2022 income and expenditure

Summary of our key financials

The 2022 budget is particularly challenging due to:

• increased targeted staff levels to handle increased volumes of activity in both Registry and Supervision and to create Registry Supervision;
• expansion of existing regimes and the delivery of new regimes, much of which requires initial pre-funding to reduce barriers at key stages for new products;
• continued investment for the future in order to deliver on our Strategy.

Careful balance has therefore been applied to:

• the extent of the work we have planned to undertake and the cost and capacity required to achieve it; and
• the impact on our retained liquid assets and the impact on industry from increasing fees to meet the increased costs.

To achieve this, we have made effective use of our retained liquid assets built up in previous years, in line with our agreed approach to financial resilience.

As a result, we have budgeted to make a deficit in 2022 on the basis that the normalisation of the pre-funding of new regimes and reaping the benefits of investment in our systems and processes will return us to a break even position by 2023.

This approach is consistent with our retained liquid assets policy as. we will remain well above our minimum threshold and anticipate that, by the end of 2022, our retained liquid assets will be broadly at our target level.

Regulatory income

The increase in regulatory activity requires an increase in funding in 2022, however the size of this increase has been reduced through utilisation of our retained liquid asset position. These retained funds have been deployed to pre-fund new regimes and provide for capital investments, many of which will target operational efficiency to manage costs in the medium-term. The resultant increase in fees will be 5.5% above inflation. As each regulatory sector’s fee cycle differs, this increase will come into effect at different points during 2022 for each sector, with the later fee cycles having less of an impact in the 2022 accounting period.

The below figures show forecast fee income from Industry sectors compared to 2022 projected fees income:

*Insurance Business includes General Insurance Mediation Business

**Other businesses - Designated Non-Financial Businesses and Professions, Money Services Business, and Recognised Auditors

Registry income

Registry income attributable to the JFSC from annual confirmation fees fell by £1 million in 2021 as the previous capital funding mechanism with Government came to an end and a greater proportion of such fees were allocated to Government. Following discussions with the Registry User Group and other key stakeholders in late 2020, we agreed to delay any commensurate increase in the JFSC portion of annual confirmation fees until 2022 and, recognising the pressures on local companies in the current climate, to focus such increases only on entities administered by a regulated service provider.

As a result, annual confirmation fees have changed in 2022 as follows:

The table below provides further details on the composition of Registry fee income:

Operating costs

Operating costs are planned to increase in 2022 in line with our commitment to expansion of our regulatory remit and our investment in ensuring that our teams have the right resources to meet the Island’s needs.

The increase in computer systems costs is partly due to the additional licence costs attributed to increased numbers of users, but also as a result of our new Registry and Supervisory systems moving out of capital investment phases and costs being incurred on an operational basis.

As many organisations will have observed, many aspects of other operating costs are set to return to pre-Covid-19 levels but may fluctuate as circumstances continue to develop.

The operating costs breakdown is shown in the table below:

Capital investment

Our capital investment in 2022 is focused on supporting our strategic core work streams. The majority of these costs relate to the migration of our core infrastructure to a secure cloud environment and further enhancements to our core supervisory systems to secure increased operational resilience and efficiency.