THE economic expert who advised the States on the zero-10 plans has given enthusiastic support to the development of the strategy. Rosemary Radcliffe backs the Policy Council’s two-stage approach, supports progress made so far and says that economic conditions seem good for the island to maintain growth and ease the black hole concerns.
‘Progress since 2006 and plans for this year and the next fit well with the stated aims of the strategy,’ she said.
The latest financial estimates have seen the States set aside £25m. a year to balance the books from 2009 and forecast only a £5m. deficit in running costs.
Ms Radcliffe said that approach was justifiable in the medium term.
‘Because the island has substantial accumulated reserves, it is not necessary or, from the economic point of view, desirable, to move immediately to a balanced budget, provided that it is recognised that, in the medium term, steps may need to be taken to correct any structural deficit that may emerge.’
Ms Radcliffe has consistently urged the States not to estimate growth running ahead of the cost of living for a long period, but to assume average real growth of 2.5% per annum for the medium term.
The global economy is growing well ahead of the long-term average, with estimates for world growth this year of 3.5%.
But she pointed out that there were substantial risks to global performance, including oil prices, global trade imbalances, slowing of the US housing market and the geopolitical situation in the Middle East.
Though implications for economic growth were ‘reasonably favourable’, the island should not depend on better-than-average growth year in, year out and needed to have money-raising contingencies ready for 2012.
‘Whether this should be in the form of a GST will be for policy-makers to decide, although to be ready with the appropriate systems must be the basis of a prudent approach.’
Ms Radcliffe has consistently highlighted the disadvantages of a GST, as introduced in Jersey, and again hinted that other measures, mainly established taxes, would be preferable.
Ms Radcliffe said that strong economic performance and tax increases in recent months had helped the island go some way towards resolving the ‘black hole’ issue.
But she urged caution on any ‘go for growth’ policy.
‘It would be unwise to rely on the continued elasticity of ETI receipts, notwithstanding that ETI receipts have grown faster than the economy in recent years, or on continued real growth in excess of 2.5% per annum on average,’ she said.
Ms Radcliffe also warned about cutting expenditure too deeply, leading to cuts in services, and said constraining capital expenditure too far would have serious consequences for the economy.
Treasury and Resources minister Lyndon Trott welcomed the support.
He said that the States was not pursuing a ‘go for growth’ policy at all costs, but seeking to maintain growth through the tax strategy.
Article posted on 14th May, 2007 - 12.00am
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