Removing GST from Food would leave big hole

Removing GST from food would ‘leave a hole’ in the Island’s budgets and would not be delivered quickly enough to help Islanders with the current cost-of-living crisis, the Treasury Minister has warned.

Deputy Ian Gorst said that expected government income – including from GST receipts – had been taken into account when formulating the recent Government Plan proposals and that the money would be used to make a ‘crucial investment’ in areas such as health, education and children’s services.

Reform Jersey Deputy Raluca Kovacs has lodged a proposition calling for the 5% tax to be axed from food. The move has received support from one of the Island’s leading retailers, the Co-op. If the proposal is approved when it is debated by the States Assembly next month, the changes would come into effect by January 2024.

Deputy Gorst, responding to the proposition, said: ‘We are aware of the proposal lodged by Deputy Kovacs. The Council of Ministers will consider it carefully and fully ahead of the scheduled debate. Through the mini-budget, ministers delivered, with the Assembly’s support, a comprehensive package of measures that will help Islanders immediately with the cost of living crisis and be funded by improved income forecasts”.

“We have already said that, in the event that the cost of living continues to rise, ministers will not hesitate to take measures to help Islanders again, with further measures to put money in their hands, when they need it. There will be many arguments made for and against the proposal, but what is undeniable is that it cannot be delivered quickly enough to help Islanders with the challenges they may face today.’

GST was introduced in 2008 at a rate of 3% before going up to 5% in 2011, the level at which it has remained.

Deputy Gorst added: “Affordable and sustainable spending plans and helping Islanders with the cost of living are based upon current and improved forecasts of income, including GST receipts. These balanced budgets have been presented in the Government Plan. This proposal would leave a hole in those balanced budgets”.

“It is disappointing that it has not been set in the context of those plans and how we propose to return the finances back to balance.”

Jersey business group founder welcomes appeal scheme for Covid-aid repayments

The launch of an appeals system – allowing claimants of the government’s Co-Funded Payroll Scheme to challenge repayment requirements – has been welcomed by the founder of a small-business group.

Beverley Le Cuirot, who founded the Small Business in Jersey Facebook page – which has almost 2,000 members – said she hoped the process would provide a ‘transparent and fair hearing’ for those who were concerned about paying back the money they were given through the initiative.

The government scheme subsidised wages for hard-hit businesses during the height of the Covid – 19 crisis, however, earlier this year, a number of small-business owners told the JEP that they had been left stressed after being asked to repay the funds.

The appeals process gives claimants the opportunity to have their repayments reassessed and considers the timeframe in which they must be paid.

Mrs Le Cuirot said: ‘It is perhaps unfortunate that small businesses have had to wait until now for their opportunity to discuss their repayments with the government. However, I am very pleased the appeals process is live and am grateful to the Chief Minister and her team for putting it in place”.

She said many businesses were still struggling with the ‘triple effect’ of Brexit, Covid and the cost-of-living crisis. “I hope that there will now be a transparent and fair hearing for those who are concerned about their repayments – including those who have done so already or are on a payment plan,” she added.

Sophie Walton, one of the small-business owners behind the Support Jersey Family Business campaign on Facebook – which called for improved financial support for businesses during the pandemic – urged the government to deal with each appeal case ‘sensitively’.

“My hope is that with this in place, the businesses who do owe substantial amounts will be able to have the total repayment amounts lowered. Many of them are still struggling with the aftereffects of Covid, coupled with Brexit. We need to ensure the government is taking this into account with any payment plans that are offered – especially with the minimum wage pay rise increases that are taking place over the next few months,” she added.

Covid review: ‘Jersey’s government did good job overall’ but…

There needs to be a better understanding of the Island’s most vulnerable citizens and their needs in times of crisis, a report into the government’s handling of the pandemic has concluded.

The report, which was published today by an independent panel of judges, found the government ‘did a good job’ dealing with Covid-19 but recommended ‘more foresight, better leadership or greater capacity to work collaboratively’.

One of its 16 recommendations stemmed from shortcomings in protecting the Island’s most vulnerable citizens. The report stated: ‘In an emergency, there is a high expectation that the government will both protect its most vulnerable and be sensitive to the needs of different communities.

This starts with a closer knowledge than Jersey has now, including a closer knowledge of those living on the margins of the community, of those with mental health issues and of those overseas workers who have been in Jersey for fewer than five years.

‘In a crisis, these groups are likely to suffer more than most.’

The report’s other recommendations include:

• Improving the Island’s outdated emergency legislation.
• The appointment of a chief scientist to help coordinate and analyse developing scientific information.
• Improved communication.
• Co-opting assistance from outside government.
• Better data-sharing and more rigorous emergency planning with appropriate rehearsal for contingencies such as a pandemic.

The report added: “We have concluded that, overall, the government did a good job… But people in Jersey have high expectations of their government and not everything went as well as it might. We list 21 areas where we have heard of well-founded disappointment in Jersey, or where our judgment is that more foresight, better leadership or a greater capacity to work collaboratively would have encouraged a more satisfied population.”

Commenting on the report, panel chair Sir Derek Myers – who was the first joint chief executive of two London borough councils and a former non-executive director at the UK department of health – noted that, at the end of May this year, 129 lives had been lost to Covid (a number which has since risen to 142).

“Nothing can bring those individuals back. We believe our report can, however, help any government of Jersey to be better prepared, make better decisions and communicate better in any further comparable future crisis,” he said.

Government chief executive Suzanne Wylie said she wanted to thank the panel – which also comprised Professor Maggie Rae and Sir Richard Gozney – for delivering its report in a timely fashion, and she said the government’s thoughts lay with those who had lost loved ones during the pandemic as well as those who had faced hardship.

“While the panel found that, overall, the government did a good job, I am grateful for its recommendations, which will be presented to the Assembly and an action plan developed so that, as an island, we can be better prepared in future,” she said.

Governments must not allow inflation to become a ‘runaway train’ – IMF chief

The managing director of the International Monetary Fund has urged governments to keep up the fight against inflation even if it means more pain at a time of extraordinary economic turmoil.

Speaking to reporters on Thursday, the IMF’s Kristaline Georgieva said that the world economy “has been hit by one shock after another″ – the coronavirus pandemic, Russia’s invasion of Ukraine and a resurgence of inflation. But she said reining in rising prices should take priority.

“If we do not restore price stability, we will undermine prospects for growth,” she said, adding: “We cannot possibly allow inflation to become a runaway train — bad for growth, bad for people, bad especially for poor people.

Ms Georgieva acknowledged that the higher borrowing costs would pinch economic growth but she urged policymakers to show restraint in spending money to ease the pain. “When monetary policy puts a foot on the brakes fiscal policy should not step on the accelerator,″ she said.

Governments, many of them already heavily indebted after battling the pandemic, should focus on helping the most vulnerable at a time of food shortages and punishingly high energy costs, not on broader spending programmes. “Policy measures need to be well targeted, and they need to be temporary,” she said.

Ms Georgieva’s call for inflation vigilance comes at a time when some economists worry that central banks will overdo interest rate hikes and cause unnecessary economic pain. She also warned that the “fragmentation” of the world economy into competing political blocs could cause inflation to linger.

If geopolitical tensions cause companies to move their supply chains — out of China, for instance — production could become less efficient and more expensive and central bank rate hikes could not do much about it. “If we lose the benefits of a more integrated global economy, we all would be poorer,″ she said.

Ms Georgieva made the comments as the world’s financial leaders gathered in Washington at the autumn meetings of the IMF and World Bank.

UK Bonds & Pound in strong rebound

UK government bonds and the pound rallied amid speculation that Liz Truss’s Government could be forced to U-turn on its unfunded tax cut plans. Pressure on gilts – UK government bonds – also eased as the Bank of England sought to steady market sentiment by increasing its bond-buying activity ahead of a Friday deadline.

According to reports, No 10 and the Treasury are holding talks over whether to abandon more of the Government’s £43 billion tax-cutting plan. This could include reversing the decision to cancel planned rises in income tax. Ministers have already U-turned on the plan to slash taxes for the highest earners.

The Prime Minister’s official spokesman made clear there will be no further changes. “The position has not changed,” the spokesman said.

Markets appeared to think otherwise, taking their cues from the reports rather than the official statements. The yield of UK 30-year gilts – which has been under heavy pressure since the mini-budget was announced – dropped by a little under 0.3 percentage points to 4.5% as the market calmed slightly.

The Bank of England had been forced to step in two weeks ago to calm the gilt markets by promising to buy up to £65 billion in gilts from those who want to sell them. The chaos had been sparked by the Chancellor’s tax-cutting package and worries over how the Government would fund it, experts have said.

Initially, the Bank’s intervention seemed to push down yields on these gilts, which rise as prices fall. But on Wednesday yields had surged as high as 5.1%, the same level they reached before the Bank’s initial intervention.

As part of the programme, the Bank bought around £4.35 billion of bonds on Wednesday and £4.7 billion on Thursday in an increased effort to help soothe the markets. It brings the total bond buying to £17.8 billion so far. The intervention ends on Friday.

Investors had previously been shaken by governor Andrew Bailey’s firm message on Tuesday that the central bank would not extend the plan beyond the end of this week. The pound also increased by nearly 2.5 cents to over 1.13 against the US dollar.

Chancellor Kwasi Kwarteng, who has been in the US meeting the International Monetary Fund, is now under pressure to reinstate a planned increase in corporation tax from April.

Mixed Markets

European markets are higher today with shares in France leading the region. The CAC 40 is up 0.76% while London’s FTSE 100 is up 0.71% and Germany’s DAX is up 0.54%.

Yesterday, the tech-heavy Nasdaq Composite was 2.31% higher at 10,657.93 points, and the benchmark S&P had gained 2.78% to 3,676.53 points. The Dow was +3.04% at 30,097.70 points, helped by gains in pharmacy retailer Walgreens and major bank JPMorgan.

Asian markets closed sharply higher today with shares in Japan leading the region. The Nikkei 225 is up 3.25% while China’s Shanghai Composite is up 1.84% and Hong Kong’s Hang Seng is up 1.25%.