Budget 2019 has been developed by the Treasury and Resources Minister with three core principles in mind: that the government should ensure its actions are affordable, that it should maintain a balanced approach and that it should apply common sense in all areas.
This Budget updates the economic outlook, sets out the island’s national income, increases income tax allowances to benefit lower and middle-income taxpayers, and provides help to both first-time buyers and buyers who will need mortgage finance in the future. It also signposts consultations on a number of important aspects of the tax system.
Deputy Susie Pinel said: “This is an affordable, balanced and common sense Budget, which is right for our current circumstances. In abiding by the three core principles, my first Budget contains no surprises, with no major tax measures, and does not disturb my predecessors’ long-term fiscal framework of achieving a balanced budget.”
Budget 2019 starts to address some of the five key strategic priorities announced last week, for example by making changes to tax thresholds that help to reduce income inequality and improve the standard of living.
Key Budget proposals include:
- £500 increase in the personal tax-free income allowance, taking it to £15,400 for a single person, and reducing their income tax bill by £130 in 2019
- £150 increase in the second earners’ allowance, which will take it to £6,000
- reduction in Stamp Duty for first-time buyers, by increasing the threshold for first-time buyers’ relief on properties from £450,000 to £500,000
- abolition of Stamp Duty on mortgages for homes costing up to £600,000 and a tapered charge for homes valued between £600,000 and £700,000
- 0.5% increase in standard Stamp Duty rates for homes valued over £500,000 to fund these measures
- increase in alcohol duty by 3.5%, which is equivalent to just over a penny on the price of a pint, and is below RPI
- 2p increase in fuel duty
- 59p increase in the duty on a pack of cigarettes
- no change to the £240 de minimis threshold for GST on goods imported by post
- £35 million Capital Programme, more than half of which is earmarked for investment in infrastructure, as well as equipment in the hospital and funds for Grainville school
- £20 million of additional expenditure allocations for Departments: more than £5 million for Health, Community and Children’s services - £6.5 million is for infrastructure budgets, as the introduction of waste charges is deferred
- £50 million is being paid into the Stabilisation Fund, to provide a buffer against economic shocks and fulfilling the Assembly’s decision to repay to reserves some of the funds drawn down to maintain investment in capital expenditure in the current MTFP
Budget 2019 incorporates forecasts which show that while books are broadly balanced by 2019, a structural deficit will emerge by 2020 of up to £30 million, where expenditure will exceed revenues. This will be addressed in part by the modernisation process already underway across the public service.
Deputy Pinel added: “We will need to make some difficult choices and have some serious discussions about how we pay for our public services and investment in priorities, as our plans must be affordable and finances must be sustainable.
“We have just lodged a Common Strategic Policy which set out our ambition to make a positive difference for Islanders. Over the coming weeks and months, Ministers and officials will be working hard on details of activities that the government will propose in the Government Plan 2020-23. These initiatives will be thoroughly costed.
“In the meantime I look forward to announcing the efficiencies and savings arising from the new Target Operating Model. The aim will be to eradicate the deficit and fund the investment in our priorities.”