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St Helena : St Helena Budget Speech 2013/2014
Submitted by Saint Helena Herald (Public Relations Information Office) 23.03.2013 (Article Archived on 20.04.2013)

Before I start my speech I would like to pay tribute to the previous Financial Secretary Paul Blessington, who sadly passed away last year. He was instrumental in SHG’s reform programme and will also be remembered for his excellent work with the scouts and within the community. I look forward to seeing his wife Margaret in the near future when she is back on Island.

St Helena Budget Speech 2013/2014


 


 


Madam Speaker


 


Before I start my speech I would like to pay tribute to the previous Financial Secretary Paul Blessington, who sadly passed away last year. He was instrumental in SHG’s reform programme and will also be remembered for his excellent work with the scouts and within the community.  I look forward to seeing his wife Margaret in the near future when she is back on Island.


 


Madam Speaker, I wish to introduce a Bill for an Ordinance to provide for the services of the Financial Year 1 April 2013 to 31March 2014.


 


Hard work and making difficult decisions would be the answer I would provide to anyone who asked me as to how this year’s budget preparation had gone. Hard work on the part of Accounting Officers preparing the budget; hard work by Directors pulling together the budget and looking for efficiency savings; hard work by Finance reviewing the submissions and analysing decisions made; and finally hard work by Members in making those difficult decisions. 


 


I believe that this year’s budget more than any previous one has been owned by Councillors.  The Medium Term Expenditure Framework (MTEF), which is the yearly budget process that Government now follows,  has been the key factor in allowing Members to take ownership and lead the process of setting the budget. 


 


It is not a simple process, it takes considerable time and effort; it started with Members setting the expenditure limits for individual Directorates last May, and ends on Monday.


 


But what does this process mean to the people of St Helena, what is the outcome and how do Saints benefit from it?  My aim is to tell the taxpayer how well St Helena Government has performed financially and economically in carrying out its duties to the people of St Helena over the past year; and how the Government will finance the coming year.


 


The past two years have seen a raft of financial changes, with the introduction of accruals accounting and output-based budgeting.  This has led to improved financial information, which in turn supports officials and Councillors so they can make informed decisions.


 


Further, major changes have been made to the taxation system, including income tax reform, further tax incentives, changes to customs duties and implementation of a service tax.   These changes have put St Helena in a position where it is ready for economic growth and to make the most of impending air access. 


 


This budget supports the work of the past two years and consolidates the approach taken.  As I see it, the budget steadies the ship rather than making significant changes to its course. 


 


Some would ask why is that? We need more change, more incentives, additional changes to the tax system - but I would say that we need to see those changes making a difference, and the signs are that they are making a difference!


 


St Helena has virtually no unemployment – one and half percent of the population are unemployed.  Any other nation in the world would dream of such a fact.


 


Over 250 Saints are now working on the Airport project.


 


Wages have increased, which is reflected in the Income Tax collected in 2012/13.


 


The predicted increased in revenue streams from Customs Duties has been achieved for this financial year.


 


Thirty six small businesses have opened in the year and 6 new companies have been registered.


 


We have significant interest from major hotel operators wanting to run and manage hotels on the Island.


 


Population growth continues and at the end of February 2013, St Helena’s population stood at 4,274, which is the highest population since 2008.  More encouraging is the age range of returning Saints, with over 150 being in the 20-40 year range in the past year alone. This is an extremely positive sign for the Island.


 


Progress made in 2012/13


 


I regularly get asked what do we get from Government for our hard-earned taxes?  I could rattle off the standard lists of services that Government provides but I wanted to highlight some of the success stories over the past year.


 


In 2013 the Airport Project moved into the construction phase and it is now hard for us to imagine life without Basil Read. The Project currently employs 350 people and it remains on time and on budget.


 


We have seen significant advances in the standards of education achieved by our children and young people. Primary school assessments, for example, have exceeded targets set and look to do the same again this year, and we also look forward to improved secondary school results this year.


 


These good results have been achieved because Government has continued to make education a top priority and has targeted resources towards improving the quality of teaching and learning, such as the investment in the Raising Attainment Partners for Primary Schools, which focused on improving the quality of teaching and strengthening leadership in schools.


 


We have continued to invest in higher education and in 2012 we saw five young Saints go to the UK to study at University. The courses being studied are all relevant to the Island’s economic future.


 


Education, like all directorates, has looked hard to maximise efficiencies whilst increasing their educational outputs.


 


The NVQ centre is performing well and enabling more and more people to gain internationally recognised qualifications.


 


Such is the commitment to up-skilling and training that I am able to report that we currently have 57 middle managers within SHG following leadership and business skills training.


 


A number of efficiencies have been achieved in health, through better procurement of drugs, and a new expanded public transport system has led to a more efficient means of transporting hospital staff.


 


Further investments have been made in services being provided, with £100,000 of capital investment in modern surgical equipment and the dental surgery.


 


Investment in staffing has led to the appointment of a Senior Social Services Manager and the re-introduction of the Community Workforce Scheme in partnership with SHAPE.


 


New staff appointments to support and improve the health service will also be announced soon.


 


We have successfully divested a number of services during the year to the private sector.  These include retail firewood activities, and Saint Connect will be delivering Utilities from 1 April.  I can also report that the new cleaning contract for Government buildings was signed on 14 March and will commence on 1 April 2013. These divestments allow Government to focus on key, core activities, whilst also stimulating the economy.


 


Enterprise St Helena has been in existence for less than a year but has made great in-roads in up-skilling Saints, with over 200 Saints trained to date.  Further training has been provided to 18 people through the Hospitality Training and Learning Centre, “2onMain”, and ESH has supported 8 Apprenticeships to date.


 


Training is only one element of ESH; attracting investment is another.  They have received over 130 overseas investor enquiries, fourteen investor visits to the Island and two high profile visits from Mantis & Protea hotel groups.


 


Another important aspect of ESH is the development of on-Island businesses.  Within their first year, 225 different businesses have been contacted, they have assisted in 67 potential new business start-ups, and 98 existing businesses, provided 4 loans and 26 business grants.


 


Enterprise St Helena has pooled agriculture sector funding to support the private sector, including increased covered polytunnel production, resulting in an increased salad crop for the Island.


 


We established a new Environment Management Directorate last year, which pulls together environmental functions from across Government, providing a focussed approach to environmental protection.


 


The Solid Waste Management project is now being implemented, with a new Project Manager appointed and capital purchases being made.


 


A new Probation Service has been delivered by the Police Directorate, by looking for efficiencies in delivery, which has been positively received. 


 


We have seen investment in the refurbishment and upgrade of a number of SHG buildings, including the conversion of Bleak House for use by disabled tenants, and the full upgrading of a number of flats and other properties. 


 


SHG continues to rationalise and down-size the public sector, with the introduction of Corporate Services, which now includes Finance and Strategic Policy and Planning.  This will lead to further efficiencies and a leaner public service.  This is supported by improvements in the use of information technology and the introduction of SharePoint, which allows documents to be shared across Directorates; and the imminent launch of the new SHG website.


 


This year, Government gave £50,000 to the Community Development Fund, which awarded a series of grants to organisations across the Island, ranging from replacement of cookers in Community Centres to a grant to complete the Donkey Sanctuary building.  All were worthy causes which will benefit many, and I am pleased to announce that a further £50,000 has been set aside for next year.


 


But we still have considerable work to do and this budget, I believe, supports the ongoing improvements needed in service delivery and economic reform.


 


 


 


2012/13 Financial Out-turn


 


As predicted earlier in the year we are on line to exceed our revenue targets for taxation and customs duties.  This has been driven by higher private sector activity, with PAYE receipts up by 35%, following strong growth in the last two quarters of the year.  Interestingly, we will also exceed on revenue predications with regards to alcohol and cigarettes.


 


Further, expenditure is broadly in line with budgeted figures, and we will achieve a near balanced budget.


 


Both sets of figures clearly indicate that improvements made to the budget process and the implementation of MTEF are working.  This will be further strengthened in 2013 through the appointment of an MTEF advisor to support Directors in their budget setting.


 


Capital Expenditure


 


Capital spending is a key factor in driving economic development and I am pleased to say that for the first time in many years, SHG has spent its allocated Capital budget. On the back of this, DFID has reaffirmed a £5m allocation for 2013/14.


 


To further improve the management of our capital projects, SHG has implemented a series of changes, with a new Programme Board and Project Management Unit operational from 1 April, and we are looking to appoint an experienced Programme Manager to support the process - plus two experienced Project Managers to drive the Capital Programme. This will provide strategic direction and operational improvements. SHG is responding to criticism and putting its house in order.


 


Going forward, SHG has a number of competing capital projects and difficult decisions will need to be made as to what projects are deemed to be a strategic priority. Indeed, with the airport less than 3 years away, the pressure on capital funds has never been higher.  We must ensure everything possible is done now to support the Island’s future.


 


 


DAPM Settlement


 


I am pleased to announce that the DAPM budget settlement signed on 19 February this year was confirmed by the UK Government on Wednesday, 20 March.


 


The settlement is an excellent result for St Helena against an extremely difficult economic climate in the UK and the rest of the world, with the UK predicting just 0.6% growth in 2013, and further budget cuts.


 


The settlement confirms grant in aid to cover recurrent expenditure of £13.4m, an RMS shipping subsidy of £5m (with half a million set aside for capital expenditure, to include improvements to life boats), and a further £5 million to fund the capital programme. Further I can announce today that  DFID has agreed to provide £1.2m to cover Short Term Technical                      Co-operation.  This is great news for St Helena.


 


2013/14 Recurrent Revenue and Expenditure


 


Two major changes are occurring during 2013 that impact on the presentation of revenue and expenditure.  Firstly, the divestment of Utilities and secondly the restructuring of a number of Directorates.


 


From 1 April SHG, will no longer deal directly with the provision of electricity, water and drainage, as these services will be divested to Connect Saint Helena Ltd. The company will be more efficient and productive which will reduce costs and result in improved services to the customer.  And it will allow SHG to focus its limited resources on core Government business.


 


The new Corporate Services Directorate will also come fully into effect from   1 April. This brings together the core functions of Government into one place, which will result not just in cash savings through efficiencies, but a more customer-focused service to the Government’s customers - the general public.  


 


This budget reaffirms SHG’s commitment to the community and civil societies.  As stated, £50,000 will go to the Community Fund, and further funding will be provided to other voluntary organisations, including the National Trust, the Heritage Society, New Horizons and to support the important work provided by SHAPE.


 


Finance will also look to increase the collection of outstanding debts and ensure that those who can afford to pay do pay.  This will involve a more rigorous approach to the management of debt and actively pursuing collection from April 2013.


 


SHG plans to spend nearly £29 million in 2013/14.  As expected, the main expenditure element will be employee costs, and nearly £5 million in subsidy for the running of the RMS.  This will be funded through £7 million in local taxation and customs, £1.1 million in fees and charges and just over £400,000 in Treasury Receipts.  DFID will directly fund just over £18 million, which includes the shipping subsidy, and the balance will be recharges between Directorates.


 


Benefits


 


During the early part of 2013, Professor Roy Sainsbury carried out a detailed review of the benefits system on St Helena and SHG looks forward to the outcome of this work, which is due soon.


 


Benefits will be revised on the back of this report and inflationary increases are expected to be implemented during the coming months.


 


Further, I can announce that full consideration will be given to introducing an incremental move towards a Minimum Income Standard during 2013, which will be a positive move to address poverty on the Island.


 


One of most important changes that will impact St Helena next year will be the introduction of the Minimum Wage, which will have a positive public and social impact as it will protect the interests of the lowest paid on St Helena.


 


Two rates will be introduced, £2.30 for over 18s and £1.45 for ages 16 and 17.  It will be introduced from 1 June 2013 and will apply to all employment on the Island.  While this may not seem a lot to everyone, for those earning around £1.50 an hour at present, this will be most welcome.


 


So, a Gardener previously earning £1.50 an hour for a 35 hour week will now be taking home an annual wage of £4,186, an increase of £1,456 per annum, or just over 53%!  This is great news for the lowest paid workers in our society and is a positive step forward for St Helena.


 


Tax Reform


 


Within my opening remarks, I stated that this budget builds on the significant changes to the taxation policy implemented last year - rather than a raft of new policies. We need to give time for a number of these incentives to bed-in.  Further tax reform should have a long term aim and with regards to that point, work has started on updating the previous taxation strategy.  A new three year strategy will be introduced during 2013 which will take us through to the airport opening.


 


The four main changes announced last year that will make it more profitable for all businesses are:


 


An Investment Tax Credit – that will provide a deduction from the business’s tax liability of 15% of the value of any additional assets imported to or constructed on the Island;


Accelerated Depreciation – which will enable a business to claim an additional 20%  depreciation in the first year, bringing forward the rate at which it can write off its assets against tax;


Rollover Relief on Capital Gains – which will enable a business to claim tax relief if it reinvests the proceeds of an asset sale back into a  business; and


Unlimited Carry-forward of Losses – which will enable a business to offset any losses it makes against future taxable profits for an indefinite period.


 


I encourage all businesses to make full use of the tax credits and rollover relief when they are filing their tax returns this year.  In fact, the use of such reliefs should significantly reduce the tax burden on a high number of local businesses, and this money can then be ploughed back into the economy and reinvested to grow businesses.


 


Tax is complicated and I have recognised that support is needed for small businesses to complete tax returns, to ensure that they receive all the benefits that are on offer. The Income Tax section will be providing out of hours call-in surgeries to businesses to help them complete their returns.  These sessions will be arranged around the businesses and will seek to ensure that businesses claim what they are entitled too.  Further, Finance will be working closely with ESH to provide information on grants that are available to local businesses, through an advertising campaign in the local press and on-line.



In order for St Helena to travel along the path to self-financing, it needs large scale investment on the Island coupled with support to local business.  It is recognised that one of the largest barriers to investment in St Helena is the extremely high cost of freight and the current level of import duties.  Taken together, these can increase the cost of investment in St Helena by around 40%.


 


St Helena needs to encourage investment, be it by local investors or through inward investment.  We want to and need to encourage such investment, and so a series of incentives will be introduced later this year to support investments over £1m and £5m.


 


This will include:


 


All investment materials to attract 0% customs duties;


0% Corporation Tax;


0% Capital Gains Tax; and


Reduced freight rates on-board the RMS St Helena for new addition containerised investment materials of up to 50%.


 


The qualifying criteria is that the investor must demonstrate that the venture is a new business start-up, or new business activity, that the investment is over £1m and will commence before 1 April 2015.  Further details of the scheme will be announced shortly.


 


Supporting local small businesses and encouraging large scale investment will further drive the economy on the Island.


 


There are no changes to the standard rates of income tax and corporation tax this year, which remain at 25%, and the current personal allowance will remain at £7,000.


 


 


 


Stamp Duty


 


As stated in last year’s budget, Stamp Duty on land sales and lease premiums will be treated as a revenue source and will continue to have a percentage rate applied. From 1 April 2013, this will rise to 2% and from 1 April 2014, it will become 2.5%.


 


Stamp duty on share transfers will be unchanged, at 1%.


 


Customs Duties


 


Much discussion has been had during the past months regarding the flattening of customs duties, the decreasing of the current rate of 20% towards 10% and the removal of the 5% rate. I am glad to say that a detailed paper will be presented to the Economy and Finance Committee on the issue towards the end of April 2013, for discussion. No changes are therefore made i

 

This article is the Property and Copyright of Saint Helena Herald.

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