Emerging from the lost decade
As Brexit and the legacy of the 2008 financial crisis begin to weigh on the British economy how will Jersey respond?
This column appeared in the Jersey Evening Post on the 28 June 2017
I t seems many in Britain and Jersey are in a state of denial over Brexit. Our leaders are eager to put a positive spin on a situation that is almost certain to go in the direction of ducks during winter.
As a ‘facilitator’ of foreign investment, half a trillion pounds flows through Jersey to the UK, according to Jersey Finance. That’s one in every twenty UK pounds. Not that the Jersey government sees much of that, but the point is we’re pretty reliant on the UK, which brings us to Brexit.
Our lauded UK Brexit representative, Sir Oliver Heald QC, summarily got the boot post election to ‘make way for a younger person’. We’re continually reassured that Jersey is in the forefront of the UK government’s mind during negotiations. But Theresa May’s cabinet is in disarray. She’s clearly struggling to get her own house in order, while having no clear direction on Brexit, other than to apparently emit hostility towards the EU. Where does Jersey factor into this?
The pound has dropped, savings are in decline, inflation and consumer debt are rising. The Bank of England has held off raising interest rates, for now, and we are well due for the next cyclical crash. Much was made of the extra £300 million in the latest set of Jersey accounts, but this was mostly driven by good investment returns — our economic situation is tenuous at best.
The 2008 financial crisis socialised risk and debt for us; profits since have been privatised. It also led to our zero-ten tax regime so we could ‘stay competitive’ in the global market, and since then the average wage has remained pretty much stagnant. It’s been a lost decade that we still haven’t fully recovered from. We now appear enslaved to the wants of the market which stopped working for us a long time ago.
The danger is that as things get economically tougher for the British economy, which they will, Jersey will look to impose further austerity measures. Founding member of Jersey Finance, John Henwood, hinted at this approach last week at an Institute of Directors networking lunch where he labelled the government a ‘bloated monster’, and promoted private enterprise, slashing wages and outsourcing.
As the death toll rises following the Grenfell Tower, it serves as a warning of what can happen when the ‘bloated monster’ takes a back seat to the market. So isn’t it about time we tried a different response?