Ladies and gentlemen.
I am honoured to have been asked to open the 23rd annual STEP conference.
It is fitting that the leading association of trust practitioners should host an annual conference here in Jersey, the world’s foremost trust jurisdiction.
Digital infrastructure
This year, the broad theme of the day’s proceedings will be the developments and innovations in the digital sector, as they relate to the financial services industry.
I won’t be getting too technical on that point – I will leave that to the experts – but I would like to speak a little about the investment that Jersey’s Government has made and continues to make in this area.
Enabling the creation of cutting-edge digital services in Jersey is the next natural step in our evolution as a world-class international finance centre.
And as we saw at the Island’s inaugural FinTech conference a couple of weeks ago, there is already much for us to be excited about.
One of the speakers at that event, Simon Devonshire, made a point that resonated with me.
Among his many accolades, Simon is the entrepreneur in residence at Number 10, and his focus is very keenly on what drives a successful economy.
He highlighted investment in infrastructure as being one of, if not the single most important element for any jurisdiction that is serious about placing digital at the heart of its future business model.
This has been for some time, and remains to this day, a key priority of the Council of Ministers.
JT’s Government-backed decision to bring high-speed fibre to the whole of the Island will be crucial to all businesses in Jersey.
Whether it is FinTech or MedTech, the thread that binds these diverse pockets of innovation in Jersey’s economy is the requirement to have a reliable and resilient digital infrastructure.
As I said earlier, I shall leave it to the speakers who will follow me to talk about the specifics of how advances in technology are affecting the trust and legal industries.
But I would like to emphasise the fundamental importance of the Gigabit Jersey project, without which the digital services we may come to rely on would not be possible.
Replacing all of our copper connections with fibre connections is a hugely challenging engineering project that involves getting a single continuous fibre from JT’s central exchange to every property on the Island.
This is the only real way of ensuring that our telecoms infrastructure does not become a bottleneck that impedes the digital growth that our industries clearly want and need.
Engineers are working hard to achieve this goal, and the results are already impressive.
JT connected its 15,000th premises in mid-October, which brings us to a total coverage of around 44%.
To put that in context, the latest rankings for high-speed fibre access in the home places Jersey first in Europe and fourth in the world.
From a Government perspective, as from a private sector perspective, this is indeed good news.
We need to continue to put in place the fundamental building blocks that will enable Jersey’s future economic growth and productivity.
Economic growth
The indicators of continuing economic recovery are there: the Island’s financial services sector grew by 9% last year; employment hit record levels in June this year.
But the States must continue to support the economy while global conditions remain fragile.
This is an approach that echoes the advice from our independent Fiscal Policy Panel, and one that is clearly set out in my Budget statement for 2016.
Of course, what has underwritten the relative buoyancy of Jersey’s economy during these past eight years of global turbulence has been the strength and resilience of our financial services industry.
The latest statistics show that on an annual basis Jersey’s economy, as measured by total GVA, grew by 5% in real terms in 2014 to a level of 3.9 billion pounds.
This increase in GVA (the first year, I might add, that the Island’s economy has grown above inflation) was driven by real-term growth recorded by the finance sector.
Financial services businesses accounted for around 44% of total GVA, and for 51% of all economic activity, aside from private rental income.
Within that, a 14% increase of 17 million pounds was recorded by trust and company administration, while legal services saw a 23% increase of 15 million pounds. A 2% increase of one million pounds was also recorded by the fund management sub-sector.
However, while these facts and figures are undoubtedly important, the impact of the industry can also be measured in many other ways.
Last year alone, finance sector businesses spent around 350 million pounds on goods and services in Jersey.
These same firms spent in the region of 720 million pounds on employment during that same year.
These employees then spent a large chunk of their wages on goods and services here in Jersey, allowing for a ripple effect in the rest of the economy.
In total, the finance sector now employs 12,700 people, and the number of full-time local staff recruited directly from school and university last year was 390. This means that in 2014 there were 80 more new recruits than in the previous year, making it the highest number recorded since surveys began in the mid-1990s.
So, in terms of economic growth, current and future employment and the all-important tax income for public expenditure, it is clear that the finance sector remains, and will continue to be, a significant part of Jersey’s economy.
It is a solid foundation, and one that has the Island’s trust industry at its heart. Trust business is the kernel of our financial services model and it continues to be an exemplar of quality.
We have a regulated, highly skilled workforce of trust professionals, and this is something to which I and my ministerial colleagues often refer during official visits abroad.
It is a key selling point for us when we are promoting Jersey in the Middle East, Asia, Africa and, closer to home, with intermediaries in London.
Planning for the future
So how will I, as Treasury Minister, be laying the necessary foundations for continued economic growth and productivity?
My 2016 Budget is designed to build on the momentum of the first Medium Term Financial Plan by maintaining the previous investment of 14 million pounds in areas such as Back to Work, financial services, the digital sector, and skills.
But it also goes further than we have ever gone in the past, by facilitating extra investment in education, health and infrastructure.
Also, for any new policy initiatives that are brought forward with the aim of making a significant contribution to our economic performance, there is a new 20 million pound drawdown provision.
This provision is intended for those economic growth and productivity policies that cannot be funded from existing resources.
It is important that we remain agile and innovative, and I believe that our funding mechanism should reflect that.
It is also vital that we continue to grow our economy while also rising to the challenges of an ageing population and meeting the healthcare and educational needs of the population.
At the same time, we must ensure that our tax, allowance and benefits systems support lower earners and vulnerable members of our community.
All of this must be achieved without altering our commitment to maintaining a low, broad and fair system of taxation.
To that end, I have set out five clear principles that will guide the development of the Island’s long-term tax policy. They are:
- Taxation must be justifiable, necessary and sustainable
- Taxes should be low, broad, simple and fair
- Everyone should make a contribution to services, while those on the lowest incomes are protected
- Taxes must be internationally competitive
- Taxation should support economic, environmental and social policy
These principles are derived from the long-term tax policy principles that were agreed by the States during the Strategic Plan debate in April this year.
My ministerial colleagues and I are united in our approach to the challenges that must be met in the forthcoming economic cycle.
Supporting financial services
We are also committed to maintaining the sound basis of our economy, which is why the Government published its Financial Services Policy Framework last year.
Building on the recommendations of the McKinsey report, this policy framework set out for the first time a clear, joined-up and confident commitment from Jersey’s Government to securing and enhancing the Island’s position as one of the world’s leading finance centres.
Now, a year on from the publication of that policy framework, I believe that Government’s relationship with the financial services industry continues to go from strength to strength.
The well-established and growing sub-sectors of services within the legal, trust and broader financial services industries will, without doubt, continue to help us grow our own economy and insulate ourselves from the impact of global economic uncertainty.
Reforming the public sector
We are also looking at our own workforce in the public sector and asking some tough questions about how more can be delivered for less.
We are reducing our staff costs through pay restraint, rigorous vacancy management and restructuring service delivery.
We are bringing departments together, improving cross-departmental working, getting full value from the roll-out of eGovernment and looking at ways to deliver services more effectively.
We are asking ourselves: how far should the public sector be directly engaged in the delivery of essential public services? Are there more efficient ways to provide those services?
We have already set up Ports of Jersey, Visit Jersey, Digital Jersey and Jersey Business – all of which provide services at arm’s length from government.
We are investigating the options for our ICT support services, and we are ensuring that we don’t undermine our strong public finances by employing any more people in the public sector than we have to.
We believe our plans will help us to: deliver a modern, efficient public sector; and support economic growth.
Conclusion
It is important that we take confidence from our past successes.
Jersey has maintained a successful economy over many years through a variety of different industries.
Today, we have secure foundations and strong public finances.
We are seeing clear signs that the economy is returning to growth, and we are planning for the spending necessitated by an ageing society.
We are working with our strategic partners to plan for the future, to stay ahead and to build on our long tradition of creativity.
At the heart of that future is innovation – in the digital sector, in financial services and in our Island community.
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