08 December 2009
This time ten years ago we were about to celebrate the start of a new century. We looked forward to the first decade of the twenty-first century with optimism, tinged with a hint of uncertainty about whether our computers would still be working, or whether they would be subject to the millennium bug.
At the time I was president of the Employment and Social Security Committee, and still in practice as an accountant. I had no plans to become the first Treasury Minister, let alone become Chief Minister.
There were ideas for a new body called the Industries Committee, whilst the Defence Committee was changing to the Home Affairs Committee. The Ministerial system itself was only an idea which the Clothier panel were contemplating. The economy was starting a cyclical downturn.
In the UK, Tony Blair was hitting his stride as prime minister, Europe was about to launch the Euro to replace the European Currency Unit (does anybody remember the E.C.U. now ?) and the governor of Texas, George W Bush, had just announced he would run for US president.
It was, I think you’ll agree, a significantly different world.
I say all this merely to set the scene. When we anticipate the decade ahead of us now, we do so from a very different starting point. We are probably facing changes as great, or greater, as all those we have had in the last 10 years, and we are doing so in a period of economic turbulence that has affected the whole world.
However we can take comfort from the fact that we start the coming decade in a strong economic position, and with an international reputation as high as, or higher than, it has ever been.
One of the most pressing issues will be our ageing population. It was a problem I began to address in the 1990s when I was at Social Security, but by the time the year 2035 comes around, more than a third of Jersey residents will be over 65 – double the number of elderly people there are now. There will be greater demand for health care and other essential services precisely at a time when there are fewer taxpayers to fund them.
How we fund long–term care for this vulnerable section of our community is itself a dilemma that has to be addressed. At the same time, those who do remain of working age will find that they are not only helping support the ageing population; they will also be supporting and paying for all the other services the Island will continue to need.
But the public purse strings are already pulled tight. And that, not surprisingly, is uppermost in my mind today. When I return to the States this afternoon it will be for a continuation of the Budget debate which began this morning.
The budget report for 2010 sets out quite clearly the dilemma we face – that very soon we will spend more than we earn. There is likely to be a permanent shortfall between the States income and the cost of providing services – a structural deficit in the region of fifty million pounds a year from 2012.
We cannot afford to wait to resolve this, so we are acting now. We started with the States Strategic Plan for 2009 to 2014, which set out two clear messages I want to stress; first that we MUST start to live within our means. And by “WE” I mean the States. That means aiming for no extra public spending without equivalent savings. But it is not just an issue for government. Everyone, including everyone in this room today, must play their part.
It is our duty as a government and as an Island to consider all possible options for securing sustainable public finances. We will support businesses to diversify into new, high-value sectors to strengthen our economy. Economic growth will enable us to keep taxes low but there will be pressure to examine higher duties and new taxes in future if we are to provide for the Island ’s most vulnerable citizens.
I believe the States is much more commercially focussed than it has ever been. We will press ahead with matching our costs, using the user-pays approach to public services where appropriate, starting with policing and immigration fees in the New Year. But we as Government need to be ever more careful in the costs we incur.
The search for efficiency savings is ongoing in all States departments. In the next decade there will be more ‘either, or’ choices – freezing pay or failing to provide services, for instance. We no longer have the funds to pay for everything we want at once and we need to prioritise, especially during hard times, so that we pay for health services and income support at a time when unemployment is high and people need it most.
We are planning a Comprehensive Spending Review, which will provide a more logical, robust way of setting spending levels. One of its aims is to replace the current Strategic Plans and Annual Business Plans with a single three-year plan that will match the timing of the political cycle. It will be a major exercise, and one which we cannot afford to repeat every year.
This will run in parallel with a Fiscal Strategy Review that will consider the wider financial pictures and bring them together in two years time with a new blueprint for the future. It will address some pressing financial questions:
· How to address any structural deficit once the economy has recovered
· How to fund essential public services in future
· How to replenish the Stabilisation fund after it runs out in 2011
· How to ensure Jersey complies with international demands on standards of taxation
· How to differentiate ourselves from our competition
My wish list for the next ten years includes the development of robust, competitive telecommunications infrastructure and exploration of alternative energy sources, particularly tidal power.
I believe the technology will advance rapidly over the next decade in both areas and we must exploit it.
It must also be a top priority to sustain a strong international profile. We are in a good position to capitalise on the accolades received recently from independent organisations of high regard, including the IMF the OECD and of course the Foot Report.
We have received many more bouquets than brickbats but will have to continually reiterate over the next ten years that we are a financial centre of the highest repute that is committed to meeting international standards.
We will have to be ready to adapt.
Predictions for what will happen next year – let alone over the next ten years – are prone to wild fluctuations. But recent forecasts expect average global growth of three percent over the next ten years. However this overall figure hides a very varied picture. Developed economies are expected to grow by two per cent or even less, but emerging economies will grow by more than double that amount at 5.5 per cent.
We have already recognised this trend. We know that in future we will have to look outside our traditional markets for new business opportunities and we have started doing that. We are specifically targeting the two Asian economies that are expected to boom during the next decade – China and India.
In November, Jersey welcomed the Chinese Ambassador on a diplomatic visit. Madam Fu left me in no doubt that one motive was to assess what the Island has to offer Chinese businesses. And later last month, the Treasury and Resources Minister led a very successful delegation to India – the second in 18 months – accompanied by Jersey lawyers, accountants and business leaders.
This work will continue into the next decade. Indeed, I am convinced that it will accelerate. Jersey’s fortunes are now irrevocably linked to the wider global economy.
The recent scrutiny of our tax transparency arrangements was part of a worldwide debate about financial systems that will be ongoing. We must remain alert, responsive and flexible.
Jersey Finance now has permanent offices in Hong Kong and London and we have strengthened our international relations team at the Chief Ministers department. We are also planning a closer working relationship with the States of Guernsey and looking for other overseas markets
To do this we need expertise, specialist, highly-trained staff, so training will be vital for the Island over the next decade. We have already invested in new schemes to grow our own teachers and nurses and have re-instated the States apprenticeship scheme with funding from the Economic Stimulus package.
Companies will also need to invest in staff training if they are to remain competitive and productive. There is scope for businesses to work with schools and training agencies in the Island so that we tailor education and courses to the needs of the local economy.
Highlands College now provides several degree level courses, including one for the financial services industry and a new BSc in information technology. Other providers are entering the market. Businesses can and should be having greater input into the training of their future employees.
At the start of 2009 I was an innocent (Well, perhaps I should say inexperienced) new Chief Minister.
I might not have expected to be faced with a challenge of a flu pandemic which could, if not properly dealt with, bring the Island to its knees.
I might not have expected two quarters of negative R.P.I. I could no doubt have expected employees to make some adverse comments about the resulting pay freeze which the States agreed.
I might not have expected that the suspension of certain high ranking employees would have lasted so long, or that certain States members would be so critical of this and other such matters. I might not have expected our senior Senator to be arrested on motoring offences, and I could be excused for not expecting him to seek political asylum in the U.K.
In short, you never know what to expect, and that is in just one year. As the old Guinness advert says, think what two can do, let alone the next ten years. But as Chief Minister you have to be prepared for whatever comes your way.
I believe the future is bright for Jersey in the decade ahead. We will have tough choices to make but we have every reason to be positive. If the government, private sector and individuals work together, we can reach our potential, and even beyond. In particular, I should like this to be the decade when everyone plays a part in making a great Island even better for ALL its inhabitants.
I hope that, when we reach December 2019, Jersey can look back on a decade of steady progress. I hope we will all be able to say that we have protected, and enhanced, our Island and our unique way of life. Time will tell, but I certainly start the decade on a note of optimism.
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