Jersey 'should not raise taxes despite weaker economy'

Jersey's States should not increase taxes despite a weakened economy and a predicted increase in inflation, an independent group of experts has said.

The Fiscal Policy Panel (FPP), which provides economic advice, said in a report it would not be appropriate to impose a heavier burden on taxpayers.

It also said the island must be careful not to start paying people too much, which could drive inflation higher.

But it also said the government should continue to search for efficiencies.

In its annual report, the FPP said the economy contracted by 8.7% last year, with the finance sector seeing falling profits "due to the low interest rate environment".

Non-finance sectors, particularly hospitality, struggled with the impact of the coronavirus pandemic, it said.

The panel said the economy was "recovering, but is still weakened and the outlook remains unclear".

It said: "Whilst [the] economy is recovering, but is still weakened, revenue raising steps, including higher taxes, impose a burden and would not be appropriate at present."

It also said that "in the face of uncertainty, prudent uses of Jersey's funds will be important" and any fiscal deficits from temporary economic distress should be "financed by borrowing rather than drawing down the strategic reserve".

It said efficiencies "should be sought regardless of the state of the economic cycle and the government should continue to search for efficiencies in future years".

In September, a spending plan was outlined by ministers to "invest in Jersey's future".

The Government Plan for 2022-2025 sets out a programme "for recovery and renewal", describing how the States could tax people more and make savings on investments.

As part of proposed changes to the budget, income tax allowances, plus alcohol, fuel and vehicle emissions duty, could all increase.

The plans are due to be debated on 14 December.

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