Public purse health check shows “unsustainable gap”

Tuesday 12 June 2018

After overspending their budgets by £2million in 2016, States Departments bounced back in 2017, ending the year £23million in the black – but the latest health check on public finances has revealed that the public purse is still suffering from serious “structural” difficulties.

With spending on the £466m Future Hospital, £45m Les Quennevais School and costs arising from implementing the Care Inquiry’s recommendations set to put pressure on States Accounts, States Chief Charlie Parker warned that action would soon need to be taken to address an “unsustainable gap” between revenue and expenditure.

Published yesterday, the States Accounts 2017 showed that increases in income tax revenue, GST and stamp duty helped States Departments generate £767m – around £30m more than the previous year. That came despite a 1% rise in spending to nearly £704million, which the States attributed to “pay awards recognised across the organisation partly offset by lower social benefits payments.”

Income tax receipts rose in 2017 to £515m from £488m the previous year, and 6.6% higher than predicted. GST raked in £87.9m, while duty charged on tobacco, alcohol and fuel pulled in nearly £60million. 

Pictured: A breakdown of spending by States department. (States of Jersey)

Stamp duty – charges applied to property transactions – generated £3million extra in 2017, totalling £33.3million overall thanks to soaring numbers of properties sold over £2million and "continuing high level of activity from High Net Worth individuals." Income from the Island Rate, meanwhile, stood at a similar level to the year before - £12.3m.

The £840m ‘rainy day fund’ and £2bn Social Security reserve were also found to be in a healthy state, rising in value by £20million and £219million respectively. Overall, the States ‘Special Funds’, which also include the Long Term Care, Tourism, Ecology and Lottery Funds, enjoyed a surplus of £286million. It was a partial drop from an “exceptional” surplus of £300million in 2016, which arose from a ‘Brexit bounce’ due to the devaluation of Sterling and record levels of employment.

It wasn’t such good news for the States-funded bodies Andium Homes, Ports of Jersey and the States of Jersey Development Company – their income was £108million compared with £135million in spending, meaning a deficit of £27million. This was explained as partly being due to having to downgrade the value of the Arrivals 1937 building.

Pictured: Breakdown of value of the States property and asset portfolio. (States of Jersey)

Nonetheless, the overall balance sheet showed an increase in net assets of £527million to £6.8bn, boosted by increases in the value of property, plant and equipment.

Mr Parker said the accounts reflected “an organisation that has worked hard to serve its community.”

“It has many examples of good performance, as well as some areas where performance is uncoordinated, inconsistent and does not provide good value for money,” he said.

The States of Jersey Annual Report and Accounts for 2017 were published today. Here are some of the highlights: https://t.co/kTO21l0g5M pic.twitter.com/6hintHTX0g

— States of Jersey (@StatesofJersey) June 11, 2018

He later added: “We are working to improve how the organisation works, by restructuring and modernising, investing in new services and skills, becoming more commercial and customer focused, and by having clearer objectives and accountabilities. We are aiming to build a public sector that is more effective, efficient and delivers outstanding, value for money services, where information about the performance and financial activity of the States of Jersey is clearer and more transparent. 

“Next year’s annual report will contain even more detailed performance information as we embed the planned structural changes and enable more comprehensive and transparent reporting.”