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"Governments don’t make economic growth"

Thursday 17 May 2018

"Governments don’t make economic growth"

Thursday 17 May 2018

The Labour Party will forever be haunted by the words, “I’m afraid there is no money” – a phrase jokingly scrawled on paper and left for the successor of the outgoing Treasury Chief.

As Senator Alan Maclean exits the States Assembly after a more than a decade of service – nearly four years of which have been spent holding the public purse strings – he says this won’t be his message for the next Treasury Minister, even if the past term has been a bumpy ride.

From the Innovation Fund fiasco to the island’s limping high street, Brexit, university funding, democracy, and that infamous ‘black hole’, he met Express to give his take on…

The infamous ‘black hole’…

"I think public finances are in a much stronger position today than they were three-and-a-half years ago. We started this term with headlines of a £145million ‘black hole’ – that was being naughty, as it wasn’t the case. What it reflected was the fact that we recognised there needed to be significant investment in Health, Education – there was a lot of capital expenditure, there had been under-investment in large areas of the public estate, which was wrong. It’s a very easy thing for governments to do. When money is a little bit tighter, you cut back on your capital expenditure. This Council of Ministers was left with having to resolve the lack of funding in previous times and the capital programme for this Medium Term Financial Plan (MTFP) put £168million of capital investment in, and that’s been allocated on an annual basis."

Why Brexit wasn’t all bad…

EU europe flag european union brexit

Pictured: Senator Maclean says that Brexit was actually beneficial to public finances due to a Brexit 'bounce.'

"Our investments have performed very well in recent years, which is a source of satisfaction, partly, ironically, as a result of Brexit. Following Brexit, Sterling depreciated almost overnight and we have quite a significant amount of our investments in non-sterling denominated investments and consequently we saw a Brexit ‘bounce’, which is one way of describing it, and that resulted in quite an significant upflift in the Strategic Reserve, the Social Security Reserve funds, and our investments generally to the tunes of many millions of pounds. So that was the benefit for public finances. We’ve seen a strong investment environment in recent years, and again, all assets have increased in value with the Strategic Reserve at the highest level it’s ever been at and the Social Security topping £1.9billion, also the highest level it’s ever been at."

A way forward for the ill-fated Innovation Fund…

"I think the idea of an Innovation Fund is absolutely right. It’s not unique to Jersey – there are other countries that have innovation funds or similar types of stimulus to support fledgling new businesses, start-ups and early stage businesses. The problem is it’s an area of risk – there’s a risk there, and that was known at the start. I remember talking to a Scrutiny Panel on the subject a few years ago and saying, 'Look, somewhere between 50 and 70% of these investments are going to fail.'


Pictured: "I think the idea of an Innovation Fund is absolutely right," says Senator Maclean.

"I think the problem of the Innovation Fund was that it didn’t develop in terms of its implementation in the way it was supposed to. By that I mean it’s absolutely fine for government to put some seed funding in, which is what we did, but ultimately you have to look towards professional and private equity models running them and seeking private funding as well, and then you’ve got a mixture of public money and private money, professionally managed by private equity professionals. They can deal with the oversight, management and picking the ‘winners’. And if they’re at arm’s length, they can deal with the failures that will inevitably come from that type of structure."

Why the 20% Retail Tax won’t be the death of the high street…

"Before I was Treasury, I was the Economic Development Minister. I’ve run businesses, I own businesses, and I very much understand the need to have the right business environment. Governments don’t make economic growth, but they should make sure that the environment is appropriate and there aren’t barriers in place to prevent growth of businesses. I was very focused on what the impact might be – that’s why we had an economic analysis undertaken and looked in real terms at what had gone on in Guernsey since they introduced it.

retail shopping shops high street king street

Pictured: While Senator Maclean remains concerned that the 20% retail tax might stop investment, he says Sandpiper and Alliance have shown confidence.

"It’s very unusual to have the opportunity to propose a measure and see what happened in a similar jurisdiction a couple of years before. And what did we see? One of the big concerns was around food retail, and actually they didn’t see inflation over that period. Of course I was very concerned [that it might stop investment], and I remain concerned, but what we’ve seen since that decision when some States Members and members of the Chamber of Commerce were saying it’s going to be a disaster, we’ve actually seen Sandpiper purchasing Liberty Wharf since this decision was made. They say that if they’d known earlier, they might have stopped that, but actually they’ve known about this since December 2016. They knew this was the intention – it was approved by the States then.

"We’ve seen Alliance (Tesco) – they’ve shown confidence since the decision to invest in new premises. They’ve taken on the old Poundworld shop in Broad Street. More than 100 jobs have been created across those entities in the retail sector."

His 2018 Budget ‘victory’…


Pictured: "The highlight for me was making an announcement of what we were planning to do with higher education funding," says Senator Maclean.

"The Budget debate can be a very fiery one. The Budget Statement 2018 – that budget was steady as she goes. Uprating allowances was a very positive thing to do to ensure that islanders retained more money in their pocket before they started paying tax. I think if you like, it’s not directly in the Budget, but alongside it, the highlight for me was making an announcement of what we were planning to do with higher education funding, having looked at loan schemes. Absolutely key to an econony is making sure you have a highly-skilled workforce.

"It was why in the MTFP addition we put £2million more into higher education funding specifically thinking from a Treasury perspective that would solve the problem. What we later realised was that it was not funding alone where the problem lay, but the way the grant was made available that was causing some families difficulty because of the thresholds to access the funding that they needed. It is clear that a lot of people were struggling. People were having to sell their homes, people were having to take on debt in order to get their kids to university – I heard stories of some families having to choose between siblings. 'You can go, but I’m sorry I can’t afford to send you, so your brother can go.'

"That’s terrible in a wealthy society, and when you loo beyond the social side, the impact on the community, when you look at the value to the economy of our young people being properly skilled, recognising not all come back – but more than 50% do – that’s going to have impacts in the long-term areas, like migration if successful. If we skill them up and they come back, we’re going to have less people we need to bring into the island longer term.

"I was disappointed that an amendment from Senator Ozouf went through that, although he was billing it as ‘certainty’, my view is that when you’re asking a future Council of Ministers to review it, it creates uncertainty. But he with a silver tongue very effectively managed to persuade the States to agree to the amendment. Nevertheless, it was overwhelmingly suppported. I think it’s the only time in my political career that I’ve seen anything supported 100% - 45 to zero, I think the vote was. I’ve never had such a positive response from members of the public, huge public feedback about relief and thanks for actually doing something about that."

Who ‘Middle Jersey’ really are…

"It’s an interesting term, ‘Middle Jersey’, because nobody quite knows who it is. There are definitions, but it could be anybody on the marginal rate of tax, which is about 84% of taxpayers, which is a very large ‘Middle Jersey’, I think."

What the Council of Ministers got wrong…


Pictured: The outgoing Council of Ministers, Senator Ian Gorst, Senator Sir Philip Bailache, Deputy Eddie Noel, Senator Lyndon Farnham, Senator Alan Maclean, Deputy Anne Pryke, Deputy Rod Bryans, Senator Andrew Green MBE, Deputy Kristina Moore, Deputy Steve Luce and Deputy Susie Pinel.

"Perhaps, if anything, we haven’t communicated as well as we could have done. I think the Chief Minister Ian Gorst would agree with me to say that, as a Council of Ministers one of the regrets is the inability to explain effectively to the population what we were doing and why we were doing it. We have tried to do it but we haven’t and we’ve been thwarted in different areas in this regard.

"I strongly believe that the majority of decisions taken have been the right decisions, they have been difficult, but necessary. What we’ve been focused on is the long-term. This is the difficulty in Jersey – it happens in the UK, it happens in the US and elsewhere – politicians are focused on the next election and making sure that they don’t do things that make it difficult to get re-elected. And that’s perfectly natural, but actually it does a disservice to the electorate because it means you’ve actually got short-term thinking. If you look at public finances in the United Kingdom where they’ve got close to £1.9 trillion of public debt, when you get closer to elections you get announcements of initiatives of spending money here and spending money there. But who’s going to pay for it?"

Why unelected constables might be a good thing…

"I think one of the things we need to keep clearly in focus is that there are a lot of senior politicians retiring or leaving the States at the same time, and that is unfortunate. It’s almost unprecedented to have quite so many going at the same time. It’s not been designed for that clearly. I think there’s 15 retirees, which is a lot, and the election process will undoubtedly throw up some other retirements, perhaps not intended, if I can put it that way.

vote ballot voting poll election referendum suffrage

Pictured: For Senator Maclean, having 10 constables elected unopposed brings an "element of stability" when so many States members are retiring.

"I think that those returning members with experience who have been politicians for a number of years, there is going to be a heavier load than normal on their shoulders. Their experience is going to be absolutely critical in key roles to give the necessary stability going forward. And there are some very good members who I certainly hope will get re-elected – not just those in the Council of Ministers, but there are some very long-standing and experienced States Members across the spectrum, both deputies and constables. And I’m one of those that in this instance is pleased – I know that some say it’s not very democratic – but I think it’s 10 constables elected unopposed, I think in this circumstance where you’ve got so many retireees, it’s created an element of stability at this critical juncture economically for the island. I’d like to see every position have an election from a democratic perspective, but in this circumstance, it’s quite good."

His overall highlight…

"It’s little things, I suppose. When I first got elected as an Assistant Minister, I had responsibility for the Harbour and the Airport, and when I was electioneering, I was told by a chap, 'Why are they closing down this signal station? It’s the oldest signal station in the British Isles. Terrible that it’s being shut down.' So when I got my new role, I asked the question, and they said, 'It’s too expensive to run.' 'Oh, can’t you do it more efficiently? How much does it cost to run? I can’t remember the numbers, but it was costing a lot of money to run it. And they said, 'We can’t do that.' 'Well stop telling me what you can’t do, and go and find a way to run it more efficiently and come back with a plan and then we’ll make a decision.'

Alan Maclean

Pictured: Senator Maclean was particularly proud to save the signal station during his time as Assistant Minister.

"So the officials went away and came back with a plan working with Jersey Heritage to reduce the service to ensure we kept a signal station, which puts the key signals up at Portinfer, but also important signals of birthdays and things like that. It’s a historic structure. It’s a small thing, but we reduced the cost of running it and we kept a wonderful piece of history operating. It’s a tiny thing, but I get a lot of satisfaction every time I look at it."

A message for his successor…

"Good luck. [laughs] I would say support the public sector reform and modernisation program, now being led by Charlie Parker, as it can deliver millions in efficiency savings that will help meet funding pressures resulting from the aging demographics, Care Inquiry and Brexit amongst others. Meanwhile, maintain a strong grip on public expenditure, support targeted investment in the economy and make it a priority to use any surpluses to replenish reserves used from the Stabilisation Fund and Strategic Reserves during the recession. I’d also advise an early review of all strategic investments."

This interview appears in the May edition of Connect Magazine. Click here to read it.

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