that goes into developing a budget strategy. The work of the Fiscal Steering Group made up of a number of States Members was invaluable in giving guidance to me in advance of the consultation last year. As I close I want to recognise particularly the Interim Treasurer of the States who has

done a tremendous amount in the short time he has spent in Jersey to strengthen financial management in Jersey, to the Chief Executive of Resources for his long hours and hard work and to the Comptroller of Income Tax, the Director of International Taxation, the Economic Adviser, the

Agent of the Impôts, the head of Statistics and all of the senior officials at Treasury and Resources, Social Security and the Chief Minister's Department, with all of their excellent teams of professionals who have supported me and the Council of Ministers throughout the proposals of the budget process. I am also delighted to welcome today, for the first time, in the gallery, the new Treasurer designate who will be assuming her office in the New Year. She is already making her mark among staff and I wish her every success in her new role. [Approbation] Finally, in terms of thanks, I would like to express my sincere gratitude to the Chief Minister for his continued wisdom and support, to my Assistant Ministers, Deputies Noel and Le Fondré, and of course to Ministerial colleagues for their diligence, and sometimes creativity, in bringing forward savings proposals that will safeguard the financial and constitutional independence. I also want to recognise the role of Corporate Affairs who have been challenging but fair in their questions. In closing, I would like to remind Members where my speech started. We are emerging from the deepest global recession since the 1930s. The recovery is fragile. If we do not make some difficult decisions now there will be even tougher decisions to make in the future. As the Island's leaders we need to have the courage, the foresight and the conviction to ensure that we make the right decisions this week to secure our good fortunes for tomorrow. Faced with difficulties, our predecessors were able to pull money-laden rabbits out of the hat. We will be successful, I am sure, in the future but we have to accept that the world has changed. We are thankful for our predecessors who made provision for downturns and we are benefiting from that foresight today. That is why we have been able to spend from our reserves to insulate Islanders from the worst effects of the downturn. Unlike most other jurisdictions we have done that without incurring a penny of debt and that is, I believe, what the majority of the Islanders expect us to do. Our proud history has been built on the fundamental principle of living within our means. I have thought a lot about our predecessors, some of the great politicians of this and the last century, such as Senator Cyril Le Marquand, and I wondered what he would be saying in this Assembly today. Would he be wanting us to live beyond our means? Our reserves come from the taxes of Islanders who have worked hard to earn it. We have to remember that the money that we hold in trust is not ours to spend on compensating for overspending. Islanders expect us to use their taxes wisely. I believe they expect us to live within our means to provide at the same time essential services as efficiently and effectively as possible. Islanders expect us to think about the future just as they think about their futures when planning their own personal finances. When I think back to the budget debate and the business plan debate, it was clear to me then, and it has become ever clearer to me now, that both Members and Islanders want to see significant savings in States expenditure before we increase taxes.  [Approbation] That is why the Council of Ministers agreed to an increased savings target of £65 million. I believe I have been open and transparent right from the launch of the Treasury's review of personal and business taxes. I have made it clear that we would be as tough as we could on making savings and efficiencies but it was obvious that I would not be able to find enough to avoid some tax rises. We need to balance the budget as quickly as possible, not for its own sake but because a balanced budget is necessary for economic growth and future job creation. It is necessary that we also meet our objectives that we have debated in this place and approved in our strategic plan. We need to maintain a strong economy and ensure sustainable public finances. We need to reform the public sector and work hard together to meet the needs of the community. We cannot achieve those aims without tackling the immediate problem. I believe

that it needs to be tackled now, today, this week and not put it off in the hope that it will go away. Our long-term constitutional independence very much depends on the way that we run our finances. Judging by the amount of Islanders that I have spoken to and have taken the trouble to contact me in the past days and weeks, I believe that their vision is that. They want a self-sufficient community which protects the vulnerable, maintains flexibility, develops a competitive economy and supports Islanders. I believe that this is the right budget for today; it is the responsible budget designed to meet the current spending challenge. Jersey is a wonderful, unique place with a long, proud history of fiscal prudence. I hope Members will agree with that and help us keep it that way. In these challenging times I commend this budget to the Assembly. [Approbation]

The Bailiff :

Is the proposition seconded? [Seconded] Very well, then there are a substantial number of amendments as Members know, and hopefully Members have the proposed order of debate. The first matter is the ninth amendment lodged by the Deputy of St. Mary and I will ask the Greffier to read the amendment.

2. Expenditure Proposals for 2012 and 2013 and Draft Budget Statement 2011 (P.157/2010): ninth amendment (P.157/2010. Amd. (9))

The Greffier of the States:

Page 2, paragraph (a): in paragraph (a), for the figure "£694.2 million" substitute the figure "£710.7 million"; for the figure "£688.3 million" substitute the figure "£704.8 million"; and for the figure "£65 million" substitute the figure "£32 million."

The Bailiff :

Deputy , before asking you to speak to your amendment, can I just make 2 preliminary remarks. The first one is that you have emailed all Members saying that you will be proposing an alternative budget during this speech. No, you will not. You will please be speaking only to the amendment. If you want to make a more general speech that will come at the time of the debate on the budget itself, but I must ask you to confine yourself to the amendment. Secondly, just to confirm that you have written to the Greffier saying you want to change the figure to £704 million, but having discussed it with the Greffier I am afraid that is not possible. Amendments have to be lodged 14 days before and it is not possible to change them again. Deputy , I invite you to speak to your amendment.

1. Deputy D.J.A. Wimberley of St. Mary :

Well, that has taken away my first line which was: "I rise with pleasure to present my alternative budget." But nevertheless it will be educative for the people in the gallery - the public - and I hope Members also. There is a lot to agree with in the budget as presented by the Minister for Treasury and Resources and I do not have any disagreement with him when he says that we need to continue to try to be efficient in our public sector. Notice I say "continue" because of course we have been driving-out inefficiencies for years and years now and there are limits to how far you can take this process, and I will address that later. But nevertheless it is important, of course, that we spend the public's money, or rather we spend the money that we gather from the public, in the best way possible and efficiently. I also agree with the Minister for Treasury and Resources on the need to raise more in tax, to the surprise of the Corporate Scrutiny Panel, but in the end they teased-out of him what the taxation money was for. It was to deal with the backlog, it was to provide contingencies and it was to carry out invest-to-save', which is necessary in order to do effective restructuring. So I do not have disagreements with those aspects but where and why I am bringing this amendment is to scotch the idea that there is no alternative. T.I.N.A.: there is no alternative. We are told constantly from many sources that cuts are inevitable, that we have to have cuts, and my amendment is restoring or putting back the cuts in 2012 and 2013.

[10:30]

Not to 2011 because we have voted those through already. Although clearly budgets are flexible animals and if we do put back the money in 2012 or 2013 maybe some of the more incredible and damaging and morale-sapping cuts that we have voted on - like stopping children being subsidised by the States to visit our world class Durrell, or stopping the effective border controls on the importation of drugs by axing the key post at Customs, and the physiotherapy at the hospital and so on - maybe some of those would be restored if we were to put the money back in to put the cuts back in 2012 and 2013. What that little exchange about the corrigendum was about was that I made an error in the computations and I added - and it is quite easy to do because there was a lot of figures - that in 2012 .. the net effect of my proposals is to add back £33 million because I accept the £12 million cuts we have already voted on and my suggestion is that we can legitimately expect to save £20 million in efficiencies and various savings that are not cuts, so there is £33 million left over. I simply divided the £33 million by 2 and stuck £16.5 million on 2012 and £16.5 million on 2013, but of course that is an error because the 2012 £16.5 million has to be carried forward into 2013 which then goes up by £33 million. I apologise for that. But the intent is quite clear that I believe that the cuts are unnecessary, they are damaging and they go against the grain. Something that should stay with us as we go through this amendment is what the Constable of St. Saviour wisely said in the Annual Business Plan debate back in September. He said about one of the amendments, I think it was the amendment to axe language teaching assistance in schools and he said: "This is difficult because we are all having to make cuts that are cuts to services that are very close to the heart." That are very close to the heart. I think we should remember that when we cavalierly say: "Let us have £50 million worth of cuts and then in a matter of days let us add £15 million to the cuts. Oh, then we will say that is just a minimum figure, we will have a few more if we can get there." Just remember that cuts are cuts to the heart. I feel that the budget that we are being faced with, leaving aside the areas where I said I agree, and also leaving aside 2011 which my amendment is not concerned with, but the proposal for the envelope for 2012 and 2013 is a budget, is a figure, is a constraint - I am looking for the word - a thing that binds you and stops you moving that is being imposed on the people of Jersey and on the States. It is not consulted; it is basically a bullying budget. It is certainly a bullying envelope. I will cover that in more detail later but the I.O.D. (Institute of Directors), the Chamber of Commerce and the Small Society, and indeed J.F.L. (Jersey Finance Limited) - I will explain in a minute why I add them too - have this chorus going on: "We have to have the cuts" and they back it up with various myths. I want a budget for all the people: the people on the street, on the bus, on the beach, for the people who grit the roads and the surgeons in our hospital. I want a fair and honest budget which protects Jersey for the future. I want us to be positive and not paralysed, and I want us to be pragmatic and not

ideological. I was looking for an image and the first image I came up with was the juggernaut. Why am I doing this? Why I am bringing an amendment to question the whole principle of the cuts? The first word that came to my mind was juggernaut but it is not the right image and it came to me on the bus, possibly driving through the snow. It came to me that the right image was the wicked witch and that what has happened is that the Island, and indeed States Members, are in some sort of a spell. People can be made to believe anything if your magic wand is powerful enough and if you have enough spin doctors and if you have enough people in the chorus to keep telling the media and, through the media, the public what to believe. This is a fantasy budget, a fantasy envelope. Jersey is an Island run by magic where services and amenities provided by the Government do not cost the same in Jersey as they cost anywhere else. We can do it for 17 per cent of national wealth. We can provide schools, hospitals, roads, clean water, safe things to eat, all the gamut of government services, law and order, we can do it for half what everyone else does it for and have no adverse consequences. We can do it without taxing people more than they are taxed already. By magic. Lots and lots of fairy dust so that we get the same services for less spend. I believe that when people wake up from the spell they will be disoriented and possibly angry. They will see that their quality of life has been eroded and damaged and the method of working to achieve this spell is fundamentally dishonest and it grieves me to be part of an Assembly which is part of that process, although in fact it is not our process. It is the process of the Council of Ministers, and in particular the Minister for Treasury and Resources and those who support him in organisations like the Small Society. The core of the alternative, if you like - although I am not allowed to call it an alternative budget - is that I believe that we should have a social investment fund as a way of ensuring that we do have a mechanism for spending where so far we fail.

The Bailiff :

Deputy , you are drifting off the subject. This is a speech about the level of cuts there should be. The Deputy of St. Mary :

Yes, Sir, and I am explaining how the £33 million will look. It will not be random tax shoved into the Consolidated Fund. That is what I am explaining.

The Bailiff :

Well, it is not very clear. Try and confine yourself to the amendment. The Deputy of St. Mary :

Yes, Sir. The amendment, as I say, is for accepting some efficiency savings and I will explain why I have chosen a figure of £20 million and why I cannot accept the notion of the Minister for Treasury and Resources that somehow again by magic you can achieve an additional £53 million of savings entirely through efficiencies, or mostly through efficiencies which I think is the claim. What we fail to do again and again is we fail to invest for a better Island and we fail to invest to save. In the first category I have 2 examples that strike me very forcibly, and the first was Fort Regent. I still remember the debate setting up the working group: "Who will look into the future of Fort Regent? Who will galvanise things, make things happen so that Fort Regent can again fulfil its potential?" Fulfil its potential. There are many, many good things happening there. I know because I go there but it could be so much more. If you imagine what could happen, particularly to the exterior and to the ramparts access, I just imagine myself wheeling my mum along the top with that view and smelling the roses. Why not? The first thing that the Minister for Treasury and Resources said in that demand was: "By the way, remember there is not any money." Now, if the States is the driver for the renovation and the excitement that could be Fort Regent and we start with that premise that we cannot put any investment in at all, then how are we going to galvanise the community? How are we going to get all the people who use Fort Regent to muck-in and make that place what it could be? It is a very sad indictment and I do want to point out that the situation with regard to Fort Regent is analogous to householder. We hear about: "If we look in our handbag and it has not got any money in it then we cannot spend it" but in fact householders of course do spend money that is not in their handbag when they buy property. Why do they do that? To improve the quality of their lives. All I am suggesting is that we do exactly the same with Fort Regent. The second example is the Millennium Town Park. Members will remember the ferocious battles to achieve a park that was not covered in buildings. Why did we have to have buildings?

Well, there was an argument about framing the park but the reason, we all know, was to pay for the park. We have got to pay for the park by putting buildings on it. Again, we ducked the issue - although now we have resolved it - of investing for a better Island and we have to have a mechanism for doing this into the future. The other category is invest-to-save.' I have examples here. We have accepted the principle of invest-to-save' within the C.S.R. and I am so glad. Personally I think we should all be grateful that at last this is inscribed as Council of Ministers and official States practice. If we have to put money in upfront for restructuring costs and then we gain a saving year on year then that is all to the good and we have to budget for that. We now all accept this process. One example, simple example, is Planning and Environment, and we have been told in scrutiny and we have now been told in their official report, if they had a proper I.T. system for the 21st century then all their planning processes would be more efficient, they could save money year on year and the public would have a better service. Fine, who would argue with that? So invest-to-save' should be applied to policy as well as process. It should be applied to save money but in policy areas. For example, the sustainable transport policy, if it is successful, as we all hope it is, and we have voted for a 15 per cent reduction in commuting, then land will be released in town that can be developed with the attendant capital gains which come to the States or to the Parish of St. Helier. There is an invest-to-save' or in the case of Health and in the C.S.R. workshop document we read in the health section .. but when financially times are hard, and this is from the report of the review group into health: "When financially times are hard' it is often these upstream investments that create cost pressures." By that they mean encouraging and even requiring our population to stop smoking, eat healthily, take more exercise and control weight and alcohol consumption. That is the context. "When times are hard it is often these upstream investments that create cost pressures now but deliver benefits in terms of better health and less demand for services in future. It is these investments that are the first to be considered for cuts."

[10:45]

We know that because twice the Minister for Health and Social Services in written answers to written questions has said exactly that: "Oh, we are under pressure, we will have to keep the services that are acute to keep people alive where there is a life and death question" and these services are the ones by implication that will go to the wall. We cannot run an Island, or it is not sensible if we do run an Island like that, but it is a daft way to run the show. So I suggest that we should have a mechanism for doing that. Road safety: many people talked in the sustainable transport policy debate about road safety and the amount of gains that there are to be had if we invest-to-save', and energy efficiency, of course, homes and buildings across the Island, that is invest-to-save.' I would suggest that when the savings are bankable they go back into the fund to be recycled. So it is a recycling fund and therefore you can see the invest-to-save' principle working. How would this work in practice, this £33 million that I want to put back into the pot? It would be dependent on the economics at the time, the State of the Jersey economy. The F.P.P., the Fiscal Policy Panel, is quite clear that there are upside risks, downside risks, it is all very fluid. In fact we know that if Zero/Ten is found to be non-compliant then we have a huge unknown - an unknown unknown - in the middle of all our calculations. So this is an indicative debate at best. But if the economy picks up more than expected then income tax receipts rise, unemployment falls and with it the cost of government because income support falls, public finances therefore are in a stronger position, there is therefore scope to restock the Stabilisation Fund and we would fund spending from the social investment fund through taxation, because the economy is doing fine. The whole thing has to be carefully managed so that the economy does not overheat. The exact reverse is true. If the economy is in the doldrums, as it is now, income tax receipts flat-line, unemployment remains high, the economy needs to be stimulated, as again we have accepted that principle in the last 2 years, it is appropriate for the Government to spend from the social investment fund and this will act in exactly the same way as the fiscal stimulus package. That investment would come from transfers from the Strategic Reserve, as it should do, or from the Stabilisation Fund if that is picked up in the meantime. The other element of the Social Investment Fund, and it is a new form of taxation that we have not considered, is the carbon levy that I would suggest. That would go straight into the Social Investment Fund and fund Jersey's transition towards becoming a low carbon society. Lest Members might be tempted to think that this is some kind of optional extra, low carbon is the only place to go. For 2 very good reasons: one is climate change, and I do not think we will have long words on climate change but I am quite willing to have a verbal punch up if

anybody wants one. But on the general issue of why we have, as a society, to go low carbon .. The Bailiff :

What has this got to do with the cuts at the moment? What has it got to do with your amendment? The Deputy of St. Mary :

£33 million invest-to-save.'

The Bailiff :

Your proposition is not to carry out the cuts which the Minister for Treasury and Resources is proposing.

The Deputy of St. Mary :

Not to carry out the cuts. Well, I shall spare people William Haig's quote about how societies have to go that way. But the benefits to individuals of that kind of investment, which would not happen under a regime of cuts it happens to a limited degree, energy efficiency is on the radar and we do £1 million worth of it every year. In a written answer to a question, I think it was in the last session, which pointed out that I think it was the Housing Department carried out some work on housing in Clos du Roncier, 30th November: "On average tenants on the estate are making a saving of £467 a year in energy costs." £467 a year. That is good for the environment, it is good for those tenants and it strikes me that it is a good use of public money as well. I would like to see that extended beyond just low income groups because I think that it is a place the Government has a duty to go, in fact to increase the security and resilience of our Island in the face of a very uncertain future with regard to fuel prices and fuel availability. So, efficiency. Why do I reckon that £33 million is a go-able figure and that we can make £20 million worth of efficiencies, which is vastly different from the Treasurer's implicit figure? I have spelt it out in my report so I do not need to go into too much detail. Procurement is a third of it, £6.5 million. Various departments, if you read carefully the C.S.R. workshop reports, can find savings and a certain amount of user pays and savings in energy. I do believe that the £20 million is achievable but I do not believe the £53 million is achievable. Another way to be more efficient if we are talking about being efficient with the public's money is to get things right, is to do things in a timely fashion that otherwise cost us a fortune. The police authority, 10 years, still not with us, recommended by Clothier and others and somehow it never came to pass. One of the results, it has been suggested - and I think I would agree with that view - is the whole disaster around the former Chief Officer of Police, the former Acting Chief Officer of Police and all those characters. That if there had been not one Minister but a police authority then there would have been political oversight but not obviously control of what the police are doing, in a different format. We might have saved ourselves a lot. The Children's Service, we failed to protect children and vulnerable families. We are now having to put that right with Williamson but also we have on the way incurred Family X and the serious case review costing between them over £2 million. Then of course the euro, whereby not listening and not telling the States what the risks were we lost in the region of £6 million, which is £8 million less what it would have cost to hedge the euro at the time. So there are ways of being more efficient and I do not deny that, and that is all to the good. But the Minister for Treasury and Resources is telling us £53 million, of which £14 million is a pay freeze effectively, its terms and conditions, and right at the top of the list is the pay freeze for 2012, 2013 which just happens to be £14 million which is the desired saving. So if you take that out you have £40 million of efficiency savings. It is very comforting, is it not, to think that we can shave-off £40 million out of our various department budgets? But if you look at the evidence - oh dear, the Deputy of St. Mary is going to look at the evidence again - but if you look at the evidence you will find that these cuts are going to be vanishingly-hard to achieve. Remember, I have already said we spend less than half of what other O.E. C.D . (Organisation for Economic Co-operation and Development) wealthy nation jurisdictions do on our public sector. Page 91 on the Corporate Services Review, if you want to check that, into the Annual Business Plan: less than half. So we can get even more savings out of this thin, lean and efficient public sector. Not everywhere is it lean and efficient but mostly. A written answer, this is Education, Sport and Culture on 30th November this year: "E.S.C. (Education, Sport and Culture) has been working hard to identify savings. It has already delivered efficiencies of nearly £4 million between 2003 and 2010. Investigations have shown that many of the areas which have already delivered savings would be severely affected by a further reduction in funding and the services they provide would be compromised." Then comes the horrific list of where we might go if we were to continue cutting E.S.C. and if we do not achieve the savings from the reduction in subsidies to the fee-paying schools. The areas that are mentioned in this question: "Close both the Youth Service and Library, close sports centres and remove the majority of the funding for sport in the Island." It is not me that is saying this, it is the Minister. Now, you can say shroud-waving but I would say if you have to save £11 million off a lean budget maybe this is where you have to go. I have included in my £20 million a couple of million from E.S.C. but this is what they are saying if they go the whole way down, £11 million. "Discontinue all free nursery

education provided through the nursery education fund" would be another option. So that is E.S.C. Public Library Service, Comptroller and Auditor General, what does he say about that? Plenty of money to save here, surely. "Meets most of the U.K.'s national standards for public libraries and achieves a high level of user satisfaction. They have achieved this in a period when its budget has been constrained and this is a testament to the quality of the leadership and the commitment of the staff." Then, this is still his findings: "Spending restraint. Assuming that the States continue to restrict spending, the Library's budget will continue to be restricted. It is likely to be more difficult for the Library to continue to meet national standards. If the proposed closure of the branch library is implemented and it is not possible to increase usable space at the Halkett Place library, achievement of certain U.K. national standards will become even more difficult." Property maintenance: "The Halkett Place building was opened in 1989 and, with age, the expense of maintaining the building is increasing, having for many years been negligible." Save where it does not show. "This will be difficult to manage within a limited budget." So the Library Service, according to the Comptroller and Auditor General, is on the edge. The Comptroller and Auditor General looked at the management of the Health Service. Now, I remember some sort of mantra that there are layers and layers of managers all managing each other managing each other and, therefore, we can save a few million at Health. Now, that is not the view of the Comptroller and Auditor General.

[11:00]

March 2009, page 33: "Our review uncovered no evidence of excessive expenditure on managerial or supervisory posts. We did, however, observe some evidence of shortage of management capacity in some areas. For example, within the directorates of medicine and surgery and anaesthesia, the directorate managers had little or no support in their roles despite the substantial scale of their managerial responsibilities. The resources of the finance function were also under strain. As in relation to the question of the number of management levels in the organisation structure, therefore, we found no evidence of inefficiency." Then he says there is a problem with data collection with knowing how much things cost and he recommends that that be addressed. That is fair enough but the gist of what he is saying is that if you look at what people are doing and interview people, then you find that it is not an inefficient organisation, but that is not what we are told. We are told: "Oh, we can save a few million down at Health because they are all managing each other." "The department's organisation structure is inherently complex because of its need to perform a wide range of functions that elsewhere would normally be organised in a number of separate institutions. Given this context, the department contains the range of specialist functions that might be expected in an organisation of this nature and scale, taking into account practice in U.K.-based institutions." So not only are they not over-managed, not inefficient by and large, but they have specific issues related to Jersey which is that they are one hospital for 90,000 people. So I am sorry. I am not getting a picture of where we can find loads and loads of easy savings so maybe they are not going to be efficiency savings. Maybe they are going to be cuts. I was in a scrutiny hearing with Planning and Environment and the Chief Officer explained how difficult it was going to be to implement his cuts because he had a department where basically one person did each job. That is obviously not true in Building Control and so on but there are many areas within Planning where the expertise is very thinly stretched. Our Chief Executive giving evidence about the E.f.W. (Energy from Waste) and the attendant problems and issues said memorably that the States of Jersey Civil Service is run on a shoestring. So where are we going to find £40 million if we are already on a shoestring? So I reject and I urge Members to reject a £33 million cut which will turn out to be .. although we have not seen the details or we have seen some of them, but I think it will be a cut because efficiency savings beyond my own £20 million which I accept are simply not going to be available. "Low tax, high spend" says Senator Shenton in a report somewhere. He says we are a low-tax, high-spend jurisdiction. We are not. We are a low-tax, low-spend jurisdiction and that is why we cannot afford to cut any more. It is unrealistic and the fact that Ministers have led the public to believe that somehow they can magically have good services for very low taxes, that spell has to be broken. Someone has to come clean. It was interesting to see the Minister for Treasury and Resources' difficulties in front of the Corporate Services Panel when he said: "Why is it that one minute we are told it is £50 million, the next minute it is £100 million?" The problem was that the Minister for Treasury and Resources did not

want to admit that there was £50 million that he had to get. The extra £50 million was his contingency, his restructuring and the backlog and the infrastructure that we have not invested in for so long that we have to get some money in from the public to pay for it. So there is this problem of laying out a stall which is not realistic and the chickens have to come home to roost. We have to tell the truth but it is very difficult because what we are saying is that we are going to have to pay for this backlog and start asking the public to pay for this backlog in a recession and that is obviously very difficult, which is why various amendments talk about the Strategic Reserve because we are in a very, very hard place - or rather the public is. The second problem with low tax, low spend is where does it go? Where does it lead us? There are 2 issues there and one is it leads us straight to the Waterfront. Now, I well remember the Waterfront; one of the sayings of our former Chief Minister: "Not a penny of public money will be spent" and the result is there for all to see, unambitious and cheap, destroying our civic pride. Whatever happened? Joy to be Jersey? Gorey Castle? Royal Square? The markets? The countryside? The Waterfront, because we tried to do it on the cheap. We nearly went the same way with the Town Park but we were saved by an amendment and then by another debate and then by another debate and then by I think another debate but at least we saved that one. Now, the other technique we use for magically providing public services at a lower cost than anywhere else is we put things off. We have a set policy of mañana which for those who do not know any Spanish at all but I think most people know what it means: tomorrow. Put it off if you possibly can until tomorrow or even do not do it at all. Only last week, there was a question asked of the Minister for Housing about housing maintenance. In 2007 he said we had an estimated £75 million backlog. Housing Department had a £75 million backlog. That is mañana. We will not do it now. We have not got the money. We will do it tomorrow. A new condition survey has just been completed and the data collected indicates that the maintenance backlog has reduced significantly to around £46 million. The maintenance backlog is now only £46 million. We have a proposition from Deputy Green that arrived in our letterboxes last week about Pomme d'Or Farm. There we see what the result of mañana politics is. He talks about how the residents there live daily, and I am sure he does not mind my quoting his proposition: "with obnoxious smells, smells emanating from a very old sewerage system which is in dire need of redevelopment." Mañana again. Smells which affect their quality of life and he says that: "the conditions at Pomme d'Or Farm, substandard internal accommodation which is both unhealthy and unacceptable. Damp, poorly heated, mouldy and unhealthy conditions." This is totally unacceptable and a disgrace and he says in that proposition that those residents have been living in that estate in those conditions for 10 years. Jersey, I should remind Members, is the richest place on the planet. Give or take one or 2 very small islands in the Caribbean, we are the richest place on the planet and yet we have  [Aside] the previous Minister for Housing is