Ascension : ASCENSION ISLAND GOVERNMENT PRESS RELEASE
Submitted by The Islander (Ascension Island Government) 08.04.2010 (Article Archived on 22.04.2010)
The budget for the financial year 2010/11 has now been approved by the Governor and we received notification on 31 March that the Appropriation Ordinance 2010 has been published in the St Helena Government Gazette giving this effect.
The 2010/11 budget aims to secure the government's continued ability to deliver services, governance and the rule of law on the island. Last year was an exceptionally difficult year with government having to face a shortfall of almost £1 million as a result of ongoing and accumulating tax arrears, steeply rising costs and falling revenue, resulting in eroding cash reserves that would have been exhausted altogether by mid 2010 had serious measures not been taken to address this. Over the past year we have brought the shortfall down to an estimated £263k and the drain on the reserves has been halted. This was made possible by action to limit expenditure across all of the government's operations and by the implementation of the restructuring and modernisation of the government that was recommended by the Council last year. I know that this will have been a difficult and uncertain time for many of you. But the consequences of not taking those actions would have been worse and doing nothing would have been very irresponsible. The structures and processes now in place will ensure a more efficient future. The administration is slimmer and fitter for purpose and that is good for all those that work and pay tax on Ascension.
We therefore begin a new financial year in better shape than we did one year ago. However with the damage already done to the cash reserves and with no money to replace or repair our infrastructure, all of which is showing serious signs of wear, the need to be cautious and prudent remains. And we benefited from some income last year, particularly our involvement in the BBC’s wind turbine project, which though very helpful, will not be repeated this year.
Our first priority is to eliminate the deficit, or shortfall, altogether. Continuing to run a deficit, even the much reduced estimated one, is not sustainable. And we need to build up the cash reserves so that we have an essential cushion that will allow us to deal with any unforeseen emergencies that might arise, and also to make a start on repairing and upgrading our infrastructure. The island badly needs a new harbour crane that is fit for the job. And the road network needs a lot of attention. We are expecting a grant of £530k from the EU to help towards that, but it is unlikely to be enough on its own. The list of needs is long and much of it is becoming increasingly urgent. Negotiations aimed at resolving the ongoing tax arrears problem continue. It is essential that we reach a satisfactory solution on this, not only because we need the money that is due to us, but to ensure that our laws are properly upheld.
Tax rates have not changed since they were introduced eight years ago. But almost everything else has gone up in the meantime, some things very steeply such as the price of electricity and water. No organization can continue with static income when costs are rising.
The Council considered the case for increases in duty and tax rates. It recommended that there should be no increase in the rate of personal income tax. There is a link between these rates and the agreement by employers to increase salaries when income tax was first introduced to ensure that after tax is deducted, nobody is any worse off. We had no wish to upset that balance.
The rate of property tax is to increase by three quarters of a percent, to 3.75%. The revaluation exercise carried out on our behalf by the UK's Valuation Office Agency in late 2008 will now be implemented. This will put the amount payable up for some properties while others whose values have fallen since the first valuation exercise was carried out in 2001 will go down.
A series of technical amendments are also being made to the Property Tax Ordinance and these will take effect from the new financial year. These technical amendments are designed to tighten up the existing legislation, deal with appeals and objections including the amount of time that should be allowed to deal with these, clarification of areas that were potentially unclear, and the introduction of a requirement to pay interest on outstanding amounts. The latter commonly features in tax legislation and it is sensible that such a provision should be contained in our tax legislation too; indeed it can be argued that it is long overdue.
The rates of duty charged on fuel, tobacco and alcohol were also considered. It was recommended that there be no increase in the rate of duty on tobacco or alcohol. Duty on fuel will increase by 2.5p per litre for generating fuel, and 1p per litre for vehicle fuel.
In last year's budget, provision was made for vehicle license fees to increase each year by 3% and the new fees reflecting this year's increase come into effect from 1st April 2010. This will put the cost of a driving license up from £6.20 to £6.40 and a Class A private motor car vehicle license up from £19.10 to £19.70.
The overall expenditure budget for the government is set at £5.345m (down from £6.2m last year) and with the implementation of the measures already mentioned there should be no shortfall in 2010/11 and indeed a slight surplus is estimated. £165,900 will be set aside from the cash reserves to fund the most pressing capital works. The cash reserves are expected to increase from their current uncomfortably low value. This is important as we need to ensure that we always have sufficient money to pay our bills, meet our obligations in full and start to invest in the infrastructure.
Discussions will shortly begin with the Island Council about possible changes to the taxation system. Subsequent to that there will need to be consultations with the employing organizations and other interested parties. This will aim to provide a sound footing for government finances in the future to ensure that we are able to deliver the required level of services to everyone here, and meet all our obligations, domestic and international. Any changes requiring new legislation will inevitably take time to bring about, and depending on the changes that are agreed those affected may need sufficient notice to make any necessary adjustments. It may therefore be necessary to hold a supplementary budget halfway through the financial year.
Administrator’s Office06 April 2010