Jersey's Public Finances

Introduction

Jersey’s status as a British Crown Dependency means that it is financially independent. It needs to raise revenue through taxation, levies and charges sufficient to finance Government expenditure.

Summary

Jersey has a tax system that is simple and stable. The personal income tax rate is 20% and tax thresholds are high. Companies are taxed at rates between 0% and 20%. Impôts are equivalent of excise duties in the UK. Jersey has a 5% Goods and Services Tax (GST) rather than VAT.

The 2025 Budget is for government revenue of £1,270 million. The major components are income tax paid by individuals £717 million (56%), income tax paid by companies £221 million (17%) and GST £129 million (10%).

The 2025 Budget provides for government net revenue expenditure of £1,196 million. The departments with the largest budgets are Health and Community Services £322 million (27%), Education and Lifelong Learning £176 million (15%) and Employment, Social Security and Housing £109 million (9%).

Capital expenditure in 2025 is budgeted to be £166 million, the major component of which is new healthcare facilities of £73 million.

The social security system is funded by contributions above a threshold from workers of 6% and employers of 6.5% (2.5% above earnings of £26,442). The single person pension in 2025 is £286 a week. Pensions are funded – the fund to meet future pension liabilities is budgeted to be £2,429 million at end-2025. There are separate funds for long term care, which meet costs in excess of £60,160, and health insurance.

Jersey has a Strategic Reserve Fund of £1,449 million.

In 2022 total government expenditure was 25.5% of GVA in Jersey, less than half the UK figure of 53.9%. Jersey’s GVA per capita was 60% higher than the UK’s. Expenditure per capita was £13,800 in Jersey, 16% less than the UK figure of £16,400.

Compared with other jurisdictions Jersey raises a high proportion of its tax revenue from tax on incomes and profits and a low proportion from taxes on goods and services.

In its most recent annual report Jersey’s Fiscal Policy Panel noted that public expenditure is growing, the central tax revenue forecast has increased, the strategic reserve is significantly lower than the range it has recommended, the stabilisation fund is effectively exhausted, healthcare costs are rising and the value of Jersey’s net assets is falling.

Financial principles

The following financial principles are used as a framework for decision-making in preparing the Island’s annual budget.

• The Budget must take into account the sustainability, stability and wellbeing of public finances.
• Public services should be funded through balanced budgets.
• Investment should be affordable and deliverable.
• Expenditure and assets should be used to deliver value for money.
• Fees and charges should be reasonable.
• Restrained approach to borrowing should be adopted.
• The value of the balance sheet should be preserved.

Tax system

Jersey has a tax system that is simple and stable. There are few changes over time in the structure or rates of taxation unlike what happens in many other jurisdictions.

Jersey’s tax policy is developed in accordance with the tax policy principles that have been agreed by the States Assembly.

1. Taxation must be necessary, justifiable and sustainable.

2. Taxes should be low, broad, simple and fair.

3. Everyone should make an appropriate contribution to the cost of providing services, while those on lowest incomes are protected.

4. Taxes must be internationally competitive.

5. Taxation should support economic, environmental and social policy.

6. Taxes should be easily implementable and administrable at a reasonable cost.

7. No one individual type of taxation will meet all these principles. But overall, the tax regime should represent a sustainable balance.

Taxes, and the mix of taxes, are reviewed and considered in light of these principles. The principles are similar to those in other jurisdictions, although there is scope for different interpretations of what they mean. A distinguishing point for small jurisdictions with significant international business is that tax rates are to some extent a “price” for living or operating in the jurisdiction. It follows that it cannot automatically be assumed that any increase in tax rates will increase revenue; it is possible that the effect will be to reduce activity and therefore total tax revenue. Analysing the wider effects of possible tax changes is therefore critical in determining policy.

Personal income tax is capped at the rate of 20%. In 2025, the threshold for paying tax is £20,700 for a single person, £33,200 for a married couple/civil partnership and there is an allowance of £3,850 for each child. Taxpayers receiving the married couples’ allowance are taxed as a single unit, and an additional allowance of £8,200 is given if both individuals are working. This means the sum of the allowances given to two working married individuals is the same as two unmarried individuals (£41,400). Married couples’ taxation – as it is known - is being phased out and a system of independent taxation introduced.

Once income exceeds the tax allowance, a marginal rate tax band of 26% is applied to taxable income until tax due is equal to an effective tax rate of 20%. From that point tax is paid at 20%.

By comparison, in the UK the single person threshold is £12,570 (2024/25), the basic rate of tax is also 20%, but higher rates of 40% are levied on income over £50,270 and 45% on incomes over £150,000. In Guernsey, the single person threshold in 2025 is £14,600. The high thresholds mean that a significant proportion of workers in Jersey pay no income tax and about 50% of personal income tax revenue is paid by just 12% of taxpayers. There are special provisions for high value immigrants. Jersey has no capital gains or inheritance taxes.

In addition to large corporate retailers (annual turnover in Jersey in excess of £2 million), a number of specialist businesses including property development, residential and commercial letting and utilities are taxed on their profits at the rate of 20%. Companies that are financial services businesses are taxed at 10% and all other companies are taxed at 0%. This is known as the 0/10 model of company taxation. These low rates help to bring business to the Island and increase the yield of personal income tax from those working for the businesses. As with personal income tax, company income tax is designed to attract business to the Island and therefore takes account of tax rates in other jurisdictions.

Impôts are similar in effect to excise duties in the UK. They are levied on imports of road fuel, vehicles, alcohol and tobacco.

There is no Value Added Tax in Jersey. Rather there is a Goods and Services Tax (GST). This is levied at the rate of 5% on all goods and services with the exception of accommodation, exports, financial services, medical services, charities and school fees (provided the school is a registered charity). There is a £300,000 threshold for GST, so small retailers are exempt. Goods bought from outside the Island with a value of £60 or more are subject to GST.

Government finances

Like other nations Jersey has to raise taxes to finance public expenditure. The detailed statistics for 2024 are published in the States of Jersey 2024 Report and Accounts. Estimates for 2025 are in the Budget (Government Plan) 2025 - 2028. The statistics in this paper are largely extracted from that report.

Table 1 shows how revenue is estimated to be raised in 2025.

Table 1 Jersey Government Budgeted Revenue 2025

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Table 2 shows the planned departmental expenditure figures for 2025 as set out in the Budget (Government Plan) 2025 – 2028. The figures are all net, that is after deducting income received by the department.

Table 2 Planned revenue expenditure by department, 2025

Capital expenditure in 2025 is forecast to be £169 million, made up of –

Estates £28 million

Infrastructure £30 million

Information technology £21 million

Healthcare facilities £73 million

Other capital expenditure £15 million

Total £166 million

Expenditure of new healthcare facilities is budgeted to be £710 million by 2028.

Reserves

The Government’s policy is to fund revenue expenditure from income rather than borrowing and to hold reserves in a number of funds. However, the nature of Covid meant that a significant budget deficit occurred in 2020 and 2021.

The Strategic Reserve Fund was established in 2005 to be used in exceptional circumstances to insulate the Island’s economy from severe structural decline or from major natural disasters. The forecast figure for the fund in 2025 is £1,449 million.

The Stabilisation Fund was established in 2019 and is forecast to be £0.6m in 2025. The intention is to build up the fund in buoyant economic conditions and make payments from it at times of economic downturn. £50 million was paid into the fund in 2019, almost all of which was spent in 2020 in response to the pandemic.

Social security

Jersey has its own social security system, providing the full range of benefits. The basic pension for a single person is £286 a week and for a married couple, based on the husband’s earnings, it is £476. In 2025 employees pay a social security contribution rate of 6% on monthly earnings between £1,164 and £5,800. Employers pay 6.5% of employees’ monthly earnings up to £5,800 and 2.5% on earnings between £5,800 and £26,442. By comparison, in the UK employees pay 12% and employers 13.8%, to be increased to 15% in April 2025.

In 2025, Social Security contributions are estimated to be £265 million and benefits to be £335 million. The Social Security Fund is estimated to have a balance of £88 million at the end of 2025. Unlike the UK, Jersey State pensions are funded rather than met by current contributions. The reserve fund to meet future pension liabilities is estimated to be £2,429 million at the end of 2025.

In addition there is an income support scheme funded by general taxation.

The funding of long-term care is a challenge for all countries. Jersey operates a long-term care scheme under which care costs in excess of £60,160 are met by a fund. The scheme is paid for by an additional charge of 1.5% on taxable income and a government grant - £39 million in 2025. In 2025, contributions are estimated to be £48 million and benefits to be £84 million. The fund is estimated to be £58 million at the end of 2025.

There is a separate Health Insurance Fund. In 2025, contributions, which are part of social security contributions, are estimated to be £51 million and benefits to be £62 million. The fund is estimated to be £94 million at the end of 2025.

International comparisons

On 13 March 2024, Statistics Jersey published Government employment, revenue and expenditure – international comparisons. The foreword to the report states that –

This report pulls together already published information from Statistics Jersey, Government of Jersey departments, and international organisations such as the Organisation for Economic Co-operation and Development (OECD) and the European Union (EU), to paint a picture of the Government of Jersey compared to our neighbours and international comparators.

This section draws exclusively on that report.

Tax revenue as a percentage of Jersey’s Gross Domestic Product (GDP) in 2021 was 22.9%, substantially lower than the OECD average (34.2%) and the United Kingdom (33.5%).

The section on the structure of the tax system in 2021 is reproduced below –

Jersey received 55% of its tax revenue from tax on income, profits, and capital gains, compared with the OECD average of 35%. Among the jurisdictions compared, Jersey had the fourth-largest proportion of tax from this source, with only Denmark (66%), Australia (62%), and New Zealand (57%) receiving a higher proportion of their taxes from income, profits, and capital gains. Note that Denmark, Australia, and New Zealand all fund their social security systems through general taxation rather than social security contributions. Of all the jurisdictions compared, Jersey had the largest proportion of revenue from these income tax and social security contributions, at 76%; in comparison, the OECD average was 61%.

Jersey had the lowest proportion of tax received from goods and services at 16%, half the OECD average of 32%, and marginally lower than that of the United States at 17%.

A more detailed analysis of tax revenues relating to wages and salaries by type was provided –

Taxes on wages and salaries include: taxes on personal income, profits, and capital gains (i.e. excluding taxes on corporate incomes, profits, and capital gains); social security contributions; and taxes on payroll and workforce. Of all the jurisdictions compared, Jersey had the highest proportion of tax revenue collected from taxes on wages and salaries at 69%, compared with an OECD average of 52%.

Jersey had the second-largest proportion of tax revenue from taxes on personal income, profits, and capital gains at 48%, double the OECD average of 24%. Only Denmark had a higher proportion of tax revenue from personal taxes, at 52%. However as noted above, Denmark, Australia, and New Zealand fund their social security system through general taxation rather than separate social security contributions.

The proportion of tax revenue in Jersey collected through social security contributions was 21%, which was below the OECD average of 26%, and was between Sweden (21%) and the UK (20%).

Government expenditure as proportion of GDP in 2021 was 28.1%, just over half the EU proportion of 50.2% and the UK proportion of 48.2%. Jersey’s proportion was similar to that of Guernsey (29.0%), Ireland (24.8%) and the Isle of man (24.0%). The report noted that “all these jurisdictions have large finance and professional services sectors that generate a high GDP per capita.” Government expenditure per capita in purchasing power parity terms was $16,937, well below the OECD average of $24,432 and the UK figure of $24,420.

The following table, reproduced from the report, shows a breakdown of expenditure.

Table 3 Breakdown of Government expenditure by function, 2021

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The report identified the following key points –

• Jersey’s spend on general public services (9.4% of spend) was marginally above that of Ireland (9.3%), and slightly below that of France (9.8%) and the UK (9.7%), all of which were below the EU average (11.7%).
• Social protection was the largest proportion of spend in all five jurisdictions: 32.7% in Jersey, 33.3% in the UK, 35.2% in Ireland, 41.9% in France and 39.9% for the EU.
• Defence represented only 0.1% of government expenditure in Jersey, compared with 4.5% in the UK, 0.8% in Ireland, 3.0% in France, and 2.5% in the EU.
• Jersey’s spend attributed to housing and community amenities was 0.5%, lower than the proportions in the other jurisdictions considered: 1.7% in the UK, 2.3% in Ireland, 2.1% in France, and 1.2% in the EU. The report notes that Andium Homes is included in social protection, and not housing
• Jersey had the highest proportional spend of these five jurisdictions on health, which represented 28.5% of government expenditure in Jersey, 20.5% in the UK, 21.2% in Ireland, 15.6% in France, and 15.8% in the EU.
• Jersey had the second-highest proportional spend of these five jurisdictions on education, which represented 11.6% of government expenditure in Jersey, 11.2% in the UK, 12.0% in Ireland, 8.9% in France, and 9.4% in the EU.

On 27 September 2024, Statistics Jersey published Public Spending Statistics 2023 which provided further analysis of public expenditure and international comparisons.

The summary of the report is reproduced below –

In 2023:

• general government expenditure increased in real terms by 6.3%, or £97.9 million in constant year 2023 prices, to £1,644.2 million
• the biggest drivers of increased real-term expenditure were:

o health – increased by £51.6 million, driven by increased spending on hospital and outpatient services

o public order and safety – increased by £14.9 million, largely as a result of a number of major incidents that impacted the Island in 2023

o social protection – increased by £14.5 million

• almost three-quarters (73%) of all general government expenditure was in the areas of social protection, health and education

In 2022:

• as a proportion of GDP Jersey’s total general government expenditure was lower than all OECD countries, apart from Ireland
• Jersey spent more on health than all OECD countries as a proportion of total spend, but less than several countries, including the UK, as a percentage of GDP

The following table, reproduced from the report shows expenditure by category in 2022 and 2023 in 2023 prices, using the international Classification of the Functions of Government (COFOG) system.

Table 4 Breakdown of Government expenditure by function, 2023 prices

The report commented that almost three-quarters (73%) of all general government expenditure is in three main areas of expenditure:

• Social protection – which includes the Jersey old age pension, income support and incapacity allowances.
• Health – which includes spend on hospital services, public health and other medical services.
• Education – which includes spend on primary, secondary and tertiary education.

On international comparisons the report shows –

• Total government expenditure as a proportion of GDP (25%) is lower than all OECD countries except Ireland. The UK proportion is 44%.
• Jersey spends a greater proportion of public expenditure on social protection, health and education than most OECD countries, driven by a high proportion of spending on health.
• 0.1% of general government expenditure is on defence, lower than any of the comparator nations.
• A lower proportion or expenditure is on general economic affairs – generally subsidies – than any OECD nation.
• The proportion of expenditure on health is higher than in any OECD nation.
• The proportion of expenditure on hospital services is higher than in any OECD nation.
• Total government expenditure as a proportion of GDP (25%) is lower than in all OECD countries except Ireland.

Fiscal Policy Panel analysis and forecast

Jersey’s Fiscal Policy Panel, a group of economists, provides the Government with independent advice on trends in the economy and the sustainability of the public finances

The Panel published its 2024 Annual Report on 24 September 2024. Its summary on public finances is set out below –

• Public expenditure is growing. The growth is in day-to-day spend rather than investment into the economy’s productive capacity. Despite an increase in an already strong tax revenue forecast, there will be an operating deficit in 2025 and 2026, with only a small surplus in 2027. The increase in public spending in an economy with little spare capacity, risks pushing up inflation and pulling in more imports, significantly reducing any beneficial impact on real incomes.
• Capital. Budget 2025 includes plans to deliver Phase 1 of the New Hospital Facility. This will be a major capital investment of up to £710 million and care will be needed, given the risk of inflation, particularly as departmental capital budgets have previously been underspent because of capacity and/or capability constraints. The Panel welcomes the planning of these budgets at more realistic levels, but would have preferred that the “saving” was used to strengthen the Stabilisation Fund or Strategic Reserve rather than be spent on additional day-to-day spend (also known as “current” spending).
• The central tax revenue forecast has increased but none of this additional tax revenue has been allocated to improving the resilience of the economy through replenishment of the Stabilisation Fund or the Strategic Reserve, as recommended in previous Panel reports. The Panel commends the approach to forecasting Pillar Two revenues and is pleased to note that the Budget proposes to invest a portion of base case Pillar Two tax receipts into the Stabilisation Fund.
• The Strategic Reserve is significantly lower than the 30-60% of GVA range that the FPP has recommended. The Panel welcomes the commitment to invest PYB revenues in the Strategic Reserve but notes that the Strategic Reserve will only be equal to 17% of GVA in 2028 and that the cash value will be lower still.
• The Stabilisation Fund is effectively exhausted. The balance remains below £1 million and the Stabilisation Fund will be unable to deliver countercyclical fiscal policy via funding injections in times of economic downturn. The Panel welcomes the decision to allocate £41.6 million (over Budget 25-28) of the expected base case receipts from the Pillar Two income forecast to rebuilding the Fund. However, the Panel calculates that the recent period of strong and above trend economic growth means that had the Government adopted an appropriate counter-cyclical fiscal stance, a minimum of £50-80 million would have been invested in the Stabilisation Fund since 2021. The Panel notes that the opportunity for using the stronger tax revenues to replenish the Stabilisation Fund, as recommended in its previous report, has not been taken.
• Healthcare costs are rising. Jersey spends a high proportion of its budget on health, more so than in OECD countries. 76% of the Budget’s total expenditure growth for 2025 – 2028 is being spent in the Health and Community Services department. This rate of growth in healthcare spending is not sustainable given that income growth is forecast to fall back to much more moderate levels. Health demands are likely to rise faster than incomes which will mean difficult choices in the medium term between funding for healthcare versus funding for other important areas of the economy.
• The value of Jersey’s net assets is falling. In 2019, net-asset-value as a percentage of GDP was 152%. This figure will fall to 111% in 2028.

Following is a summary of the Panel’s recommendations –

1. Fiscal Strategy and Spending. The Panel is concerned with the prioritisation given to current (or day-to-day) expenditure growth, rather than rebuilding the reserves and using strong tax revenue to preserve resources for future investment. Fiscal decisions need to give greater consideration to medium term challenges, ensuring the Island’s economy is resilient to cyclical and structural shocks in an increasingly turbulent global economy.

2. The Strategic Reserve is significantly below the level the Panel believes is necessary to provide economic resilience and to protect Islanders from the impact of major crises. The Panel welcomes the decision to invest the proceeds from Prior Year Balance taxation debts into the Strategic Reserve. However, further action to increase this reserve should be taken as a matter of urgency.

3. The Stabilisation Fund is effectively exhausted. Further, immediate action be taken to improve the balance of the Stabilisation Fund. This could take the form of a commitment investing a proportion of cyclical tax revenues into the Stabilisation Fund as well as a commitment to invest a proportion of upside/additional Pillar Two revenues.

4. Pillar Two. The Panel welcomes the Government’s prudent approach to forecasting Pillar Two revenues. Investing Pillar Two income in reserves will generate future investment returns which could in turn be used to fund investment into increasing Jersey’s productive capacity, crucial for long-term economic growth. Such a prudent approach in the short term is recommended considering the medium-term risks around the changing global tax regime.

5. Healthcare expenditure and related funds. The rate of growth in healthcare spend is not sustainable given that income growth will fall back to much more moderate levels. Health demands can be expected to rise faster than incomes creating pressures for further spend. Managing this pressure will have consequences as it limits spending on other areas of the economy too, such as public services and investment into productive capacity for economic growth.

6. Inflation and overheating. Headline RPI inflation is falling, but there are signs that inflationary pressures may be building on Island putting further pressure on the cost of living faced by islanders. The Panel is concerned that the proposed expenditure growth, when there is little spare capacity in the Island, can be expected to generate additional inflation or force demand offshore, outside of Jersey’s economy.

Further information

The most accurate statistics on the Island’s finances are in the Government’s States of Jersey 2024 Report and Accounts. However, this is a long, technical and complex document. There is a better analysis of the figures and forward projections in the Budget (Government Plan) 2025 – 2028.

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