Economy

Summary

  • Currently, finance sector activities account for around 40% of economic activity and 70% of tax revenue.
  • The prosperity of the people of Jersey depends on its economy, and given the very small size of Jersey in practice, this means producing goods and services that are sold in other jurisdictions the proceeds being used to import goods and services consumed in the Island.
  • In the foreseeable future, finance centre activities will continue to provide a large proportion of the employment, and the tax revenue, on which the Island depends.  But the continued success of this industry cannot be taken for granted.  The industry needs to adapt to changing circumstances.
  • The Alliance’s vision for Jersey is in line with the excellent report New Perspectives, by the independent members of Jersey’s Economic Council, published in December 2020.  The Alliance enthusiastically adopts the recommendations in this report as the basis for its policy on the economy.
  • Promoting an entrepreneurial culture, embracing the importance of the “new economy”, being created globally through technology, artificial intelligence and data, and regeneration from an infrastructure and quality of life perspective are essential.
  • Jersey must aspire to and achieve the highest levels in education and skills.
  • The Government’s role should primarily be to facilitate an environment in which entrepreneurship and innovation flourish and then to let the private sector and the arm’s length bodies get on with it.
  • Farming, hospitality and the creative industries have an importance well beyond their economic impact and need to be supported accordingly.
“The prosperity of the people of Jersey depends on its economy”

The starting point

Policy on the economy has to begin from the current position.  The following table shows the breakdown of economic activity, measured by gross value added (GVA), in 2019 at 2020 values (the 2020 figures are distorted by the impact of Covid.)

Jersey, Gross Value Added by sector, 2019

Sector Gross value added

£m

Percentage
Financial services 2,003 39.5
Other business activities 585 11.5
Hotels, restaurants and bars 224 4.4
Public administration

Manufacturing

432

51

9.3

1.0

Rental income of private households

Electricity, gas and water

797

66

15.7

1.3

Agriculture

Wholesale and retail

Construction

Transport, storage and communication

Total

60

324

353

180

5,076

1.2

6.4

7.0

3.6

100.0

Source: Statistics Jersey.

The table shows that financial services dominate the economy, accounting for 39.5% of gross value added. It is also the case that finance centre activity is responsible for around 70% of tax revenue, largely in the form of income tax from people working in the sector.  Agriculture, one of Jersey’s traditional industries, accounted for 1.2% of GVA.

Hotels, bars and restaurants accounted for 4.4%.  Part of this represents the tourist industry, which 50 years ago accounted for around half of the economy, but much of it reflects consumption by residents.  Rental income of private households needs some explanation.

It is a theoretical concept and is basically what homeowners would pay themselves to rent their property.  No actual payments are made.  The concept enables meaningful international comparisons to be made.

The importance of an economic model

The prosperity of the people of Jersey depends on its economy, and given the very small size of Jersey in practice, this means producing goods and services that are sold in other jurisdictions the proceeds being used to import goods and services consumed in the Island.

Other the centuries Jersey has been highly successful in exporting its produce – stockings and cider in the 17th and 18th centuries, fishing and shipping in the 19th century, potatoes since the 1850s, tourism for much of the 20th century and more recently financial services.  The success of these industries has enabled Jersey people to enjoy a high standard of living, including the provision of public services paid for by taxation.

The Alliance has set out its vision for Jersey –

    • A vibrant, inclusive, self-confident community.
    • An Island that has always punched well above its weight and will continue to do so.
    • A high-quality education system that equips islanders to succeed in the rapidly changing world of work.
    • An economy that continually adapts, now with an increasing focus on technology, ensuring continued prosperity for the people of Jersey.
    • A first-class healthcare system that covers everything from prevention to long term care.
    • A society that strives to reduce inequality and help ensure equality of opportunity.

 

This is in line with what Jersey has been in the past.  The task of government is to help ensure that there is the right business environment to ensure that the economy does continually adapt.

Policies for the future

In the foreseeable future finance centre activities will continue to provide a large proportion of the employment, and the tax revenue, on which the Island depends.  But the continued success of this industry cannot be taken for granted.  The industry needs to adapt to changing circumstances, and also the Island needs to develop other industries so as to diversify the economy.

The Alliance’s vision is in line with the excellent report New Perspectives, by the independent members of Jersey’s Economic Council, published in December 2020.  The Alliance does not believe in reinventing the wheel and enthusiastically adopts the recommendations in this report as the basis for its policy on the economy.  The Alliance endorses the five interrelated strategic themes which the report identifies as the most significant drivers to future economic prosperity –

    1. Jersey should stimulate growth by encouraging a more vibrant entrepreneurial culture and enhancing local innovation.
    2. Sustainability is a huge force in shaping society and economies globally which Jersey needs to place at the centre of its economic policy.
    3. Jersey must truly embrace the importance of the “new economy”, being created globally through technology, artificial intelligence and data.
    4. For Jersey’s economy to flourish the Island needs regeneration from an infrastructure and quality of life perspective.
    5. Unless Jersey innovates and aspires to the highest levels in education and skills development across our entire population, our economy will not prosper.

 

The Economic Council’s paper includes messages for Government, which again the Alliance endorses and which it will seek to act on in Government –

    1. Jersey’s economy needs an inspiring and clear vision for its economic development with a twenty-year plus horizon.
    2. The Government’s new “Economic Framework”, which is under development, needs to be accelerated and must include clear strategies for all key economic segments and industries (the ‘verticals’), that are maintained to ensure they remain current.
    3. Government primarily needs to be a true enabler and facilitator of innovation – to help create the right environment – and needs to accelerate its own orientation in this respect. The role of Government is not always to be the funder of initiatives as the private sector and private/public partnerships can sometimes provide more viable solutions.
    4. Government’s enabler role requires it to provide opportunities for the highest levels of collaboration amongst suitably qualified local residents and people with diverse backgrounds. Our intellectual capital is a powerful asset that should be harnessed to help shape strategies.
    5. The engine of good decision making is the presence of reliable data, which allows rigorous and proper analysis.
    6. Jersey’s international reputation and its local identity are precious and should be actively managed, both for economic and cultural reasons.
    7. The Economic Council could provide the Government with an on-going source of challenge and guidance.
    8. Government should actively elicit reactions and responses to this paper from organisations and citizens as additional input and provide its own considered response.

 

First class education and skills are vital to the future prosperity of the Island – and Jersey owes it to its young people to ensure that they are equipped to compete in an increasingly competitive marketplace in which ability to use the latest technology will be vital.

This means that children and young people must be educated for the working world they will enter, one aligned with the Island’s economic strategy.  The culture of lifelong learning must also be firmly embedded – within government, companies and the education system.

The Independent Review of Education Funding showed that Jersey has some catching up to do in respect of education.  In particular, the percentage of pupils who go on to Level 3 study is ten percentage points lower than the UK figure.

Jersey already has a good higher education offering through a combination of Highlands, JICAS, Digital Jersey and the Institute of Law Jersey but is capable of doing much more using hybrid and in-person learning.  The concept of a higher education campus in Jersey, preferably embracing the faculty of an UK university, is, at first sight, attractive and merits detailed analysis.

In considering education it is tempting always to consider revising the curriculum.  While this must be done it is more important in the short term to raise the level of attainment and to embrace technology in every subject rather than teaching it as a stand-alone subject.

More generally, the role of Government should be to facilitate an environment in which entrepreneurship and innovation flourish and then to let the private sector and the arm’s length bodies get on with it.  The Economic Council has a crucial role to play here by ensuring that the Government has top quality advice on the priorities, whether they be in respect of education, population policy, planning, regulation or taxation.

Government by its nature is not entrepreneurial, but it alone controls the policies which determine whether a nation prospers or declines.

Specific industries

This policy paper sets out a framework for the Jersey economy and does not attempt to set out detailed policies for specific industries.  However, some general observations are appropriate –

  • Finance centre activities are crucial to the prosperity of the people of Jersey.  Policy should ensure that Jersey remains a well-regulated, attractive location for a wide range of financial service activities.
  • Jersey is developing as a centre for global technology businesses.  This represents a welcome diversification of the economy.  Policy should provide the framework to encourage this industry to grow.
  • Farming may now be small in terms of economic output but is huge in respect of its importance to the Jersey way of life, protection of the countryside (important for tourism and mental well-being) and combatting climate change, and must continue to be supported.
  • Hospitality has suffered as a result of the pandemic and it remains to be seen what the long-term effect will be in respect of people’s willingness to travel.  Policy must help the industry adapt to a very different market.
  • The creative industries are also small in terms of economic impact but again important in respect of their contribution to Island life and the wellbeing of the people of Jersey.  The significant progress that has been made in developing a cultural strategy needs to be maintained.

 

The role of Government owned bodies

Jersey Electricity, JT, Jersey Water, Jersey Heritage, Andium Homes and the Jersey Development Company all play a vital role in providing services to the Island, and Digital Jersey, Visit Jersey and Jersey Finance each have a significant promotional role.   Generally, these bodies have been very effective, and each is capable of doing much more to benefit the Island if given the scope to do so.

The Alliance’s machinery of government policy paper will set out a proposed new framework under which the States Assembly would be responsible for the legislation on the Government-owned bodies, appointments to boards would be made in accordance with the requirements of the Jersey Appointments Commission, formal approval resting with the relevant minister, major decisions and annual plans would be signed off by the relevant minister but otherwise all operational matters should be the responsibility of relevant boards.

 

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