Falklands : LEGISLATIVE ASSEMBLY 28 May 2010 The Hon Mr Dick Sawle
Submitted by Falkland Islands News Network (Juanita Brock) 03.06.2010 (Article Archived on 17.06.2010)
Mr Speaker, Honourable Members, before I forget my manners, I must add my personal thanks also to most of my colleagues earlier on this week in previous Legislative Assembly for the assistance and work on behalf of the Falklands given by the Governor, Alan Huckle and his wife, Helen.
The Hon Mr Dick Sawle:
Mr Speaker, Honourable Members, before I forget my manners, I must add my personal thanks also to most of my colleagues earlier on this week in previous Legislative Assembly for the assistance and work on behalf of the Falklands given by the Governor, Alan Huckle and his wife, Helen. It is much appreciated and I would also like equally to add my thanks to Paul and Ann Martinez and wish them well in their next posting where they will be able to hide amongst the plethora of other Martinez’ in their local telephone directory. I wish them well in retirement and future careers.
P.G. Woodhouse once said, “The great thing in life if we wish to be happy and prosperous is to miss as many political debates as possible.” This quotation was adopted by my daughter on her Skype page, who strangely enough is studying politics and has been running around my head now for some time.
The fact is, Mr Speaker, that all of us wish to be happy and prosperous and as a Government means that we have to ensure that we have enough funds to maintain a good standard of living for everybody and meet the ever increasing costs of providing community services such as education and medical services, whilst meeting the ever burgeoning demands of the repair and maintenance of our infrastructure.
Unfortunately, perhaps, I can’t therefore avoid political debate but have no doubt that P.G. Woodhouse was completely correct. However, by means of political debate, I hope that those listening or later on reading this will appreciate that this Government is aiming to try to achieve that happy and prosperous life to which he was referring.
Last year there was a deficit budget I.E. as measured by a short-fall in net liquid assets and therefore excluding depreciation, of some £3Million, which came about in order to try and meet some of those social objectives. We should therefore be clear that the previous deficit most certainly had the same aims as this one, I.E. those of happiness and prosperity. But of course it is simply not sustainable in the long term.
This year we have seen from the budget that this Assembly has produced another deficit budget but reduced by £2Million to £1Million. It is our stated intention to no longer aim to produce surplus budgets but rather aim for a balanced budget. Over the five year term of the five-year term of the medium financial plan. This is sensible as it reduces future pain for many people in businesses in our community but still leaves us with a cushion of reserves built up over the years.
I do recall one elected member some years ago saying that reserves were kept for a rainy day. Well, it may have drizzled a bit but I believe the sun may yet appear. However, forecasting is more than art but a science, of course. But I do believe that interest rates will rise although it may be yet some time before the artificially low levels at which they have been kept in order to boost the western economy can be raised.
One can only hope that quantitative easing – apologies to Roger for that one – which loosely translated means the easing of financial pain through the printing of a quantity of money, coupled with low interest rates will have done its job on the western economy and consequently our reserves will flourish as markets recover.
But we are not immune to the world recession, of course. It is interesting to note that the benchmark process that we use to measure the performance of the management of the growth fund in our reserves has shown a considerable improvement in the first quarter of this year. This benchmark uses the objective analysis of the FTSE/Government All stocks index together with the FTSE All share index. To cut through the babble, this means that the benchmark is a very effective indicator of how UK investments are faring.
And since March 09 there has been an approximate 25% improvement, which is obviously beneficial for the performance of our reserves. The performance of this growth fund is important to us as it is the main component of our consolidated fund, which is available for general use and is not set aside for specific purposes such as pension and insurance funds, for example.
But budgets that reduce personal disposable income are never welcome. The fact is that until now we have tended to rely on income streams from outside sources rather than internally generated revenue to fund our spending as a nation. Fishing, in my view, can no longer be flogged for every last penny. As I said to Penguin news recently in a letter, we cannot expect to refuel our corporate chequebook from the sale of Licence Quotas when, with the exception of Tooth-fish and Loligo Squid, stocks are in decline and high-volume, low value fish, such as Rock Cod usurp and displace what were once more valuable finfish stocks.
It could well be that Illex stocks will recover. There have been some good signs of that this year but it would be a high risk strategy to count on that income to make up the deficit. We should remember also that fishing still accounts for 60% of our gross domestic product and we need to protect its future.
We have agreed to reduce the taxation threshold from £14,000.00 to £12,000.00 per annum. In 2008 it’s worth noting that personal taxation was paid by 73% of the population. In other words, 27% of the working population paid no personal taxation at all. The fact is that we have enjoyed tax thresholds here that are far higher than most countries and are still, after this budget, nearly twice that of the UK.
It makes sense that when budgets are tight we should look to include more workers in the tax net and this is what we have done with the reduction in the tax threshold. This will place about another 10% of our working population into that tax bracket. People previously paying no tax will now have to share the financial responsibility and burden of the country we all live in. We all, of course share, to a greater or lesser extent, the benefits.
Total taxation revenue has gradually increased and, in the last four years for which we have data I.E. 2004/5 to 2007/8, the income from taxation was increased from £4.8 to £9.2Million. These figures include corporation tax as well as personal tax. In terms of corporation taxation paid over the same period, this has increased by a factor of 3 - £1.7 to £5.5Million in 2007/8. The good indicator for the private sector is, indeed, healthy.
The introduction of MSL in order to specifically meet the increasing costs of Medical Services in our community has been seen by some as an unwelcome and unfair tax on business. Both employer and employee pay additional charges but the fact is that this is an option favoured by many and views that I had sought from constituents very much favoured the re-introduction of this tax. The £660,000.00 that this will raise will go a long way towards maintaining the level of medical service that we all require.
Businesses now are in the same position as Government in that they cannot simply increase prices for goods and services to meet this rising cost. Government has been tasked with reducing expenditure over the years and it has done this. Each year now, for about 10 years departments have met their budget savings of around 3%. The fact that some of these savings are subsequently lost due to public demand for increased services does not detract from the fact that efficiency targets were met when requested. Businesses will now also see if they can make efficiencies. Those with the biggest wages bill will have the hardest task but those smaller operators will have the least burden.
It’s also important to focus on areas that have not been affected by this budget. The current rates of personal and corporation rates of taxation remain unchanged. Withholding tax and capital gains tax have not been introduced. VAT or common sales tax has not been introduced. I would hope that this sends a clear message out that we are open for business and looking to attract an increase in investments and activities with a business regime that is stable and attractive.
There is also no increase in embarkation fees, passenger levy, harbour dues or custom clearance fees, nor is there any tax on fuel. We wish to attract visitors and business in what are still emerging opportunities in the Tourism sector, which accounts for about 4% of our GDP.
The big news in our economy is the discovery of oil within the Falklands. Nobody can be in any doubt that is heartening and gives rise to great optimism. However, it can take many years to reach its potential and begin to make a difference to our treasury.
In the meantime, there is no doubt that the added activity that exploration brings will bring with it opportunities and also some revenue. There will be those that will seize those opportunities and make the most of them. Evidence that this is already the case is eminently visible. And people should, perhaps, bear in mind that with oil exploration and later - I hope - exploitation, come many opportunities for far-sighted individuals.
I believe that the service sector in our economy looks set to develop and I would hope that people with plans in the private sector will appreciate that there is a government that wishes to encourage their aspirations and allow them to grow as they would wish to do so.
It is not just oil that is the challenge. It is all the peripheral services that would go with it that are just as big an opportunity for the entrepreneurs in our society.
On a more mundane but nonetheless important level, it’s interesting to note that the retail price index on which we base many increasing costs has risen by less than 1%. However, it is, I believe, not disputed by anyone living here that the cost of living in the Falklands is high. We have to take into account shipping costs and also having to weigh in the advantage of having no VAT puts the inevitable business of holding far more stock than would normally be the case with any UK business. However, the fact remains that many prices in the shops here are shockingly high. This means that those who are low-paid can afford even less now. And when we, as a government, begin to collect tax off people further down the wages scale, the disposable income of the lower paid workers is hit even more harshly. We need to ensure that prices paid for a variety of goods and services, including the internet and fuel are not excessive.
Turning to the Civil Service, we agreed a 1% pay increase. This is important as the Civil Service Pay structure has not kept pace with inflation now for several years. To have not given any increase yet again would dimply have resulted in a demoralised service. I would like to add here that I have found all of the Officers I have dealt with to be conscientious and hard working. It is not, I guess, always easy to serve political masters and on many occasions it has been the case that they, as messengers, are often in the firing line for simply carrying out political decisions that may have been unpopular.
Finally, one of the smaller items I noticed in the budget is that there is no increase in the charge for cleaning septic tanks, which remains at £116.00. Just in case anyone should think there is a degree of self interest in the subject, I have never been reliant on any such provided government solution at Seaview Cottage, having always preferred self-provision to excessive charges.
On other matters, I am glad that we have largely wrapped up the decision making process on FIMCO. I have read volumes of figures and have had many meetings with a variety of people. David Waugh has produced good, objective and considered reports and John Ferguson is a guy who knows the nuts and bolts of this business and speaks his mind freely – something which I, for one, certainly appreciate.
I have spoken with some farmers – not as many as I would have liked to and I regret that I was unable to make the livestock working group’s presentation to Members and some farm visits. My views now are now clear. There is little doubt that FIMCO has to continue and needs to grow and expand its business to become viable. I did have some doubts initially and I think it is fair to say that I had sat on the fence for some time. However, I would never wish people to think that I would ignore advice given or be so set in my ideas that I could never listen and evaluate and make decisions based on the experience and knowledge of others.
The business plan makes some assumptions which are inherently risky. Most importantly these centre around the amount of raw material needed to make it viable and whether or not the producers can deliver. I am prepared to believe that they can and that there is a willingness among many farmers to stake their futures on it. I believe that they can and they will and on that basis alone, I believe we have to fund the plan. To do otherwise could spell the end of farm development.
I share with John Ferguson and my colleagues many doubts about the sum of the costing for the capital works required. I believe that there are many areas where these costs, with a little local ingenuity and enough skill can be greatly reduced. And I am all for that if there is a willingness to give it a go. I am pleased that my colleagues have supported this plan and approach.
I would like to finish by saying that whilst we have many good reasons for optimism for our economic future, it would be too soon, as this budget has evidenced, to relax our approach and I don’t think that you would expect that of this Government.
Development projects that will grow and expand our economy need to be fully evaluated and carefully considered. In the meantime we all have to share a bit of the financial pain, which is by no means as sharp or as severe as most other countries.
The future, I believe, is rosy and bright for the Falkland Islands.
Mr Speaker, I support the Motion.