Comment: Are the States 'crowding out' investment?

Monday 30 July 2018

It's been quite a week for the Government of Jersey, with a row over the communications team wanting - and then back-tracking from - a role in approving what's sent out under the 'Freedom' of Information Law, to news of a critical project going millions over the original budget.

That all came on the back of news the government approved 100% of its own requests to take on staff from outside the island, and just before a new tourism project in St. Mary was rejected by the Environment Minister.

Express columnist, the Insider, has found it tough to take...

"I have recently returned from a spell in Guernsey where I have spent time with local entrepreneurs and business people. The mood is pretty glum and in some cases as bad as 'I am looking for a way out.' Meetings rapidly focusing on a generally weak business environment and a lack of confidence. The result was a reluctance to make further investment - which in turn weakens sentiment by creating a negative feedback loop.  These loops are very, very hard to break. The underlying cause was both government policy, and a lack of government policy, with the government broadly being accused of breaking the first rule, which is 'to do no harm.'

Some pretty fruity language was used to describe the quality of the government and its decision making. Since returning I have seen a string of news which makes me wonder whether Jersey is in danger of 'doing a Guernsey,' as the early signs for the new government and revamped civil service are not good.   

The impact of a lack of population growth on the Guernsey economy was quite evident. Those calling for a clamp down on immigration in Jersey ought to spend a bit of time researching the issue. Or just speak to somebody who remembers what happed to the Jersey economy when it last indicated that it was 'closed for business.' The property market in both Islands makes for an interesting comparison. If you are a property owner in Guernsey, you have seen limited price growth and possibly price falls.  The result is reduced property development and fewer jobs in the building trades.  In Jersey its the opposite. If you are not a property owner you might see limited price growth, or price falls, as positive - but you are overlooking the second and third stage impacts. Turnover in the property market releases substantial amounts of capital and is a significant driver of economic activity. This equals jobs and taxes to support our profligate government, and aging population.

Pictured: Plans for a new holiday village at Tamba Park have just been rejected. 

The new government is already sending pretty negative signals to the economy. Take the example of Jonathan Ruff and Tamba Park. What is the purpose of having a planning process involving an expert inspector - which the minister can simply ignore? I wonder how many property developers are now factoring this 'random risk' in to their decision making.  It's certainly not good for confidence, which is already suffering from a growing uncertainty. If you have no love for property developers, despite the fact that they are major job and wealth creators, think about the wider impacts.

"This project was in line with the stated tourism plan. Why should investors support tourism when one part of the government undermines another?  Who wants to take forward plans for a Digital Village, Tourism Village or Fort Regent when, having spent a small fortune on plans, you are subject to a random risk from a government which lacks a holistic understanding of the economy? Uncertainty and confusion is not good for confidence and neither is failing to understand the knock on effects of a decision.  If this minister worked for me, I would be encouraging him to reconsider his position and admonishing myself for over promoting him.

At the same time it seems that the government doesn’t understand the basic concept of 'crowding out' where the government sucks up resources which are denied to the private sector.  As the private sector pays tax and the government does not this is not a good long term tactic. The private sector is generally more efficient than the public sector, and so this leads to a long term lack of productivity growth (sound familiar to any students of the Jersey economy?)  

The sheer number of people employed in the public sector (7,890) in a 'people-constrained' location has always been a problem. It is now being compounded by the public sector crowding out the private sector in the recruitment of non-locals. The States has approved 100% of its own applications for non-local staff. Whilst not a surprise, is does indicate a crooked game. The bigger surprise is that they made 38 applications last year and that the number will be smashed this year with 39 joining in just April and May alone (by definition, all high earners).  

It is fundamentally dishonest of the government to be hoovering up non-local staff whilst stripping licenses from the private sector, and denying key recruitment so that they can 'keep a lid on numbers.' These high earners have to be paid for by the productive private sector at a time where States policy is making wealth creation harder.  Alongside higher minimum wages, the new States is sending a pretty negative message to wealth creators and entrepreneurs.

Pictured: Stephen Hardwick, States' Communications Director, has had to clarify his department's role in approving FOI requests.

We need not worry, however, because there is a new, high earning, Communications Director who can spin this in a positive way. Despite being a highly paid non-local using up a valuable licence, he seems to have got off to a poor start by badly communicating a new policy around the management of Freedom of Information requests. It sounds like a desire to control and spin.  If so he doesn’t understanding the fundamental point that Jersey is too small and interconnected to spin.  We all meet people just going our everyday lives who have real insight into the actual facts. I fear this approach is going to damage what little confidence remains in government.  The people voted for change. They assumed it would be for the better. I would urge the Chief Minister to half the economically unproductive Communications department and make them focus on publishing facts.  The public is smart enough to work out what the facts mean.  They will react badly to being spun.  

Embarrassing FOI's to be pre-approved by comms advisors | Bailiwick Express https://t.co/9EhDkCV4wv

— Bailiwick Express (@bailiwickxpress) July 23, 2018

The government cannot influence global events like Brexit but has a duty to be a positive influence on the local economy by both doing no harm and providing a framework where the private sector has the confidence to invest to support the current and future tax base. If the government is not going to provide that then I wonder how many entrepreneurs will reconsider the longer term outlook for the Jersey economy.  

At a personal level my own confidence is reaching a new low. I think any future investments I make will be outside of the Island for the foreseeable future. I hope Mr Ruff doesn’t beat me to them, because I can’t really see him ploughing further investment in to Jersey."

The views expressed in this piece are those of the author and not of Bailiwick Express.