Corona virus: 1 - Jersey's economy: nil

Monday 01 June 2020

With lockdown restrictions gradually being eased, and official virus cases now in single figures, the battle lines are being drawn this week over how Jersey is going to rebuild its corona-crashed economy.

Ministers are putting forward their plans, which they are labelling "Respond, Recover and Renew" - but one of their number, Senator Sam Mézec, will also unveil counter-proposals as the leader of Reform Jersey.

The numbers are stark - experts estimate that the virus will wipe more than £100m off Government income in 2020, and that problem will continue, pushing public finances further and further out of kilter, at a time when the economy could contract by more than 6%.

Recently, the Chief Minister estimated that the economy was losing more than £120m a month. 

Last week, the Income Tax Forecasting Group produced two potential scenarios for Government income:

• A ‘base-case forecast’ – public revenue dropping £80m compared to 2019, which has been deemed the “more likely” outcome
• And a ‘downside forecast’ – more of a ‘worst case scenario’ in which income drops by £136.9m.

Pictured: The actual income forecasts compared to how much the government has planned for (IFG/Government of Jersey).

Ministers want the endorsement of their fellow States Members for their plans, when the island's politicians meet this week. In their report, they say their actions so far to support islanders and businesses - such as the salary co-pay scheme,  deferring Social Security and GST, and the Loan Guarantee Scheme - were their initial 'response'. 

Next comes the 'recover' phase, which will involve "timely, targeted and temporary" measures to stimulate the economy, similar to the £44m of initiatives implemented following the global financial crash in 2009. 

Pictured: the advice from Government advisers, and how Ministers have responded (FPP/Government of Jersey).

And lastly comes 'renewal,' which Ministers say will involve: "...developing a more diverse, inclusive, productive and sustainable economy for the long term. Social, community and environmental recovery are closely linked to this work, which will aim to promote economic inclusivity, diversity and sustainability and improve the standard of living and wellbeing of citizens."

To advise them, they have created a 'Political Oversight Group', made up of senior ministers, officers, and four people from the business community: Wendy Martin (CVC), Andrew Mclaughlin (RBSi), John Riva (KPMG) and Gerald Voisin (Voisins). That Group will be supported by an even broader Economic Council. 

Pictured: how the new Political Oversight Group fits in.

The Government says that the scope of the economic recovery work will include:

The scope of economic recovery work includes the following. 

• "Identifying, evaluating and prioritising ideas that form the cornerstones of inclusive economic recovery e.g. national productivity strategy.
• Identifying and considering future challenges to Jersey’s ‘foundation economy’ (agriculture, fisheries and aquaculture, retail, hospitality, construction and those sectors providing goods and services to them e.g. freight forwarding and wholesale) e.g. long-term changes in consumer behaviour, and how the Government can support them through carefully-targeted interventions.
• Identifying and considering opportunities in the ‘new economy’ (financial services, digital, telecoms and other services less dependent on local physical custom) including new sectors and markets.
• Evaluating the ease of doing business with the Government and associated bodies (e.g. regulators) with a view to improving competitiveness, while maintaining Jersey’s position vis-à-vis international standards.
• Researching, evaluating and recommending successful policies implemented elsewhere.
• Facilitating the best possible outreach to business sectors, employee representatives and charity enterprises.
• Identifying, developing and evaluating actionable sector-specific initiatives (e.g. hospitality) and thematic initiatives (e.g. productivity).
• Reviewing available data within the Island and considering new metrics that can support better decision-making.
• Considering a new delivery and performance framework to report across key economic and societal deliverables."

Economic Development Minister, Senator Lyndon Farnham commented: 

“The measures that the Government put in place to protect Islanders from COVID-19 have been very successful, but they have come at a significant cost to the wellbeing and livelihoods of Islanders and Island businesses. 

“The Government must now therefore develop proposals that will be equally successful in restoring the health of our economy, both in injecting a timely, temporary and targeted stimulus to businesses and in developing a more diverse, inclusive, productive and sustainable economy for the long term.”

Ministers will be giving a media briefing on their plans at 13:00; that will be followed by Reform Jersey publishing more detail on their plan at 15:00. Dubbing it a 'New Deal', they say it will, "...ensure that the focus of our economic recovery is on raising living standards, improving public services and realigning our economy to ensure we are prepared for the challenges of the future, such as climate change and the digital revolution."

Pictured: Senator Sam Mézec, who is a member of Council of Ministers, and also the leader of Reform Jersey, who will today unveil counter proposals.

Today's announcements follow weeks of speculation as to how the government plans to rebuild the economy. The Assistant Treasury Minister, Senator Ian Gorst, used a previous media briefing briefing to unveil his own 'New Deal:'

“Be in no doubt: the Treasury Minister, myself, and the Economic Development Minister will be bringing forward a package of bold measures that get the economy out of the doldrums that it’s in, that puts money into islanders’ pockets and helps stimulate right across the economy...And that will be a combination - and I won’t say much more than this - a combination of reduced taxes which are targeted, timely and temporary; it will involve the capital projects that the Economic Development Minister’s spoken about; it will involve some money for training and retraining; it will involve stimulating green lifestyles and the ability for greening  right across our island; it will involve support to introduce technology which will drive to improved productivity.”

Despite specifically referring to the Treasury Minister and ED Minister, he later told a Scrutiny hearing, that the above announcement was actually just a personal view:

“And I for one personally support [the measures]. Of course, they’ve got to go through the process, which is why I alluded to them at a high-level. I think it is important for Ministers to speak in public about what the direction of their policy is and the ideas that they’re asking officials to consider.

“So, it wasn’t an announcement as perhaps it’s been picked up in the media, but I did say that for my part, a bold package of measures, which included those elements would be and should be appropriate and should be brought forward."