Jersey Fiscal Panel Warns Of Budgetary Risks

by Robert Lee, Tax-News.com, London

20 July 2011

The plan to consolidate Jersey's financial position looks to be broadly on track, but there remains little room for manoeuvre and the risks have intensified, Jersey’s Fiscal Policy Panel says in its latest report, published on July 18.

The panel’s fourth annual report looks at the finances of the States in the context of the uncertain global economic outlook. It notes that the pace and nature of fiscal consolidation remains broadly appropriate, given the current economic outlook, and that Jersey should continue to plan on the basis of a fragile and drawn-out global recovery.

Panel Chairman Joly Dixon said: “The main conclusion from the report is that, while the forecast budget balances are similar to where they were nine months ago, there are a number of new risks to these forecasts. Expenditure has risen slightly more than income, and although the proposal to save GBP65m (USD105m) still looks achievable, a lot of work and difficult decisions will still be needed to ensure that they are.”

The panel’s key recommendations are:

• In light of the tight position of the States' finances, the decision not to progress all of the reductions in expenditure in Budget 2011 should be reconsidered or alternative measures found;
• More ambitious plans will be needed to rebuild the Stabilization Fund by running larger surpluses as the economy recovers; and,
• Further measures to strengthen medium-term fiscal policy including a consideration of future scenarios and setting strategic priorities.

The report also discusses the success of the discretionary fiscal stimulus programme and the proposed improvements to medium-term planning.

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