Jersey’s Fiscal Policy Panel has released its 2009 Annual Report assessing the economic outlook for Jersey and implications for the States' finances. The report particularly underlines the need for Jersey to preplan tax measures for coming years to ensure the territory’s long-term sustainability.
Its report notes: “In today’s economic climate, fiscal policy should be used to stabilise the local economy. There are concerns about the long-term sustainability of the public finances and a strategy to address this should be agreed now, which could be implemented once the economy recovers.”
The Panel’s report expects the Jersey economy to shrink this year and in 2010 as a result of world recession causing a squeeze on finance sector profits. It thus reiterates the advice it gave to the Treasury and Resources Minister Philip Ozouf in an open letter in March that the economic outlook merits the implementation of fiscal stimulus measures now.
Although it makes clear that the total size of any stimulus should be based on the economic outlook and the availability of suitable measures rather than by the money available in the Stabilisation Fund, the Panel broadly supports the size of stimulus package now being proposed. It has again stressed that measures should be timely, targeted and temporary, as well as offering value for money.
Taking a longer-term perspective, the report highlights the fact that current forecasts suggest some action may be required when the economic downturn is over to ensure the public finances are sustainable. The Panel does not recommend that any policy changes be made at this stage, however it believes that a strategy must be agreed this year that could be implemented when the economy recovers. Finally, building on the recommendation in its November 2008 update, the Panel believes it is appropriate to keep the balance in the Consolidated Fund to a minimum at all times by transferring any surplus to the Stabilisation Fund. This is in order to reduce the temptation to commit to spending these funds during the business plan and budgetary process.
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