From John Clennett, former Treasurer of the States,.
SENATOR Ben Shenton is undoubtedly right to draw attention to the increases in States expenditure over the past five years, but surely these increases can be attributed in large measure to the adoption by the States of the ministerial form of government, and in particular to the adoption of the new Finance Law, all done under the banner of ‘greater flexibility’.

Under the old Finance Law, the States had to consider at the same sitting the committees’ requests for expenditure and the Finance Committee’s proposals for meeting that expenditure. Under the law, the Budget had to balance. The Finance Committee put together a package of priorities to achieve that end.

Individual committees could present proposals on Budget day which upset the Finance Committee’s proposals, but in that case the Finance Committee had to propose an adjournment and come back with fresh proposals for raising the necessary funds.

Under the new Finance Law, with the expenditure debate taking place in a virtual vacuum, it is not surprising that without the discipline of having to acknowledge the consequences of expenditure, Members pursue their pet schemes with enthusiasm, and when revenue raising comes to be considered, there is always the option of carrying a deficit forward, as was seen in regard to the amendment regarding alcohol duties.

In regard to the £50m black hole, it is being suggested that this is due to States profligacy, but I would suggest that although current States expenditure may in places be excessive, this expenditure is by no means the root cause of the problem.

I believe the problem arises because the States acceded to pressure from the EU to amend the taxation of companies incorporated in Jersey, resulting in a virtual gift of £100m of revenue to other jurisdictions. GST was brought in to raise roughly half of this loss, but how it was expected to raise the balance has never been disclosed.

What has also never been disclosed are the circumstances in which the pressure from Brussels was brought to bear, which politicians represented Jersey in the negotiations, if any, and with what strength the potential damage to Jersey’s economy was emphasised in the enforced change from a system which seemed to be working perfectly well. In our efforts to be whiter than white, did we just roll over and say ‘Inshallah’?

Be that as it may, the damage is done, and having lost a source of £100m taxation revenue ostensibly with very little resistance, it seems most unlikely that it can be replaced except by another taxation source.

The difficulty is that whereas the lost taxation was borne by companies which did not seem to be feeling any particular pain, any replacement tax may have to be borne by individual members of the public, to their great discomfort.

Our future rests in the hands of States Members, more specifically the ‘cabinet’, and it is the responsibility of them to come forward with proposals for putting the Island’s finances back on track. Time is not on our side.