States Meeting Transcript - 5th December 2012

STATES OF JERSEY OFFICIAL REPORT

WEDNESDAY, 5th DECEMBER 2012

PUBLIC BUSINESS - resumption................................................................5

1. Draft Budget Statement 2013 (P.102/2012): fifth amendment (P.102/2012 Amd.(5))...5

1. Senator P.F.C. Ozouf (The Minister for Treasury and Resources):.......................5

1. Senator S.C. Ferguson:..................................................................5
2. Deputy R.G. Le Hérissier of St. Saviour:................................................6
3. Connétable L. Norman of St. Clement:..................................................6
4. Senator L.J. Farnham :....................................................................6
5. Senator B.I. Le Marquand:...............................................................7
6. Connétable A.S. Crowcroft of St. Helier:................................................7
7. Connétable P.J. Rondel of St. John : ......................................................7

8. Connétable J.M. Refault of St. Peter:....................................................8
9. Connétable D.J. Murphy of Grouville :...................................................8
10. Deputy G.C.L. Baudains of St. Clement:..............................................8
11. Deputy J.H. Young of St. Brelade : ....................................................9
12. Deputy J.A. Martin of St. Helier:......................................................9
13. Deputy G.P. Southern of St. Helier:..................................................10
14. Deputy A.E. Pryke of Trinity : .......................................................10
15. Deputy S.G. Luce of St. Martin:.....................................................11
16. Deputy M. Tadier of St. Brelade:....................................................11
17. Connétable S.W. Pallett of St. Brelade : ..............................................13
18. Senator P.F.C. Ozouf : ...............................................................13

2. Draft Budget Statement 2013 (P.102/2012): second amendment (P.102/2012 Amd.(2)) ...........................................................................................17

1. Deputy G.P. Southern :..................................................................17
2. Senator P.F.C. Ozouf :..................................................................19
3. Deputy G.C.L. Baudains:...............................................................20
4. Deputy J.G. Reed of St. Ouen:..........................................................21
5. The Connétable of St. Brelade:.........................................................21
6. Deputy A.K.F. Green of St. Helier:.....................................................21
7. Deputy M. Tadier :......................................................................22
8. Deputy J.H. Young:....................................................................23
9. The Connétable of St. John:............................................................24
10. Deputy J.M. Maçon of St. Saviour : ..................................................24
11. Connétable D.W. Mezbourian of St. Lawrence:......................................24
12. The Connétable of St. Peter:.........................................................25
13. Senator F. du H. Le Gresley:........................................................25
14. Senator A.J.H. Maclean:.............................................................25

15. Deputy J.A. Martin: .................................................................26
16. Deputy T.M. Pitman of St. Helier:...................................................27
17. The Connétable of St. Mary : ........................................................28
18. Deputy J.M. Le Bailly of St. Mary : ..................................................28
19. Deputy J.A. Hilton of St. Helier : ....................................................29
20. Senator I.J. Gorst : ...................................................................29
21. The Connétable of Grouville :........................................................30
22. Deputy M.R.Higgins:...............................................................30
23. Deputy E.J. Noel of St. Lawrence : ..................................................31
24. Connétable S.W. Rennard of St. Saviour:............................................31
25. Senator S.C. Ferguson:..............................................................32
26. Deputy G.P. Southern : ..............................................................32

3. Draft Budget Statement 2013 (P.102/2012) - as amended..............................35

1.3.1 Senator P.F.C. Ozouf :..................................................................35

2. Draft Finance (2013 Budget) (Jersey) Law 201- (P.103/2012)..........................36

1. Senator P.F.C. Ozouf (The Minister for Treasury and Resources):......................36
2. Senator P.F.C. Ozouf :..................................................................37
3. Senator P.F.C. Ozouf :..................................................................39
4. Senator P.F.C. Ozouf :..................................................................39

1. Deputy J.H. Young:....................................................................39
2. Deputy G.C.L. Baudains:...............................................................40
3. Deputy T.A. Vallois of St. Saviour:....................................................40

4. Deputy J.H. Young:....................................................................40
5. Senator P.F.C. Ozouf :..................................................................41

5. Senator P.F.C. Ozouf :..................................................................44

3. Draft Income Tax (Amendment No. 41) (Jersey) Law 201- (P.104/2012)..............44

1. Deputy E.J. Noel (Assistant Minister for Treasury and Resources - rapporteur):........44
2. Deputy E.J. Noel: ......................................................................45

1. Senator S.C. Ferguson:.................................................................45
2. Deputy G.P. Southern :..................................................................45
3. Deputy E.J. Noel: ......................................................................45

3. Deputy E.J. Noel: ......................................................................48

1. Senator L.J. Farnham :..................................................................48
2. Deputy G.C.L. Baudains:...............................................................48
3. Deputy E.J. Noel: ......................................................................49

LUNCHEON ADJOURNMENT PROPOSED..................................................49 LUNCHEON ADJOURNMENT................................................................50

4. Deputy E.J. Noel: ......................................................................50

1. The Deputy of St. Ouen:................................................................51
2. Deputy E.J. Noel: ......................................................................51

5. Deputy E.J. Noel: ......................................................................51

1. Deputy G.P. Southern :..................................................................52
2. Deputy T.A. Vallois: ...................................................................52
3. Deputy E.J. Noel: ......................................................................52

6. Deputy E.J. Noel: ......................................................................52
7. Deputy E.J. Noel: ......................................................................53

1. Deputy J.H. Young:....................................................................53
2. Deputy E.J. Noel: ......................................................................53

8. Deputy E.J. Noel: ......................................................................53

1. Deputy T.A. Vallois: ...................................................................54
2. Deputy J.H. Young:....................................................................54
3. Senator S.C. Ferguson:.................................................................54
4. Deputy E.J. Noel: ......................................................................54

9. Deputy E.J. Noel: ......................................................................54
10. Deputy E.J. Noel: ......................................................................55
11. Deputy E.J. Noel: ......................................................................55
12. Deputy E.J. Noel: ......................................................................55
13. Deputy E.J. Noel: ......................................................................56

1. Deputy G.P. Southern : ..............................................................56
2. Deputy G.C.L. Baudains: ............................................................56
3. Deputy T.A. Vallois:................................................................56
4. Senator P.F.C. Ozouf : ...............................................................57
5. Senator S.C. Ferguson:..............................................................57
6. Deputy E.J. Noel:....................................................................57

14. Senator P.F.C. Ozouf :..................................................................58

4. Draft Goods and Services Tax (Amendment No. 4) (Jersey) Law 201- (P.105/2012)..59

1. Senator P.F.C. Ozouf (The Minister for Treasury and Resources):......................59
2. Senator P.F.C. Ozouf :..................................................................60
3. Senator P.F.C. Ozouf :..................................................................60

1. Senator I.J. Gorst :......................................................................61
2. Senator P.F.C. Ozouf :..................................................................61

5. Old Age Pension: increase for 2012 (P.97/2012) - as amended.........................61

5.1 Deputy G.P. Southern :..................................................................62

1. Senator F. du H. Le Gresley:............................................................63
2. Deputy M. Tadier :......................................................................65
3. Deputy G.P. Southern :..................................................................65

6. Draft Social Security (Amendment of Law No. 4) (Jersey) Regulations 201- (P.101/2012)..............................................................................66

1. Senator F. du H. Le Gresley (The Minister for Social Security): ........................66

1. Deputy M. Tadier :......................................................................69
2. Deputy G.P. Southern :..................................................................69
3. Deputy R.G. Le Hérissier: ..............................................................70
4. The Deputy of St. Ouen:................................................................70
5. Deputy J.H. Young:....................................................................70
6. Deputy J.A. Martin:....................................................................72
7. Connétable D.W. Mezbourian of St. Lawrence:........................................72
8. Deputy G.C.L. Baudains:...............................................................72 Deputy J. A. Hilton of St. Helier (Vice-Chairman, Health, Social Security and Housing Scrutiny Panel):........................................................................76

2. Senator F. du H. Le Gresley:............................................................76

1. Deputy G.P. Southern :..................................................................78
2. Deputy M. Tadier :......................................................................78
3. The Deputy of St. Ouen:................................................................79

4. Senator F. du H. Le Gresley:............................................................79

3. Draft Social Security (Amendment of Law No. 4) (Jersey) Regulations 201- (P.101/2012) - proposition to refer to Scrutiny..........................................80

1. Deputy M. Tadier :......................................................................80
2. Senator F. du H. Le Gresley:............................................................81
3. Senator P.F. Routier: ...................................................................81
4. Deputy G.C.L. Baudains:...............................................................81
5. Deputy J.A. Martin:....................................................................81
6. Deputy J.A. Hilton:.....................................................................82
7. Deputy G.P. Southern :..................................................................82
8. The Connétable of St. John:............................................................82
9. Deputy M. Tadier :......................................................................83

4. Draft Social Security (Amendment of Law No. 4) (Jersey) Regulations 201- (P.101/2012) - resumption...............................................................84

6.4.1 Senator F. du H. Le Gresley:............................................................85

5. Senator F. du H. Le Gresley:............................................................86
6. Senator F. du H. Le Gresley:............................................................87

7. Draft Social Security (Amendment of Law No. 4) (Jersey) Regulations 201- (P.101/2012): second amendment (P.101/2012 Amd.(2)) ...............................87

1. Deputy G.P. Southern :..................................................................88
2. Deputy J.A. Martin:....................................................................90
3. Senator F. du H. Le Gresley:............................................................91

4. Deputy S. Pinel of St. Clement : ........................................................91
5. Deputy G.P. Southern :..................................................................92

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

PUBLIC BUSINESS - resumption

1. Draft Budget Statement 2013 (P.102/2012): fifth amendment (P.102/2012 Amd.(5)) The Bailiff :

The Minister for Treasury and Resources has lodged a fifth amendment to the Budget, that is Projet 102/2012, and presumably, Minister, you will be asking the Assembly to agree to take it straightaway?

Senator P.F.C. Ozouf :

As my colleague, the Minister for Home Affairs said, it has come to me pleading the fifth amendment, which is perhaps not a great position. I do have to seek Members' permission and that is, so they completely understand, that while yesterday's amendment does not result in a consolidated fund deficit Members might want to turn to page 55 of the Budget statement, which shows that the balance in hand of the Budget proposals were £19.7 million. We always attempt to try and keep around £20 million in the consolidated fund for the variations of income. This amendment would not, as a result of the Assembly's decision yesterday, mean we were in deficit but we are trying to ensure that we do recover some of the lost revenue and hence I am asking Members to consider an increase on the level of tobacco. I ask Members' leave to permit me to debate a fifth amendment.

The Bailiff :

Does the Assembly agree to take this amendment straightaway? I will ask the Greffier to read the amendment.

The Deputy Greffier of the States:

Page 2, paragraph (a) - after the words "as set out in the Budget Statement" insert the words - "except that the estimate of income from taxation during 2013 shall be increased by £395,000 by increasing the proposed increases on tobacco duty from 10 per cent to 13.2 per cent."

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

The proposal is simply to effectively do half of the proposed amendment, which has been withdrawn from yesterday. We speak in terms of tobacco revenue in the simple unit price of an equivalent packet of 20 cigarettes. There is of course a much more detailed calculation which is within the legislation but, to put it simply, I am proposing to make a further increase to recover £395,000, which would be the equivalent of 50p on a packet of cigarettes. I move the amendment.

The Bailiff :

Is the amendment seconded? [Seconded]

1. Senator S.C. Ferguson:

I feel great sympathy for the Minister for Treasury and Resources this morning: he is faced with an extremely difficult decision. Does he follow the dictates of Health and put the price of tobacco up thereby reducing the money available for Health or does he leave the price as is and collect more money, which he can put into Health? He is damned if he does and he is damned if he does not. If I can help, the graphs in the Corporate Services comments at page 13 - I am sorry to keep referring back to them, but a picture is worth a million words - are a good indication. The amount collected from tobacco impôts has been falling steadily. The consumption has been falling steadily so if we put the price up again the amount collected will continue to fall. Why are we doing it? Yes, it is

perhaps good for people's health but is it that or is it that the Minister needs the money to put into health to cope with all the other things. We have been putting it up steadily for the last 10, 15 years and we are well into the trend where an increase in the impôts will mean a fall in consumption. We will, in effect, drive smokers further offshore collecting their duty free. The Corporate Services Panel had a hearing recently where the Customs officer stated that they estimate that 30 per cent of cigarettes smoked in the Island are duty free. Any increase will increase that trend. It is a very simple choice. Do we vote for the increase and reduce the tax take for the Minister for Treasury and Resources or do we vote against it and at least maintain the tax take?

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

Very briefly, and partly related to Senator Ferguson. I have not seen a more Monty Pythonesque kind of scenario like the one that was played out yesterday in the sense that we were playing around constantly with 3 taxes. We are playing around with totally contradictory arguments that surround those taxes, which the Senator has just alluded to, because we are so afraid of attacking certain parts of the tax governor in this Island. It may be the issue will open out when Deputy Southern 's amendment comes up later and there will be broader discussions about the balance that exists within the tax system. But I am getting increasingly frustrated at this dancing on a head of a pin and playing around constantly with these 3 taxes as opposed to taking a much more overall look and being prepared to challenge what previously have been the unchallengeables.

3. Connétable L. Norman of St. Clement :

Again just briefly, Deputy Le Hérissier mentioned contradictions. I am wondering if the Minister for Treasury and Resources could explain to me what has changed since the Budget was lodged because when the Budget was lodged he stated in the media, and I assume he was reported correctly, that he was increasing the duty on tobacco to the maximum he could so as not to encourage smuggling of these products, which in itself has received publicity in the media. But now and coincidentally - I suppose it is a coincidence because Deputy Baudains won his amendment quite correctly - the Minister has no problems with encouraging smuggling and indeed he now quotes the Customs and Immigration Service that they are satisfied that the increase is not going to require them to allocate extra resources. What has changed between the statement he made lodging the Budget and the statement he has now made after Deputy Baudains won his amendment?

[9:45]

4. Senator L.J. Farnham :

I really think the Senator should perhaps stick with the original plan of 38p a packet, and this may come as a surprise because I am no fan of the way tobacco is imported into the Island. That is something I hope the J.C.R.A. (Jersey Competition Regulatory Authority) comes to grips with fairly soon,  and perhaps the Minister  for  Treasury and Resources  could allude to that in his response because that is an issue that has been going on for years and years and it is depriving the Treasury of revenues. But in these straightened times I maintain the same argument against this as I would have done had I been present for the amendment of the Constable of St. Helier, and I reluctantly voted against Deputy Baudains' amendment because I was content with a 1p increase in fuel duty as proposed by the Minister for Treasury and Resources. But, whether we like it or not, and of course there are very valid health reasons for the way we price tobacco, but if we are really serious about it we would not have our own duty free shop at the airport and be encouraging massive sales of cigarette products and being completely hypocritical about this. Yes, the Minister for Economic Development is looking at me with a puzzled expression on his face and quite rightly, he says, it pays good money. That is really what is behind all of this. We have also to bear in mind that we are still in recession and whether we like it or not a good proportion of the

population does smoke and does enjoy tobacco, and we are going to be hammering them and taking more money out of their pockets, which I think is wrong and given these times, so I am reluctantly not going to support this amendment, but I think the Ministry for Treasury and Resources should stick with his original proposal.

5. Senator B.I. Le Marquand:

I rise firstly to give my support to the Minister for Treasury and Resources' amendment. I think we are all well aware of the linkage between tobacco consumption and serious illness of a whole variety of different thoughts, but the reason I really rise is the issue of smuggling to explain the position, as I understand it, from the point of view of the Customs and Immigration Department. It is correct that in the last 12 months they have experienced some difficulties and some workload in relation to people attempting to bring in more than they should but that seems to have been caused primarily .. it is not caused by systematic smuggling, it is caused primarily by the practice of some duty free shops elsewhere of selling things like packs of 1,000 without warning people of the fact that when they get on the other end, if it is a Customs area, they are not going to be able to bring them through. The position, as I understand it, of Customs on this is that there is a point where if the tax was raised by too much, commercial smuggling might well come into play; it does not, at the point of the previous proposition, and it would not either at this particular point, but we do need to be aware of that if much larger amounts were being proposed. So I support this. I do not think there is a problem in relation to smuggling. In fact, if I could just finish off on the point of the difficulty they had had, what they have been attempting to do is engage with the duty free shops in other places and try to make them more responsible and to understand that it is not good sales practice to be selling things to people without warning them that they will not be able to bring them in. But I see no difficulty with this particular amendment.

Senator L.J. Farnham :

Can I have a point of clarification from the Minister? The Minister said if one brings in more than his allowance they would not be allowed to bring them in. Surely that is not accurate. If one pays the duty on the extra then one is perfectly entitled to bring them in.

Senator B.I. Le Marquand:

That is absolutely right. Sorry, I was trying to explain the nature of the problem which they had experienced but of course people bringing them in are perfectly entitled to pay the duty on so doing; that is absolutely correct.

6. Connétable A.S. Crowcroft of St. Helier :

My question to the Minister for Treasury and Resources is similar to the Constable of St. Clement. My understanding is that the smoking public were prepared for an increase of a certain level and because of something that happened in the Assembly yesterday they are now going to have to cope with a bigger increase in the cost of tobacco. I am just curious to know whether the Minister for Treasury and Resources thinks that is fair that a proportion of the public without any consultation or indeed any warning, because of something over which they have no control, are going to have to deal with a much bigger increase. Is that fair? Should there not be some kind of consultation, at least a warning, that this will happen next year and the greater amount will have to be raised in the coming year? Is this a question for the Minister?

7. Connétable P.J. Rondel of St. John :

I am fully supportive of this specific increase and in saying that could the Minister look seriously, along with the Minister for Health and Social Services, of introducing a green packet scenario as happens in Australia and thereby we cut out all the advertising on cigarettes. It will affect the revenue to the Budget but he will have to look elsewhere in years to come obviously for revenue, but I think we need to be sending out a strong message, as has been introduced in Australia. There you buy a green packet of cigarettes, it does not matter who makes the product. They also have these labels, as I explained yesterday, these gruesome labels on the outside with a picture of somebody with throat cancer or eye cancer, et cetera, and they really made me feel ill. I think if you want to stop issues to do with smoking we need to be looking at alternative taxes and I did say yesterday, tongue in cheek a tax in relation to my doom and gloom colleague here on the left who was going on about beef burgers, that we have to find alternative ways of raising taxes other than hitting the same ones year in, year out. Will you take that on board and work with the Health Department in bringing something forward that we stop smoking, where possible, altogether?

8. Connétable J.M. Refault of St. Peter :

I am delighted to follow my grumpy colleague to my right. It will come as no surprise that I am going to support the Minister for Treasury and Resources on this one. It is an unfortunate consequence of what we decided in this House yesterday, in the Chamber yesterday, and there are always unintended consequences when we make last minute changes. I am also not going to disappoint Members to give them a little bit of a health warning again this morning. I would like to just read out a very short passage for Members: "Public Health disappointed that the smoking ban has not reduced more in recent years, but the initial fall in 2007 when the smoking ban came in has been maintained. It is clear from these results and from those of previous years that we need to do more to reduce the smoking prevalence in Jersey." This has been identified in the Tobacco Control Strategy. Regulations around advertising promotion and display of tobacco products are due in 2013 as well as a prohibition of tobacco vending machines. Preventative programmes in schools have been added to and the number of children who have never smoked is increasing. This will hopefully follow through to the adult population in future years. I look forward to the day when the Minister for Treasury and Resources can no longer put any further taxes on cigarettes because no people are buying them. I say that from personal experience. In my family my mother died far too young from smoking. I have an older brother who is waiting for heart and lung transplants in the U.K. (United Kingdom) through smoking so I fully support this amendment.

9. Connétable D.J. Murphy of Grouville :

I am very uneasy about this. I think people must realise that smoking is an addiction. It is not just a way of passing the time or sitting in the pub drinking with a cigarette. This is an addiction and it is a very, very serious hard addiction. In some cases it is known that it is harder to give up smoking than to give up heroine. Please, what I would say is either channel this money into helping people to give up their addiction, or indeed perhaps just keep it low key for the moment, bringing it in more gradually than you are trying to do now. This is a hammer to smash a walnut and I am afraid that it is not really going to work because, as people have already said, you are going to encourage smuggling to get them in, to get them cheap. People will do anything to keep their addiction going. You must help them to get over that addiction. That is the most important bit and this is not helping.

10. Deputy G.C.L. Baudains of St. Clement :

I am alert to the difficulties facing the Minister for Treasury and Resources and he has a very difficult task, and all I can say is I am glad I am not doing it. [Laughter] On the other hand, if I were [Laughter] .. Senator Ferguson raised the issue of possible diminishing return. That was one issue. I am basically concerned that first of all, I mean we are talking about the dangers of tobacco and therefore it is a good idea to raise the taxation but I do not think we should lose sight of the fact that this is .. that is part of it, but what we are talking about here is raising revenue and, in my view, there is danger in addressing symptoms rather than the cause. As such, I hope the Minister for Treasury and Resources will look for a fresh initiative to replace the C.S.R. (Comprehensive Spending Review) because plainly it is not working. We are happy to squeeze all the pips in order to get as much money as possible in order to balance the books against our expenditure. To me it is the expenditure which is getting out of control because, as I said yesterday, if we did have it under control then we would not face the reality of yearly expenditure rising above inflation year on year. We really do need to look at that because if we carry on squeezing the pips one day we will probably squeeze the wrong pip and the mess will be our economy. One question I would have for the Minister for Treasury and Resources is does this - I presume it does and I hope it does - include tobacco and cigars as well as cigarettes because I have been concerned for some time about the generalisation that surrounds tobacco as if it was something that was totally avoided whereas in fact there are some benefits of tobacco. I am not talking about people who smoke 60 a day, they should know better. I mean, for example, I will not go into great lengths, but one of the benefits is that tobacco is the most powerful germ killer known to man.

11. Deputy J.H. Young of St. Brelade :

I rise to be 100 per cent in support of the Minister for Treasury and Resources. As a young person I took up smoking for 5 or 6 years and I think it is cultural reasons. A lot of young people get drawn into that. I think as we live in a society where people have a free choice and we do not ban things we need disincentives. We do not have any other measures to do it and we need to be very clear in our message, so having a tax which is a disincentive to young people starting smoking. We also know for those who smoke already that giving up smoking at any age in life I think, if I read the literature correctly, gives some benefit. When one meets people who suffer from the terrible morbidity it is not just that people die early, it is their morbidity from bad circulation problems, difficulty in walking, difficulty in breathing, having to be permanently on oxygen and so on. When you see those things many of those people now regret having taken up smoking. I think we need to be clear in our messages and having disincentives in place, just following Senator Ferguson's argument, I think if it does result in less smoking and less tax great because the end result will be less health expenditure and liabilities and costs on society. I think the tobacco industry is the only one, as far as I know, that has to find new customers to replace those that lose their life through using its products. I think it is about time that we had some clear strategies and a disincentive in place and I say that as an ex-smoker.

12. Deputy J.A. Martin of St. Helier :

I just have a couple of questions for the Minister for Treasury and Resources and he can confer with the Minister for Home Affairs before he sums up. Firstly, I am a bit confused about the 50p maximum because we will have wholesale smuggling. It would follow through that if this amendment is supported taxes on cigarettes can never rise again because we will have wholesale smuggling.

[10:00]

I need the Minister for Treasury and Resources to answer that question because in a time of minimum wage not covering inflation and wage freezes we cannot say people can afford it. To the Treasury it is ..

Senator B.I. Le Marquand: Can I clarify that, Sir? Deputy J.A. Martin:

I will give way.

The Bailiff :

It depends whether the Deputy gives way or not. Deputy J.A. Martin:

I have not addressed a question to the Minister for Home Affairs. The next bit is directly addressed to the Minister for Home Affairs and it is the question of, if the Minister does want to keep raising the duty on cigarettes he does need to have a serious conversation with Customs through the Minister for Home Affairs that what was said by the Connétable of St. Clement was correct. If people do try and bring more cigarettes in than they are allowed they can either pay the duty or 9 times out of 10 they are confiscated and they walk away. I do not know anyone that is prosecuted. I see this many times at the airport and it has happened to people. If there is no deterrent people will carry on keeping: "Let us chance it. I have paid X for them and they are duty free anyway. I may pay the duty if I want to or I can walk away from it." I think we have 2 problems here. We either believe the Minister for Treasury and Resources is not trying to raise .. well we know he is trying to raise money but as far as I am concerned if this is as far as you can go we could probably all live with this debate on the reassurance from the Minister for Treasury and Resources that cigarettes will never rise again in duty.

13. Deputy G.P. Southern of St. Helier :

I too, like Senator Ferguson, have got a great deal of sympathy for the Minister. He is trying to balance his budget, which is obviously unbalanceable since there are major issues still to be resolved with public sector workers, and he has committed himself absolutely to no major, significant increases in tax rates. Therefore, he has taken out of his hands - he has put it down - the dream of all tax collectors which is G.S.T. (Goods and Services Tax) and he has said: "I am going to leave that alone", and for once he is sticking to it. The Connetable of St. Clement was right when he said: "And what is the argument for this bash the smoker'? It is the easy target." We bashed the drinker yesterday and now we are bashing the smoker. The easy targets. What is the difference between Tuesday and Wednesday when Tuesday there was a complete argument why he could not go further than this and then come Wednesday: "I am going further than this in order to balance my budget and we like to keep around a £20 million float"? Words to that effect is what we just heard the Minister for Treasury and Resources say and yet what we are talking here is £400,000. Around a £20 million float is around £20 million with or without this £395,000. It is there anyway. With or without this amendment the budget is balanced. You just rewrite the numbers and the amount in the float will be slightly less. Balanced budget. Do not feel, Members, that you have to vote for this in order to get balance. Not quite the case. £20 million in the float, that is the reality. But I do feel sympathy for him and we might have a different debate in a few minutes' time.

14. Deputy A.E. Pryke of Trinity :

As you expect, I fully support the Minister for Treasury and Resources and let me just tell you, smoking does kill. It is a simple fact of life. Smoking kills about 150 people in Jersey and if we could ban cigarettes I would support that. If he wanted to increase tax by £1 a packet, I would support that because I am here to save lives. Not only will it save lives from lung cancers but also a high proportion of neck and head cancers. I know that several months ago people were questioning the cancer rates in Jersey and the high rate of head and neck cancers. Here we are, this is the reason. People do smoke. We have had a decrease in smoking but there is still a long way to go. I am fully supportive of the Minister for Treasury and Resources. Constable Rondel - he is gone - let me reassure him that there are health picture warnings on all packets of tobacco and as he says, as he commented like the ones in Australia, they do show the side effects of smoking with vivid pictures of head and neck cancers and I think they show a pair of lungs of a person who has been smoking. If it stops a person from buying at least one packet of cigarettes more in a week by this increase then that can only be but a good thing. Constable Murphy said about the addiction. For some people yes it is, but there are programmes. Because it is an addiction, it does not mean to say that you should not stop smoking. There are programmes, help to quit, run by G.P.s (General Practitioners), run by pharmacists, run by Health itself. We are there to help people to stop smoking. This House, back in 2010, approved the Jersey Tobacco Strategy and it was agreed then to employ fiscal and legislative measures in order to address the demand and supply of tobacco products. This is part of our strategy. This is part of what this House approved back in 2010. I will leave it at that and I fully support and ask Members if they really care, if this is only a small way, about our cancer rates please support the Minister for Treasury and Resources.

15. Deputy S.G. Luce of St. Martin :

Deputy Southern says: "Do not feel that you have to support this amendment", and he is quite right. You do not feel you have to support Deputy Baudains. You do not have to support increases in other forms of taxation. What we do have to do is to think about how we are going to balance this budget. If we continue to knock the Minister for Treasury and Resources and stop him raising funds, which allows him to balance the budget, we then, at some stage in the future, will have to face some even more serious consequences of taking money away from things that we really want to do. Tobacco volumes have fallen every year for the last 15 years and the Minister has taken into account that next year he is expecting volumes to fall further. I believe that he has allowed for that in the money that he is expecting to take. I would ask Members to think very carefully about what has been said about tobacco and the harm that it does to people and the effect it has on the Island as a whole and our health service. I would also ask Members to think carefully about how they intend to balance the budget if they are not going to support the Minister for Treasury and Resources.

16. Deputy M. Tadier of St. Brelade :

[Aside] What we have understood today in this Assembly is that we make policy by unintended consequences. What happens is we have a Government here who says we have to tax all these different types, whether it be fuel, whether it be tobacco, or whether it be alcohol. It does not really matter what we do. We say ostensibly that the reason we tax alcohol is to change behaviour and the reason we put fuel on cars is because obviously we need to pay for the roads and somewhere in the background there is a little green bulb in the Minister's brain which says: "Yes, we should be doing this for environmental purposes." What we have is a Back-Bencher comes with an amendment and says: "Do not tax fuel." We do not tax fuel because that is populist essentially. It is not wrong, it is just populist. Everybody uses cars. Smoking is a minority sport so we harm the minority interest group, if you like, in that sense. Before you know it the 10 per cent figure which I suppose would have been sacrosanct before because certainly I am sure if I had challenged the 10 per cent figure for tobacco the Minister would have said: "Oh no, we have studied this for very many months and weeks and we have come up to the fact that 10 per cent is the optimum rise for duty in tobacco", and of course like that overnight: "Oh no, it is 13.2 per cent, that is what we need." I would say, why is that? Of course, we know the technical answer is simply mathematical but it is not part of planned policy. I think that is the key thing in Jersey. We do not have planned policy. We do not have mandated politics and goodness do we not realise it more and more every couple of weeks when we come to the States Assembly. Petrol, alcohol, fuel, it does not matter so long as we get our pound of flesh. Ideology is just there in the background to try and dupe us into what is essentially a mathematical balancing problem. We have heard a lot of arguments I think that basically say: "I do not like smoking, therefore we tax it." I think the Minister for Health and Social Services has probably come out with the most perhaps consistent position in the sense that she would like to ban smoking. That is fair enough but we run a very fine line of risk when we start to moralise in this Assembly especially about things that are legal and which we have the power to change and make illegal if we do not like them. If we are going to stand up in here and say:

"Smoking is bad for you. You should not smoke, et cetera, and we are going to tax you out of existence", we have to question why smoking is legal in the first place. I think we also need to look at the graph of harm which has been done by experts in terms of drugs. Everyone will be familiar I am sure with the infamous Professor David Nutt from the U.K. There was a graph produced by several experts in drug harm in the U.K. and which drug comes top in terms of both harm to others and harm to users? It is alcohol of course. That is right at the top almost exponentially curving round on that graph. Tobacco is sixth down on the graph. The drugs that are more harmful than that being cocaine, methamphetamine, crack cocaine, heroin and alcohol. Below that you have cannabis. You have things like anabolic steroids, ecstasy, L.S.D. (Lysergic Acid Diethylamide) right down the bottom and mushrooms. Of course we are not talking about those things today. We are not talking about the fact that there are other drugs which do either more or less harm to society. We do not care about them. We do not really care if people are snorting cocaine in a back room of a toilet or if they are having a spliff with their friends on a card night because even though that is possibly doing lots of harm we cannot tax that at the moment. What we do is we allow these people not to be snorting pure cocaine. We allow them to be snorting Paracetamol and talcum powder and we do not care about their health. We do not care about the harmful products that go into those things because we have a very strange view of morality and of the penal system and of

taxation, all of those things which we do not want to challenge. What we do every few years, at the moment we stand here and say: "Smoking is bad, alcohol is bad. Let us tax it", but there is no joined-up policy when it comes to do doing that. Let us look at some other considerations. Just to emphasise that point; imagine if this Assembly had been full of people who hated car ownership. We would then have passed an amendment or it may have been part of the original proposition which hiked-up the cost of fuel duty so that those minority of dirty car users who do not use the bus, who refuse to use their bicycles but insist on using their cars, even though we know that it is bad for the environment and bad for us perhaps as individuals because we are not doing any exercise and we are growing fat in our vehicles when we sit on the Avenue in the morning listening to the dulcet tones from Radio Jersey or whatever we listen to, we are penalising that minority interest group. I do not really understand what the rationale is for duty taxation. It does not seem to be a fair way of taxing people but then again Jersey perhaps has never specialised in fair taxation. Let us listen to an academic called H.V. McLachlan, I think from Glasgow University, who talks about some of the issues around smoking and taxation duty on that. He says: "There is a possibility, perhaps even a likelihood, that in Britain smokers as a group subsidise non-smokers as a group." That probably sounds slightly counterintuitive to some people who have been indoctrinated over many years: "It is indicated in a recent research note that the costs to the N.H.S. (National Health Service) of deaths through smoking of smokers is estimated to be only £1.7 billion while the expected tax revenue from tobacco next year is £7.8 billion." Quick mathematics shows almost a ratio of 6:1 more or less, or 5:1.

[10:15]

"Furthermore, those who die from smoking would not, were they to have been non-smokers, have been immortal. They would have died from other causes and suffered from other costly illnesses. Why consider only health care costs? There are various other relevant items of public expenditure: in particular, since smokers, on average, do not live as long as non-smokers, [and that is what we have been told again today] they do not as a group generate the same pension costs as non-smokers as a group." My message today is simply that it is dangerous when politicians start to moralise, especially on things which are legal. Also, this point that I started with, the only reason that we are asking for an additional increase today is because of a complete anomaly because a Back-Bencher managed to get his policy through and therefore we have to steal apples from another stall. Does not really make sense to me. I will not be supporting this amendment although I will reserve my right to choose whether or not we have any increase at all on tobacco.

17. Connétable S.W. Pallett of St. Brelade :

Everybody will be pleased that this is going to be extremely short and I certainly do not intend to give you a lecture on smoking. I am going to support this amendment not because it is anything about a balanced budget or I have got any sympathy for the Minister for Treasury and Resources. Really for me I am going to support it because it is harmful as the Minister for Health and Social Services already said. It is harmful, it is harming my children. Both my children smoke. I hate it with a vengeance and if any price rise is going to prevent them from smoking then I am going to support it. They live on duty free cigarettes, they travel a lot. They just bring them in time and time and time again and that is one sort of loophole that I think if we are going to stop people smoking we need to do something about. I would like to know the quantity of cigarettes that are brought in duty free to find out what the problem is with it. Another issue with that as well, younger people will get around it with duty free and the amount of time they travel and they will use it as a way of getting cigarettes but the older generation, I am afraid, do not have that option. It is going to hit them harder than it is going to hit younger people and it is younger people that we want to get to stop smoking. I think that is really all I want to say. Again, I think if we can look at the amount of duty free cigarettes that are brought in, and I certainly agree with the Minister for Home Affairs as well, we do have to be careful of the increased risk of smuggling because it is no doubt going to be an issue if we raise it to a level where it seems to be a preferable option.

The Bailiff :

Does any Member wish to speak? Then I call upon the Minister to reply.

18. Senator P.F.C. Ozouf :

I will deal with the last 2 speakers first. I am grateful for the Connétable of St. Brelade's non sympathy because I am not looking for sympathy really. I am not a moral crusader. I have just got a job to do in serving this Assembly in putting an expenditure proposal and an income raising proposal and we have got various different levers. The Connétable of St. Brelade did make quite an important point and I received 3 calls last night. One was a text message to be honest and the others were 2 calls. One was a message, the one that I picked it up. They said: "I am sorry, [first name], Philip. I am sorry you lost your amendment on fuel duty but I really do not mind you putting it in on tobacco", because one of them was a parent and he said: "If you can do anything to stop my kids smoking then do it." Secondly, they said: "It is a filthy habit of which I hope I did not start in the first place." I do not want to do a moral argument and all the prohibition argument I am afraid. I thought it was a good idea to have P.C.s (personal computers) in the Assembly but I am getting a bit worried about Deputy Tadier 's research when he talks about all those things. Research is good but I am afraid I am not going to stand here and say that we have got a few levers to make in terms of opportunities to raising revenue. A number of Members have made some important points and I just need to respond to them. I am going to just ask Members - I know they have got lots of information in front of them - can they just get the Corporate Services' report because I want to just draw their attention to one thing, page 12 and also page 33 of the Budget Book. I just want to make 2 quick points about that. Deputy Southern and I, I do not think, are going to agree on many issues. We agree on some things on politics. I need to say to him that £20 million of a float in a current account on the consolidated fund is not there for spending. It is there as a buffer. It is there for a buffer to deal with uncertain times and income tax forecasts that sometimes do range. We do our best in order to serve the Assembly. I am given independent advice on it and that money is not there to spend. The money that is there to spend is the decisions we make on spending versus the income we raised. I would also say to Deputy Baudains, I did not want the sympathy but I suppose I am grateful for it. Yesterday he mentioned that there were underspends I think he said of £60-£70 million, £70 million. I would love to have underspends of £60 million or £70 million. £7 million or £8 million is what we get and that is some of the issues that we normally

allow people to carry forward, prepayments of school fees and other things. It is a relatively small amount so I am afraid there is no hiding place. The Minister for Treasury and Resources is not a magician. I would like to think I was but I am simply not. The Connétable of St. Clement said: "Is 38p?" Yes, I did say that there is a certain amount of money that you do need to put on duty before you create a tipping point, which is based upon the advice that I get from Customs and they said that effectively of a high tens of p's, 50p is about the limit. The Council of Ministers did discuss a 50p increase originally but we put a balanced proposal together of a bit of fuel duty, a bit of alcohol duty, which again I think my Assistant Minister has been doing a survey. I do not think we have explained to Members what we mean when we say a 10 per cent increase. He did question some people. He believes that people do not understand that when we talk about the 10 per cent increase in duty, or in this case the 13.2 per cent increase, we are not dealing with a 13.2 per cent increase in the retail price. I do not think we have explained that and I am sorry. Sometimes perhaps we, because we live with the figures all the time, do not realise that we need to explain it. It is a 13.2 per cent increase and to the Connétable of St. John it is a 13.2 per cent of the duty of all the duties on tobacco, whether that be pipe tobacco. It was Deputy Baudains that asked that particular question. He did raise the issue of C.S.R. and again I am afraid there is no hiding place, I say to Deputy Baudains. We are making savings. We have taken £60 million out of base budgets and he talks about overspending but the overspending is going in education mainly, it is going in job creation and it is going in stimulating the economy to get economic growth, so I would invite Deputy Baudains to come into the Treasury and for us to explain what we are doing. Yes we are going to have to go further in terms of efficiencies but this year we are putting forward a Budget which is designed, broadly speaking, to match income with expenditure subject to the investments that we have made in terms of pulling out J.T. (Jersey Telecom) shares, so I need to say to the Assembly to be please consistent and, yes, there is only a number of levers that we have got. Senator Ferguson: if Members could turn to her very helpful report, in relation to page 12 of her report, where she does show that there is an increase where there has been a decrease in the amount of tobacco, and there has been a decrease in the amount of tobacco and if Members will look at that graph she can see and Members should look at that red line. Those Members who want to deal with tobacco consumption, that red line shows that it works, the policy works. I am not suggesting that I am primarily dealing with this from a consumption point of view. The unintended consequence of the Treasury putting forward increases is that consumption falls. Yes, the income, I would need to say to Members, I am not suggesting and I am not putting forward saying that there is going to be a 13.2 per cent on the same level of consumption. If we do put a higher increase in tobacco duty, there will be a fall-off in consumption and that is built-in to the figures and that is why the figure is, if Members get their calculators out, they will work out that 13.2 per cent based upon last year's figure is a greater amount but we have already downgraded the amount of importation that is coming in. I think Senator Ferguson's graph is helpful for those Members that want higher duty on tobacco to deal with consumption. I do not think they are grumpy and unhappy. I do not think they are at all. I think the Constable of St. John needs to be nicer to some of his Constable colleagues but I will be nice to him, if he also wants to know about the determination of dealing with other issues of tobacco for those people that are concerned about it, and I would be too: yes, of course, Australia leads the way. They have brought into force just last week clean packets that you are not allowed actually they are brown packets - they do not look very nice. There is no branding and I know that there is a tobacco strategy that is coming forward. The issue of importation, of duty free: so I asked whether or not we could ban duty free on tobacco because I thought that there was an inconsistent message, but I am told that we cannot do that unilaterally, that we have obligations in relation to other arrangements with other countries, but clearly that is going to be an issue that is going to be an ongoing issue. I would just say that an individual can only bring in a pack of 200, so they are limited and our Customs and our frontier controls do a very good job in relation to ensuring that there is an awareness in relation to the

maximum amount of duty free brought in and they are effective. I say to the Constable of St. Clement, no, upon advice - and the officer's room has the Deputy Customs Chief and he advises, and I take advice from him through the Minister for Home Affairs - and they are saying that 50p is not going to start getting a huge amount of contraband tobacco coming in. Page 33 of the Budget and Senator Farnham and I am really going to implore Senator Farnham to support this revised amendment. We have set the expenditure and if I have only a few levers at my disposal, I will use a lever where I think there is a lever that can be pulled. I would like Members just to look at page 33 of the comparison of the retail price of a packet of cigarettes and I am going to upset the tobacco lobby again by I am going to remind Members of the net price of a packet of cigarettes. The net price of a packet of cigarettes currently in Jersey is £2.34. In the U.K. it is £1.58. Now I know that costs in Jersey are said to be much more expensive but I do not know any other commodity, any other product which has a net price which is one and a half times that of the U.K., so if there is anything, if there is a lever I can use, then this is one of the ones that I can use and I ask Members to reverting back to the conversations yesterday we had on fuel duty, I want to see that margin reduced and to use the Jersey Competition Regulatory Authority to make sure that there is nothing inappropriate going on because there is clearly an issue there. It does not cost an extra 1.5 times, it does not cost an extra 70p to bring a packet of 20 cigarettes from the United Kingdom to Jersey. Now I am limited in terms of the options that I have got. This is one of them and lifting it up to 50p and I say to Deputy Martin, I will go higher if I can on that duty rate because I think you can .. you cannot do it in big jumps, you need to do it over a period of time. We need to give Customs the confidence and awareness about duty free and yes I would like to look at the issue of duty free because I think there is an inconsistency but I cannot do that in isolation to others and, yes, there will be further increases in tobacco duty going forward but you can only do it in a certain step change. Finally I think I have answered all the questions that Members had. This is a relatively simple argument that the Treasury is making. I am grateful for the sympathy of Members but I just ask Members to make some common sense decisions if I may. We put spending limits in the M.T.F.P. and the Treasury has to raise money. I have to try and balance a budget. We have lost fuel duty. Members have an opportunity of regaining some of that revenue from tobacco. Some Members will say that it achieves some of their other objectives. I believe that it does. I believe that it is a fair and reasonable alternative proposal to at least get us near to the revenue that we lost from fuel duty and in order to make sure that that Consolidated Fund keeps around that minimum amount of money that I have said that is necessary and prudent. The autumn statement, later on in the U.K. will show a Government that has not been prudent. This Assembly has been prudent in relation to its spending of the past. I do not want to saddle future Assemblies with income and expenditure which is mismatched, and this is really a debate just simply about that. Deputy Le Hérissier, I think I did not answer his question. He wants a big debate about tax. This is not a big debate about tax, this is a simple issue just raising the revenue for the expenditure which we have

agreed and this is primarily on health, and so I make a proposition and ask for Members' support. Deputy G.P. Southern :

I do not believe the Minister has addressed my fundamental question about what constitutes a balanced budget. £19.5 million in the float or £20.5 million, is either balanced?

[10:30]

Senator P.F.C. Ozouf :

We have had all these debates and the Budget Book is full of all the information of the underlying deficits and balanced budget approach that we are taking and Deputy Southern is one of those individuals. I cast no aspersion on his views but he believes that if the money is there you should spend it. He wants us to be spending the money.

Deputy G.P. Southern :

This has got nothing to do with spending the money. Senator P.F.C. Ozouf :

So I have not got anything else to say. This is a simple issue, we have agreed the [Interruption] .. this Budget is about raising the revenue and I am asking Members to put more revenue into tobacco in order to pay for the spending. It is as simple as that and I believe that this is a product that we can do it. I believe there are 2 other questions.

Senator S.C. Ferguson:

Can I have a point of order? I am sure the Minister was not deliberately misleading the Assembly. My information is that the price comparisons with the cigarette prices in Jersey and in the U.K. are not supplied by the Statistics Unit and they are taken from a U.K. website, which can sell below the recommended retail price, therefore I think we should be a little careful in relying on those figures.

Senator P.F.C. Ozouf :

That is not correct. First of all I am not aware that there is a recommended retail price for tobacco products, if there was that would be anti the U.K. Competition Law. There is a competition effectively on price on tobacco products and my point is simply this, Senator Ferguson can see that there is an underlying huge difference between the price of a packet of cigarettes when stripping out duty and tax and whether or not it is 10p either way, it is massive. It is 150 per cent so a point of clarification, the date is clear, I can know that a packet of cigarettes in the U.K. is around about £7.30 and I look at the price displays and I know it is about £6.44. The maths is simple.

The Bailiff :

Very well, now we are moving on to the vote. Deputy M.R. Higgins of St. Helier :

Can I have a point of clarification?

The Bailiff :

You  did  not  speak,   Deputy ,  I  do  not  think  so  you  cannot  ask  for  a  point  of  clarification. [Laughter]

Deputy M. Tadier :

I would like just to ask a point of information with regards to the comments that the Minister made about duty free not being possible to ban that, would he circulate a paper on that in the next week so that I think it is an area of interest to Members.

Senator P.F.C. Ozouf :

It is not my responsibility, I cannot do it within a week but we will do our best. I move the amendment and ask for the appel.

The Bailiff :

Very well. The appel is called for then in relation to the fifth amendment lodged by the Minister for Treasury and Resources. I ask Members to return to their seats and the Greffier will open the voting.

2. Draft Budget Statement 2013 (P.102/2012): second amendment (P.102/2012 Amd.(2)) The Bailiff :

Very well. So we now come to the second amendment lodged by Deputy Southern . I will ask the Greffier to read the amendment.

The Deputy Greffier of the States:

Page 2, paragraph (a) - "After the words "as set out in the Budget Statement", insert the words - "except that, in relation to existing taxation measures, the prescribed limit for the purposes of Article 135A(3B) of the Income Tax (Jersey) Law 1961 (which concerns persons granted 1(1)(k) housing consent) shall be increased for the year of assessment 2013 from £625,000 to £643,750."

1. Deputy G.P. Southern :

I believe this is a fundamentally very simple amendment and it is one on which the Minister for Treasury and Resources and I completely agree. I use the word "completely" somewhat loosely because as usual the Minister for Treasury and Resources agrees with me in principle but not in practice, especially ..

The Bailiff :

You mean not completely? Deputy G.P. Southern :

I mean, barely agrees with me, Sir, but not in practice, especially when I bring an amendment to his precious Budget as I am prone to do. The point is that the time has come, I think, to properly share the load with those with the broadest shoulders. In particular when we face a year, 2013, when we are going to be implementing some £3 million worth of cuts to welfare, to benefits. So we need, I believe, to spread the load fairly and that to my mind includes the very wealthiest on the Island, the high net worth individuals that we invite to share the privilege of living in Jersey for a certain sum and last year, 18 months ago, that was set at a fixed sum, essentially high net worth individuals who come to the Island pay 20 per cent on the first £625,000 of income wherever it is earned and a further 1 per cent on any remainder. Their contribution to Jersey tax revenue stream is at least £125,000. Of the 140 high net worth individuals currently here, we do receive £13.5 million from that particular source so it is a significant income stream. Unfortunately it is fixed, so over time its value reduces due to inflation. It comes less and less valuable as time goes on unless it is indexed. For example, the example I use in my report, is that £1,000 back in the year 2000 only purchases £625 worth of goods today due to erosion, due to the cost of living. My amendment means that the sum on which high net worth individuals, 1(1)(k)s, pay tax, will be index-linked and the sums if we index-link immediately on R.P.I. (Retail Price Index) at 3 per cent are in my report, and we are talking about a relatively small sum. Tax then gets paid on a 20 per cent on £643,750. That is the first year. However if we index-link over time, that could be a very significant sum. The example I use again in my report is that if we were to index the whole of the income stream from high net worth individuals at £13.5 million, if we were to index that today - we cannot because that is retrospective, but if we were to do that - then we would achieve another £139,000 worth of tax revenue. If that were to continue over, let us say, 8 years that is over £1 million worth of revenue. Now, what I am suggesting is that unless we index-link that sum going forward, we will be losing those sorts of sum eventually. Now, as I say in my paper, in the past I understand this has been a problem. Ten years on, 15 years on, 20 years on after a 1(1)(k) arrives in the Island, they are paying relatively little amounts due to the erosion of inflation for the privilege of living in Jersey. Now I want that to stop. The Minister himself in his comment - and this is where he agrees with me - he says "The way in which Jersey set the minimum tax contribution it expected from 1(1)(k) residents in the past has meant that in some cases the value of that contribution has been eroded over time." Agreement: there is a problem. Agreement also: "The Minister understands the desire to ensure that the value of the tax contributed by 1(1)(k)s is not eroded over time." So he agrees, let us stop this erosion over 1(1)(k)s' contribution. With that in mind, he is proposing to review the regime once it has been in place for long enough for meaningful conclusions to be formed. With that in mind he is proposing to review, not act, to review the scheme once it had been in place for long enough for meaningful conclusions to be formed. Long enough. When is that: 2 years down the line, 5 years down the line, 10 years down the line? We will fix it, or we might. No, he has made no commitment to fix it. It is a commitment to review it. So while he is agreeing with me, he says that he will review it sometime down the line when he feels ready. I am saying, no. There is a simpler solution, we could and we should start now with indexing that amount. He then goes on to say: "Introducing an automatic annual increase in the minimum tax expected from 1(1)(k)s could very quickly make the Island's tax offering uncompetitive." So he agrees with one hand and in another sentence he is saying: "Oh, but that might make us uncompetitive." Well, let us have a look. This year to date there were 7 applicants under the new regime, 6 of whom now are resident here, have bought and have now settled. So the numbers with the scheme are steady. People still want to come under the regime of £125,000 minimum tax contribution. I believe that indexing that tax contribution would make no difference at all to the attractions that Jersey has for these high net worth individuals. The Minister for Treasury and Resources also says on page 4 of his comments: "While £1 spent in 1990 [referring to my figures] would now buy one-third less, it is not clear that incomes in the same period can be expected to have increased by 131 per cent." In order to make a comparison all he has to do is look at the Average Earnings Index and he will find that the increase has not been 131 per cent for ordinary people, thereby paying more and more tax on that increase. The increase is not by 131 per cent, it is by 171 per cent, so average earnings goes up even quicker, as we have been told time and time again recently when looking at the balance of earnings in the Island. So, the principle is not objected to, just the timing and yet we have got no date for that review that the Minister wants, nor while the principle is accepted by the Minister as correct, is there a mechanism to be put in place in order to make sure that this erosion of the income stream does not take place in future. I suggest it is time that we did, that we do put that indexing, that mechanism in place, to ensure that the contribution that we get from 1(1)(k)s for the privilege of living on this Island does not erode over time. So I maintain the proposition.

The Bailiff :

Is the amendment seconded? [Seconded] Does any Member wish to speak? Senator Ozouf ?

2. Senator P.F.C. Ozouf :

I am not sure that Deputy Southern was trying to mislead the Assembly but he said that we are in agreement. I am not sure that we are in agreement because I am not sure that Deputy Southern agrees with the 1(1)(k) regime at all. I cannot remember, it may well be that there is an underlying issue. I put forward a change to the 1(1)(k) regime 18 months ago, or in July 2011, that is not a full tax year since we have done it. I would remind Members that at that stage the Assembly agreed to do that and we agreed to put a fairly significant increase in the minimum contribution. I rehearsed the arguments at that time about the need for competitiveness. We are in fact more expensive than other jurisdictions. We believe that that is one of the factors people come to Jersey and they will move location because one aspect is tax. There are minimum tax contributions in competing jurisdictions. Guernsey has, as my report says, a maximum tax cap. We have a minimum tax cap, Guernsey has a maximum tax cap of £100,000.

[10:45]

The Isle of Man has £115,000, in fact Switzerland can be as low as £35,000 and other places such as Monaco effectively there is no tax contribution at all - they get it all by indirect taxes. We proposed when we brought in the new 1(1)(k) regime a higher rate. Effectively it was quite a significant increase in terms of the minimum tax contribution. Where I do agree with Deputy Southern , and I am willing to say again publicly, that I want over time that minimum contribution to be maintained in real terms. My only difference is, is that I want to see a full year of tax from the new arrangements being put in place. Ours is not a maximum tax rate, it is a minimum tax rate, and I want to see the extent to which our new policy which was designed to make sure that 1(1)(k)s had the advantage of bringing their business to Jersey rather than parking it in another jurisdiction before they came here. The idea of the new regime was that they brought all of their business to Jersey. So we did not only get that minimum tax contribution on the first £625,000, we got the 1 per cent above that, but we got all that other benefit of inward investment and we have been doing good work, there has been good work done by the Minister for Economic Development's team. He has now got a new employee in relation to marketing and awareness of the new regime. The Minister for Housing gives very careful consideration of each of the 1(1)(k) applications. There has been some good news. Perhaps it is not been quite as successful as we wanted, which I

think is quite an important message to go out in this debate. Deputy Southern wants us to increase again that minimum contribution in a way that has unintended consequences and I simply am not prepared to support that at this time. I am willing to work with the Minister for Housing and to review again the overall 1(1)(k) policy in the next few months. I still want to deal with this situation whereby I am told that 1(1)(k)s that came here in 1970 are paying £5,000 and there has been lots of political point-scoring about that. The reality is that those individuals do not simply have the income anymore in order to do that and I am wanting to suggest that there is potentially a transitional arrangement where they would go to the normal 20 per cent rate because it is not the case that some of those individuals have got hundreds of thousands of pounds worth of income, their savings have either gone with the dotcom (.com) crash or other arrangements. So I am looking at the historic issues of 1(1)(k)s. I cannot rip up the rule book. There are obligations that have been given and there is also an important message of certainty and stability that we send out to Jersey in relation to our 1(1)(k) regime. We changed this only last tax year. I do agree that I want in time to bring forward a proposal to maintain that minimum tax contribution and I will do it before the next Budget and I will certainly be doing more work with colleagues on that. But this is too early. It is going to be damaging in terms of the message it sends out that we make a change to the arrangement before we know the full impact of our new arrangements. I agree with Deputy Southern . I want to raise as much revenue as I possibly can, however, I am not going to do anything which undermines the competitive nature of the 1(1)(k) regime and could end up with us not achieving our targets overall because this is a subtle arrangement. This increases effectively the amount of tax that pays at 20 per cent and we are going to make it even more difficult. There may be another way that we can guarantee that we can ensure that we can get that minimum tax contribution by condition on the housing licence or other ways. There are other ways in order to do it. I would just remind Members that when we did originally and there have been a number of variants of the 1(1)(k) regime. In the 1990s this Assembly thought that it was possible to set the minimum rate at £200,000 and I think we had one 1(1)(k) arrive. That was no good for the economy, no good for inward investment and if we were to index the 20 per cent income arrangement over a period of time then effectively we would making individuals have even more substantial amount of income to prove to us before the Minister for Housing would be willing to grant a consent. And we are not going to get the 1(1)(k)s in. At this period of the economic situation we want to encourage as much inward investment into the Island as possible. It is a factor that the minimum contribution is important, but it is also that so are all of the other benefits that inward investment bring. Inward investment, investment into the Island economy, investment into jobs which is the kind of discussions that we are having. We are looking at 1(1)(k)s not simply on the issue of their minimum tax contribution. We want 1(1)(k)s to be investing in Jersey, investing in new kinds of businesses, investing in businesses for the intellectual property area, for I.T. (information technology) businesses, et cetera. That is what the U.K. do. They encourage entrepreneurship and this is about a policy of encouraging people who are going to bring investment and entrepreneurship, and I am afraid simply increasing as Deputy Southern is proposing is not going to achieve those objectives. I am committed to maintain in real value the minimum tax contribution over time but you do not do it after not even having one full year of data and certainly not a full year when you have got the research that you have carried out with