Jersey Government Upbeat On Economic Growth

by Jason Gorringe, Tax-News.com, London

03 October 2006

Jersey's Minister for Treasury and Resources, Senator Terry Le Sueur last week revealed that the local economy, as measured by Gross Value Added (GVA), grew by 3% in real terms between 2004 and 2005 to reach GBP3.4bn.

The government is reported to be upbeat about the first real term growth in the Island's economy for 5 years, as revealed in the report compiled by the States Statistics Unit.

Senator Le Sueur announced that:

“I am very pleased with these results as they make the commitment we made in the Strategic Plan of 2% per year, real term growth for five years, an achievable target. At a time when we are looking for real economic growth, a change of this magnitude in GVA is a very encouraging sign.”

He continued:

This demonstrates that the business community feels increasingly confident now that the States has delivered coordinated and forward looking policies which will create a framework for the future. We hoped that creating such a framework would provide the conditions for economic growth and this figure shows this is the case.”

The Jersey authorities believe that their Fiscal Strategy for the Island is responsible for the growth. Broadly speaking the Strategy comprises three main elements, namely:

1) Tax reform

The States have approved tax reform and committed to a number of new policies. The Income Tax Instalment System has been in place for nearly a year, and the authorities have expressed confidence that they are on track to receive around GBP3m in additional tax revenue.

The States has also approved the ‘20% means 20%’ initiative which will phase out certain tax reliefs for the more wealthy and, it is expected, will bring GBP10m in taxation over a period of five years. Other parts to the reform include the 0/10 regime and the planned Goods and Services Tax (GST).

Public consultations on both initiatives have now concluded and legislation will be presented to the States by the end of the year.

2) Efficiency savings

Work is ongoing to achieve a more efficient and cost-effective States of Jersey. The States has agreed that by 2009, the total savings target for the whole organisation in all areas of work is GBP20m per annum. The States recently approved the Annual Business Plan which confirmed the expenditure allocations for 2007, and these now include GBP14 million pa of the GBP20 million target.

3) Growing the economy

According to a statement published by the Treasury and Resources Department last week:

"Today’s report shows that economic growth has been achieved in 2005 and is within our grasp in coming years. The economy, when measured by GVA grew by 5% but in real terms (i.e. adjusting for inflation) it increased by almost 3%. This figure highlights the importance of the combination of the three factors of the fiscal strategy. When efficiency savings within the States of Jersey are made and economic growth is achieved, changes in taxation are minimised. It is therefore expected that the predicted levels of taxation will be sufficient."

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