Research - Lodged Government Plan 2023-26 P.97-2022 - 4 October 2022

STATES OF JERSEY

PROPOSED GOVERNMENT PLAN 2023-

2026

Lodged au Greffe on 4th October 2022 by the Council of Ministers

Earliest date for debate: 13th December 2022

STATES GREFFE

2022  P.97

PROPOSITION

THE STATES are asked to decide whether they are of opinion

to receive the Government Plan 2023–2026 specified in Article 9(1) of the Public Finances (Jersey) Law 2019 ("the Law") and specifically –

1. to approve the estimate of total States income to be paid into the Consolidated Fund in 2023 as set out in Appendix 2 – Summary Table 1 to the Report, which is inclusive of the proposed taxation and impôts duties changes outlined in the Government Plan, in line with Article 9(2)(a) of the Law;
2. to approve the proposed Changes to Approval for financing/borrowing for 2023, as shown in Appendix 2 – Summary Table 2 to the Report, which may be obtained by the Minister for Treasury and Resources, as and when required, in line  with  Article  9  (2)(c)  of  the  Law,  of  up  to  those  revised  approvals;
3. to approve the transfers from one States fund to another for 2023 of up to and including the amounts set in Appendix 2 – Summary Table 3 in line with Article 9(2)(b) of the Law;
4. to approve each major project that is to be started or continued in 2023 and the total cost of each such project and any amendments to the proposed total cost of a major project under a previously approved Government Plan, in line with Article 9(2)(d), (e) and (f) of the Law and as set out in Appendix 2 - Summary Table 4 to the Report;
5. to approve the proposed amount to be appropriated from the Consolidated Fund for 2023, for each Head of Expenditure, being gross expenditure less estimated income (if any), in line with Articles 9(2)(g), 10(1) and 10(2) of the Law, and set out in Appendix 2 – Summary Tables 5(i) and (ii) of the Report;
6. to  approve  the  estimated  income,  being  estimated  gross  income  less expenditure, that each States trading operation will pay into its trading fund in 2023 in line with Article 9(2)(h) of the Law and set out in Appendix 2 – Summary Table 6 to the Report;
7. to approve the proposed amount to be appropriated from each States trading operation's trading fund for 2023 for each head of expenditure in line with Article 9(2)(i) of the Law and set out in Appendix 2 – Summary Table 7 to the Report;
8. to approve the estimated income and expenditure proposals for the Climate Emergency Fund for 2023 as set out in Appendix 2 – Summary Table 8 to the Report; and
9. to approve, in accordance with Article 9(1) of the Law, the Government Plan 2023-2026, as set out at Appendix 3 to the Report.

COUNCIL OF MINISTERS

REPORT

Introduction

In accordance with Articles 9(1) and 15 of the Public Finances (Jersey) Law 2019, the Council of Ministers seeks the approval of the States Assembly to the Government Plan 2023-2026 which is included in Appendix 3 of this report.

Article 9(1) of the Public Finances (Jersey) Law 2019 provides that the Council of Ministers must prepare a Government Plan and lodge it in sufficient time for the States to debate and approve it before the start of the next financial year.

Article 15 of the Public Finances (Jersey) Law 2019 sets out the effect of the approval by the States Assembly of a Government Plan.

Structure of the Government Plan

Part 3 of the Public Finances (Jersey) Law 2019 sets out the statutory content and scope for the Government Plan and is set out at Appendix 1 for ease of reference. This requires certain  specific  information  to  be  included  within  the  Government  Plan and also requires the Council of Ministers to provide any other information that the Council of Ministers believes that the States may reasonably expect to need in order to consider the matters required to be set out in the Government Plan. The Government Plan 2023- 2026, included at Appendix 3, sets out this information.

Draft Legislation containing a Taxation Draft and Social Security amendments As the Government Plan 2023-2026 proposes imposing or varying a tax for 2023, in accordance with Articles 11 and 12 of the Public Finances (Jersey) Law 2019, the Minister for Treasury and Resources will lodge draft legislation containing a taxation draft that implements those proposals. This will be lodged in line with the 6 week lodging period as required by Standing Orders so that it can be debated by the States in the same sitting as the Government Plan.

As  the  Government  Plan  2023–2026  also  proposes  changes  to  Social  Security legislation to remove the States grant to the Social Security Fund, and transfers from the Health Insurance Fund, the Minister for Social Security will lodge draft legislation containing the necessary legislative amendments that implement these changes. The legislation will be lodged in line with the 6 week lodging period as required by States Standing Orders so that it can be debated by the States in the same sitting as the Government Plan.

Amendments to the lodged Government Plan 2023-2026

States Members seeking to amend the Government Plan 2023-2026 are asked to note that the Public Finances (Jersey) Law 2019 provides:

"13 Amendment to lodged government plan

1. An amendment to a lodged government plan may, in addition to proposing the amendment to the plan, propose –

1. the  amendment  of  any  enactment  that  imposes  a  tax  or  provides  for  the administration of a tax (whether or not the Minister has lodged a taxation draft that would amend the enactment); or
2. the imposition of a new tax.

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2. A person, committee or panel who intends to propose an amendment to any element of a lodged government plan referred to in Article 9(2) must, in preparing the amendment, take into account the impact of the amendment on –

1. the States' finances;
2. the medium-term and long-term sustainability of the States' finances and the outlook for the economy in Jersey; and
3. the  sustainable  well-being  of  the  inhabitants  of  Jersey  over  successive generations."

In addition, it states that:

"14 Limitations on approval

The States may not approve a government plan that would –

1. show a negative balance in the Consolidated Fund at the end of the first financial year covered by the plan; or
2. authorise the transfer of money between one States fund and another in a manner that is inconsistent with any enactment or with the terms of a States fund."

Effect of Approval of the Government Plan 2023-2026

The Public Finances (Jersey) Law 2019 also outlines the impacts following the approval of the Government Plan:

"15 Effect of approval

1. The  approval  by  the  States  of  a  government  plan  is  an  approval  of  the appropriations, financing and transfers set out in the plan for the first financial year it covers, such that in that year –

1. an amount of not more than an approved appropriation may be withdrawn from the Consolidated Fund and spent in accordance with the plan;
2. a States body or area of operation specified under Article 9(8) may withdraw from the Consolidated Fund an amount, to be spent on the related head of expenditure, of not more than the lesser of –

1. the amount of income that is earned by, or is attributable to, the States body or area of operation in that year, and
2. the amount, set out in the plan under Article 9(8) in relation to the head of expenditure,  of  the  estimated  income  of  the  States  body  or  area  of operation;

3. a States trading operation may withdraw from its fund an amount of not more than the approved appropriation and spend it in accordance with the Plan;
4. the Minister may arrange financing in accordance with the Plan; and
5. money may be transferred between States funds in accordance with the Plan.

2. The approval by the States of a Government Plan is also an approval of –

1. the designation of a project, set out in the Plan, that is to be designated as a major project;
2. the undertaking of the major projects that are set out in, or designated under, the Plan; and

3. the proposed total cost, from start to finish, of each of those major projects.

3. The approval by the States of a Government Plan Authorises the Minister to direct how an approved appropriation for a reserve head of expenditure in the Plan may be spent (including on another head of expenditure) in the first financial year covered by the Plan.  
4. Is not an approval of any appropriations, financing or transfers for the years following the first financial year covered by the Plan"

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APPENDIX 1

Extract from the Public Finances (Jersey) Law 2019

PART 3

FINANCIAL PLANNING AND AUTHORITY TO SPEND Government plan and taxation drafts

9 Preparation and lodging of government plan

1. Each  financial  year,  the  Council  of  Ministers  must  prepare  a government plan and lodge it in sufficient time for the States to debate and approve it before the start of the next financial year.
2. The government plan must set out –

1. the estimated income to be paid into the Consolidated Fund in the next financial year;
2. the proposed amount of any transfer of money from one States fund to another during the next financial year;
3. the amount of any other proposed financing to be obtained for the next financial year;
4. each major project, and each project that is to be designated as a major project, that –

1. is proposed to be started in the next financial year, and
2. has  not  previously  been  set  out  in  an  approved government plan;

5. the proposed total cost, from start to finish, of each project referred to in sub-paragraph (d);
6. any amendment to the proposed total cost, from start to finish, of a major project that was set out in or designated under a previously approved government plan;
7. the proposed amount to be appropriated from the Consolidated Fund for the next financial year, per head of expenditure;
8. the estimated income from each States trading operation to be paid into its fund in the next financial year; and
9. the proposed amount to be appropriated from each States trading operation's fund for the next financial year, per head of expenditure.

3. The government plan must also set out, more generally –

1. the estimated income to be paid into the Consolidated Fund in the 3 financial years following the next financial year;

2. the estimated amount of any proposed transfer of money from one States fund to another during each of those 3 financial years;
3. the estimated amount of any other proposed financing to be obtained for each of those 3 financial years;
4. the total estimated expenditures from the Consolidated Fund for each of those 3 financial years;
5. the estimated expenditures from the Consolidated Fund for each major project to be carried out in each of those 3 financial years;
6. the estimated income from each States trading operation to be paid into its fund for each of those 3 financial years; and
7. the  total  estimated  expenditures  from  each  States  trading operation's fund for each of those 3 financial years.

4. The government plan must also include –

1. the estimated amounts that will be in each of the States funds listed in Schedule 5 at the start and at the end of each of the 4 financial years covered by the plan; and
2. any other information that the Council of Ministers believes that the States may reasonably be expected to need in order to consider the matters mentioned in paragraphs (2) and (3) and sub-paragraph (a).

5. The Council of Ministers must not lodge a government plan that shows a negative balance in the Consolidated Fund at the end of any of the financial years covered by the plan.
6. The Council of Ministers must –

1. in  preparing  the  government  plan,  take  into  account  the medium-term  and  long-term  sustainability  of  the  States' finances and the outlook for the economy in Jersey; and
2. set  out  in  the  government  plan  how  the  proposals  in  the government plan take those matters into account.

7. The government plan may include a reserve as a head of expenditure.
8. The government plan may, in relation to a head of expenditure, set out an amount of the estimated income to be earned by, or be attributable to, a specified States body or area of operation of a States body in the next financial year.
9. The Council of Ministers must –

1. in  preparing  the  government  plan,  take  into  account  the sustainable  well-being  (including  the  economic,  social, environmental and cultural well-being) of the inhabitants of Jersey over successive generations; and

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2. set out in the government plan how the proposals in the plan take that sustainable well-being into account.

10 Proposed appropriations for non-Ministerial States bodies or other

bodies

1. A government plan lodged by the Council of Ministers must set out, as  the  proposed  amount  referred  to  in  Article 9(2)(g)  to  be appropriated in relation to the operations of a non-Ministerial States body or body listed in Schedule 6 for the next financial year, the amount that is submitted to the Council of Ministers by –

1. the chairman of the States' Public Accounts Committee, in the case of the office of the Comptroller and Auditor General;
2. the  chairman  of  the  States'  Privileges  and  Procedures Committee, in the case of the States Greffe;
3. the non-Ministerial States body, in the case of any other non- Ministerial States body; and
4. the Minister responsible for ensuring the proper resourcing of the body under the enactment that established that body, in the case of a body listed in Schedule 6.

2. The Council of Ministers may include, in the government plan, a statement indicating whether or not the Council supports any of the submitted amounts referred to in paragraph (1).
3. For the avoidance of doubt, the amounts set out in the government plan under this Article may be the subject of an amendment under Article 13.

11 Lodging of taxation draft

1. If a lodged government plan proposes imposing or varying a tax for the next financial year, the Minister must lodge draft legislation containing a taxation draft that implements the proposal in sufficient time for the taxation draft to be debated and approved by the States before the start of that financial year.
2. Paragraph (1) does not prevent the Minister from lodging other draft legislation containing a taxation draft at any time.
3. If, at any time, the States approve a proposition that suggests that a taxation draft should be lodged and the Minister does not lodge draft legislation containing a taxation draft in sufficient time for it to be debated before the time when it should have effect, the Minister must explain why he or she has not lodged it.
4. Only the Minister may lodge draft legislation that contains a taxation draft.

12 Taxation draft may be given immediate effect

1. The States may by Act declare that, on the Act being made, a taxation draft in a draft Law has effect as if the draft Law had been passed by the States, confirmed by Her Majesty in Council and registered in the Royal Court.
2. The States may extend the application of the Act to an ancillary provision that is contained in the same draft Law.
3. An Act referred to in paragraph (1) may be made at any time after the taxation draft to which it relates has been lodged.
4. If a taxation draft which has effect under paragraph (1) provides for the renewal of an existing tax, any enactment which was in force in respect of the tax as last imposed has full force and effect with respect to the renewed tax, subject to any taxation draft or ancillary provision which also has effect under paragraph (1).
5. If, after an Act has been made under paragraph (1), a taxation draft or ancillary provision given effect by the Act is amended before it is confirmed by Her Majesty in Council, money that is paid or deducted in respect of it but that would not have been paid or deducted in respect of the version as amended and confirmed must be repaid or made good.
6. If, after an Act has been made under paragraph (1), a taxation draft or ancillary provision given effect by the Act is not adopted by the States or is not confirmed by Her Majesty in Council, any money paid or deducted under it must be repaid or made good.
7. In this Article –

1. an "ancillary provision" is a provision in a draft Law that provides for –

1. the collection and administration of a tax,
2. the proper administration of matters connected with the imposition of a tax,
3. the interpretation, application, effect or commencement of a taxation draft,
4. consequential amendments, transitional arrangements or savings that are supplemental to a taxation draft being given effect; and

2. a reference to a taxation draft or ancillary provision includes any amendment to a taxation draft or ancillary provision that is adopted by the States before the Act is declared.

13 Amendment to lodged government plan

1. An amendment to a lodged government plan may, in addition to proposing the amendment to the plan, propose –

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1. the  amendment  of  any  enactment  that  imposes  a  tax  or provides for the administration of a tax (whether or not the Minister has lodged a taxation draft that would amend the enactment); or
2. the imposition of a new tax.

2. A person, committee or panel who intends to propose an amendment to  any  element  of  a  lodged  government  plan  referred  to  in Article 9(2) must, in preparing the amendment, take into account the impact of the amendment on –

1. the States' finances;
2. the medium-term and long-term sustainability of the States' finances and the outlook for the economy in Jersey; and
3. the sustainable well-being of the inhabitants of Jersey over successive generations.

Approval of government plan

14 Limitations on approval

The States may not approve a government plan that would –

1. show a negative balance in the Consolidated Fund at the end of the first financial year covered by the plan; or
2. authorise the transfer of money between one States fund and another in a manner that is inconsistent with any enactment or with the terms of a States fund.

15 Effect of approval

1. The approval by the States of a government plan is an approval of the appropriations, financing and transfers set out in the plan for the first financial year it covers, such that in that year –

1. an amount of not more than an approved appropriation may be withdrawn  from  the  Consolidated  Fund  and  spent  in accordance with the plan;
2. a States body or area of operation specified under Article 9(8) may withdraw from the Consolidated Fund an amount, to be spent on the related head of expenditure, of not more than the lesser of –

1. the amount of income that is earned by, or is attributable to, the States body or area of operation in that year, and
2. the amount, set out in the plan under Article 9(8) in relation to the head of expenditure, of the estimated income of the States body or area of operation;

3. a States trading operation may withdraw from its fund an amount of not more than the approved appropriation and spend it in accordance with the plan;
4. the Minister may arrange financing in accordance with the plan; and
5. money may be transferred between States funds in accordance with the plan.

2. The approval by the States of a government plan is also an approval of –

1. the designation of a project, set out in the plan, that is to be designated as a major project;
2. the undertaking of the major projects that are set out in, or designated under, the plan; and
3. the proposed total cost, from start to finish, of each of those major projects.

3. The approval by the States of a government plan authorises the Minister to direct how an approved appropriation for a reserve head of expenditure in the plan may be spent (including on another head of expenditure) in the first financial year covered by the plan.
4. For the avoidance of doubt, approval by the States of a government plan is not an approval of any appropriations, financing or transfers for the years following the first financial year covered by the plan.

16 Amendment to an approved government plan

1. The States may amend an approved government plan only on a proposition lodged by the Council of Ministers.
2. A proposition to amend an approved government plan must not result in the plan showing a negative balance in the Consolidated Fund at the end of any financial year covered by the plan.

Supplementary powers

17 Approval still pending at start of financial year

1. This  Article  applies  if  the  States  have  not  approved  a  lodged government plan before the start of the first financial year covered by the plan.
2. For each month of that year during which the government plan remains unapproved, an amount up to the maximum set out in paragraph (4) may be withdrawn from the Consolidated Fund in

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respect of a proposed head of expenditure set out in the unapproved plan if there is an equivalent head of expenditure set out in the most recently approved government plan.

3. For each month of that year during which the government plan remains unapproved, a States trading operation may withdraw an amount up to the maximum set out in paragraph (4) from its fund in respect of a proposed head of expenditure set out in the unapproved plan if there is an equivalent head of expenditure, under which an amount is appropriated from that fund, set out in the most recently approved government plan.
4. The maximum referred to in paragraphs (2) and (3) is 1/12th of the amount of the appropriation for the equivalent head of expenditure set out in the most recently approved government plan.
5. Articles 18  and  22  apply,  with  any  modifications  that  the circumstances require, with respect to heads of expenditure in the unapproved government plan.
6. Paragraphs (2) and (3) cease to apply as soon as the States approves the government plan referred to in paragraph (1), and in that case any amounts withdrawn under this Article are treated as being withdrawn under that plan.

18 Power to re-allocate

1. Despite an approved government plan, the Minister may direct that a specified amount appropriated under the plan for one head of expenditure be allocated to another head of expenditure that is –

1. set out in the plan; or
2. a new head of expenditure relating to a major project set out in,  or  designated  by,  the  plan  or  a  previously  approved government plan.

2. The specified amount may be withdrawn from the Consolidated Fund and spent  on that other head of  expenditure in  the  same financial year for which the amount was appropriated, as if the amount had been appropriated for that other head of expenditure.
3. For the avoidance of doubt, the total amount appropriated for the original head of expenditure is decreased by the specified amount.
4. The Minister must give the States at least 4 weeks' notice of the day on which the Minister proposes to give a direction under this Article and, if a proposition objecting to the proposed direction is lodged before that day, the Minister must not give the direction unless and until the States reject the proposition or the proposition is withdrawn.
5. If a direction under this Article would affect a head of expenditure that relates to the responsibilities of any Minister, that Minister must be consulted before the direction is made.

19 Power to transfer amounts to following year's reserve

Despite an approved government plan, the Minister may direct that an unspent amount appropriated for a head of expenditure in one financial year be deemed to be appropriated for a reserve head of expenditure for the following financial year.

20 Power to transfer major project amounts to following year

Despite an approved government plan, the Minister may direct that an unspent amount appropriated for a head of expenditure for a major project in one financial year is deemed to be appropriated for a head of expenditure for that major project for the following financial year.

21 Power to allocate excess income

1. This Article applies if –

1. an approved government plan includes, under Article 9(8), the estimated income that will be earned by, or be attributable to, a States body or by an area of operation of a States body during the first financial year covered by the plan; and
2. income in excess of that estimate is earned by, or attributable to, the States body or area of operation during that financial year.

2. Despite the approved government plan, the Minister may direct that the excess income referred to in paragraph (1)(b) be allocated to a head of expenditure set out in the plan.
3. The amount subject to the Minister's direction may be withdrawn from the Consolidated Fund and spent on that head of expenditure in the first financial year covered by the approved government plan, as if the amount had been appropriated for that head of expenditure.

22 Limitations on powers – non-Ministerial States bodies and States

trading operations

1. The Minister may give a direction under any of Articles 18 to 21 with respect to a head of expenditure that relates to the operations of a non-Ministerial States body only with the approval of –

1. the chairman of the States' Public Accounts Committee, in the case of the Comptroller and Auditor General;
2. the  chairman  of  the  States'  Privileges  and  Procedures Committee, in the case of the States Greffe; or
3. the accountable officer of the non-Ministerial States body, in any other case.

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2. Amounts appropriated from a States trading operation's fund may only be allocated under Article 18 to –

1. another head of expenditure, set out in the plan, for which amounts are appropriated from that fund, or
2. a  new  head  of  expenditure  relating  to  a  major  project, described in Article 18(1)(b), that is being undertaken by the States trading operation.

3. Articles 19 and 21 do not apply with respect to amounts appropriated in relation to a States trading operation from the Consolidated Fund or its fund.

23 Semi-annual updates

1. The Minister must, in accordance with paragraph (2), prepare and present to the States a written statement setting out –

1. each  function  undertaken,  within  the  applicable  6-month period referred to in paragraph (2), under any of Articles 18 to 21, 24 and 26 to 28; and
2. each direction given, within the applicable 6-month period referred  to  in  paragraph (2),  by  the  Minister  under Article 15(3) with respect to the amounts appropriated for a reserve head of expenditure.

2. The Minister  must  present  the  statement  in  respect  of  the  first 6 months of a financial year no later than 31st August of that year, and must present the statement in respect of the second 6 months of the financial year no later than the last day of February of the next year.

Emergency expenditures 24 Authority to withdraw a specified amount

1. Despite an approved government plan, the Minister may authorise the withdrawal of a specified amount from the Consolidated Fund if he or she is satisfied that –

1. the  circumstances  described  in  paragraph (2)  require  an immediate expenditure; and
2. no other amount, or an insufficient amount, may be withdrawn from the Consolidated Fund under the applicable approved government plan.

2. The circumstances referred to in paragraph (1)(a) are –

1. a state of emergency has been declared under the Emergency Powers and Planning (Jersey) Law 1990; or

2. the Minister is satisfied that there exists an immediate threat to the health or safety of any of the inhabitants of Jersey, to the stability of the economy in Jersey or to the environment.

3. The Minister must present a notice to the States of a withdrawal under paragraph (1) as soon as is practicable after it occurs.
4. If the amount specified under paragraph (1) is less than £10 million, the Minister may, despite the approved government plan, direct that the amount be appropriated from the Consolidated Fund.
5. If the amount specified under paragraph (1) is £10 million or more, the  applicable  approved  government  plan  must  be  amended accordingly under Article 16.

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APPENDIX 2 Summary Tables

Summary Table 2 - Borrowing for 2023

Existing  Change to  2023  2024  2025  2026 £'000  Approval  Approval  Approval  Proposed  Proposed  Proposed Costs of Covid-19  208,520  (208,520)  -  -  -  - Fiscal Stimulus  29,641  (29,641)  -  -  -  - Refinancing of past-service liabilities  480,000  (3,000)  477,000  477,000  477,000  477,000 Housing Bond  250,000  -  250,000  250,000  250,000  250,000 Total Approved Borrowing (before Our

968,161  (241,161)  727,000  727,000  727,000  727,000 Hospital)

Borrowing for Our Hospital  756,000  -  756,000  756,000  756,000  756,000 Total Approved Borrowing  1,724,161  (241,161)  1,483,000  1,483,000  1,483,000  1,483,000

Community Fund  T&E  T&E  -  7,000  7,000 Revenue Transformation Programme (Phase 3)  T&E  T&E  9,425  9,425  - Our Hospital  HCS  HCS  804,500  804,500  -

Cabinet Office  2,780  70,116  67,336

Children, Young People, Education and Skills  21,220  210,908  189,688

Customer and Local Services  10,452  105,755  95,303

Infrastructure, Housing and Environment  31,177  86,682  55,505

Health and Community Services  26,207  274,089  247,882

Jersey Overseas Aid  -  17,700  17,700

Justice and Home Affairs  4,530  39,700  35,170

States of Jersey Police  234  27,342  27,108

Ministry of External Relations  290  3,378  3,088

Department for the Economy  -  40,264  40,264

Treasury and Exchequer  3,355  70,743  67,388

Past Service Pension Liability Refinancing  174  13,956  13,782 Departmental Expenditure  100,419  960,633  860,214 Non-Ministerial and Other States Bodies

Bailiff 's Chambers  68  2,192  2,124 Comptroller and Auditor General  80  1,158  1,078 Judicial Greffe  2,382  11,509  9,127 Law Officers' Department  237  11,118  10,881 Office of the Lieutenant Governor  107  946  839 Official Analyst  53  738  685 Probation  88  2,732  2,644 States Assembly  68  8,814  8,746 Viscount's Department  826  2,928  2,102 Non-Ministerial and Other States Bodies Expenditure  3,909  42,135  38,226 Covid-19 Response  -  25,211  25,211 Departmental and Non-Ministerial Expenditure  104,328  1,027,979  923,651

Reserves

Reserve for Centrally Held Items  -  43,506  43,506 General Reserve  -  29,187  29,187 Reserve Expenditure  -  72,693  72,693 Our Hospital - Financing Costs  -  3,050  3,050 Revenue Heads of Expenditure Total  104,328  1,103,722  999,394

Electronic Patient Records  JHA  JHA  191 Regulation Group Digital Assets  IHE  IHE  1,252 Replacement LC-MS system  OA  OA  - Probation/Prison Case Management system  Prob  Prob  440 Pride Software  JG  JG  - Phoenix Software  VD  VD  300 Court Digitisation  JG  JG  1,639 35,888

Replacement Assets

Replacement Assets and Minor Capital  IHE  IHE  3,930 Refit & Replacement of Fisheries Protection Vessel & Auxiliary

IHE  IHE  - Vessels

Replacement Assets and Minor Capital  CYPES  CYPES  250 Replacement Assets and Minor Capital  HCS  HCS  3,755 Replacement Assets and Minor Capital  SoJP  SoJP  200 Replacement Assets and Minor Capital  JHA  JHA  162 Replacement of Aerial Ladder Platform  JHA  JHA  768 Replacement Assets and Minor Capital  CBO  CBO  3,000 12,065

Community Fund  M  T&E  T&E  1,000 Reserve for Central Risk and Inflation  T&E  T&E  8,100 Total Project Heads of Expenditure  140,515 Our Hospital  M  HCS  HCS  80,100 Total Project Heads of Expenditure including Our Hospital  220,615

Summary Table 6 - Trading Operations Revenue Heads of Expenditure 2023

Estimated  Estimated  Estimated £'000  Income  Expenditure  Net Income Jersey Car Parking  7,661  (5,862)  1,799 Jersey Fleet Management  5,434  (3,228)  2,206 13,095  (9,090)  4,005

Summary Table 7 - Trading Operations Capital Heads of Expenditure 2023

Estimated £'000  Expenditure  Jersey Car Parking - Car Park Enhancement and Refurbishment  60  Jersey Fleet Management - Vehicle and Plant Replacement   2,000

2,060

Summary Table 8 - Climate Emergency Fund

2023 £'000  Estimate Opening Balance  7,998 Transfer from the Consolidated Fund  4,400 Expenditure  (7,050) Closing Balance  5,348

Page - 21

P.97/2022

APPENDIX 3 Government Plan 2023-26

OCT 2022

Proposed Government Plan

GP

Government Programme

2023-26

CONTENTS

Foreword by the Chief Minister 4 Foreword by the Minister for Treasury and Resources 6 Executive Summary 8 Economic Context 14 Financial Strategy 19 General Revenue Income 23 Budget Proposals 29 Public Sector Spending 2023-2026 38 Delivering Value for Money 45 Capital and Other Projects 2023 - 2026 49 Our Hospital 69 The Government of Jersey Balance Sheet and States Funds 70 Financial Matters Under Development 84

APPENDICES

Appendix 1: Key to Abbreviations 88 Appendix 2: Proposition and Summary Tables 90 Appendix 3: Supplementary Financial Tables 96 Appendix 4: Administrative Tax Measures 107

Foreword by the Chief Minister

I am delighted to introduce the first Government Plan since the new Council of Ministers and Assistant Ministers took office in July. At the General Election, the public voted for change, for a better way and a fresh approach. We are now putting Jersey back on track, and this plan will support our ambition for Jersey to be a place where everyone can thrive.

We have hit the ground running, developing this Government Plan concurrently with our Strategic Priorities for the next four years, and implementing an action plan for our first 100 days in office. We have already delivered a mini budget to help Islanders with the rising cost of living, legislated to increase the minimum wage to £10.50, and we have taken steps to improve our accountability, transparency, and how we engage with the public.

We live in a beautiful Island – there is so much we value and we want to protect. We nevertheless have our challenges, which the new Government is committed to addressing so that Jersey can be a place where everyone feels they can have confidence in the future. We will continue to act to address the housing crisis, our population and skills challenges and the climate emergency.

This Government Plan takes action to protect our future. It invests an additional £61 million in our key public services during 2023, supports improvements to public infrastructure through £363 million of capital investment over the course of the plan (£141 million in 2023), and gives further assistance with the cost-of-living crisis. These are increasingly challenging and uncertain times globally, but Jersey retains a strong and credible position, where we are able to fund the improvements in services which we must deliver, support Islanders where required and retain a balanced budget.

We must keep taxes competitive and low if we are to continue to thrive and grow our economy. The Government Plan delivers the 12% increases in personal income tax thresholds agreed in the mini budget which will keep more money in the pockets of Islanders. In 2023, we will also freeze alcohol duty, freeze duty on road fuel, increase the minimum annual contribution for High Value Residents and introduce a higher rate of stamp duty for buy-to-let investments, second homes and holiday homes. This is a Government Plan that puts the needs of Islanders first and supports hard-working individuals and families.

The new Government will continue to respond to changing global circumstances and the impact this may have. Increasing interest rates, for example, are likely to put added pressure on mortgage holders, and aspiring mortgage holders. The Government will monitor the increasing burdens on household budgets and act to give targeted support where necessary.

Ministers recognise the challenge that Covid-19 presented to our public finances over the past two years. As an Island, we have recovered well, and importantly this Government Plan ensures that the borrowing undertaken as part of our covid response will be repaid by the end of 2022. This is reflective of a positive position in respect of the health of our public finances. Our funds and reserves remain strong and robust, and the Government Plan forecasts ongoing operating surpluses.

It is important that we use taxpayer's money efficiently, and that every pound spent is benefiting Islanders. In 2023, we will begin work to ensure that the Government is delivering value for money, and focusing spending on areas that matter most to the public and where new investment is needed to support key frontline services. With full employment and intense competition for staff and housing, we are mindful that despite our desire to enhance services, we must not exacerbate the pressures felt in the private sector. This is why we will actively identify where we can stop and simplify our activities so that our public sector can boost productivity.

As a community, we can look forward positively to the years ahead. We have shown in recent years how resilient we are. We now have a government with clear priorities, which is engaged with the issues impacting on Islanders most and focused on dealing with our challenges. Working together, we can support Island families to achieve their ambitions of a long-term future in Jersey, and this Government Plan takes us a step closer to realising that aim.

Foreword by the Minister for Treasury and Resources

Over the next four years, the Treasury and Council of Ministers will need to focus on the many challenges facing our community and concentrate on the issues that matter to Islanders. Government must shape its policies to support a strong economy, ease the pressure on family budgets in these exceptional times, and ensure our success can be shared across the community.

We must protect our Island's future by achieving long term sustainability of our public finances, investing in health & education, and investing in our economic recovery and growth. The cost of living has been the Treasury's number one priority, closely followed by getting a grip on the public finances.

While we rightly focus on our island's finances, we must always be mindful of the wider global situation. The war in Ukraine, changes to UK interest rates and new governments across Europe all have far reaching impacts on the global environment and economy.

With the UK announcing new tax measures and the Bank of England increasing interest rates it shows how vital it is for us to maintain a stable and prudent approach to balancing our finances.

We are assessing the situation and planning for many eventualities and scenarios. Whilst the global and UK economy is in a state of flux it is important to take stock of the situation, understand it's impact whilst remembering we have a strong economy that has proven resilient in the face of many challenges over the last few years.

We also need to be mindful that the current level of volatility, inflation and interest rates may lead to further measures being necessary to support islanders. We will not hesitate to announce further measures should there be a need.

In a highly competitive world, our long-term economic success cannot be taken for granted and, to this end, we will continue to develop a sustainable economic framework within which we can create the right conditions to achieve Jersey's full economic potential in the face of varied global challenges.

Jersey's future must be one of economic success amidst immense global uncertainty. The Government will work tirelessly with all partners and arms-length organisations to ensure that the foundations of a truly sustainable economy are laid during the coming four years

The Housing Crisis in Jersey cannot be understated. The Government needs to send a clear message that our priority is affordable purchases for first-time buyers. We will maximise affordable properties on publicly owned land to restore hope, retain the talents and skills of young Islanders and keep our community diverse and vibrant.

In addition, we will find ways to support affordable purchases, be it through deposit schemes, shared equity, or deferred payment options. In all these areas, building homes and helping first-time buyers, we will continue to stand firmly in support of Andium Homes.

States spending must be controlled and focused on the priorities of Islanders. We will need, of course, to invest in key areas: the health service, mental health, children's services, education, and skills training.

Islanders are rightly concerned at the increase in borrowing that occurred under the last Government. We have committed to too much public debt, and we need to return to prudence and live within our means. We will start to pay down our debts beginning with those accrued during COVID, which can be fully repaid in 2022.

On tax, we must remain consistent in supporting low, simple, and competitive taxes. Treasury will of course need to play its role in designing schemes to fund the climate emergency response and to help change behaviour, this work must be proportional and based on public consensus.

Over the term of this Government Plan, we will continue to monitor the international roll out of the OECD global tax rules – Pillars 1 & 2: ensuring that we preserve our commitment to global tax standards and maintaining our international tax competitiveness. Importantly, to steer us through the MONEYVAL assessment in 2023, which is crucial for the well-being of our economy and to protecting jobs in the Island.

As a government will work to continue to ensure Jersey is a green, digitally enabled, and entrepreneurial finance centre, which can be confident of its future providing jobs and prosperity for Islanders for years to come.

I have outlined enough challenges and priorities to help four years pass very quickly. Within the Treasury Department itself of course we also have challenges to meet in improving our service to Islanders and businesses.

I will do all I can to tackle these head on and improve our level of service.

We know to expect the unexpected and that Government will need to be nimble and flexible in responding to the challenges of the future.

Executive Summary

Purpose of the Government Plan

Following the general election in June 2022, the new Council of Ministers has developed its Common Strategic Priorities for the next 4 years, which will be lodged with the States on 4 October 22. This will be supported by individual Ministerial Plans, which will include more detail on how each Minister will support these priorities in 2023.

This Government Plan explains the financial context in which those plans will be delivered and sets out the financial approvals that Ministers are proposing to ensure that taxpayer's money is focused on delivering of both their priorities and existing services.

The timing of the election has reduced the amount of time Ministers have had to develop this Government Plan. Notwithstanding this, the plan is designed to provide adequate resources and flexibility to drive progress on the Council of Minsters' vision for the Island, whilst ensuring the ongoing sustainability of Government and States' finances.

More detailed information on items in the plan will be published in an Annex to the plan as soon as its practical.

Government Plan 2023-2026

Context

This plan has been written in a time of great economic uncertainty, with the global economy disrupted by the ongoing effects of the war in Ukraine, the Covid-19 pandemic, and other geopolitical developments. We are forecast to see inflation at levels not seen for decades, with interest rates also rising after a sustained period of low interest rates.

These changes have resulted in significant improvement in the forecasts for Government income. However, it also results in expenditure pressures on both Government, and Islanders. This plan takes action to address these challenges whilst investing in the priorities of the new Council of Ministers and ensuring the long-term sustainability of Public Finances.

Addressing the Cost of Living Crisis

In proposing the "Mini-Budget", the Council of Ministers took immediate action to help Islanders with the cost of living crisis, agreed by the Assembly in September 2022. Personal income tax thresholds and allowances for 2023 were increased by 12%, allowing the higher allowances to be factored into the Income Tax Instalment System (ITIS) effective rates issued towards the end of 2022, keeping more money in the pockets of Islanders.

In addition, immediate support was agreed for Islanders through temporary reductions to Social Security Contributions, an enhanced Cost of Living Temporary Scheme (COLTS), an increase to the Community Cost Bonus, enhancements to the Cold Weather Bonus and Payment schemes and further support for families with less than five years residence.

This Government Plan sets out additional revenue measures that continue to support Islanders, by restraining overall increases in duties, where appropriate to do so:

• Freezing alcohol duty on all strengths of beer, cider, wines and spirits.

• Increasing tobacco duty on cigarettes by Retail Price Index (RPI) of 7.9% plus 5% in line with published health policy. Increasing duty on hand rolling tobacco and cigars by RPI of 7.9% plus 6.4% and 8%, respectively, as part of a longer-term commitment to align with cigarettes.

• Freezing duties on road fuel but maintaining the commitment to channel 9 pence per litre to the Climate Emergency Fund.

The cost of these measures has been partly offset by specific targeted measures to raise additional income:

• Increasing Vehicle Emissions Duty (VED), most notably on higher CO2 emitting vehicles, from 1 January 2023.

• Increasing the minimum annual contribution for High Value Residents (HVRs) from £145,000 to £170,000.

• Introducing a higher rate of Stamp Duty for buy to let investments, second homes and holiday homes at 3 percentage points above the normal rate for residential property.

Delivering Value for Money Public Services

As both a national and local government, the Government uses taxpayers' money to provide a full spectrum of services to Islanders. It is essential that these services demonstrably deliver good value for Islanders, with the right services being delivered, and those services being delivered efficiently and effectively.

Following its appointment, the new Council of Ministers has worked quickly to agree its spending priorities. This Council of Ministers does not wish to repeat previous mistakes of agreeing additional expenditure before savings are delivered. To ensure that the consequences of any changes to existing funding are understood, full reviews of services will be undertaken. In the meantime a modest target for savings has been included, with the intention that further savings will be delivered, allowing funds to be reprioritised to areas that benefit Islanders most and that require additional investment.

The plan provides £53 million for the impact of inflation on the cost of public services in 2023, and also maintains commitments to fund Arts, Heritage and Culture (AHC) at 1% of revenue expenditure, to grow Jersey Overseas Aid (JOA) contributions as a proportion of Gross Value Added (GVA) and to invest an additional 2% in our health service each year. The States Grant to the Social Security Fund will also be restored from 2024.

In developing the plan, it became apparent that additional funding was required in some areas of Government, and £61 million of growth has been allocated in 2023. Many of these areas will required further investment in future years of the plan, but Ministers have constrained this growth until it is clear how such additional investment would be affordable over those future years. Amounts have also been included for the ongoing costs of Covid-19, whilst the Plan also provides for the removal of remaining borrowing for Covid-19 consequences.

Investing in our Island

The Capital Programme is vital to ensure that Government has the assets required to effectively deliver quality public services. In recent years Government has consistently spent less on capital than allocated in budget provided, and Ministers have considered both affordability and deliverability in developing the programme.

In total £141 million has been allocated to capital projects in 2023, with £363 million planned across the 4 years of the plan. This represents an investment in our infrastructure, increasing the value of our assets and building our balance sheet. Existing projects have been more realistically profiled to ensure that taxpayers' funds can be used effectively and are not tied up unnecessarily. New investment in the Opera House and development of a therapeutic children's home has also been included, enabled by the one-off special dividends from JT in 2023 and 2024.

It is clear that more investment is required, for example in our drainage network and sports estate. However, this needs to be paid for, and any proposals in future Government Plans will be accompanied by a suitable funding strategy.

Sustainable Public Finances

The Public Finances (Jersey) Law 2019 (PFL) sets out a requirement for each Government Plan to have regard to the long-term sustainability of the Island to ensure that we safeguard it for future generations.

This plan delivers budgets that are balanced across the plan. This is important to ensure that we are spending within our means and making provision for the replacement of our assets.

The impacts of Covid-19 on the public finances have been lower than forecast in previous Government Plans, and the prudent application of underspends in 2021 and 2022 means that we will be in a position to eliminate the borrowing required for Covid-19 by the end 2022, four years in advance of the previous target. This is an enviable position and reduces future pressure on public finances.

If funds become available through additional income or reduced expenditure over the period of the plan, these will be used to begin to rebuild the Stabilisation Fund in line with the advice of the Fiscal Policy Panel (FPP).

The value of the Strategic Reserve is forecast to be preserved, subject to short-term volatility, and Ministers will continue to consider options to protect and grow the fund in future government plans. These will also be impacted by the outcomes of the review of the Our Hospital project and any changes to the costs or funding strategy. This Government Plan does not include any new borrowing proposals and in fact reduces Covid-19 borrowing to nil. Pending the outcome of the review into the Our Hospital project, the Plan carries forward the existing borrowing approval of £756 million.

Ministers are also committed to ensuring that the Social Security Fund remains sustainable for future generations. It is planned that the annual States Grant payment into the Social Security Fund will be restored to its full value from 2024 onwards. The cost of providing old age pensions will increase with the ageing demographic but the Fund is still forecast to hold four times annual spend by the 2070s. The results of the full actuarial review of the Social Security Fund will be published in 2023 and will inform a full review of the fund in the next Government Plan.

The Health and Social Services Minister is currently undertaking a wide review of the Island's health and care cost, which will inform options for the future funding of our whole health and care system. This work will continue throughout 2023 with options being brought to the States Assembly in 2024. It will include reform of the arrangements that underpin the Health Insurance Fund.

Sustainable Wellbeing

The Council of Ministers has taken sustainable wellbeing into account through the development of the Common Strategic Policy 2023-2026, Ministerial Plans and the Government Plan 2023-2026.

The Common Strategic Policy 2023-2026 sets out our shared ambition and our 7 priorities for change:

The Ministerial Plans set out specific priorities for delivery by individual Ministers in 2023 and beyond.

The Government Plan 2023-2026 sets out the income and expenditure that will support the delivery of the Common Strategic Policy and Ministerial Plans in 2023.

The Common Strategic Policy, Ministerial Plans and Government Plan reflect the issues that are most important to Islanders as expressed during the election, were informed by data and evidence, and demonstrate our focus on the economic, social, cultural and environmental wellbeing of Islanders both now and in the future.

The Council of Ministers' policy on population will be published in June 2023, and will be included in future Government Plans in line with P.116/2021.

Economic Context

The International Economic Outlook

The latest forecast from the International Monetary Fund (IMF)[1] is for global growth of 3.2% this year and 2.9% next, much lower than the 6.1% seen in 2021. By any comparison, this is a significant drop off from the global growth position. Growth is expected to stabilise in the post-pandemic environment going into next year for emerging economies, while we could see continued falls in advanced economies for the next two years. Whilst circa 3% growth might appear strong in a normal national context, in a global context anything below 3% has is very low, and as such these figures need to be interpreted as a particularly problematic global economic outlook.

Figure 1: Economic growth forecasts (%). Source: International Monetary Fund July 2022

The key risks to the global outlook relate to supply-chain disruption due to the ongoing war in Ukraine and bounce back from the pandemic. The war has disrupted the global economy due to international tensions with Russia and led to higher global commodity prices for key Russian and Ukrainian exports such as oil, gas and grain. Imposed sanctions have also had an impact on the economies imposing them, mainly in places of needing to source alternative supply-chains.

Commodity price increases and lingering supply-demand imbalances have led to increased 2022 inflation projections. The IMF in their most recent 6 monthly report (June 2022) forecast 6.6% in advanced economies and 9.5% in emerging market and developing economies. Inflation in both the UK and US has risen more quickly than these expectations – for example UK inflation was 8.6% in August 2022. Wage growth has on average not kept up with inflation across both advanced and emerging market and developing economies.

Jersey's Economic Outlook

The 2020 GVA for the island was £4,636 million. On the last official figures Jersey's economy contracted sharply in 2020, this is not unexpected with the global circumstances. Evidence does suggest that the economy has held up better than expected and also recovered well. Official GVA growth rate figures show a contraction of 8.7% – driven by a difficult year for sectors such as hospitality which were particularly affected by the pandemic. Additionally, there was a significant fall in banking profits, partly due to the cuts in interest rates in early 2020. This however is expected to significantly change going into 2023 with the markets expecting the Bank of England to raise interest rates considerably, which is a driver of banking profits in Jersey. The complete removal of pandemic restrictions over the last year will additionally guide the return to normal growth levels.

Since a pandemic peak in the lockdown of spring 2020, the number of people Actively Seeking Work (ASW)[2] in Jersey has fallen from 2,290 to just over a quarter of that figure at 620, the lowest on record. This, combined with approximately 1,000 job positions being available[3], places the economy in a position of near-full employment and suggests a strong recovery from the pandemic.

Figure 2: Actively Seeking Work (non-seasonally adjusted). Source: Statistics Jersey

The Business Tendency Survey (June 2022)[4] provides strong evidence for economic recovery post-pandemic with the proportion of businesses reporting an increase in activity being 20 percentage points higher than those reporting a decrease. Despite this, it is notable that across all sectors businesses are facing considerable price-related pressures. No business reported a decrease in input costs on the previous quarter, compared to 84% reporting an increase. In the finance sector, 28% of surveyed businesses reported a

decrease in profitability, compared to the considerably higher figure of 42% in the non- finance sector.

Where previously the hospitality industry was lagging behind other areas on a return to trend business activity' levels due to extended periods of inactivity through the pandemic, they have now caught up with other sectors. On the other hand, the finance sector faced the least impact from the pandemic and therefore had the least recovery needed to return to trend levels. All sectors are now sitting in a similar, slightly positive place on this measure. The hospitality and finance sectors can be compared to all sectors combined on the chart below.

Figure 3: Weighted net balance of responses to business activity question of Business Tendency Survey, by sector. Source: Statistics Jersey

The FPP's Medium-Term Report (July 2022) lowered their long-term growth expectation, reducing trend GVA growth from 0.6% to 0.45% due to the lower expectations for growth in the working age population[5]. This was mitigated somewhat by an increase in long-term productivity expectations. The previous report forecast 0.2% growth in productivity, 0.3% in working age population and 0.1% in employment; now these figures sit at 0.35%, 0.1% and 0% respectively.

The FPP's latest forecast from July 2022 comes after the observed sharp downturn in economic activity in 2020. They predict for a strong recovery, set to level off above 2019 levels, from 2023. This is not in contradiction to downwards revisions to annual trend growth forecasts due to expected rises in productivity and the minimal revision of 0.15%. A considerable factor in this forecast is the growing financial services sector and their forecast profits. The chart below provides an illustrative projection for changes in GVA until 2026, based on the previous three FPP forecasts.

Figure 4: Economic forecast – changes in GVA. (Index 2019 = 100). Source: Fiscal Policy Panel

There are ongoing issues within the economy around affordable housing. The graph below shows the widening of the gap between wage growth and housing price growth over the last 20 years which has accelerated dramatically in the last 3 years. This causes significant pressure for the population and acts as a blocker to growth as well as causing difficulties for individuals and families.

Figure 5: House Price Statistics - Annual House Price Index, Retail Price Index and Average Earnings Index: Source Statistics Jersey

Fiscal Framework

The Fiscal Policy Panel is established by the Public Finances Law, which enshrines its independence and sets requirements for it to provide an annual report on Jersey's economy and Government finances, and to inform the preparation of the Government Plan. The Council of Ministers or the Minister for Treasury and Resources can also request other reports on specific subjects.

The FPP will continue to be responsible for monitoring the application of the fiscal guidelines.

The fiscal framework remains an important pillar of Jersey's economic and fiscal policy and sets the medium and long-term aims that help to inform budgetary decision making, with particular regard to the balance of income and expenditure (i.e. budget deficits or surpluses).

The key guidelines identified in previous Government Plans are to:

• Seek to increase the Strategic Reserve and public sector net worth, while following the advice of the FPP on borrowing and net financial assets.

• Run a primary structural current balance or surplus in the long-term until the Strategic Reserve is judged large enough to meet its mandate.

• Borrow only to finance investment (or refinance liabilities), except under times of economic duress, and monitor the impact on net financial assets.

The Fiscal Framework continues to be kept under review and will be updated if necessary.

Financial Strategy

Financial Principles

The Council of Ministers agreed the following financial principles to be used as a framework for decisions making in preparing this Government plan.

Tax Policy Principles

The following tax policy principles established in previous Plans continue to be used in this Plan.

Financial Strategy for 2023-2026

In developing the plan, the Council of Ministers have had to contend with significant competing pressures and have considered the recommendations from the Fiscal Policy Panel. The financial strategy for 2023-2026 applied the agreed financial principles to these immediate challenges faced by the Government. The key elements of the financial strategy for the Government Plan and the mini-budget, for 2023-2026 are:

• An affordable and deliverable plan, with Public finances balanced across the plan period.

• Alleviating the impact of the Cost-of-Living crisis on Islanders. As well as direct support for more vulnerable Islanders, budget measures have been designed to give back money to taxpayers.

• Eliminating the requirement for borrowing to fund the impact of the Covid-19 pandemic with Covid-19 borrowing fully repaid in 2022. The States Grant to the Social Security Fund (which was used to meet the financial impacts of the pandemic) will be reinstated in full from 2024.

• As the Council of Ministers has had limited time to develop the plan due to the timing of the election, additional expenditure approvals have been included to meet their immediate priorities. Whilst some of these may require more investment in future years, these costs should be met through the simplification and rationalisation of existing government activities or improved income forecasts.

• The plan includes a refreshed approach to reducing the cost of Government, which focuses on delivering all elements of Value for Money (VFM), including cashable efficiencies, improved productivity and detailed reviews of specific services to drive best value.

• The Our Hospital project is being reviewed as part of the Council of Ministers' 100 Day Plan. To reflect this, the project has been included in the plan based on existing States decisions, but shown separately. Once the review has concluded a proposition will be brought to the States that would amend the plan to reflect any changes to the project, including the funding strategy.

Ministers have had a relatively short period to develop the plan, and focused on the immediate priorities. There are a number of outstanding matters that need attention, such as how to fund future infrastructure, the sustainability of the Social Security Fund and a financing strategy for the climate emergency which will need to be considered in future Government Plans.

General Revenue Income

The Government funds ongoing, annual expenditure and investment in assets through three main sources: general tax revenues, other government income and departmental income which are paid into the Consolidated Fund.

General Tax Revenues

General tax revenues provide the main source of funding for the Government, with four main tax types.

Other Government incomes

The Government also receives income from four other sources, as set out in the table below.

Departmental income sources

In addition to amounts paid directly to the Consolidated Fund, Government departments receive money from fees and charges for individual services. These amounts are included within individual net revenue expenditure allocations and are estimated at £100 million in 2023. The number of different sources of income reflects the variety of services provided by the Government. This includes fees for private patients at the hospital, school fees, fees for the disposal of inert waste, planning fees, and income from rents and our sports facilities. This income is included in department Heads of Expenditure.

Special Funds also receive income designated to them, as well as the investment returns on fund balances. This is then used for expenditure in line with the purpose of the fund.

Latest Income Forecasts

The Income Forecasting Group (IFG) advises on the forecasts of all States income from taxation and social security contributions. Membership of the group includes senior civil servants, the Government's chief economic advisor as well as at least two external members.

The Income Forecasting Group's latest forecast was prepared in August 2022, and reflects the latest economic forecast produced by the independent Fiscal Policy Panel in July 2022. The forecast is published alongside the Government Plan.

The global macroeconomic outlook continues to evolve in a rapidly changing environment. Since the Spring 2021 IFG revised forecast report[7] the global economy has worsened, with the continued conflict in Ukraine, supply chain and energy supply disruptions contributing to rising inflation.

The FPP economic assumptions reflect the latest local and international developments to July 2022. The main variations to the economic assumptions used in the IFG Forecast for Spring 2021 include:

• Higher interest rates and increased financial services profits lead to an upgrade in the GVA forecast for 2023. This is followed by a period of slower growth in 2024 and 2025.

• Inflation is projected to reach a peak of 9.2% in 2022, the forecast is lower than the UK predominantly due to less of a reliance in Jersey on gas for energy supply.

• Average earnings are projected to rise almost alongside inflation, due to a tight labour market keeping demand for skills high and thus wages reflecting this.

• Employment is assumed to rise consistently in the financial services sector, whilst the non-finance sector is expected to see a period of above trend growth reflecting strong post-pandemic recovery.

• The forecast for house prices and transactions remains unchanged to 2025 with small changes to the trend.

The IFG's Summer 2022 forecast (based on the FPP assumptions of July 2022) has been developed as a central forecast' to represent the IFG's view of the most likely outcome.

The IFG's latest forecast of total States income reflects:

• The FPP's economic assumptions of July 2022 and other related economic data from Jersey;

• General revenues income outturn for 2021;

• Initial information on general revenues income for the first two quarters of 2022;

• Forecasts from Treasury for Other Income'; and

• Market intelligence from the IFG.

The Summer 22 forecast is the latest forecast produced and covers the years 2022-26, the forecast assumes standard tax policy where relevant. The impact of the mini-budget (P.80/2022, approved in September 2022) was considered separately by the IFG and is shown separately to the central forecast scenario.

The FPP will issue further economic assumptions as part of their annual report in November 2022, and the IFG will consider the impacts of any changes on the income forecast following the issue of that report.

Figure 6: Range of IFG Income Forecast Summer 22. Source: IFG

Summary of Latest Forecast

The overall changes from the Spring 2021 forecast addendum are:

Personal Income Tax

Personal income tax has increased for all years of the forecast. This is primarily driven by higher than expected tax outturn for 2020 and 2021, data from the Income Tax Instalment Scheme (ITIS), as well as the latest FPP economic assumptions. The higher forecast in economic assumptions for compensation of employees, average earnings and employment growth all contribute to an increased projection of personal income taxes over the plan period.

Corporate Income Tax

Corporate income tax reflects a significant increase in the previous forecast driven by financial services profits growth with market expectations for rising interest rates over the period of the plan. The forecast for corporate income tax from non-financial services also increases, though financial services remains the majority of corporate income tax collected.

GST and International Services Entity Fees

The FPP's economic assumptions for compensation of employees, the main determinant of Goods and Services Tax (GST) receipts have increased and are the main driver for the increase in forecast GST receipts. The forecast also incorporates the increased receipts from the lowering of the de minimis level from £135 to £60 from 1 July 2023, estimated at £1.1m from 2023 onwards.

Impôts Duties

Impôts duty reflects an increase in each year of the forecast, driven predominantly by forecast increases in the RPI, with the default assumption being that duties for fuel and alcohol are maintained in real terms and that tobacco duties rise above RPI. The adjustments for Covid-19 which take into account behavioural changes along with the latest available market intelligence data were reviewed. The Covid-19 adjustments reflect behaviours and consumption re-adjusting slowly in 2022 and returning to pre-pandemic levels from 2023 onwards. Impôts duties have been forecast based on existing tax policy for duty increases. Variations from these long-term policy positions are not reflected by the IFG forecast, but are addressed in the next section on budget proposals.

Stamp Duty

Stamp duty has been revised to incorporate the outturn of in-year transactions for 2022 and the updated FPP economic assumptions. The stamp duty forecast has grown significantly from 2021 forecasts, with the property market in 2021 seeing the highest annual average values as well as the highest turnover of properties for all property types to date.

One-off Dividend Income

Subsequent to the IFG Forecast, an additional planned special dividend payment has been agreed with Jersey Telecom. This will increase income in both 2023 and 2024 by £20 million, and is funded through the retained proceeds of the sale of the IoT element of the company.

These proceeds will fund further investment in our Island, including investment in the restoration of the Opera House, the provision of a Therapeutic Children's Home, and funding of an ongoing Community Fund to build on the successes of the Fiscal Stimulus programme in providing funding to local organisations to improve the facilities they provide to Islanders.

Furthermore, an additional £5 million will be held centrally to support initiatives to reduce hospital waiting lists.

Budget Proposals

Overview

When viewing the budget proposals outlined in this Government Plan, it is important to recognise that they were preceded by a cost of living mini-budget which was adopted by the States on 21 September 2022 and was part of the Government's 100 Day Plan.

From a tax perspective, the mini-budget included proposals from the Council of Ministers to increase the income tax thresholds by 12% from 1 January 2023. This is well ahead of the RPI figure for June 2022 (7.9%). These changes are summarised below to provide the context in which the Government Plan should be viewed.

No further changes to personal income tax thresholds and allowances are being proposed in this Government Plan. However, several budget proposals in other areas are outlined below.

In the event that RPI rises above the 12% increase in thresholds and allowances provided for, then making amendments to the Government Plan will be considered by Ministers.

Income tax (personal taxation) exemption thresholds

The income tax exemption thresholds operate like a personal tax allowance. They set a limit below which an individual, married couple or couple in a civil partnership do not pay income tax. Additionally, individuals and couples with income below these thresholds will not pay Long Term Care (LTC) contributions.

When these thresholds are increased it benefits those who pay tax at the marginal rate. Data suggests that around 90% of personal taxpayers pay at the marginal rate (rather than at the standard rate), meaning that a large majority of taxpayers benefit from these increases.

In the past, any increases to the thresholds have been based on the lower of inflation (RPI) or the growth in average earnings.

The impact of these increases is shown below.

Income Tax Exemption Thresholds

Tax 2022  2023  Approved  Reduction

Actual Approved Increase @ 26% Single person  £16,550  £18,550  £2,000  £520 Married couple/Civil partnership  £26,550  £29,750  £3,200  £832

Table 3: Income Tax Exemption Thresholds

The income tax exemption thresholds are higher than the equivalent allowances in Guernsey the UK and Isle of Man.

Second earners' allowance

Where both spouses or civil partners are earning (for example, they are employed, self- employed, or receiving certain pension income) they are also entitled to the second earners' allowance', which reduces the tax payable on the earnings of the lower-earning spouse.

Co-habiting couples who are neither married nor in a civil partnership are entitled to two single person's thresholds which, when combined, exceeds the married/civil partner threshold. The second earners' allowance equalises the tax position of couples who are married or in civil partnership with two income earners compared to those who are not.

The second earners' allowance will be increased by 12% from 1 January 2023 as approved by the States Assembly on 21 September 2022 in response to the cost of living crisis.

Second Earners' Allowance

Tax 2022  2023  Approved  Reduction

Actual Approved Increase @ 26% Second earners' allowance  £6,550  £7,350  £800  £208

Table 5: Second Earners' Allowance

Child allowances

Where an individual or a couple has a child, they can claim an increase to their income tax threshold. The increase is per child and is available from birth until the year in which the child finishes compulsory education. An additional allowance in respect of children is available for single parents, unmarried couples, and for married couples and civil partners where one individual in that couple is incapacitated. It is available per household.

Both allowances will be increased by 12% from 1 January 2023 as approved by the States Assembly on 21 September 2022 in response to the cost of living crisis.

2022  2023  Approved  Reduction Actual Approved Increase @ 26% Child allowance  £3,060  £3,450  £390  £101

Table 6: Child Allowance

Additional Child Allowance in 2022 and 2023

Tax 2022  2023  Approved  Reduction

Actual Approved Increase @ 26% Additional child allowance  £4,590  £5,150  £560  £146

Table 7: Additional Child Allowance

Child care tax relief

An individual or couple paying a nursery, nursey class, registered day carer or an accredited nanny can claim an increase to their exemption threshold. The increase is capped depending on the age of the child. A higher cap is available in respect of children under 4 years of age.

Child care tax relief costs will be increased by 12% from 1 January 2023 as approved by the States Assembly on 21 September 2022 in response to the cost of living crisis.

Child Care Tax Relief

Tax 2022  2023  Approved  Reduction

Actual Approved Increase @ 26% Child care  £6,273  £7,050  £777  £202

Child care (enhanced)  £16,320  £18,300  £1,980  £515

Table 8: Child Care Tax Relief

Impôts (Excise) Duties

Ministers' proposals for excise duties on tobacco, alcohol, road fuels and motor vehicles are set out below.

Increases in excise duties approved by the Assembly, will take effect at midnight on 31 December 2022.

Tobacco

In line with recent years, rates of duty for tobacco products have been subject to above- inflation increases with a view to changing consumer behaviour. Ministers wish to continue with that approach, acknowledging that the price of those products is linked to consumption, especially regarding the uptake of smoking among children and young people.

Continuing that policy of above-inflation increases, Ministers are proposing an increase on tobacco products of 12.9% (equating to June 2022 RPI of 7.9% plus 5%), except for cigars and hand-rolling tobacco, which will be subject to a greater increase.

In recent years there has been a policy of closing the gap between duty charged on hand- rolling tobacco and cigars, and the duty charged on cigarettes. In continuing to close this gap, Ministers propose to increase the duty on hand-rolling tobacco by 14.3% (equating to RPI of 7.9% plus 6.4%). This increase removes the differential between the amount of duty charged on hand-rolling tobacco and the duty charged on cigarettes.

Ministers are proposing to increase the duty on cigars by 15.9% (equating to RPI of 7.9% plus 8%). The differential between the amount of duty charged on cigars compared with the duty charged on cigarettes and hand-rolling tobacco will now be £85 per kg (2022: £89 per kg).

The proposed increase in duty for 2023 would mean a 97p increase in the duty on a standard packet of 20 cigarettes (from £7.54 to £8.51 per packet). The increase on hand- rolling tobacco of 14.3% means a £4.26 increase in a 50g pouch (from £29.81 to £34.07 per pouch).

Road fuel

To help with the ongoing cost of living impacts, Ministers propose to freeze fuel duty for all types of road fuel in 2023. In the months leading up to the publication of this Government Plan, the pump price for petrol and diesel has reduced, bringing some benefit for motorists and businesses. There continues to be considerable variation between pump prices across different forecourts, often nearby to one another.

This freeze for a full year should be considered an exceptional policy, which is being proposed specifically to help with the increases in the cost of living.

Ministers remain firm in their commitment to pay 9p per litre from fuel duty receipts into the Climate Emergency Fund.

Alcohol

Recognising the importance of the hospitality industry to our Island's economy, Ministers are proposing to freeze duties on all types of alcoholic beverages on the basis that further duty rises would adversely affect the industry at a time when prices are rising.

Vehicle emissions duty

VED is charged when a vehicle is first registered in the Island. The amount of VED payable depends on the manufacturer's CO2 emissions data, meaning that the charges are higher for the most polluting vehicles.

Continuing to encourage the purchase of electric cars and lower emission vehicles, Ministers are proposing to significantly increase VED rates from 2023. This excludes commercial vehicles and tractors.

VED charges will increase for nearly all vehicles, with the greatest increases applying to the most polluting vehicles. From 1 January 2023, the highest two bands will be increased by 75% and 85% respectively, with lower bands increasing by 32%. The Government will continue to keep VED rates under review for future years to encourage the importation of more efficient petrol and diesel vehicles, as well as electric vehicles.

RPI impact of increases in Impôts

The estimated impact of the increase in tobacco duty and VED is an increase in RPI of 0.2%.

GST review – offshore retailers and the GST "de minimis" level

The requirement for large offshore retailers to register for GST and the reduction of the import GST de minimis to £60 has been deferred from 1 January 2023 until 1 July 2023. This postponement was in response to a request from a group of businesses impacted by the new rules to allow them time for necessary systems changes. The deferment was debated and approved by the States in September 2022.

Higher rates of Stamp Duty on buy-to-lets

Following the States' adoption of an amendment to Government Plan 2022 from the then Corporate Services Scrutiny Panel, proposals have been developed to charge higher rates of Stamp Duty on the purchase of properties that are acquired for any purpose other than to be used as a person's main residence. This includes buy-to-let properties, second homes, and holiday homes. The higher rate will also be applied to relevant transactions subject to Land Transactions Tax (LTT') and Enveloped Property Transactions Tax (EPTT').

Economic analysis has assessed the potential impacts on revenue and owner-occupation. It is suggested that the measure could modestly increase revenue and stimulate additional purchases by owner-occupiers.

For the time being, Ministers are proposing that the higher rate is set at 3 percentage points above the normal rate of tax for residential property from 1 January 2023.

The wider review of Stamp Duty (scheduled to conclude in the Summer of 2023) will present a further opportunity to review the market impact of the higher rate, albeit based on a relatively short period of time.

Benefits-in-Kind Exemption – Bicycles and Bus passes

Ministers are proposing to extend the schedule of tax exempt benefits-in-kind to include all pedal bicycles (manual and electrically-assisted) and bus passes provided by employers to their employees.

High Value Residents (HVRs)

The Minister for Treasury and Resources must consider the limits and rates of income tax for HVRs by 1 January 2023 (and then every 5 years).

From 2018, all incoming HVRs have entered regime 4' of the HVR tax system, under which they are subject to a mandatory minimum annual personal income tax charge of £145,000, with all income exceeding £725,000 taxed at 1%. Approximately 70 of 200 HVRs in Jersey fall within regime 4.

Using the available RPI data for the 4 years between March 2018 and June 2022, Ministers are proposing that the minimum tax charge should be increased to £170,000, with all income exceeding £850,000 taxed at 1%[8].

Ministers are reviewing the existing HVR scheme with a view to refreshing the scheme for new entrants.

Additional Tax Measures to be Considered in Future Plans

Previous Government Plans included the development of measures and options to raise taxation of approximately £10 million in total for implementation by 2024. The proposed changes to HVR and Stamp Duty deliver £3.4 million of this target, and further measures that will be considered include:

• Further changes to Stamp Duty. A review of Stamp Duty is due to be concluded in the Summer of 2023.

• Broadening the tax base of corporate taxation. This has included the recent introduction of taxation of medicinal cannabis growing and processing.

In addition, we will consider options for restricting interest relief for landlords.

The next Government Plan will also include Budget measures to promote innovation, including a policy roadmap on innovation for Jersey businesses. This will follow stakeholder engagement with Islanders and investors in 2022 and 2023.

Progress of Tax Reforms and Reviews

Independent Taxation

From 1 January 2022, independent taxation became mandatory for all new couples arriving in Jersey and for all couples marrying or separating on or after that date.

The transition to independent taxation will be gradual. A pilot group of couples elected to be taxed independently for the year of assessment 2022. For the 2023 year of assessment the opportunity to elect to be independently taxed was open to any couple. A further year to elect for a voluntary move will be available for the 2024 year of assessment subject to States Assembly approval.

In 2023, Ministers intend to lodge the final stage of legislation that will pave the way for all couples to be taxed independently. This legislation will contain the compensatory allowance that will ensure a smoother transition for marginal rate couples who would otherwise lose out financially. As above, this is subject to approval by the States Assembly.

International Tax Reform

For the past several years, the OECD has been working intensively to establish a new global tax framework, aimed at addressing the challenges of increased globalisation and the digitalisation of the economy. The Government of Jersey has been closely engaged throughout every step of this process through Jersey's seat in OECD fora.

On 8 October 2021, the OECD Inclusive Framework – of which Jersey is a founding member

– released a statement on a two-pillar solution, in which 136 jurisdictions, including Jersey, joined the political consensus on the new tax framework.

The proposed elements of these pillars are targeted and limited in scope, focussing on the world's largest Multi-National Enterprises (MNEs). The October announcement was an important political stepping-stone and established the Building Blocks for the tax reform process. But significant further technical work is ongoing and implementation plans remain to be developed. Jersey remains actively involved in these discussions.

If ultimately agreed by Inclusive Framework:

• Pillar One of the Building Blocks will create new profit allocation rules for the world's largest Multi-National Enterprises (MNEs), with global turnover in excess of 20bn and profitability in excess of 10%. The Pillar 1 rules will exclude Regulated Financial Services. For the very small and targeted number of MNEs globally that are impacted by Pillar One, certain of their profits would be re-allocated to market jurisdictions; and

• Pillar Two of the Building Blocks will introduce a new framework of taxation whereby Multi-National Enterprises (MNEs) that are in scope (those with global revenues of at least 750m) would pay a Minimum Effective Rate of taxation of 15 percent, with an important carveout for investment entities (such as funds). This Minimum Effective Rate would be calculated in a specific way based on financial statements and on a country-by-country basis.

Pillar One is a minimum standard that Jersey will be required to introduce in legislation, notwithstanding the minimal practical impact. However, Pillar Two is a common approach, giving Jersey options regarding how, if at all, a global minimum tax would be implemented in Jersey. The Government is engaged in extensive stakeholder engagement and data analysis

– locally and internationally – to understand potential impacts of the various policy options. However, it is not possible at the present time to clearly predict what MNE behavioural effects may be, given that impacts will depend in part on what other jurisdictions do with implementation and the timing of those actions. As no political decision has been made on Pillar Two, this Government Plan contains no estimate of any potential impact the reform measures may have. This position will be kept under review for future Government Plans as decisions on implementation are made.

Reporting Information by Partnerships

Following the introduction of new economic substance rules for partnerships in 2021, partnership filing requirements are being amended. Partnerships will file one combined notification each year, which will be used to capture all relevant information relating to the partnership's economic substance and income tax. The opportunity will also be taken to bring the general partnership assessing rules into line with that for other Jersey partnership vehicles, giving their partners full responsibility over their tax position. The changes to the law and filing processes have been subject to a public consultation.

Company Tax Return Filing Deadline

To help ease pressures over the Christmas period, Ministers are proposing to move the deadline for companies to file tax returns from 31 December to 30 November. This measure, which was subject to a public consultation, will also align the filing and payment deadlines for companies.

GST on Menstrual Sanitary Products

In agreeing P.66/2022[9], the Assembly previously requested the Minister for Treasury and Resources to issue law-drafting instructions to make all menstrual sanitary products exempt from GST. The 100 Day Plan includes an alternative proposal to provide free sanitary products. The wider scheme, which was noted in the mini-budget replaces and improves the commitment made by the Assembly in P.66/2022.

Public Sector Spending 2023-2026

This Government Plan proposes £966 million of spending in 2023 on delivering services to Islanders. While the impact of the Covid-19 pandemic on Government finances is reducing, this plan also includes £30 million of necessary and contingent funding to respond and recover from the pandemic in 2023. This is a reduction from the £86 million budgeted for Covid-19 in 2022.

Recognising the impact of rising inflation on government expenditure, an additional £53 million has been provided in 2023. Further amounts are built into the plan for the impact of inflation in future years.

In addition to the costs of the pandemic response in 2023, we will be investing a further £61 million in initiatives that support the delivery of ministerial priorities (including the 100 Day Plan).

The table below shows how expenditure changes in each year of the plan.

1400 1200 1000 800 600 400 200 0

2018 2019 2020 2021 2022 2023 2024 2025 2026

Expenditure Actuals Expenditure Forecast Income

Figure 6: Income and expenditure trends before depreciation

Inflation and Formula Driven Growth

It is both prudent and good financial management to plan for the impact of economic influences on Government finances. As such, we have set aside amounts to cover inflationary pressures on pay (held centrally), benefits and non-pay expenditure.

4% of non-pay expenditure inflation has been allocated directly to departments (after allowing for inflation on departmental income capped at 2.5%). 2.7% has been held centrally to contribute to the Value For Money savings target in 2023.

Since parts of our organisation will be subject to inflation at much higher levels, for example fuel supplies, a provision is being made and will be held centrally for these excess inflation items.

Inflation is, by nature cumulative, and so this amount grows throughout the plan. There remains a significant amount of uncertainty around levels of inflation. Higher inflation will typically lead to increased levels of both income and expenditure. It is proposed that if inflation is higher than forecast and income forecasts consequently increase, any unspent amounts at the end of 2022 are prioritised to provide additional provision in the reserve against the corresponding impact on expenditure in 2023.

The Plan also includes a number of areas of expenditure that are determined by pre-agreed formulas: an annual 2% increase in Health budgets to maintain service standards and meet the costs of health care inflation, staged increases in the JOA budget to 0.3% of GVA by 2025, and maintenance of spending on Arts, Heritage and Culture as 1% of government expenditure.

Revenue Growth Funding

This plan proposes additional funding for departments to meet the immediate priorities identified by the Council of Ministers. This funding totals £61 million in 2023 over and above amounts included in previous plans and is in addition to departments' existing budgets. Additional funding is provided to address service pressures across all areas of government, including significant additional funding for health, education and children's services. The States Employment Board will have a continued focus on strategic workforce planning, which will consider how any headcount implications of the growth should be managed to reduce the impact on the wider labour market, in conjunction with the Value for Money programme.

£10 million of this growth has been held centrally in the reserve, where the exact amount of timing of spend is still uncertain. This includes provisions for potential inflation in excess of RPI, and funding of the ongoing financial consequences of elements on the 100 Day Plan which are yet to be finalised.

Whilst there may be a need for further investment in future years, these costs should be met through the simplification and rationalisation of existing government activities and any improvements in income forecasts. Departments will not be able to commit to additional expenditure until this is realised.

Figure 8 provides a summary of this additional funding by department (including amounts held centrally). Further information on the proposed additional expenditure can be found in Appendix 3.

Value for Money

The targets previously included in Government Plan 2022-2025 have been reviewed by the Council of Ministers, and reprofiled across the period which is considered to be a more realistic plan. In 2023, £7 million of the £10 million target will be achieved through restraint in the allocation of non-pay inflation, with a further £3 million delivered through the Value For Money programme, which is set out in the next section of the plan.

These targets are a minimum reduction in overall expenditure, and the Council of Ministers will look to simplify operations, stop services that are no longer required and improve efficiencies across government. This will allow funding to be reprioritised into areas needing further investment, or further reduce overall spend. This work is part of the longer term VFM programme, expected to deliver full year impacts from 2024.

Covid-19 Response and Recovery Spending

Whilst the impact of the pandemic has reduced, we will still be providing £25 million for direct costs of the pandemic in 2023. Whilst much of the cost is one-off, there are some items where spend will continue into 2026 and beyond. In future plans these will begin to be incorporated into departmental expenditure, to reflect the ongoing costs of living with Covid- 19. As the ongoing impacts of Covid-19 continue to be uncertain, a reserve of £5 million has also been provided in 2023 to meet unforeseen costs of Covid-19 or other health protection incidents. If possible, this will be supplemented by unspent allocations at the end of 2022.