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Corona virus: 1 - Jersey's economy: nil

Corona virus: 1 - Jersey's economy: nil

Monday 01 June 2020

Corona virus: 1 - Jersey's economy: nil


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.

IFG_forecast_figures.png

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. 

FPP Advice

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. 

Political Oversight Group

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."

SamMezec.png

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."

 

 

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Posted by Dave Mathews on
The main financial problem for many people is Accommodation.
With House prices at a record high and Social Housing rentals going crazy, Senator Sam Mezec as Housing Minister is already out of his depth and I am afraid to say failed.

So we should leave these decisions to the experts.
Posted by Scott Mills on
after reading the bullet pointed plans...translated .... we'll need to draft in more "experts and consultants" from the real world...to tell us how to do the job we are paid to do.
Posted by David Moon on
The less the government and their consultants interfere with the economy the better. The Island prospered when it was a market driven economy. The local populace have shown themselves to have plenty of ininiative and entrepreneurial ability to generate a successful economy when they are risking their money not just theorizing like playing monopoly. How can there be talk of reducing taxes when their is a black hole in the public finances from the zero ten tax system. They should concentrate on restricting immigration, reducing the population, building a new hospital , scrapping the zero ten tax system and resorting to the previous system under which everyone resident in the Island paid tax at 20% including companies managed and controlled or carrying on business in the Island.
Posted by Scott Mills on
Dave Matthews...does Senator Mezec set rents? does he advise the estate/letting agencies, private landlords or andium on their monthly rental prices?

David Moon wholeheartedly agree, once the bumbling politicians who decided to let island and global companies pay no tax, that was curtains for a lot of people who where already struggling. I understand Jersey has to compete with other financial centres (but they have 2 big brother's with London and USA - Delaware). I don't agree with everyone pays 20%, it should be tiered. Because someone earning £20k paying 20%, is not a fair ratio to someone paying 20% on £150k. I understand the total is more for the higer earner, but this results in a bigger impact on the person earning £20k. Anything under £25k pay 10%, anyone under £35 pay 15% (just for example). Remember there's a lot of seriously rich people who pay no tax whatsoever over here, and people on pitance paying more than multi-millionaires, without the cry of "well I worked hard for my money". Yes and so do cleaners of schools/public toilets, bin men, bus drivers, gardeners etc...
Posted by Keith Marsh on
There is really 2 choices out of this financial mess :-
1) Tax more .... Scrap zero ten , Increase Income Tax for high earners £ 200,000+
2) Reduce Tax [GST to 0% local market + increase to 20% for on-line shopping] Give all Islanders a once only tax break ~ and hope the people spend this money in JERSEY.
Our economy is good and solid. It just needs a "kick start"
Posted by William Boyd on
So "the less the government and their consultants interfere with the economy the better"? Really? Maybe consultants should leave well alone, however, if the government had not "interfered" with the economy during this Covid pandemic countless thousands in the island would now be living in penury in the streets and many businesses bankrupt. Government has "interfered" with the economy by giving millions upon millions of aid to companies and individuals and thank God for that. I have been listening for decades to so-called expert businessmen asking for the government to get off the back of business only for some time down the line to come begging for government assistance. This was before Covid 19. Hospitality, agriculture, fisheries, retail, all have had their hands out in the past. I agree it is the role of government to provide the climate for good businesses to operate and not overly interfere in the runnng of businesses. That does not mean we want a Wild West capitalism. Also, the much vaunted private sector is not always brilliant, witness the banking fiasco, pensions mis-selling, PPI farce, privatised rail companies handing back franchises, UK telephone directory enquiries now costing £5 a pop when under the nationalised BT they were free. I could go on, Enron, Goldman Sachs etc etc. I for one am thankful the government did "interfere" in the economy. One would have hoped that business would be grateful.
Posted by Martin J on
Possibly we may benefit from a comprehensive Freedom Of Information request on the rainy day fund going back 10 years or so & or aligning with zero 10 with States (now Government) OVERALL spending being scrutinized to see where all the ££$$ has gone! Jersey should be able to deal with this C19 by years of good financial preparation. Other countries have had epidemics so why think we would be spared a pandemic?

If it has been financially mismanaged by current or past Politicians then these should be accountable as we do not want to be hit with a Government induced "Incompetence" tax to lump onto the Long term care tax! GST etc. I am led to believe that a nursing home is being rented by the Gov,t for £80K a week in addition to the £14M oxygen tent which is empty and unlikely to have any C19 occupants! I agree it is god to prepare but were MT hotels not offered as an alternative to the tent at Bel Royal.
Posted by Jon Jon on
This government couldn’t fight themselves out of a paper bag.Luckily decades back we had politicians who were prudent,who made sure money was put away for a rainy day,had they not we’d be in a far worse mess than we are in now.This government has brought in more and more people over the last few years,thus pushing up rents,house values,schools bulging,hospital that needs replacing,the list goes on and on.
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