2020 income and expenditure

Our 2020 projections for income and expenditure involve raising £22.32 million in fees, compared to £19.55 million raised during 2019. This increase of approximately 14% is significant and driven by resourcing our largest ever capital investment programme and further developing our capability to combat the financial crime threat.

We have budgeted our operational expenditure to match our expected income during 2020 – resulting in a balanced net operating position before any potential litigation costs.

We have carefully constructed our 2020 budget to ensure that we have the flexibility in our human resources to deliver our capital projects, benefit from future economies and expand our work as may be required.

The table below illustrates the increased regulatory and registry fee income that comprises the majority of our revenue. Within the “Other income” line is the financial support that the Government of Jersey has committed to providing. The arrangements under which these amounts will be paid have not been finalised at this time.

¹ Registry fee income in our 2020 annual audited accounts will include £1.15 million to fund our capital programme for Registry, which it will be necessary to recognise in the P&L. No increase in registry fee rates will be required to raise these funds.

Dialogue on fees

Most of the fee levels required to fund our 2020 programme of work are already in place. Our recent fee consultations have prompted valuable dialogue with the Funds, Insurance, Banking, DNFBP, and Trust Company sectors, as well as Registry customers, about increases in fees which reflect the substantially rising cost of regulation.

We have explained the importance of our work to counter the financial crime threat, enhance risk, data and workflow management capacity, and match the investment Industry is making in technology. We will consult further with the Investment Business and Funds sectors during 2020 and fee increases in these areas will not have a full impact this year, due to the timing of these sectors’ fee levies.

We have also included in our strategic roadmap our intention to consult more widely on the structure of our fees base and how we can ensure that it is as sustainable as it can be in the face of changing and competitive financial markets. The figures below show the forecast fee income from Industry sectors compared to the 2020 projected fees income.

Capital programme

Our budget is critically dependent on achieving highly ambitious timelines for our capital investment programme. The programme will be subject to enhanced internal controls to ensure the rigorous management of all our capital projects on a phase-by-phase basis. In the event that we do not quite meet these timelines, other budgeted costs in 2020 will reduce.

The most capital intensive undertakings during 2020 are the combined £4.8 million investments to enhance our registry systems (£2.1 million) and implement Industry portals (£750,000), plus other key workstreams totalling £1.9 million. Both of these highly ambitious projects will bring substantial benefits to all stakeholders who interact digitally with us. These projects will also provide significant benefits in the future, particularly where we can demonstrate our supervisory effectiveness and do business more efficiently.

Alongside the enhanced controls for capital projects, we will robustly manage our operating cashflows, as summarised below.

Cost control

We have kept increases in the cost of existing staff in line with Jersey retail price inflation, although wage inflation is often significantly higher in comparable areas of the private sector. In addition, the annualised cost of the AML unit, established half way through 2019 to meet MONEYVAL requirements, plus non-permanent staff costs to complete projects and workstreams, comprise most of a further £1.3m to total staff costs. We are also rigorously controlling travel and training costs. The main drivers of cost increases are computer systems and staffing costs to support our capital investment programme.

Future

In the final years of our strategic roadmap, we do not expect to require the same level of fee increase as our capital investment programme will be reducing. This will only be the case if drivers of cost, such as new functions, do not arise.

Our budget does not include what would be required to fund the JFSC taking up work related to a Jersey Resolution Authority or any work we might do with the (Interim) Financial Stability Board. Equally, it does not include costs for any other roles which we may be given, including potential work on Consumer Lending and Pensions regulation. We will transparently identify the costs of any additional work we may do.

Summary of key financials