States Meeting Transcript - 8th November 2011

STATES OF JERSEY OFFICIAL REPORT

TUESDAY, 8th NOVEMBER 2011

STATEMENT ON A MATTER OF OFFICIAL RESPONSIBILITY..........................4

1. The Chairman of the Privileges and Procedures Committee will make a statement about the Education and Home Affairs sub-panel review Issues surrounding the Review of Financial Management of Operation Rectangle'.............................4

1.1 Connétable J. Gallichan of St. Mary (Chairman, Privileges and Procedures Committee).4

1. Senator S.C. Ferguson:..................................................................6
2. Senator S.C. Ferguson:..................................................................6
3. Deputy R.G. Le Hérissier of St. Saviour:................................................6
4. Deputy R.G. Le Hérissier: ...............................................................6
5. Connétable D.W. Mezbourian of St. Lawrence:..........................................7
6. Deputy T.M. Pitman of St. Helier:.......................................................7
7. Deputy T.M.Pitman:....................................................................7
8. Deputy M. Tadier of St. Brelade:........................................................8
9. Deputy M.R. Higgins of St. Helier:......................................................8
10. Deputy M.R.Higgins:................................................................8

PUBLIC BUSINESS..............................................................................9

2. Draft Budget 2012 (P.159/2011)..........................................................9

Deputy S. Power of St. Brelade:................................................................9

1. Senator P.F.C. Ozouf (The Minister for Treasury and Resources):.......................9

2. Draft Budget 2012 (P.159/2011): amendment (P.159/2011 Amd.)......................17

1. Deputy G.P. Southern :..................................................................17
2. Senator P.F.C. Ozouf :..................................................................21
3. Deputy G.P. Southern :..................................................................23

3. Draft Budget 2012 (P.159/2011): fourth amendment (P.159/2011 Amd.(4))...........25

Senator P.F.C. Ozouf :........................................................................25

1. Senator P.F.C. Ozouf (The Minister for Treasury and Resources):......................25
2. Senator B.E. Shenton:..................................................................27
3. Senator F. du H. Le Gresley:............................................................28
4. Connétable J.M. Refault of St. Peter:...................................................28
5. Senator B.I. Le Marquand:..............................................................28
6. Deputy E.J. Noel ofSt.Lawrence:......................................................29
7. Deputy M. Tadier :......................................................................29
8. Connétable M.K. Jackson of St. Brelade:...............................................30
9. Senator F.E. Cohen:....................................................................30
10. Senator P.F.C. Ozouf : ...............................................................30

4. Draft Budget 2012 (P.159/2011): Second Amendment (P.159/2011 Amd.(2))..........33

1. Deputy G.P. Southern :..................................................................33
2. Senator P.F.C. Ozouf :..................................................................35
3. Senator S.C. Ferguson:.................................................................37
4. Deputy M. Tadier :......................................................................37
5. Deputy J.G. Reed of St. Ouen:..........................................................39
6. Deputy M.R.Higgins:..................................................................39

LUNCHEON ADJOURNMENT PROPOSED..................................................41 LUNCHEON ADJOURNMENT................................................................41

7. Deputy R.G. Le Hérissier: ..............................................................41
8. Senator B.I. Le Marquand:..............................................................42
9. Deputy A.E. Jeune of St. Brelade:......................................................43
10. Senator J.L. Perchard: ...............................................................43
11. Deputy G.P. Southern : ..............................................................44

5. Draft Budget 2012 (P.159/2011) - as amended..........................................46

1. The Deputy of St. Ouen:................................................................46
2. Deputy A.E. Pryke of Trinity :..........................................................46
3. Senator A. Breckon: ....................................................................47
4. Senator B.E. Shenton:..................................................................48
5. Deputy P.J. Rondel of St. John : ........................................................49
6. Connétable K.P. Vibert of St. Ouen:....................................................50
7. Deputy M. Tadier :......................................................................50
8. Senator F. du H. Le Gresley:............................................................53
9. Senator S.C. Ferguson:.................................................................54
10. The Connétable of St. Brelade:......................................................54
11. Deputy D.J.A. Wimberley of St. Mary : ..............................................55
12. The Connétable of St. Mary : ........................................................56
13. Deputy G.P. Southern : ..............................................................56
14. Deputy A.K.F. Green of St. Helier : ..................................................57
15. Senator F.E. Cohen: .................................................................58
16. Deputy E.J. Noel:....................................................................58
17. Senator P.F.C. Ozouf : ...............................................................58

3. Draft Finance (2012 Budget) (Jersey) Law (P.160/2011)...............................64

3.1 Senator P.F.C. Ozouf (The Minister for Treasury and Resources):......................64

4. Draft Income Tax (Amendment No. 40) (Jersey) Law (P.161/2011)...................66

1. Senator P.F.C. Ozouf (The Minister for Treasury and Resources):......................66
2. Senator P.F.C. Ozouf :..................................................................66

5. Draft Goods and Services Tax (Miscellaneous Amendments No. 2) (Jersey) Regulations (P.162/2011)................................................................67

5.1 Senator P.F.C. Ozouf (The Minister for Treasury and Resources):......................67

1. Senator T.A. Le Sueur:.................................................................67
2. Senator P.F.C. Ozouf :..................................................................68

6. Procedures of the States: misleading information and selection of Scrutiny Chairmen and members (P.169/2011) - proposal by Deputy of St. Mary to reduce minimum lodging period under S.O.26(7)..........................................................69

6.1 The Deputy of St. Mary:................................................................69

1. Deputy R.G. Le Hérissier: ..............................................................70
2. Senator P.F.C. Ozouf :..................................................................70

3. Deputy F.J. Hill of St. Martin : ..........................................................70
4. Senator T.A. Le Sueur:.................................................................71
5. Deputy M. Tadier :......................................................................71
6. Senator T.J. Le Main: ..................................................................73
7. The Connétable of St. Mary:............................................................73
8. The Deputy of St. Mary:................................................................73

ARRANGEMENT OF PUBLIC BUSINESS FOR FUTURE MEETINGS ....................75

7. The Connétable of St. Mary (Chairman, Privileges and Procedures Committee):.......75

7.1 Senator A. Breckon: ....................................................................75 The Connétable of St. Ouen:..................................................................76

ADJOURNMENT................................................................................76

[9:30]

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

STATEMENT ON A MATTER OF OFFICIAL RESPONSIBILITY

1. The Chairman of the Privileges and Procedures Committee will make a statement about the Education and Home Affairs sub-panel review Issues surrounding the Review of Financial Management of Operation Rectangle'

1.1 Connétable J. Gallichan of St. Mary (Chairman, Privileges and Procedures Committee)

The Privileges and Procedures Committee has recently been approached by BDO Alto ("the firm") which has asked the committee to investigate their concerns about the manner in which the Education and Home Affairs Scrutiny Sub-Panel's review into issues surrounding the Review of Financial Management of Operation Rectangle has been conducted. To avoid any perception of a potential conflict of interest, Senator Ferguson as president of the Chairmen's Committee, Senator Le Marquand as Minister for Home Affairs and Deputy Trevor Pitman as chairman of the sub- panel, did not participate in the consideration of this matter which was therefore considered by the remaining 4 P.P.C. (Privileges and Procedures) members. In making this statement I wish to make it clear that, notwithstanding the ongoing concerns expressed to us, P.P.C. is not questioning the Chairmen's Committee original decision to allow the sub-panel's review to go ahead. Neither is it questioning the choice by the Education and Home Affairs panel of this particular review topic. P.P.C.'s concerns therefore relate solely to the manner in which the sub-panel and the Chairmen's Committee have acted in this matter. P.P.C. further wishes to make it clear that its involvement in this matter comes not in the usual manner from a complaint under the Code of Conduct for States Members but rather from paragraph 4.25 of the Code of Practice for Scrutiny Panels and the P.A.C. (Public Accounts Committee), R.30/2008. This states that: "Questions about a potential conflict of interest on the part of a member of a panel should be referred in the first instance to the Chairmen's Committee for consideration who will refer the matter to the Privileges and Procedures Committee if a satisfactory resolution cannot be achieved." Although in this case there was a resolution put forward by the Chairmen's Committee the complainant did not feel that the terms of that resolution had been adhered to. P.P.C. has also considered this matter in accordance with its duty under Standing Orders to "promote high standards among members of the States". The committee's investigations have shown that the firm first approached the Chairmen's Committee at the outset of the review because it was concerned about the perceived lack of impartiality of the sub-panel chairman, Deputy Trevor Pitman. At that stage the Chairmen's Committee considered the concerns raised but concluded that it saw no reason to prevent the review going ahead. Before making this decision the Chairmen's Committee had received correspondence from the chairman of the Education and Home Affairs Scrutiny Panel which included an undertaking that: "The review will be conducted rigorously and fairly and that all matters will be dealt with on an evidential basis."

When responding to the firm on 1st July the Chairmen's Committee wrote: "The chairman of the sub-panel and the chairman of the main panel were quite clear that they were determined to focus the review on evidence from a full range of witnesses and to consider their findings in a fully objective fashion. They gave an undertaking that there would be no further public comments by members of the sub-panel on issues connected with the review until the review had been completed." In contacting P.P.C. recently the firm remained concerned that its initial concerns about conflict of interest had not been properly addressed but they also raised additional concerns that the undertakings about "no further public comments" had not been complied with. The firm drew P.P.C.'s attention to entries on Deputy Trevor Pitman's own blog about the review, to a Channel Television interview he had given and to 2 video interviews about the review given by Deputy Pitman to the Voice for Children blog. P.P.C. considered the content of the blogs and received transcripts of these video interviews. P.P.C. was extremely concerned about the tone and content of the 2 video interviews by the sub-panel chairman which were critical of the actions of BDO Alto, and which comment on a wide range of other issues relating to the ongoing review.

Having identified these matters P.P.C. wrote to the Chairmen's Committee to inquire what action, if any, the committee had taken to enforce the undertaking given at the outset that the members of the sub-panel would not make public comment during the course of the review. It was clear from the response received that no action at all had been taken by the Chairmen's Committee even though the president wrote in her reply that: "The Chairmen's Committee does indeed stand by its decision that it is inappropriate for any comments to be made on personal sites during any Scrutiny Review." Prior to the final preparation of this statement, P.P.C. met with the president of the Chairmen's Committee, Senator Ferguson, who confirmed that no specific measures were put in place by the Chairmen's Committee to monitor adherence to the undertaking given by the sub- panel. The Senator opined that this matter was effectively delegated to the chairman of the main Education and Home Affairs Scrutiny Panel and indeed her letter to P.P.C. dated 11th October 2011 included the comment: "However, the Chairmen's Committee has also been made aware that reminders to the sub-panel chairman in respect of his undertaking not to make blog entries have been given by the main panel chairman." P.P.C. subsequently also met with Deputy Le Hérissier, chairman of the main Education and Home Affairs Scrutiny Panel, and Deputy Trevor Pitman, chairman of the sub-panel. During that meeting it became apparent that Deputy Pitman disputed that he had given an undertaking not to make further public comment on issues connected with the review prior to its completion. He commented that he would not allow himself to be constrained in such a way and that he would respond to media inquiries, including those from citizens' media as he felt appropriate. He was asked if he had seen the letter of 1st July in which the undertaking was given and he said he could not be sure, although Deputy Le Hérissier reminded him that he had seen it. Deputy Le Hérissier said he had reminded Deputy T. Pitman about the undertaking but had believed that the blog entries had tailed off very soon after the letter of 1st July was sent. It is clear from these 2 meetings that there was confusion between the Chairmen's Committee and Deputy T. Pitman about the precise nature of the undertaking given to the firm. The Chairmen's Committee was not monitoring the situation and Deputy Pitman did not advise them that he disagreed with the undertaking set out in their letter to the firm. The chairman of the Education and Home Affairs Scrutiny Panel did not feel that he had been specifically tasked with monitoring the situation as he felt he had been involved in the early discussions about a potential conflict more as a witness than as a member of the Chairmen's Committee. The correspondence that P.P.C. has seen makes it clear that the sub-panel chairman was well aware at the outset of this review that concerns had already been raised about a perceived lack of impartiality on his part. P.P.C.'s view is that when the Chairmen's Committee nevertheless agreed that the review could proceed he should have been scrupulous to ensure that the review was conducted in accordance with the undertakings given to that committee. P.P.C. does not know what conclusions or recommendations will be in the sub- panel's report when it is published in the coming days, but is concerned that whatever the outcome, the review may be overshadowed by a perception that a conflict of interest did exist despite assurances to the contrary given by the Chairmen's Committee. P.P.C. would consider it to be regrettable if because of this perception, the review was seen by some to be of limited value. P.P.C. is equally concerned that the Chairmen's Committee, having allowed this review to go ahead on the basis of certain undertakings, took no action as soon as the committee became aware that those undertakings had not been complied with. P.P.C. would suggest that the next Chairmen's Committee take on board the following: 1. If a commitment has been made then it must be communicated to all parties; 2. Any commitment must identify who is responsible for maintaining compliance; 3. Compliance with a commitment must be monitored; 4. Members must be scrupulous to ensure that their actions do not reinforce any perceived conflict; 5. Scrutiny members must recognise that the successful outcome of a review is their paramount concern. Recommendation 4 in the recent review of the last 3 years of Scrutiny undertaken by the Chairmen's Committee, R.118/2011, is that: "All members and officials must ensure adherence to Standing Orders, Codes

of Practice, Protocols and Guidelines". [9:45]

The new Assembly will shortly be sworn in and this is the ideal opportunity to review the lessons learned from recent reviews and to ensure that members undertaking the vital role of Scrutiny in future are adequately supported. P.P.C. believes that if Scrutiny is to be taken seriously in the new Assembly the new Chairmen's Committee must be prepared to take steps to ensure that Scrutiny Panels act in a professional way and the committee must be willing to take firm action if panels do not follow agreed procedures.

The Deputy Bailiff :

The statement having been made the matter is then open to questions.

1. Senator S.C. Ferguson:

I have not yet received an explanation as to why I was excluded from the discussions as being conflicted. Perhaps the chairman would explain to the Assembly.

The Connétable of St. Mary :

Indeed I did give an explanation of this to Senator Ferguson when she attended on the P.P.C. last week. The explanation being that as President of the Chairmen's Committee and that being the organisation being directly looked into by the P.P.C, there was obviously need to consider whether she would be conflicted. An initial meeting was held by P.P.C. to discuss this with the 4 members who clearly were not conflicted and it was unanimously agreed that this was the right course of action.

2. Senator S.C. Ferguson:

Supplementary? Would the chairman also explain what P.P.C. intends to do or to recommend to the new P.P.C. regarding blogging by all Members of the Assembly when they are involved with Scrutiny reviews?

The Connétable of St. Mary :

I would like to be quite clear; the purpose of our investigation has been to deal with the perceived conflict of interest by the Scrutiny Panel itself. Matters of other members blogging, witnesses for example, may be something that needs to be considered but did not form part of this discussion.

3. Deputy R.G. Le Hérissier of St. Saviour :

Notwithstanding the confusion that may have arisen, would the chairman acknowledge that a letter was sent to P.P.C. on 27th September from the major witness who was cited in this report? The contents were never shared with ourselves or with the Chairmen's Committee. I and the sub-panel chairman were summoned to meet P.P.C. with 2 days' notice with no explanation given of what the charges were or what the circumstances were. Would she confirm that those were the circumstances and to this date we have not seen that letter and until that letter is replied the witness will not verify their evidence to the Scrutiny Panel?

The Connétable of St. Mary :

Deputy Le Hérissier is well aware of the reasons why P.P.C. was undertaking this investigation. The letter sent to P.P.C. was requested specifically because of perceived conflicts of interest of members of P.P.C. to be dealt with exclusively by the remaining panel, but Deputy Le Hérissier was advised of the nature and the specifically tight nature of the matter we were investigating, which was simply the perceived conflict of interest. As for whether or not the witness will reply to the report, whatever Deputy Le Hérissier mentioned, P.P.C. has been specific to advise the witness that any replies it needs to make to the Scrutiny Report should not be held up as a result of this statement.

4. Deputy R.G. Le Hérissier:

Can I ask a supplementary? Does the chairman - I repeat the question - think it is right to accuse people of things in total darkness and in a covert manner? We were not informed. The company mentions legitimate and numerous concerns. That is what is on the letter to us and to the chairman. Why were we not informed of those concerns and not given an opportunity to reply to them?

The Connétable of St. Mary :

As I said, Deputy Le Hérissier was informed of the precise tight nature of this inquiry. The numerous concerns mentioned are all concerns of perceived conflict of interest that are raised in the blog entries, but they all stem from the same direct concern.

5. Connétable D.W. Mezbourian of St. Lawrence :

A bit more general; in the final paragraph we are told that: "P.P.C. believes that if Scrutiny is to be taken seriously in the new Assembly .." This is a question addressed to the chairman of P.P.C., I would like her to tell the House of her view as to how Scrutiny has been viewed in this Assembly?

The Connétable of St. Mary :

I do not purport to speak for the Assembly but I would say that there have been numerous instances where Scrutiny members say they do not think their work has been valued, therefore I think it is entirely appropriate to mention when Scrutiny members themselves seem to be the cause of their undervaluing.

6. Deputy T.M. Pitman of St. Helier :

Can I just say that as I believe the chairman is misleading the House, I will be seeking to make a statement tomorrow and I will be putting it on my blog. Will the chairman just confirm that we were denied any access to these allegations and  it  is completely untrue to say that we were informed about the details because we were not, and if the chairman cannot confirm that I will have to say that she is telling the House an untruth?

The Connétable of St. Mary :

All the other parties were informed that we were investigating a perceived conflict of interest. Any details stemming from that stem from the entries in the blogs themselves. There is no intention to mislead the House. I have said exactly what has transpired but the content of the letter to P.P.C. is kept confidential as has been requested.

7. Deputy T.M. Pitman:

Supplementary? Again that is not correct that we have been informed of these alleged conflicts, which were of course thrown out by the Chairmen's Committee. Does the chairman think it is not right? The actual thing she is referring to is my revelation that this company was attempting to charge the taxpayer and Scrutiny £14,000, discounted from £26,000, for attending a 2-hour scrutiny hearing and have been obstructive right from the very start.

The Connétable of St. Mary :

There are those who may think that this was a reluctant witness right from the start, but any investigation of the chronology of events leading up to this review would at least give some explanation as to why that perception might exist. P.P.C. understands that the review was initiated by approach from 2 local bloggers, one of whom had published a highly critical series of reports about this particular company which of course, as with any other company, needs to defend its professional image. On 12th June, that blog announced that the review would take place some 2 full days before the Education and Home Affairs Scrutiny Panel had met to decide that that would happen. Not only was it announced 2 days before the panel had agreed to undertake it on the blogger's site, but it was also referred to on that same day by Deputy Pitman, on his own blog. Therefore I think we have some understanding of how concerns of preconceptions have already started to appear in the minds of that company. As regards a fee note, which is obviously a

confidential matter sent to the panel, which was broadcast widely by Deputy Pitman and others, my understanding is that was the result of a misunderstanding between the company and the department, and the company was advised quite firmly that Scrutiny does not, has not and will not pay for evidential evidence, although I would stress that this is not by any means the only time when a fee note has been raised in error and having been advised of the fact the company has not sought any payment thereafter, to the best of my knowledge.

Deputy T.M. Pitman:

The chairman is misleading the House; the company are still seeking that money.

8. Deputy M. Tadier of St. Brelade :

First of all may I congratulate the chairman in her part that she is playing in this highly predictable set piece, which is to discredit the report of the Scrutiny Panel even before it comes out. The question is, why is P.P.C., and the chairman in particular, so quick to jump on a perceived conflict due to the separation of roles from a Back-Bench Member when it does nothing and has done nothing to address the conflicts of interest with the Constables, the Jurats, the Solicitor Generals, the Attorney Generals, and the Bailiff who also have dual roles, which is a much more important conflict of interest than a Back-Bencher. I would ask also why P.P.C. does not take the plank out of its own eye before trying to remove the speck from one of its Back-Benchers who is trying to do a job to uncover a very important issue for the public of Jersey, which has already been discredited, probably successfully, by P.P.C?

The Connétable of St. Mary :

Firstly I regret the fact that Deputy Tadier seems to try to import motives to me that simply do not exist. Secondly, I am specific that this investigation is simply into a perceived conflict of interest, which has already been adjudicated on by the Chairmen's Committee for which undertakings were given and then, blatantly, these undertakings were not complied with. That is no fault of P.P.C. and it is not a question of a dual role. It is one of States Members absolutely actively deciding to take one course of action, which may or may not be to the detriment of the final report. P.P.C. has, quite clearly from my statement, taken no issue with the subject of the report or even issue with the way the Chairmen's Committee adjudicated initially on the conflict of interest. So Deputy Tadier must understand and listen to the content of the statement rather than making his own ill-conceived judgments.

9. Deputy M.R. Higgins of St. Helier :

I may have misheard the chairman, but did she say that some information was not passed to the people who were accused of having a perceived conflict of interest because the person who had written said the matter was confidential? If that is the case, does she think she has followed the principles of natural justice by revealing all the allegations and all the information to the people who have been accused of this conflict?

The Connétable of St. Mary :

As I have said repeatedly, what P.P.C. has investigated is a very narrow point arising out of a letter. The point we are investigating is a perceived conflict of interest in the way the review has been carried out - nothing more, nothing less - relating specifically to blog entries and media statements given by the chairman of the sub-panel. To that extent everybody has been informed as to what P.P.C. has been looking into.

10. Deputy M.R. Higgins:

Supplementary? Can the chairman just confirm was all the information that she was given passed on to the people who were accused of this perceived conflict of interest?

The Connétable of St. Mary :

All the information I have ever been given about anything? No. What has been passed on is the information relevant to the investigation that P.P.C. has undertaken.

The Deputy Bailiff :

The 10 minutes has now expired and therefore questions are at an end. PUBLIC BUSINESS

Deputy G.P. Southern :

If I may, could I inform Members that I wish to withdraw P.168 on nurses pay. The comments that arrived yesterday change the circumstances of that proposition and I need to withdraw it in order to work further on it. But I only got the comments last night, so I apologise to Members for the late notice.

Senator T.A. Le Sueur :

I apologise for the late arrival of those comments but I welcome and thank the Deputy for his action this morning.

2. Draft Budget 2012 (P.159/2011) Deputy S. Power of St. Brelade :

May I make a request? I am minded not to take part in the Budget debate and I have a number of reasons for this. I feel, and I have felt, and I have expressed my views to Senator Ozouf , that the Assembly should not have taken part in any further business after the decision to run the election. In that case, on 19th October 4 new Constables, 2 new Senators and 10 Deputies were elected which will represent 31 per cent of the 51-seat Assembly. In my view, having spoken to 3 of them, these Members feel they are disenfranchised in a major piece of work, which is the 2012 Budget. Therefore, I will not take part in this debate and I will withdraw and I urge other Members to consider their position. This is nothing to do with my respect for the Minister for Treasury and Resources or his work. It is simply that we should not be debating this.

The Deputy Bailiff :

Very well, if you are going to withdraw, you can withdraw. I therefore call on the Greffier to read the proposition P.159.

The Greffier of the States:

The States are asked to decide whether of opinion to approve the estimate of total taxation revenue in 2012 of £574,778,000 as set out in summary table A on page 48 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, and land transaction tax and stamp duty court fees for 2012 as set out in the Budget Statement.

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

Today's debate is taking place at a critical time for the world economy and for Jersey. The Governor of the Bank of England has said: "This is the most serious financial crisis seen since the 1930s, if not ever." Add it to the President of the World Bank's comments last Friday that the world economy is still wobbling on the edge and could tip very quickly, that the integrity of the European single market is also under threat.

[10:00]

Economic growth in the G7 economies is forecast to be less than 1 per cent in the second part of 2011. Business and consumer confidence in the United States continues to fall as Governments run out of options to stimulate growth. Closer to home, the U.K. (United Kingdom) is in the process of rebalancing its economy and the Bank of England has injected a further £75 billion in a round of new quantitative easing to buy time and address the underlying problems of excessive debt and over-leveraged balance sheets. In the past, market determined exchange rates helped balance trade surpluses and deficits between countries facing economic difficulties; however, now that many European countries have fixed their exchange rates we cannot expect a swift resolution to the current European sovereign debt crisis. With regard to our own position, in October 2011 the report from Jersey's Fiscal Policy Panel said that future expectations for global economic growth have been revised downwards and the speed and the extent of the global recovery is now much more uncertain than before. This was likely to hold back Jersey's recovery although it is hard to quantify the effects. The Fiscal Policy Panel has now revised its central estimates for economic growth next year to between minus and plus 2 per cent. The F.P.P.'s (Fiscal Policy Panel) advice on what we should do is clear. We should be ready to support economic activity without weakening States finances. This is what we have been doing and this is what this Budget will continue to do. Before addressing the specific measures in this year's Budget, I would like to reflect for a few moments on the last 3 years, our current position and the journey that has brought us here. In 2009 I had the difficult job of reporting to this Assembly a forecast recurring deficit of up to £100 million by 2013. It is worth recalling that this deficit was calculated to include not only the effect of the global downturn but also restoring appropriate contingencies for unforeseen expenditure and setting reasonable spending estimates. This meant our public finances were, however, in danger of being destabilised. Unlike certain Governments who are now in serious difficulties, we did not take the easy path. We were transparent, we identified the problems, we took proper independent advice and we faced up to dealing with our deficit. Together we resolved to tackle it with a 3-part plan: reducing spending by £65 million over 3 years, boosting economic growth through a fiscal stimulus package and raising taxes by £35 million to close the remaining gap. What progress have we made against our plan? Firstly, on C.S.R. (Comprehensive Spending Review) savings. All departments are delivering and as a result we have collectively exceeded our targets for this year. The approval by the Assembly of the 2012 Business Plan means that we are also on course to achieve our target of £33 million of savings in 2012. Savings of a further £32

million are planned for 2013. I want to repeat my thanks to the independent reviewers who gave up their time and experience to serve the Island. I also want to recognise the Corporate Affairs Scrutiny Panel's role in assisting with the Comprehensive Spending Review. Their latest report has some constructive observations that the C.S.R. is more than just about efficiencies. It is a key part of the fundamental reform of the public sector that we have begun in this administration and must continue in the next. Secondly, boosting the economy. Members approved the plan to stimulate the economy with the targeted use of £44 million of fiscal stimulus cash. It is encouraging that through Advance to Work 200 young people have found employment. Young people are now in States apprenticeships and long-term unemployed people are being brought back to work through Advance Plus programme and Work Zone. Fiscal stimulus has kept Jersey going. More than that, Jersey Hospice, Durrell, the Shelter, the Opera House and other third sector bodies have benefited from the new investment to assist them in their outstanding work I think Members should be proud of the lasting legacy of all of these projects and housing and infrastructure improvements. Thirdly, tax. In last year's Budget Statement I promised that we would develop new tax policy in a number of areas and I am pleased to report that significant progress has been made. The new Tax Policy Unit issued its report on the outcome of business tax in September. It came, of course, as no surprise that the consultation response was clear, that we should retain Zero/Ten. The Zero/Ten model provides fiscal neutrality that is fundamental to our financial services industry and while maintaining tax revenues at an internationally competitive rate. A review of alternative corporate tax regimes, including an economic analysis, concluded that moving to an alternative regime would in most cases reduce tax revenues and would damage Jersey's reputation for stability and fiscal independence. While it has sometimes been difficult, upon advice I have maintained the consistent view that Zero/Ten is absolutely fundamental to Jersey's positive economic future. The States has approved legislative amendments, which were intended to remove those elements of our tax

legislation that were considered harmful by the Code Group, and on 13th September the Code Group approved our Zero/Ten tax regime and confirmed that our rollback proposal would remove the harmful effect of our regime. This will be tabled formally at Ecofin next month and the fact that we have secured Zero/Ten, I believe, is excellent news for Jersey. Securing the future of Zero/Ten brings certainty and stability to the business community and give us a significant advantage over our competitors delivering reassurance and certainty to our industry and providing the foundation for growth. This Assembly also approved a new 1(1)(k) tax regime for incoming high net worth individuals. This regime was designed to attract new people and their wealth to Jersey. This will provide the opportunity to bring new entrepreneurship and new jobs to Jersey. Inward investment, particularly, creates valuable economic growth and employment, but I will continue to keep under review the equity and fairness of the current present arrangements. We have maintained an exceptionally strong balance sheet. Property, in its current use, is valued at over £1.7 billion, more if we consider development potential. Infrastructure, including roads, sewers, harbours and the airport are valued at a further £1 billion. Utility companies that are wholly or partly owned by the Assembly have a book value in excess of £250 million. More, if they were ever sold, too. The strength of our balance sheet extends to more than just fixed assets. Most countries meet pension costs from current revenues. Jersey in contrast has both a security reserve fund of £800 million to support the future costs of an ageing population and a health insurance fund with a balance of over £80 million in it today. In addition, the States has a pension fund for all its public sector workers that is fully invested to generate returns and reduce the cost to the taxpayer. Having said that, I do not underestimate the difficulty of providing for an ageing population. Nor, do I underestimate the difficulty of funding public sector pensions when people are living longer and investment returns are falling. There is much, I think, we can learn from the findings of the Hutton inquiry into U.K. public sector pensions, and officials in the Treasury and the Chief Minister's Department are working together with stakeholders to develop options to change that the new Council of Ministers and new States Employment Board will consider. We of course also have a safety net of nearly one year spending set aside in our strategic reserve but in addition we have other substantial cash balances and reserves now receiving more active management within the context of the new Treasury arrangements and the common investment fund. The balance on the consolidated fund, which has improved as a result of the 2010 outturn comfortably covers the deficit of £90 million expected for 2012 and with a return to balanced

budgets in 2013 we will see the consolidated fund increase to the F.P.P. target of at least £20 million by 2014. We have retained the balance of over £10 million in the stabilisation fund, a much better position than I thought possible a year ago. This strong position brought about by past prudence and the measures that we have taken over the last 3 years are the reasons why Jersey is well placed to withstand the current global turbulence and maintain its resilience into the future. This has been perhaps the most difficult time the Island has faced, without exaggerating, since the Second World War. This has been a difficult time to be Minister for Treasury and a Treasury team to face. During the recent elections many Members have faced challenges from Islanders while canvassing. Members would quite understandably ask themselves whether the actions we have taken over the last 3 years were necessary and if there really is a prize for such prudence. We all know our fellow Islanders are finding the current climate difficult. For many local households, particularly those struggling with employment issues, I understand the strong talk of public finances does not mean much at the household level. Islanders, particularly those on fixed incomes, low and middle incomes, have faced a double squeeze. Firstly on their income from the necessary changes to our tax structure and, secondly, the effects from the global financial crisis. I understand that tax increases have had an impact on everybody. This has been a tough phase of fiscal tightening and this has been difficult. The Assembly supported the view that these were, however, the prudent decisions to take. Borrowing or spending from reserves on current expenditure would not have been sensible and many nations are now learning the harsh consequences of following such a path. I believe that future generations will look back on this period and on this Assembly and be grateful that we faced up to our responsibilities. We did forecast the problems ahead and, unlike many other Governments around the world, we did something about it. In the not too distant future I am confident that Islanders will benefit from our prudence and I would like to add my own sincere personal thanks to all Islanders and Members for supporting me and accepting the difficult decisions and, I repeat, that the actions we have taken will play a significant long-term dividend for our Island community. Now we have taken these tough measures what are the challenges facing us in 2012 and beyond? If the weakening in the large economies continues future rises in interest rates will be delayed in the U.K. certainly until 2013. While low interest rates historically were a powerful economic stimulus they do have an effect on our banking profitability. Company tax revenues from the banking sector will therefore not recover until interest rates do. I understand that Jersey retailers are facing competition from internet sales and increasing competition, particularly in the grocery market, and we are all obviously concerned about the future of online retailing. However local retailers have already begun reshaping their businesses and I found it encouraging that the Statistics Unit reported that in the first 6 months of this year retail sales volumes were 4 per cent higher and footfall continues to increase. While unemployment has risen to over 1,300 people from the previous low levels our unemployment, as a proportion of the total job market, is still significantly lower than most jurisdictions. It was encouraging that the number of people in work in June stood at the highest level that we have ever seen recorded. It is also encouraging that inflation in Jersey is lower than that of the U.K. The latest forecasts from the Economics Unit suggest that underlying inflation for the coming year will be in the region of 3 to 3.5 per cent, but I cannot emphasise enough how important it is for high inflation not to be factored into wage and price decisions. This would damage the Island's competitiveness, our local economy and job prospects. The States is right to underline its own commitment to avoiding a wage price spiral. All Governments need to continue to work hard to maintain their economic position. We must be innovative and deliver diversification in the economy to provide the competitive position for all Island businesses in all sectors of the economy. Improving economic performance will secure well paid jobs for Islanders and I would like to explain how this can be achieved. Continuing to enhance our reputation internationally certainly helps. Three years ago we decided to focus our efforts on the emerging development markets in Asia/Pacific and the Middle East; the areas of the world that are going to be in future the engine of future growth. In the last 18 months I was privileged to lead trade delegations to Shanghai, Mumbai, Abu Dhabi, to create new relationships. These cities are the cities that are the fastest growing in the world and our new offices, partly funded by fiscal stimulus money are already

winning new business, creating jobs and securing our economic future. [10:15]

Ministerial colleagues also led delegations to Israel where there is huge potential for Jersey to create new business and build on existing business sectors. Latin America should be our next target market and we should intend to focus on developing new opportunities in this part of the world. We punch above our weight and Jersey continued this year to be ranked as one of the highest rated offshore international financial centres. We climbed into the top 10 locations in the world for wealth management and private banking services, and we now rank in the same group as major city centres like Zurich, Geneva and Frankfurt. For a small Island in financial services we really are a global player and our industry contributes directly or indirectly to a significant proportion of our tax revenue, and there is no comparable industry that can contribute so significantly to our G.D.P. (Gross Domestic Product) on a per capita basis. But Jersey is of course not a single economy. We are committed to encouraging diversification. All sectors of the economy matter: retail, construction, I.T. (information technology), tourism and agriculture. The Minister for Economic Development's new growth strategy is out for consultation and while placing new emphasis on the development of financial services products and markets places equal weight on supporting existing sectors and diversification. In difficult market conditions it is impressive that agriculture has developed a new sense of confidence. I was greatly encouraged yesterday to learn of the successful rural conference. This has been an example of an industry, a ministry, and scrutiny under the

Deputy of Grouville of working well together. I am optimistic that with appropriate Government support agriculture will continue to make a valuable contribution to the economic, social and environmental aspects of Jersey life. During my time at Treasury I thought it was important to concentrate on the balance sheet too and particularly strengthen the relationship with our utility companies for which I am responsible as shareholder. Each company over the last 3 years has made enormous strides to improve efficiency, and the working relationships are now excellent. I would like to recognise the boards of Jersey Water, Jersey Electricity, Jersey Post and J.T. (Jersey Telecom) for their efficient performance, sometimes in difficult trading conditions. Perhaps like our court, J.T. is an unsung hero of helping positioning Jersey for the world today. Yesterday Members heard of the exciting plans to invest in an ultra-high speed fibre optic broadband network. If we remain reliant on the copper wire network then the Island's infrastructure in communication and technology could be compromised and that could undermine future growth and our competitiveness. I carefully analysed the case for going further than simply speeding up copper and have concluded that without doubt fibre is the future. Perhaps even more exciting are the potential economic spin-offs in a whole host of areas that could mean that Jersey is one of the first truly gigabit economies. Lighting up Islanders lives, quite literally, with fibre optic could create a cluster of world class I.C.T. (information and communication technology) businesses that will come to Jersey because of our legal framework, tax benefits, expertise, skills and lifestyle. It is a

chance to potentially create hundreds of new jobs that will directly support businesses in Jersey in the future. Ultra-fast broadband could literally revolutionise also the way that public services are provided. From healthcare to education it can also energise the future phases of the Comprehensive Spending Review as we reform the public sector. Connecting every home in the Island is also socially inclusive. Every household, including low income families, will be able to connect to the fibre optic network at affordable prices. An investment in infrastructure is and could be the beginning of a Jersey new I.C.T. strategy but to do this we must move and we must move quickly. I would like to see the funding for an independent I.C.T. representative body which will provide consultation, industry representation and promotion in a similar way that Jersey Finance does for that sector. While investment in I.C.T. and continued investment in the finance industry will provide stability and diversification there is a need to provide further support for tourism too. I can say that I have released, with the Council of Ministers endorsement, the additional money for the tourism development fund from the contingency but I believe that we can do more. Event led and cultural tourism has been the success story of recent years. Events such as the marathon, Jersey Live, Branchage Film Festival demonstrate the scope of what can be achieved. At a time when other jurisdictions do not have the benefit of Jersey's financial position and they are being forced to reduce their spending on sport, culture and the creative arts it creates an opportunity for Jersey working with these sectors to attract further visitors to Jersey. Over the years tourism has been a vital part of our economy. Today it provides jobs and a whole range of benefits to the Island, including some of the finest hotels and restaurants, vitality in our shops, and it sustains our air and sea links. We should send out a clear message that we believe in its future and will do everything possible to provide more support. States Members will, I hope, appreciate that this has been an exceptional year with only a short matter of weeks between this Budget and the 2012 Business Plan. A review of all forecasts of States income suggests that there are no material changes necessary, even with the more depressed outlook for interest rates. As we have seen capital and infrastructure spending is one powerful way to continue to boost the local economy. We are currently making sure that the £37.5 million of new capital in 2012 is spent next year. Spending includes for the next 12 months: £3 million for the new Gorey pier head; £2 million for Elizabeth Harbour remediation; over £5 million for the Philip Street shaft; £11 million on sewers, roads and sea defences; £5 million for Pomme d'Or Farm and £2.6 million for Clinique Pinel and a further £8 million for the General Hospital. However, money sitting in States bank accounts does not benefit the economy and there have been a number of capital allocations from previous years that have been unspent. For this reason I am determined that both the £21 million for the new police headquarters and the new Ann Court car park fund of £9 million are injected into the economy next

year as soon as possible. But more than that there is also now a pipeline of additional work that could be commenced by the Minister for Housing, Property Holdings and S.o.J.D.C. (States of Jersey Development Company) who are working constructively together, and with the revised investment strategy I published last week we have created a new sustainable method for funding future investments in infrastructure from our own resources. Taken together, our plans on capital and infrastructure spending represent a further significant stimulus for the Jersey economy next year. Getting the money we have working, keeping the economy moving, keeping people in jobs, delivering the dreams of home ownership, improving our infrastructure, getting value for money and investing in our future, all funded from our existing resources. I understand Members continued concern over the issue of non finance, non locally-owned businesses. As I have said, I am confident that the December meeting of Ecofin will confirm that following the repeal of the deemed distribution provisions our Zero/Ten regime is not harmful. Nevertheless we need to be careful not to raise any doubts in the minds of the Code Group membership by proposing changes to our business tax regime that could compromise that. In the new year, after confirmation from Ecofin we will be in a position to engage with businesses to review options, which meet the principles set out in the business tax review. Whatever the option we choose Members will be aware that we are not able to discriminate between locally-owned and foreign-owned companies. I do understand Members' concern and reconfirm my absolute commitment and that of the Council of Ministers to finding a proper and fair solution. It is however worth noting the measures that we have already taken to bring other companies into the scope of tax. Oil and extraction companies now pay tax at 20 per cent and property development companies, whether locally-owned or foreign-owned all pay tax at 20 per cent on their profits, their development profits, and more is being done to ensure that our tax system is not abused through inappropriate tax planning. Last year's Budget was extremely challenging. We needed to secure the Island's economic stability to ensure that we could continue to balance our books. I am delighted to say that today while we must still be responsible we do not need to raise more taxes from most Islanders. In fact we are in a

position of being able to give something back to those who need it. This Budget is designed to start the process of unifying the Island and provide further stimulus. Last year I committed to increase revenues raised from international service entities and I propose in this Budget to increase the fees paid from banks from £30,000 to £50,000. This measure should raise £600,000. I have also considered ways of raising revenues from very high earners. Relief from pension contributions will therefore be restricted to those earning over £150,000 per year. This will mean £1.2 million is raised and will mean that also 20 means 20 really does apply to the very highest earners. Since lodging the Budget I have received representations from the industry who were concerned that these measures could lead to Islanders not planning for their futures. I have listened carefully and studied the data but I do not believe the measures will have the effect that I was represented. I propose restricting the tax free element of termination payments to £50,000 except in the case of death, injury and disability where the payments will remain fully exempt. This measure will raise in the region of £500,000. Turning to impôts. Over the last 3 years we have managed broadly to maintain the level of impôt duties despite the falling trend in importation and consumption of alcohol and tobacco. In previous years this Assembly has raised fuel duty. Sensitive to incomes being squeezed I am pleased to propose that there will be no increase in fuel duty in 2012; however I do propose the following increases, which are around 5 per cent alcohol and 10 per cent on cigarettes. This will mean 35 pence on a packet of cigarettes; 50 pence on a bottle of a whiskey, 6 pence on a bottle of wine, 1 pence on a pint of beer but 2 pence on a pint of strong beer. These increases are in line with the policies of my colleagues, the Minister for Health and Minister for Home Affairs and are supported by the Council of Ministers. The States approved a new vehicles emission duty in the 2010 Budget. Earlier this year there was consultation on changes to emissions duty and it has been accepted that further changes to V.E.D. (Vehicles Emission Duty) would not assist new car sales. For this reason I am proposing to increase just by 5 per cent all the categories for V.E.D. This will mean an extra only £2 on the cost of a Ford Focus and this modest increase in impôts and V.E.D. should, in total, raise in the region of £2 million. As part of the C.S.R. process I

committed to review court service charges and the Budget proposes a whole range of changes to court fees in order to cover the costs of providing these services to users. However, following representations from the Citizens Advice Bureau and other concerned bodies I do not now propose to increase the £7 charge for small debts pursued through the Petty Debts Court. While the measure was not material, it was going to raise about £2,000, I do not want to create any difficulty in the collection of small claims. But now for the best news. Conscious that families are feeling the pinch, this Budget provides substantial additional support to those families with young children. During the consultation on the F.S.R. (Fiscal Stimulus Review) we identified that working parents were paying up to £16,000 a year for childcare whereas the tax relief was only on the first £6,150. This Budget proposes to almost double childcare from £6,150 to £12,000 for preschool children. This measure benefits families by up to £1,580 a year for every preschool child that is in childcare. As an added bonus I am proposing that it should apply immediately to 2011 assessments. [Approbation] This helps middle income families the most. I believe this is the single biggest targeted improvement in taxation for families for young children that has ever been proposed and the Council of Ministers needed no persuading that this was a good thing to do.

[10:30]

Families will benefit by around £1 million, which is being paid for by the earlier measures compared to last year. This substantial benefit will not only help families to meet the cost of childcare but go some way to helping the Island attract and retain essential workers, particularly in the nursing field. In addition, after consultation with the Minister for Education, I am pleased to propose the extension of tax relief for childcare States run nurseries as well as private nurseries. In the last few years we have done a great deal for those on income support and now pensioner households can look forward to a new secure future with the long-term care scheme coming into force next year. I am, however, conscious that the effects the recession have had on middle income families and I therefore propose increasing exemption limits for this year in line with average earnings at 2.5 per cent but by the full rate of inflation published earlier at 4.5 per cent. This £7 million of benefit is designed to help middle income households. I will give Members an example. If we take a married couple where both parents work and have a household income of £55,000 with 2 children, one of which is under the age of 3 and that they pay £12,000 nursery fees and have a mortgage of £275,000, these measures will mean that their income tax liability will be £1,830 lower this year than it was last. Since launching this Budget I have considered if there were any additional measures that I could come forward with. Many Members believe that home ownership is important, and we agree. Currently first-time buyers only benefit from full relief on properties on the first £300,000 but there is no relief for stamp duty on any of the costs of buying a home beyond £400,000. This does not make sense when an average first time buyer 3-bedroom house and home buy units are valued above this level which is applicable for relief. For this reason I have considered and lodged an additional measure that extends first-time stamp duty relief on properties up to £450,000. First-time home buyers will benefit from this relief and first-time buyers on low incomes also I think need consideration of more help to particularly finance their deposits. For that reason I will be recommending to the new Council of Ministers that consideration is given to the creation of a scheme to support first-time buyers on low incomes with loans for deposits at low interest rates. Currently the dwelling house loan fund and the housing development fund have substantial unallocated balances that could be used for such a scheme. Allocating £2.5 million could help more than 50 low income households achieve the dream of homeownership and provide a much needed boost to the residential housing market. Over the last year there has been much debate about the best ways to target tax relief. Many proposals, including G.S.T. (Goods and Services Tax) food exemptions, have been suggested and debated by this Assembly. I understand that the intention behind these proposals is to help families. The problem has been complexity and

administrative cost, which makes the measures that were proposed inefficient. This Budget measure I am proposing is affordable, targeted and will leave more money in the hardworking family's pocket, maintaining efficiency and will create no additional administrative cost. As I said

at the beginning of this Assembly, this is a budget of consolidation with no unpleasant prescriptions, given to those that need it and preparing for investing in our future. Looking to the future, some important advances in tax policy with Zero/Ten and 1(1)(k) have been described but there is more to do in the area of tax policy. It is important that our tax system continues to support all those who live here and do business here. Our key priorities remain to ensure Jersey stays internationally competitive and delivering a tax regime that works for Jersey's individual and businesses. However, specific focus over the lifetime of the next Assembly should include considering whether a move to independent taxation and current year assessment for all individuals is feasible and how might this be achieved. Also seeking to replace the 27 per cent marginal rate, which is still not very well understood, for personal income taxpayers with a simpler regime which retains the low effective tax rates that are enjoyed by very many Island residents. We should also review opportunities to go further as this Budget announces today with 20 means 20 for those on the very highest incomes, particularly with a target of those incomes over £150,000. There is also more work to be done on property development returns. When tax relief for interest payments was reinstated it did have some unintended consequences a few years ago and we should review the rules to make them easier to apply and comply with. As well has having a clearly understood tax policy that sustains the Island's economic competitive we need to ensure that taxes collected are done so efficiently and fairly. We will need to make it easier to file tax returns for Islanders and pay their return electronically. The tax office will make more use, in future, of its investigative and penalty powers so as to ensure that everybody pays the tax that is rightly due. Last year I asked the Assembly to put more money into tax collection. This has proved to be a wise investment as the additional tax collectors have more than paid for themselves and I can report to the Assembly that the additional tax collectors recovered over £2 million over the last 12 months. Our tax transformation project could achieve further annual increases in tax revenues of up to £10 million

per annum. Simplification of the personal tax system and self-assessment for business and personal taxes will be achieved and this will also save on administrative costs. Greater use will be made of data sharing between income tax and social security. We have a robust and respected regularly framework for our financial services and Members will recall the importance that we have attached to the tax information exchange agreement network and double tax agreements. Treasury officials have effective working relations with a growing number of jurisdictions and, as a result, we now have 25 tax information exchange agreements in place and here is another area where we lead the world. I am pleased to report that since lodging the Budget, after months of hard work, I signed the T.I.E.A. (Tax Information Exchange Agreement) with the Indian High Commissioner for the Indian Union in London last Thursday. The signing of this agreement will open up this significant new market for the Island. We will continue to pursue reciprocal agreements with other responsible jurisdictions. So this is the last sitting where my predecessor as Minister for Treasury and Resources, Senator Le Sueur, will be in this Assembly and I would like to recognise his extraordinary diligence, far-sightedness and patient endeavour in financial matters. [Approbation] His longstanding commitment to financial prudence and stability has served the Island extremely well. He has played a significant part in creating the legacy that I described earlier. It has been a privilege for those of us who have worked with him and I, for one, will miss his wise, calm and always thoughtful guidance. I would also like to thank most warmly and sincerely my colleagues on the Council of Ministers and particularly my 2 Assistant Ministers, but also the Treasurer of the States and all the hardworking Treasury staff in the Resources Department as well. [Approbation] This has not been an easy time. Despite being an enormously difficult 3 years, a tremendous amount has been achieved. We have a new respected Treasurer or the States and an almost completely reorganised Treasury and Resources Department. We have a new financial planning framework and a C.S.R. that will change forever the way we manage spending. We have a new more active management of the balance sheet and we now have certainty on tax and a huge reform of tax policy already paying dividends. This debate marks the end of a tough 3 year plan and while today we are considering 2012 it will be for the new Assembly to continue to safeguard our future. While we have dealt with the serious matter of the deficit there is, of course, always more to do.

The new Council will need to set a new target for annual savings for the C.S.R., it will need to restore the stabilisation fund, identify the future funding for health and social care, plan for falling pupil numbers in secondary schools and confirm the ways of funding long-term infrastructure particularly in the area of housing and liquid waste. Last year we committed to the difficult decisions needing to close the fiscal gap and return to balance budgets. This year we are able to benefit from those measures and give money back to Islanders and their families. With this Budget I am continuing to get money into the economy with significant infrastructure and capital spending. Getting people back to work, creating jobs and training for the unemployed, increasing tax relief for families with young children, raising exemption limits to the benefit of most taxpayers, boosting home ownership and leaving more money in the pockets of Islanders. While other jurisdictions may have been financially reckless resulting in the financial crisis in the world today, over the last 3 years Jersey has put in place measures to preserve our hard-earned financial security and taken the difficult decisions in the interests of security sustainability for future generations. I am an optimist. Winter always turns to spring, economies run in cycles and a worldwide recovery will sure emerge. The measures that we have taken position Jersey extraordinarily well to capitalise on the recovery when it comes. From a sound and well-managed base secured through foresightedness of this Assembly the next Assembly can go on to deliver prosperity for the Island that this Assembly serves. I commend this Budget to the Assembly. [Approbation]

The Deputy Bailiff :

Is the proposition seconded? [Seconded]

2. Draft Budget 2012 (P.159/2011): amendment (P.159/2011 Amd.) The Deputy Bailiff :

Very well, we now come on to the first of the amendments, which is P.159 in the name of Deputy Southern . I ask the Greffier to read the amendment.

The Greffier of the States:

Page 2, after the words "as set out in the Budget Statement" insert the words "except that estimate from New Company Fees via Financial Services Commission' shall be increased by £3,700,000 by increasing the additional charge payable to the States from the annual company registration fee from £115 to £230 and the estimate of income tax from employees shall be decreased by £3,700,000 by increasing income tax exemption thresholds by 6.85 per cent and not by 4.5 per cent as proposed in the Budget Statement".

1. Deputy G.P. Southern :

I would be churlish not to give due praise and credit to the Minister for Treasury and Resources for the thoroughly uplifting speech he has just given on the Budget and for, indeed, many of the measures included in the Budget. I point out, while doing so, that what I propose by way of each of my amendments is a very small, modest - I call them moderate - tweak to the budget plans of the Minister for Treasury and Resources. While he was talking I was thinking about when he came to the bit on telecoms he was talking about this new initiative and I realised I had missed the meeting yesterday and I was thinking: "What was I doing while I missed that meeting?" because I intended to go and see what the development was about and how it was going to be funded. I realised that after 6 weeks of campaigning I was back on the slog of dealing with individual constituents and their problems and I was dealing with the reality of what all these fine words were about and the end result of where we find ourselves in the economy. I was talking to one parent whose son, 17, is on the Advance to Work programme and had been receiving £35 a week and feeling really good about himself because he could see himself developing into a career and unfortunately he has lost his 3 month placement. He has not been re-engaged, with the result that since his mother is just over the income support threshold there is no money coming into the house for him or by him and he feels thoroughly disillusioned and disappointed and he has lost sight of where he is going. He is demotivated completely. Now, for that individual and for that family more is needed. I was also, yesterday dealing with a single mother who has gone out to work since September, got herself a part-time job despite having 2 children, one of which is under 5.

[10:45]

She only qualifies to get funding support for her childcare that she needs in order to work for one of those children, because she does not earn enough to cover paying for both children, one of whom is at school and needs extra care to get through to 5.00 p.m., 5.30 p.m., 6.00 p.m. when she can be picked up. So while it is very good that we have got some serious measures in the Budget for those who are income tax payers with childcare and that the thresholds have been indexed, the reality comes lower down the scale. For many people, they are struggling to survive in today's Jersey. So my amendments, both this one and the next one, are to do something more to improve the lot of those who live here. I want to start with pages 9 and 10 of the Budget, the full document that is 50 pages. If Members will turn to it they will see a chart, the O.E. C.D . (Organisation for Economic Co-operation and Development) report that confidence in the global economy has weakened and if they look at it they will see a pair of lines business confidence going downwards, negative, consumer confidence going downwards, negative, and substantially negative. If they turn the page they will see another chart. "This weakness is expected to continue for the next 2 quarters in most major economies" and it is. It is. You will notice on those for Euro 3, Germany, France and Italy, the chart has gone negative for the first time in 2 years. So we are in for a serious time and I believe we have to do more than just a budget which is neutral, which is what I believe the Senator's Budget is. So he says: "Despite this global uncertainty there are positive signs in the Jersey economy, in summer responses from finance companies to the business tendency survey showed higher business activity and an improvement in profitability. The States also saw a significant improvement in G.S.T. forecasts between June and July." If Members will turn to the sheet I circulated earlier, I think they might see otherwise than things are looking better. Because the reality in the 6 months since this was drafted, this Budget, until now, or in the few months since it was drafted, things have got substantially worse. If Members look on the second side with the bar graphs, they will see what is happening in financial services, business tendency, business activity on its way down. Business optimism on its way down and gone negative. New business on its way down and gone negative. When the Senator talks about new areas we are expanding, still new business going down. Profitability substantially has gone down. That is the reality. Attached to that, no matter what we might say, at the bottom of that, figure 1.7, changes in unemployment eternally and, it seems to me, inevitably rising. That is the reality we face. Just to drive that home, perhaps, on page 12 of the Budget report it talks about future tax revenues are difficult to predict and are forecast within a range, that range is going upwards through 2010 into 2014. The reality on which those increased revenues are based is on this graph I have just put in front of Members where it says: "Circulated by Deputy Southern " and you can see the Fiscal Policy Panel's predictions over time. The top one is in October 2010 all upwards. By July 2011 we have got a prediction which is flattening out, has a wider spread, is flattening out, by the most recent one it has gone negative. The downside is here. All the way through the last year the Fiscal Policy Panel has been advising us that things are getting worse and they are. That is the reality. So I suggest we should be doing more than what is proposed. The context is, as Members will note, given in my paper, in my proposition, in the report on page 3 that company tax has been going down over the past decade substantially while personal tax has been going up. If we examine just a small area from 2003 we will see that business tax has gone down by £140 million while personal tax has gone up by over £200. I start at 2003 because annual return, the charge on annual return for companies, has not altered since 2003. So when it comes to changing the annual charge, return fee, on companies, bear in mind that company tax has gone down by £140 million since the annual return fee last went up. Personal tax has gone up by £200 million. So the £3.7 million I am asking Members to support from an increase in company tax is (a) a modest, moderate amount and (b) in the interval since it last moved company tax has gone down by £140 million. We are talking today,

in this amendment, about an addition of £3.7 million, a tiny drop. So let us not hear great squeals about companies suffering this enormous change when in fact the reality is it is not, and over the past 8 years they have been doing very well. The Minister also said - I will get the quote right - "I do not need to raise more taxes." I do not need to raise more taxes and yet if we look back to page 3, at the bottom chart, we shall see that in fact employees tax in 2012, income tax alone, has gone up from £274 million to £296 million, a rise of £22 million, while company tax between 2011 and 2012 has gone up by £2 million. So in fact although the Minister says: "I do not have to raise taxes" and has put some measures in which reduce the tax bill, the indexation of exemptions and the allowances for childcare, which is all to the good, nonetheless income tax bill for individuals has gone up significantly. So he does not need to but in this package he has done so. What my amendment says is that that rise in taxation should be ameliorated by - it is only a small sum - £3.7 million. But, as we say, it is a transfer from business tax to individuals and their personal tax bill. Now, I, as Members will be aware, have spent some time this year questioning the Minister for Treasury and Resources as to how he is going to charge companies that are none local and non finance in order to get some revenue from them and equalise, create a level playing field in our income tax. Time and time again he has said: "I will bring something in the Budget." For example, on 18th January Senator Ozouf said: "Let me just be clear that Deputy Southern is not going to write my script in terms of saying that I will not find a solution to non local, non finance companies paying zero tax." I must have been arguing that he did not have a solution at the time. As a result of the Deputy of Grouville 's amendment to the Budget, which was accepted: "I will be working on trying to find ways of raising revenue from these entities in Jersey." So a commitment on 18th January this year which firmed up on 1st March. Will the Minister inform Members what mechanisms he has under consideration to replace the income tax revenue from non finance companies lost through the replacement of the 20 per cent rate by the zero rate? His answer was: "Statements on taxation matters happen at the Budget. I have said that in the Assembly before and I will say it again now, it is a matter that will be brought forward in the Budget." Where is it? There is no measure in this Budget to raise any fee or charge from non local, non finance companies. It simply has not happened. I will not argue today about whether and how it can happen, the fact is the Minister for Treasury and Resources has failed to do what he was committing to and what has been an issue throughout the entire year, and a burning issue out there among votes that non local, non finance companies are paying zero tax in Jersey. My measure at least raises tax on those companies along with many others. But it is a level playing field and it is, I believe, appropriate certainly to make those companies pay some tax. Now, we are told we have already had a consultation on company tax and I was just about to go to responses but what I need first is the comments. I turn to the comments of the Minister for Treasury and Resources about why we should not do what I am proposing. He starts on page 2 of comments, if Members would like to turn to it: "The Minister for Treasury and Resources opposes this amendment for the following reasons. Consultation on increasing the annual company return fee was undertaken in autumn 2010. That is true. The overwhelming response was that increasing costs for local companies was not desirable in the current economic climate. The overwhelming response. Let us turn to the responses, annual company fees, summary of responses. Questions 1 and 2 on raising fees: what is the likely impact on Jersey as a place to do business of an increase in the level of annual company fees? Listen to this overwhelming response. "Overall the views seemed somewhat neutral as to the impact on business of an increase. One respondent thought that the impact would be hard to measure but considered that any increases would tend to make Jersey less favourable as a jurisdiction and would not necessarily attract business. Another thought it would be difficult to justify to clients and a third considered it would have no impact on Jersey as a place to do business." Is that overwhelming rejection? It is not. Then what is the likely internationally

competitive impact on an increase in the total level of Jersey annual statutory fees? [11:00]

The response, again, overwhelming? The responses were relatively neutral but there were concerns expressed about remaining competitive in relation to jurisdictions which offer the same services. Now in the comments this leads on to this response, this overwhelming response which was quite neutral. In response the basic I.S.E. (International Service Entities) fee was increased instead of the annual company return fee and this allowed increased revenues to be raised from foreign-owned companies while protecting locally-owned companies is what the comments say. The reality of that is who pays the I.S.E. fees, by and large, I.S.E. fees, what are they? They are the payment that is made by companies to avoid having to deal with G.S.T. largely by people who export services, i.e. who pays them? The financial services industry. So it is not necessarily foreign versus local it is I.S.E. is paid by the finance sector by and large. Then there is another question on this which says: "Do respondents agree that the company annual fee should not exceed the base fee for non financial service company charged by Guernsey which is currently up to £250. If Members will turn to the comments page you will see a chart there showing the relative fees for company fees with Jersey somewhere in the middle-ish at £350 currently with £150 for the annual return fee and £200 for the I.S.E. fee which has just been raised last year. It says here, those respondents who specifically addressed this question were in unanimous agreement that the annual company fee should not exceed the base fee for non financial services, companies, charged by Guernsey. Several respondents felt that an increase to £250 could not be justified on the basis of increased administration. £250 we are told is the comparative mark for Guernsey. But the reality is that in Guernsey the equivalent charge for this I.S.E. fee is £500. Finance companies in Guernsey we are saying here would be the £200 on top of the £150 actually pay £500. So increasing the fee does not make us uncompetitive with Guernsey at all. The comments I can only suggest are misleading because the fee in Guernsey is not £250 for finance companies, it is £500. The overwhelming response is singly not there. No one is then saying that this will result in an enormous loss of business. So we then move on. The overall response to the consultation on company fees was: "While it was not a specific recommendation of the Green Paper the Minister feels that the direction of those received responses points towards holding annual company fees at the current level for another year [that year has now passed] and that consideration is given instead to a modest increase in the I.S.C. fee by way of alternative" and that is what came to pass last year. But hold the annual company fee for another year. That year has passed, the decision time is now. What I am proposing is that the fee is doubled from £115 to £230 with the fee that goes to the J.F.S.C. (Jersey Financial Services Commission) for registration remaining the same. Why do I want to do this? As I say, we have had a promise to get some taxation, some revenue from these particular companies, that has not been done and I wish to transfer that revenue to the benefit of each and every taxpayer on the Island. It is only a small amount but nonetheless does make a meaningful difference, I hope, in that we have indexed the exemptions at 4.5 per cent. The reality for most families is they are between 7 and 9 per cent worse off over the last few years in terms of coping with inflation at a time when pay rises have been low. All families are suffering. The 4.5 indexation misses the mark because we know we have just hit 5.4 per cent in terms of the R.P.I. (Retail Price Index) so it is already almost 1 per cent behind the mark, even with 4.5 per cent families are worse off. This small rise of an extra £3.7 million will mean that some families may feel that life is not as bad as it was and that they can afford a little more to live in Jersey than previously they could. What will inevitably happen is that £3.7 million will find its way back into the economy because by and large will spend it. So it is a small slight but perhaps significant attempt to boost the economy. As I say, with company taxes having come down by £140 million since 2003 I think £3.7 million transferred from companies to people's pockets is worthwhile. I

maintain the proposition. The Deputy Bailiff :

Is the amendment seconded? [Seconded] Before I open it to the floor can I say that the Budget debate is one of the important debates in this Assembly in the year and it is very disappointing to see that we have, in the course of the last speech, been proceeding with only 27 Members in the Assembly. That is a discourtesy to the proposer of the amendment and it is a discourtesy to all the Members who remain in the Assembly because it may be that one of them for legitimate and urgent personal reasons may need to leave at some point. So can I ask those who are no doubt listening to the debate outside to return to the Chamber in order that we may have a better number in the Assembly. [Approbation]

Deputy G.P. Southern :

We would soon get them back if we went to vote first.

2. Senator P.F.C. Ozouf :

I do understand what you are saying, there is also an enormous amount of work that goes into preparing for this Budget debate from proposers of amendments as well as Treasury. I was grateful for Deputy Southern 's kind words when he started. That does mean a lot to me because we do not always see eye to eye, but I certainly understand the sentiment behind his proposition and, indeed, many of the propositions that he brings to this Assembly in terms of trying to give something back to Islanders. My proposal in the Budget Statement is to increase exemption thresholds in line with the inflation that was published earlier, which is worth about £7 million. If I could have done more without jeopardising the Island's finances, then I certainly would have done. As Minister for Treasury and Resources I do need to be concerned about the wellbeing of the overall situation of the public finances, the economy, as that ultimately affects all of us. If I may say, while increasing company fees it might seem an easy option, almost a free option to put money in Island's pockets, we do have to be aware in debating such measures the knock-on effects that any increases in company fees have. If we increase fees to a level that hurts local businesses and that that damages our competitiveness, then overall we do not achieve our objective. We damage the economy. If profits fall and jobs are lost it will be the residents of Jersey who will have to find the reduction in that loss of business. So I apologise for repeating constantly the issue of competitiveness but it is absolutely vital. We reviewed the level of company return fees in 2010 and during that review we identified that there was scope to increase the fees by £100. This make us slightly more expensive than Guernsey and slightly less expensive to the Isle of Man. I know Deputy Southern mentioned the £500 in Guernsey and that is not I.S.E. fee. Technically there is a fee that some financial services companies pay but it is subject to interpretation and our research - and we have done an awful lot of work on this - is that very few companies pay it. So it is not the important benchmark that he says. I know that is complicated because we have had to look at that and we have had to look at the schedule of charges. They may well be in the schedule but the reality is that companies are not paying it because of the discretionary nature of the way that the system works. We consulted on company fees and the overwhelming feedback from the Chamber of Commerce and