Picture this: a friend has gone down with a bad cough and high temperature. You suggest they ease up until they get better. The friend ignores you. Their condition worsens. Still they carry on as if nothing was wrong. Eventually they end up in hospital with pneumonia.
Exactly nine years ago that person was me. I remember my state of denial, continuing to go on bicycle rides even as the cough got worse, my breathing got shorter, and the infection worked its way into my lungs. I ended up in A&E barely able to breathe.
I think of that time in my life when I consider Jersey’s current situation. Our economy has been deteriorating for 20 years, yet our leading politicians appear in denial. They accuse people who highlight the island’s problems of “talking Jersey down”. For years – decades – they have ignored the warning signs, and busied themselves with the performative side of politics; commissioning reports, setting goals, making statements – whilst nothing significant changes. They take comfort in Jersey’s relative wealth (and in many cases their own personal wealth), even as the decline accelerates. Carry on like this and we are heading towards the economic equivalent of A&E.
In this piece I want to briefly look at what’s gone wrong, and then suggest how we might turn the situation around.
First, the facts. Jersey’s economy (economic output per head of population) has flatlined for 20 years. In that time, productivity has declined by more than 20%. In finance – the main engine of the economy – productivity has declined even more dramatically. To put that in context, ten years ago Guernsey’s economic output per head of population was a little below Jersey’s (£49,100 compared to Jersey’s £49,800). In 2018 Jersey’s had fallen to £43,500 whilst Guernsey’s had climbed to £52,500. You might have thought such a staggering reversal in fortunes would trouble our politicians. But no. It has passed almost entirely unremarked.
As Michael Oliver, a former economic adviser to the States of Jersey, recently put it: “We are behind the curve… We’re now looking down the barrel of a gun and it’s not very nice… There’s a lot of complacency, lethargy…”
Of course, economic growth is not the only important thing in life. What really counts is whether people have good lives. So perhaps Jersey does better on this front? Unfortunately not. Statistics Jersey have started producing reports on the “Better Life index”, which measures wellbeing, using standard international criteria. In 2013, Jersey was 15th out of 38 countries with a score of 7.5. In 2018 we were down to 19th with a score of 6.8. The UK, France, the USA and Germany all outperformed Jersey. Just as economically, when it comes to quality of life, Jersey is on the slide.
Government action (and inaction) have made the situation worse. Starting in the late 1990’s, the government began using immigration to try and generate economic growth. Self-evidently that policy failed. But what was really inexcusable was promoting mass immigration without providing enough new homes or regulating the housing sector. The result has been an entirely predictable house price spiral of catastrophic proportions.
So we’ve ended up in the absurd situation that high immigration has caused a housing crisis so extreme that immigrants no longer want to come, even if we throw the doors wide open. Farming is in a battle for survival, dependent on low wage workers who don’t want to come here anymore. It’s a similar story in hospitality. Essential public services are also short of workers.
Whilst a relatively small (but influential) class of business people, property owners and the super wealthy continue to do well out of Jersey, far too many live in poverty, and the middle class is squeezed as never before. People are leaving because they see no future here. The government has run out of money and is racking up debt. In summary: the Jersey economic model has collapsed under the weight of its own contradictions.
Just as with our personal health, the first stage in getting better is to move beyond denial, and resolve to take action. Jersey’s economic rejuvenation is the defining challenge of our time, wherever you sit on the political spectrum.
Let’s begin by asking fundamental questions about Jersey’s future direction. Do we want to simply recreate where we were before Covid and Brexit? Or do we want to use this moment to radically rethink our economy? I think the latter. We must use this opportunity to build a better, more inclusive Jersey, a society more at ease with itself.
With economic renewal in mind, I turned to the late Colin Powell’s influential “Economic Survey of Jersey”, published in 1971. He was after all an architect of Jersey’s last great pivot, from tourism to finance. Yet in 1971 he didn’t see it coming. “Tourism is the island’s ‘number one’ industry, and the island must continue to depend upon tourism for the lion’s share of its material wealth”, he wrote. Clearly, picking winners isn’t easy. It is in any case unlikely that we can rely on a single economic sector to ride to the rescue; there is no “finance” waiting in the wings to take over. It’s going to be a bit more complicated than that.
Mr Powell did however make an observation of great significance. “Jersey has… prospered as an independent unit on the basis of differences with our surrounding territories”. In other words, what we have more than anything else is our identity as a separate jurisdiction. That identity is manifested in our special constitutional arrangements, but it is also expressed in our heritage, culture, and natural environment. Everything we do should build on, and serve to strengthen our unique identity.
We need to be clear about our goals. Economic growth is not an end in itself. If it is achieved by increasing incomes only for the well off, or trashing our environment, then it is not worth having. We need growth based on increased productivity, not a rising population.
Wellbeing is important, so Jersey’s economic strategy needs to target improvements in the Better Life index as well as GDP.
As an island we have always had a flare for reinvention, but recently the pipeline has run dry. We need to rediscover that spirit of innovation and entrepreneurialism. To me it is summed up in the phrase “small island, big waves”; an island that punches above its weight, but does so in a way that makes it an inspiring beacon to others. The opportunity before us is to marry the reinvention of a vibrant economy with social inclusion and environmental improvement. Let’s build our economic and social renewal around Jersey as a force for good in the world. Let’s make Jersey matter.
What would that mean in practice? We can start with what we’ve got. The three pillars of Jersey’s economy – finance, farming and hospitality – are not single entities. Each has multiple strands. Future success is going to come from recognising the strands that are growing, and ensuring they develop in ways that feel inspirational.
Take finance. It’s a crude caricature, but you could say that for decades finance in Jersey has been concerned with hiding money away. That business model is under sustained attack. Meanwhile, one part of the finance sector that is growing is putting money in the service of economic and social improvement. From the energy transition to environmental conservation, we see major, generation-defining shifts in the global economy. Jersey’s finance sector should be at the forefront of enabling those changes. Some work is already underway – Jersey Finance has launched its “Jersey for good” programme – but we need to turbocharge our commitment to sustainable finance.
Farming? There is no future in an industry that is based on scouring the world for ever poorer workers who are prepared to put up with what we have to offer. We need to shift up the value chain, and become a beacon of best environmental practice. That can only mean a move to organic and regenerative farming. Tourism? Another industry that needs to move upmarket and away from a dependence on cheap imported labour.
Transformation isn’t going to be easy and it’ll need government support. We need to build a bridge to this better future. Whichever direction our economy develops, it is going to need people who are highly skilled, flexible and creative. There is simply no better way in which we can spend taxpayer’s money than to drive up skill levels in the workforce. We’ve known this for years. It’s a big theme in the Common Population Policy. Digital Jersey have made a good start. However, we still spend far too little on education and training. We need a game changing policy shift: perhaps give every adult a £10,000 voucher to spend on training or education.
Jersey’s economic transformation must be based on better lives for everyone. Covid gave us an insight into how interdependent we are. We should build on that sense of social solidarity. You cannot ask people to take part in a major programme of change if they do not believe that their interests will be looked after. Getting the business environment right is vital, but we need to do more than create an economy that works only for the wealthy.
Social solidarity requires a broadening of the tax base, not least because improving workforce skills will cost money. At the moment the tax system benefits the asset-rich. Property owners have seen massive unearned gains over the last few years, so we should institute a windfall tax on some of these gains. Kristina Moore’s proposition to increase stamp duty on second home sales is a tentative move in the right direction. Likewise we must tax “planning gain” – the huge increase in land value that occurs when a field is rezoned for housing. An empty property tax is also way overdue.
Is such a major programme of economic, social and political transformation possible? Politicians sometimes despair at the island’s resistance to change. But the truth is they rarely commit to winning the argument. From the new hospital to the climate emergency, where are the ministers arguing their case passionately in every forum imaginable? Politics is about persuasion; you have to engage with the public continuously. Instead we have a government that is remote, secretive and distrusted.
The beauty of aiming to make Jersey matter is that it ties together so many themes. Enhancing the environment, meeting our climate commitments, protecting our heritage, investing in people, encouraging innovation, reforming government – it’s a holistic programme where the strands reinforce each other.
One final thought. A health scare can be the start of a slide into long term decline. Or it can be the kick up the backside we need to get fitter and stronger. Any programme of improvement needs a conversation. So let’s talk.