Good afternoon,
Thank you for inviting me to join you today. It’s my first speech to
Chamber and, as Economic Development Minister, I sincerely hope it
won’t be my last. As I look around, it’s impressive to see so many
important people in the room...business leaders, politicians senior public
servants... but I hope you won’t mind me saying, so, none of you are more
important than these people sitting over here. Everything I’ll be saying
today is aimed squarely at making Jersey into an island where these
talented students, the business leaders, politicians and public servants of
the future will want to live and work. If we get the next 15 years wrong,
then they’ll be the business leaders, politicians and public servants of
elsewhere and I can tell you now, that everything I’m working on in the
Economy Department has the aim of delivering an economy and therefore
a society in which Jersey’s young people can see themselves living the
rest of their lives.
Today, I’ll be talking about the challenges that Jersey is facing – these
aren’t unexpected nor are they unique, in fact, they’re challenges we have
in common with much of the Western world but it is time to stop talking
and to start acting, it is time for Government to start leading and so, as
well as outlining the challenges, I’ll be introducing you to the Future
Economy Programme, a piece of work that our Economy Team is working
on today and which will be unveiled in September. It is the strategy that
builds on the work of the Economic Council and was started by my predecessor, Deputy Farnham, the strategy that will help us attain the
sustainable economic growth that our island needs, if we are to deliver a
prosperous Island for future generations.
Today, I’m going to speak the truth about our economic future - the Future
Economy will be your responsibility when the majority of people in this
room are retired - and so it’s vitally important to me that you are part of
our discussions - and that this discussion goes beyond the Council of
Ministers, and beyond this generation of business leaders.
So what is the challenge? It is how we achieve sustainable economic
growth.
I want to explain where we are now, what the challenge is for the future,
and how we think we can address it…
Before I set out this long-term issue, I want to add that “I’d rather be here
in Jersey than anywhere else.”
These are the words of our Chief Economist, Tom Holvey. And it’s not just
because of the beautiful beaches and fantastic food, but because
economically Jersey is in a stronger position than many of the other
economies who are facing this challenge. We have greater potential to
solve our own problems than many other places….
Currently, Jersey enjoys some of the highest living standards in the world.
But we shouldn’t take this for granted – for instance, other small islands
are not in the same position:
Fiji has the same size economy as us but – with 900,000 people – has
nine times our population.
Meanwhile Aruba has the same size population as Jersey, but its
economy is half our size.
In other words, as has been said before – Jersey punches above its
weight.
One way to measure living standards is through GVA per person, that’s
the total amount of value produced in the economy divided by the total
population. By this measure, Jersey consistently ranks among the top 20
in the world.
We should be incredibly proud of this. We have an incredible track record,
built over decades, of economic growth delivering an increasingly high
standard of living but that story changed following the 2007/8 financial
crisis and the time has come to rewrite it once more.
This time, we have to do it in the face of significant challenges but they
are for the most part known challenges and so, I have no doubt that if we work together, if we back each other and ourselves, then we can succeed
in the face of them.
As this graphic shows, over the last 20 years, Jersey’s economy has only
grown by 0.1% a year on average.
That’s not a lot of growth but it is growth, however, for the most part, it has
been delivered by growing the working population, something which, in a
tiny island, brings its own problems around space and infrastructure in the
short and medium term but over the long term, it has also given us a clear
demographic challenge.
And, if we’re to rise to that challenge, whilst at a minimum, maintaining
living standards, then we have to make that line climb much more steeply
in the coming 17 years.
In simple terms, that means productivity growth. Each of us has to
produce more value through our economic activity, than we have done
over the past 15 or twenty years.
But if we’re talking sustainable growth, then productivity cannot mean
working longer hours – it has to mean making the output of those hours
you do work, more valuable.
The challenge is that by 2040, the number of people who do not work in
the economy – principally, the young and the retired – will make up a
larger proportion of the Island’s population.
Today, we have just over 1.9 working people for every single non-working
person. By 2040, that will have fallen by half a person to 1.4 working
people providing the private and public services, including education and
healthcare to a single non-working person. This figure is known as the
‘dependency ratio’ and, if we are to restrict population growth, then it will
fall.
This fall in the dependency ration defines our challenge.
As you can see from this animation, without migration, by 2040, over 65s
will increase by 50%, while the working-age population will fall by 10%.
As things stand, that means that demand for public services like health
and long-term care will rise and this means that we have to make some
decisions.
If we do nothing (I do believe in putting the do-nothing option on the table
to remind yourself that inaction is a conscious choice) then our standard
of living and public services will, simply worsen, as we will have less
money per person to maintain the economy at current levels.
Alternatively, we could encourage more working age people into the
Island by continuing our current economic model and the model for the
past couple of decades, by increasing migration. More people will provide
economic growth but they would also put a greater strain the Island’s
infrastructure and housing, as well as providing our future generations
with exactly the same demographic challenge.
If we only focus on public services, then, in the absence of any
substantive growth in immigration, we could choose to increase taxes. But
that would mean us all facing up to our students here, and telling them
that they’ll have to pay a higher rate of taxes to pay for our healthcare.
Now, if we are to make Jersey an attractive place for young people to stay
– where they enjoy a good quality of life and rewarding careers – then I
believe we need to do things differently. And we have to start doing that
now.
Our long-term aim will be to see each of us producing more and earning
more without needing to work longer hours or pay a higher tax rate.
And to do this we’ll need to use every lever we have.
We will, indeed we already are developing new sectors to our economy
but we need to go further. Using our regulatory agility in conjunction with
our entrepreneurial spirit, we’ve attracted investment into the highly regulated, high quality medicinal cannabis sector. This has given us the
knowledge and reputation to begin attracting investment into plant-based
pharmaceuticals. That can not only earn high levels of revenue but could
be of enormous help in our pursuit of cost-effective healthcare.
We can harness our natural resources to produce and sell renewable
energy.At today’s price (8p) 1GW of wind generated electricity would generate
around £340m GVA.
Different sectors would expand the variety of attractive and high-value
careers, hopefully leading to more young people staying in Jersey.
But more immediately, existing businesses must embrace technology that
enables us to be more productive.
Improving productivity isn’t about working harder.It’s about working
smarter.
Being more productive involves producing and creating more goods and
services for the same amount of time worked and that can be done by
simply reviewing processes. By slimming them down and using
technology to make them more efficient.
The Chief Minister and I recently visited one local office of a multinational
business that had done just that and significantly increased its profits without growing its workforce. And most impressively, its local technology
team was at the heart of the transformation, which is now being
showcased to other global offices.
I know that this is easier said than done and that you work incredibly hard
but still, I have to lay the challenge with you. We’re in this together, and
the island needs you to focus on increasing productivity so we can all
deliver sustainable economic growth?
And that challenge is equally valid for government, which has struggled
and continues to struggle to streamline its processes for its own and
everyone else’s benefit.
Because achieving sustainable economic growth is a challenge for us all.
We can continue to welcome migrants to Jersey to bolster the workingage population.
At today’s productivity levels, that could require a population of 150,000 in
2040 – just to retain our current living standards.
Some level of migration in the future will be needed, but we also need to
do things differently.
The more productive we are, the fewer additional workers we will need to
retain our quality of life.
Productivity means doing more with:
- people
- resources
- the skills we have already
- being entrepreneurial and developing new parts of the economy.
This means:
- embracing change
- empowering ourselves to do more with new technology
- ensuring that we are all able to adapt and develop skills throughout
our working lives
- it means finding opportunities to do new things to increase economic
growth.
I said that we were doing okay, but we need to do better than the 0.1%
annual average.
The EU has seen productivity grow at an average of 2.1% per year.
Whereas Jersey’s productivity has fallen.
Had Jersey’s productivity grown at the EU average, our economy would
be £200m bigger.
Our ambition – the green line – is the result of increasing economic and
productivity growth.
Between now and 2040 we need each worker to produce at least 7.5%
more value in real terms.
The further we are away from this productivity growth of at least 7.5%, the
more population growth that will be required.
Our challenge is to get as close to that minimum 7.5% as possible.
Now, I’m keenly aware that many people will question the focus on growth
and productivity. Many of you will be thinking about the need for our island
community to be rich and diverse. For the environment to be protected
and for life to be about more than just work. I can assure you that I
completely agree. For growth to be sustainable, it means we need to
provide a diverse economy with career opportunities that excite young
and ambitious minds. It means we have to provide a resilient economy
that can withstand unexpected shocks and we have to deliver an
economy that minimises its environmental impact. In turn, this means
minimising population growth.
The Future Economy Programme is designed to deliver exactly this and
whilst we will have to wait until September to see it, I can assure you that
in the Economy Department. we’re not waiting till then before we get
started, we’re already doing a great deal.
We are addressing the barriers to business – please get involved in the
consultation which is being undertaken by Jersey Business.
We will shortly be publishing Jersey’s first Export Strategy – because
Jersey’s past, present and future success will depend on exports. Our
future is global and the strategy will help non-finance businesses increase
their markets through exporting.
With Digital Jersey, the Government has funded and launched Impact
Jersey, a scheme designed to accelerate and strengthen Jersey’s
technology ecosystem, and will help develop a research and development
sector in the island, another important piece in the productivity growth
puzzle.
Impact Jersey is being funded with £20 million of public funds and it’s
aimed at solving the island’s biggest challenges.
Its strategic priorities include boosting productivity in local industries – as
well as identifying sustainable transport solutions, enhancing health and
wellbeing, improving infrastructure, and ensuring islanders have the right
skills for the future.
So please take a look at impact.je and register to get updates about the
challenges being offered. Your inspiration, could help us solve Jersey’s
most intractable challenges.
We are also exploring the feasibility of environmental and economic
benefits of renewable energy - and we are interested in the opportunities
a wind farm might create for other parts of the sector - such as vertical
agriculture.
Because Jersey is in a strong position, with low levels of debt and healthy
reserves, we will use that strength to ensure our public funds are working
to protect our Island's future.
Government could use some of its reserves to invest in solutions to
strategic challenges that provide financial returns. To this end, those
reserves could invest hundreds of millions of capital into the economy,
whilst themselves continuing to grow for our benefit.
All of this adds up to the beginning of a culture of sustainable economic
growth - which will use all the tools at our disposal, including our own
community’s enterprising and innovative nature to deliver a future that all
young islanders can buy into.
Our vision for the Future Economy Programme is for Jersey is to be a
consistently high-performing, environmentally sustainable and
technologically advanced small island economy by 2040.
However, this does not mean growth at any cost and to ensure that this is
the case, this vision is underpinned by five themes – our ambition is for the economy to be resilient, innovative, skilled, fair and international. In
short, sustainable.
To achieve this vision we all need to play our part, from you, the vibrant
business community we have in the Island today, to you (gesture to
students) our leaders of tomorrow.
In September, we will set out the framework for sustainable growth to
2040.
But the strategy is not the solution.
The solution is found in how we, as an island, come together and act to
deliver the growth we need from now until then and the key measure of
that success will not only be found in the key economic indicators, with
which we’re so familiar.
The clearest sign as to whether we’ve succeeded in building a diverse,
high performing, sustainable economy will be in whether our young
islanders choose to vote with their feet. If they can see that Jersey truly is
the land of opportunity that I believe it is, then I’ve no doubt that they’ll
choose to stay here, knowing they can build a fulfilling life in our tiny,
incredibly successful land.
For that to happen, we need to act now and I ask you all, to join me and
my colleagues in government in securing Jersey’s future success by
delivering Jersey’s future economy.
Thank you
gov.je