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Falklands 2018/19 budget reflects strength of the Islands economy

James Wilson, Appropriation Bill allows for a departmental operating budget expenditure in 2018/19 of £72m. Supported by budgeted 2018/19 revenues of £82m. (Pic Twitter B. Elsby MLA)

The following is the Budget 2018/19 presentation made by the Falkland Islands Financial Secretary, James Wilson.

 Mr. Speaker, the purpose of the Bill before you today is to authorize the appropriation of monies from the Consolidated Fund for the next financial year.

You will have heard the Governor’s Annual Address a reference to the current strength of the Falkland Islands economy.

The Government has significant financial reserves. These reserves have been built up during years of prosperity. Government reserves are not immune to the impact of stock market shocks. However, the impacts are limited by investment policies which value security above speculative high returns.

The total budgeted income for the Government this year is £60m. As reported to the 25 April 2018 Standing Finance Committee, the total forecast income for this financial year now exceeds £100m.

Corporation tax receipts have reached £34m, compared to a budget for this current year of £8m. Fishing licenses income in 2017/18 for the year to 30 April was £24m, more than last year. Returns on investments have also held up. Dividends received, and profits on investments sold to 30 April 2018 from investments was £10m, which again exceeds the budget set for this year.

On the cost side it is important to note the impact of rising fuel prices on Government departmental budgets, as well as consumers. The price per litre for diesel to the Power & Electrical section in December 2016 was 38p, but by March 2018 was 50p: an increase of 35%.

The Budget for 2018/19 is built upon a sound financial base.

At the January 2018 Executive Council a number of budget principles were agreed. The purpose of having budget principles is to help provide a direction about what the final budget should be about and how much money should be spent overall. I will now highlight some of the key decisions in relation to these principles. Principle one is to improve the quality of life within the Falkland Islands

Welfare payments will increase by the rate of inflation.

There will be a broader review of welfare payments during 2018/19 to achieve greater clarity about the target recipients and make proposals to enhance services as required. Family Allowance will be increased to £75 per child per month from 1 July 2018.

Family Allowance payments will be tax free: backdated to 1 January 2018.

Please note that anyone who has made voluntary tax payments for family allowance since January will receive the credit against their 2018 liability in the normal tax return process in 2019, and a repayment if they have overpaid tax compared to their assessed liability. Those making voluntary tax payments on account can review their arrangements and stop making payments with immediate effect. Weekly full retirement pensions will increase from £153 to £156 a week.

A 2% cost of living pay increase will be awarded to FIG workers.

The minimum wage will increase from £6.58 to £6.67 per hour.

Next, encouraging economic development in the Falkland Islands

Corporation tax rates and income tax rates will remain unchanged.

Corporation tax receipts provide the most significant area of support for the operating budget, but are dependent upon the economic success of companies.

A consultation on taxation is currently in progress with the Chamber of Commerce. Hopefully there will be some recommendations in the coming year that will assist and encourage investment by companies.

There has been a consultation about some aspects of oil taxation. The purpose of this consultation to seek views on how to make some of the oil tax rules clearer, to encourage inward investment to the stable tax regime of the Falkland Islands. With the Capital Appropriation Bill, you will hear details of capital investment that will benefit the economic development of the Falkland Islands, through strengthened infrastructure.

Principle four is to invest in the long term financial sustainability of the Falkland Islands. Financial resilience and strength is key to the future of the Falkland Islands.

The risk appetite for the BSC has been to remain prudent. This has meant seeking evidence for the basis of assumptions about budgeted income in 2018/19.

Investment in infrastructure through a capital program is a means to help achieve long term financial stability and economic growth. Also, it is also accepted that maintaining infrastructure has a cost, and cannot be neglected.

The financial decisions agreed enable a reasonable level of funds to be held in reserves. Government continues to be debt free with no borrowing, which addresses principle 7. The five year medium term financial plan and capital program does not require any borrowing, and leaves Government with a reasonable level of reserves.

There is funding in place to maintain efficient and effective services.

There will be no increases in 2018/19 in rents, service charges, postage charges, Stanley House, leisure centre charges and veterinary fees.

The Public Accounts Committee issued a useful report in quarry pricing last year, and one of the actions that Government will now have is to work towards greater transparency of how prices are put together.

The Standing Finance Committee will review the calculation for electricity prices every three months, in the public part of the meeting, which will help us all understand the impact that the cost of fuel and the price of spares for the Power Station. One area of price increases is that Medical charges for non-entitled patients will be revised.

I will now mention pension arrangements. Although there is a significant deficit on the Retirement Pension Fund, Government has a plan to address this. Steps were taken by the last Assembly to increase the financial strength of the fund.

For the Retirement Pension Fund an annual amount of £1.5m will be transferred in and this will be increased annually at a faster rate than what the retirement pensions paid out will.

In summary, the Appropriation Bill before the House today allows for a departmental operating budget expenditure in 2018/19 of £72m. This is supported by budgeted 2018/19 revenues of £82m.

Mr. Speaker, Honorable Members, this concludes my presentation of the Appropriation Bill to this House and I beg to move that the Bill be read a second time.

Legislative Assembly Tuesday 29 May 2018 - Capital Appropriation Bill

The purpose of the Bill put before you today is to authorize the appropriation of monies from the Capital Equalization Fund for the next financial year.

The Bill is for £35m. This is the funding that is required in 2018/19 calculated as follows:

1. The full 2018/19 capital program of £47m less;

2. Adjustments to the 2017/18 capital program of £12m (being amounts carried over to 2018/19 less additional funding approved in 2017/18)

The capital program of investment is extensive and I will provide greater detail at the next meeting.

Mr Speaker, Honorable Members, after the Bill has been referred to the Select Committee I will provide more details of the schemes contained in the Capital Programme, both for 2018/19 and subsequent years. However at present this concludes my presentation of the Capital Appropriation Bill to this House and I beg to move that the bill be read a second time.