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| Going for growth
| Deputy Gerald Voisin
President, Economic Development Committee |
The headlines of the front page of this newspaper on Wednesday 30th June read, "Brakes off for economic growth". This is without doubt the most positive statement to come out of the States Assembly for years, at last there is a political commitment to get behind the economy and demonstrates the wind of change in our economic thinking which gives cause for belief in that future.
The approved Strategic Plan is unequivocal on the importance of economic growth ñ at a target rate of 2% annually in real terms ñ to the Island's future. I see this as a repudiation of the narrow and possibly even arrogant assumptions of the past that we could somehow suspend economic orthodoxy and dispense with the need for such growth and yet still enjoy a growing level of tax receipts to fund public services. It seems to me that at last there is a realisation, no doubt influenced by the relative economic difficulties of the past couple of years, that this is not the case. The future is one of exciting development for the Island, where the aim of judicious government policies is to nurture growth at a sensible level, respecting that we are an island of finite size and resources.
As this is a Finance supplement, I shall concentrate in this article mostly on growth opportunities in the financial services industry. Please be assured, however, that this in no way denies the importance of other sectors of activity in our growth aspirations. They are an important part of Island life and can be reviewed separately but we all seem now to acknowledge that financial services are the motor of our economy. In the current tax and spending debate minds have been focused on the fall in revenues which can be expected from financial services moving to a lower tax rate in order to stay internationally competitive. Although this move may lose the Island some £50 million in tax revenues it seems to me to be overlooked that it is actually aimed at safeguarding a further £180 million of contribution to the public purse. That is the reality which we are protecting in seeking to grow the industry. Another way of looking at the contribution to the annual amount of £20 million per annum in economic growth that we are seeking to generate year on year as part of the fiscal strategy, is to relate it to current and predicted financial services profitability aggregated for the Island as a whole. This is currently estimated at £1.1 billion per annum so a simple sum shows that if this can be raised to say £1.3 billion for the sector, then the additional £200 million at a 10% tax rate provides the additional £20 million of extra tax revenue sought.
Of course, this is too simplistic. It takes no account if changing market dynamics and would dangerously assume that other things, particularly the international environment, do not change either. What matters is not the ability for financial services to do this in any given year but to sustain it over the long term. That means a strategy for investment and government doing those things which it can do in order to assist the development of the industry whilst staying out of things which Governments cannot or should not do. In other words, investment not micro-management.
What I would like to see in terms of the States approach to financial services from now on is a much more responsive approach ñ both to industry initiative and to other changes in global demand. I see this taking form initially in four distinct areas. These are law-making, education, licensing policy under a changing population strategy and enhanced promotion. The list is not exhaustive but establishes some useful priorities to tackle and create some momentum. I will deal briefly with each in turn:
Law Making and Regulatory Developments
This is a vital area to enhance any growth strategy. Our history shows conclusively that where we are able to identify a market demand and create good law to leverage that demand, such as for example the 1984 Trusts (Jersey) Law, then we tend to create a market niche which serves us well. Not surprisingly, I see an opportunity to replicate such a successful formula in the future.
It is not just a question of law as the introduction of the recent Expert Investor Funds Guide by the Financial Services Commission also demonstrates. However, with initiatives under way in terms of Protected Cell Companies, revisions and enhancements to the Security Interests Law and the Trust Law and a proposal to improve our 'toolbox' further with a Foundations Law it is the case that we are seeing more activity in the commercial law making area now which is encouraging. Law making of commercial benefit to the Island should primarily be driven by industry demand but also needs a controlled framework which makes sure there are some priorities without commensurate obstacles. Again, this is a function of government and we are progressing ideas which in the future may see a pre-
agreed amount of law drafting time set aside each year for just this purpose. The benefit would be to ensure a framework in this area too which also emphasises economic growth and is in line with the Island's overall strategic aims. For the financial services industry to compete in the long term we need products and services which are relevant to the marketplace and enabled by our legal infrastructure and the creation of the necessary law itself.
Education
I am also convinced that we need to upgrade our indigenous skill base. At the time of writing, the first real skills survey of the financial services sector in Jersey is underway through the auspices of the Training and Employment Partnership. I expect its conclusions to be revealing. I understand that we need to do more in terms of financial services training and visibility both in the secondary tier of education and in terms of recovering graduates more quickly once they have obtained their degrees in primarily UK universities. At present many come back but only after several years working away often in a sector with no direct relevance to the finance world on which so much of the Island's wealth creation is based. Plainly these are circumstances which need a fresh look and a fresh approach and whilst I do not have the precise policy blueprint to hand for today's article I can assure readers that I understand the need to develop initiatives in this area if our primary industry is to remain cost effective and therefore competitive. Licensing
Policy & Resources have recently published their proposals for a changed population strategy. I think these are to be applauded and seen as a key component of any economic growth strategy. However successful we are in educating the local population the Island's high value added finance sector will still have a need to import skills and expertise as well in a fast moving market. My view of the recently published proposals is that they put the licensing decision as far as possible back into the hands of the employer within a pre-agreed set of numbers of licences for the institution concerned. This is good news as the business is always likely to be in a better position to make a judgment about how to use its scarce licensing resource than any third party. Moreover, the new system, if agreed, will also reduce bureaucracy by delegating that choice to the business rather than asking them both to justify and document it to a Government department.
I realise that these changes are some way from nirvana to many international businesses operating in the Island but they are a significant step in the right direction and further evolution may yet be possible. As government, I think it is essential that we continue to work with business to achieve the maximum possible flexibility and momentum in giving employers access to the skills they need within Jersey's own particular circumstances. This effort will undoubtedly continue.
Promotion
When you have something to sell, sell it! A maxim with which I hope many readers will agree. We have an excellent product, a skill base and product array in financial services which need development but which still compare well with others. We have a reputation, good infrastructure and a global clientele. These are all pre-requisites to further enhancement of our promotional activity which I am very pleased to see now developing strongly in the capable hands of Jersey Finance Limited. My Committee has already voted additional resources to support JFL's promotional activities this year and have argued for continuation of this funding as essential for further showcasing of the Island. As a result we are reaching audiences in the Middle East, the United States and in Europe where Jersey's visibility was previously very low and JFL are to be congratulated for their excellent work and encouraged to do yet more.
In addition, I see opportunities to cross-fertilise our promotional activity in the finance sphere with the promotion of other sectors of activity where the Island seeks to sell itself in export markets. Tourism and agriculture are obvious additions and collectively with finance there seems to be a real opportunity to showcase the Jersey 'brand' overseas in an increasingly joined up way. I am interested with my Committee in exploring this further as part of the general economic growth strategy and we will pursue this energetically since we should neither neglect nor underestimate the power of promotion in seeking enhanced prosperity for the future.
What precedes is not a wish list but either action being taken now or contemplated in the near future. There are many other initiatives to pursue and this is but a snapshot. However, in any endeavour such as that on which we are embarked ñ two further qualities will be required in abundance. Determination ñ since not all will agree that these are the best or right things to do ñ and also because energy will be needed to see them through. In addition and perhaps, above all, a high degree of self-belief will be essential. In fact, in any discussion of economic growth an increase in our self-confidence and positive approach is perhaps the biggest growth requirement of all.
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