Government finances deteriorating - expert panel

Panel chair Sir Jon Cunliffe said the government needs to focus on the island's long-term challenges

The government of Jersey is spending more than it is earning and is operating at an increased deficit, independent finance experts have said.

The Fiscal Policy Panel (FPP), an independent group that looks at how well the island generates and looks after its money, said in its latest report that the current government finances had "deteriorated".

It has asked ministers to make a "formal commitment" to save more money in the island's reserve funds, which it said are below the level recommended in its last report.

Panel chair Sir Jon Cunliffe said the island's economy was "relatively strong" after two years of good economic growth but ministers had to focus on addressing "long-term challenges".

Economy is 'vulnerable'

He said: "Jersey does not have some of the tools that other countries have to manage economic downturns and shocks... and its tax system is not that strong.

"So, when bad times happen, Jersey does not have that many things it can do to cushion the shock, which is why Jersey has those reserve funds because they're really the insurance policy that matter for the future."

The FPP said it welcomed the government's decision to invest prior year tax debts in the island's Rainy Day Fund [States Strategic Reserve] but further action was needed as a "matter of urgency".

It said the the current level in the fund, valued at £1.09bn, made Jersey's economy "vulnerable if a crisis was to occur" in the near or short-term.

The FPP also said the Stabilisation Fund, which supports the economy in case of a downturn, was "exhausted".

The report said the proposed government budget predicted an operating deficit of £18m in 2025 and £1m in 2026.

The FPP made a total of six recommendations to the treasury minister and the States Assembly, including:

• Managing a growing level of healthcare spending that is "not sustainable" and may require "difficult choices" between funding health or other areas of the economy

• Keeping an eye on inflationary pressure that may be building because of proposed government spending

• Investing revenues from the new Pillar Two tax regime into reserve funds

Treasury Minister Elaine Millar said "the coffers aren't absolutely dry"

In response to the report, Treasury Minister Elaine Millar said: "We do still have some reserves; the coffers aren't absolutely dry.

"I take on board that we need to build them and we have started work to do that."

She said the government's level of health spending was clearly something "we need to think about".

She said: "If people want health spending at the level we have, then we have to make hard decisions elsewhere."

Ms Millar said the Council of Ministers heard the FPP recommendations.

She said: "We, as a council, have to think about what we do in terms of our spending overall... it is a very difficult balance."

"One person's unnecessary spending is another person's playground."

Ministers are due to consider the report ahead of the government budget debate in November.