Bold budget commits to health, roads and economic growth

“A FORWARD looking agenda of investment in critical economic and social infrastructure,“ was His Excellency the Acting Governor Alex Mitham’s description of the 2017 Budget presented for deliberation on Tuesday.

Mr Mitham gave the traditional address to the nation at the opening of the Budget Session. The Legislature’s final Budget decisions will be announced at today’s (Friday) session of Legislative Assembly.

Capital funding

Investment was certainly the key word in the Budget with the Financial Secretary Lydia Morrison outlining a five year programme amounting to a net £61 Million or £80M including the current year’s programme.

Much of the funding will go to roads, health and social care and economic development. This year’s Bill requested approval for £15.9 Million from the Capital Equalisation Fund.

Mrs Morrison said in order to ensure the fund had a level of reserves to support those investments an additional transfer of £4M per annum for the period of the Medium Term Financial Plan had also been agreed by Budget Select Committee, “though Budget Select Committee recognised that additional funding will be needed from the Consolidated Fund to fund the full programme.”

Outlining highlights from that programme she said over the next five years the following investments will be made: 

  • £47.9M in infrastructure and maintenance comprising £21.3M for roads, including £6M for the MPA road and £2.5M to continue maintenance
  • £17.8M for Health and Social Care, including £10M for the Vulnerable Peoples Unit 
  • £5.2M for improvements at KEMH, 
  • £5.3M for economic development related projects (eg. FIPASS maintenance, investigating port facility)
  • £2.7M for the provision of new Sports facilities and Training Centre.
  • £1.6M to continue to look into the Air Terminal at MPA and a replacement power station.

In his speech to the nation Mr Mitham stated the Falklands economy had performed well in recent years, “outstripping OECD (Organisation for Economic Co-operation and Development averages) and driven largely by revenues from our fisheries and offshore oil exploration.”

But he cautioned, “the last two years have also seen some limiting factors, including lower than average Illex catches.”

He said the oil industry had been adjusting to a prolonged era of lower global oil prices, “which has delayed industry investment plans. Nonetheless, our economy continues to generate new economic activity, jobs and growth as government and businesses invest in capacity to take advantage of future opportunities.”

On that matter he later noted that Customs and Immigration had reviewed more than 1,500 work permit and visa applications in the last year.

Appropriation Bill

Outlining the Appropriation Bill 2017 Ms Morrison confirmed the Islands had faced a second challenging year. She said: “Following several ‘boom’ years for squid there is always a risk of a ‘bust’ year and that has been the case with Illex with a second year of modest catches,” however the situation had been improved by the current high market prices for Illex. FIG is not expecting to have to make licence fee refunds this year she said.

She announced that the appropriation of £65.9M was predominantly funded from revenues, “anticipated in the year of £60.5M with the remainder coming from the reserves built up from wind-falls in Illex and oil and gas exploration in recent years.”

She added however, “whilst windfalls have allowed FIG to improve services in recent years our recurring revenue streams have only increased marginally. Therefore whilst considering proposals during this budget, the Select Committee were conscious of the need to maintain spending at a level that does not make excessive use of reserves or increase operating deficits to a level that is unsustainable into the longer term. By limiting the deficits Budget Select Committee were able to set a budget that is sustainable in the medium term, whilst still redirecting previous year’s surpluses towards the capital programme and operational budget”.

She noted:

  • 2% pay increase for FIG employees
  • 1%  increase in employment programme rates 
  • 1.7% increase in grants for students studying in the UK.
  • 2% increase to the weekly state pension rate (and a corresponding 2% increase to FIG and FLH pensions). 
  • Pension contribution increase to £15.75 for employees and employers.
  • Self-employed and Voluntary rate for residents increase to £31.50 with the full Actuarial rate of £58.25 paid by those making voluntary payments from overseas. 
  • Government will continue to make the £1.5M top up payments to the Retirement Pension Fund for the period of the MTFP.
  • 10% increase in Stanley House fees
  • various increases to FIG legal, registry and court services fees
  • 4% increase in septic tank cleaning 
  • 1% increase in government housing rents 
  • £1,000 increase to the banking licence, 
  • the embarkation fees will rise to £25
  • Update to the Civil Aviation Fees to cost recovery. 
  • Landing fees for Stanley will rise to £25 per ship passenger from July 1, 2018.
  • Minimum Wage increased to £6.58 an hour from January 1 2018. (The Living Wage is now considered to be £7.31 per hour).
  • pension contribution threshold will increase from the same date to £263
  • reduction in the MST rate to 0% for employees, employers and the self-employed from  January 1, 2018. 

In Mr Mitham’s speech he said the 2017/18 Budget reflected  many of the priorities identified in the Economic Development Strategy review with the proposed capital investments already listed on the front page. 

Mr Mitham  expanded saying FIG intended to roll out a number of focused initiatives to, “expand and develop our labour force, support business and sector growth, reduce barriers and position the Falkland Islands for a bright economic future. These will be supported, in part, by the recently introduced amendments to the Immigration Ordinance, which are intended to help us recruit and retain individuals with the necessary skills to build our community.”

He outlined the success and challenges of all of the Islands primary industries and while referring to the fishery noted that the Illex fishery would benefit from greater regional cooperation and data sharing with Argentina, “and the Falkland Islands Government hopes that Argentina will work with us to support the ongoing conservation and management of this important fishery region.”