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Home | December 2012 Please tell us what you think of this article. Tell a friend Print Friendly

St Helena : UK Chancellor of the Exchequer’s Autumn Statement: What does this mean for St Helena?
Submitted by Saint Helena Herald (Public Relations Information Office) 22.12.2012 (Article Archived on 05.01.2013)

Last week saw the UK Chancellor of the Exchequer’s Autumn Statement. This is largely viewed as a ‘mini budget’ – a midyear stocktake of how the Government’s finances are progressing. The message seemed to be:

 


UK Chancellor of the Exchequer’s Autumn Statement:


What does this mean for St Helena?


 


 


Last week saw the UK Chancellor of the Exchequer’s Autumn Statement. This is largely viewed as a ‘mini budget’ – a midyear stocktake of how the Government’s finances are progressing. The message seemed to be:


 


“UK Government debt is still rising as a proportion of the economy. We hoped debt would start falling in 2015/16, but now we think it’s going to start to fall at least a year later. The economy is in worse shape than we thought it would be. As a result, taxes will need to go up and spending fall further than we thought. The pain of fiscal austerity will now extend beyond 2016 to 2018.”


 


This is a grim message. The UK economy has once again underperformed against forecast. Some, such as the UK Business Secretary, Vince Cable, have suggested there is a risk of a ‘triple dip’ recession and a Japanese style ‘lost decade’, or simply that the UK economy will keep ‘bumping along the bottom’. Rating agencies, such as Fitch, have warned that the UK could lose its ‘AAA’ credit rating, given a loss of credibility in the Government’s plans to reduce the scale of its debt.


 


Looking at some of the underlying economic indicators, it seems the Government expects virtually no real wage growth over the next two to three years, unemployment to rise, savings to decline and house prices to stagnate.


 


Between 2012/13 and 2017/18 Government expenditure is expected to rise by £91.2 billion, but revenue from taxes is expected to increase by one and a half times as much. In effect, UK tax payers are being asked to pay more, but spending on public services will not rise in line with this. The difference between the two is needed to try and pay off the Government’s debt.


 


What does this mean for Saint Helena?


 


The ramifications of this downturn in the UK Government’s finances for St Helena are obvious to many. For a start, we cannot expect continued increases in support from the UK Government, particularly if we cannot demonstrate the progress and impact from what has already been provided. 


 


So what does this mean?


 


Firstly, it means that if we expect a local revenue stream to underperform, or want to expand expenditure in some area, we must look internally (i.e. on-Island) first for solutions. St Helena is lucky that there has been no reduction (so far) in the levels of aid received from Her Majesty’s Government (HMG). But it is also clear that they will not increase budgetary aid or plug any holes which emerge. The Island has to do that by itself, meaning budgets have to fit what is available, or we have to increase local taxes.


 


Secondly, SHG is placing more focus on demonstrating impact and value for money. Mind-sets have shifted away from saying something should be done because we have always done it, to showing that every penny is working towards the bigger picture of getting a tourism economy developed and improving the quality of education, health and infrastructure. Tangible results are the only way HMG can justify to the UK tax payer further investment in the Island.


 


This year’s ‘mini budget’ comes at an important time in our own budgetary process and is a timely reminder of the external environment and of the financial position of our key donor. 


 


 


 

 

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