The financial problems currently being encountered by the Cayman Islands have led to media speculation that Jersey must be experiencing similar difficulties. However, the two jurisdictions are very different and Jersey has built up significant financial strength and resilience.
1. Before the current economic crisis, Jersey had already modernised and broadened its taxation system. Public consultation on tax reform began in 2001; a three per cent Goods and Services Tax and a ten per cent tax for financial institutions were introduced in 2008.
2. Jersey runs a strong, prudent fiscal policy. Since the 1980s, the island has paid budget surpluses into a long-term savings account. This Strategic Reserve currently holds £500m – that’s 12% of the island’s total annual economic activity (GVA*). The government has no public debt.
This prudent approach to fiscal policy was strengthened in 2006 with an improved fiscal framework which introduced a Stabilisation Fund (effectively a second savings account). The government has used this to put money aside in periods of growth, which is now being used to support the economy through the current downturn.
Jersey also introduced an independent Fiscal Policy Panel of leading economists to publicly advise the Treasury Minister. This use of independent advice in setting fiscal policy has few parallels in other small jurisdictions, or even in larger economies.
3. Jersey’s finance industry has been relatively unaffected by the global downturn, with only modest job losses to date. Profits for 2009 are likely to be down after a strong run lasting several years, but the diversity of Jersey’s finance industry is expected to limit the overall impact from a downturn in any particular financial sector.
4. Jersey’s long standing commitment to international standards of regulation, co-operation and transparency should ensure its continued success as an international finance centre in the years ahead. Jersey firmly supports the OECD drive to achieve a level playing field in tax cooperation, including an end to the bank secrecy laws that exist in other jurisdictions.
Notes to editors
1. In the years prior to the global financial crisis Jersey was running significant surpluses and is expected to run a surplus of £42m in 2009. The Island has no borrowing and a Strategic Reserve of £500m or 12% of GVA.
2. Goods and Service Tax, introduced in 2008 at a rate of 3%, is generating annual tax revenue of £50 million.
3. Jersey’s Stabilisation Fund amounts to £156m or 3.5% of GVA. £44 million of that amount is now funding an economic stimulus package to mitigate the effects of the downturn on islanders. The balance of £112 million has been earmarked to cover the impact of the economic downturn on States finances.
4. The outlook for Jersey public finances
2009 2010 2011
Budget surplus+/deficit- £42m -£51m -£70m
Source: States of Jersey Treasury and Resources Department
Forecasts show that during the downturn, tax income will fall and spending on benefits will increase. The Island can more than meet the costs of projected deficits for 2010 and 2011 from the savings in the Stabilisation Fund, without touching the Strategic Reserve.
5. Jersey’s Fiscal Policy Panel (FPP) advises the Treasury and Resources Minister on the Island’s fiscal (tax and spending) policy and how it can help achieve the States’ objectives of economic growth with low inflation. The Panel comprises: Joly Dixon CMG (Chairman); Christopher Allsopp CBE and Marian Bell CBE.
The FPP’s latest report.
6. * GVA (Gross Value Added) measures the contribution to the economy of each industry or sector in Jersey. It is calculated as the sum of profits and earnings of individuals and businesses.