A less intrusive government, or one that invests in our future?

It’s not a popular position to defend the public sector when many businessmen look upon many services provided by the government as something of a luxury we can no longer afford. It’s got to the point that I now try to avoid the subject.

But when a well-respected minister continues to peddle myths, I can’t help myself. I have to put the opposing view.

The minister in question is the Economic Development Minister, who has a particularly important job at present and who took advantage of a recent event organised by Lloyds TSB to explain how he intends to do it.

His talk was supposed to contain ‘a good sprinkling of realism or what some may describe as the real truth’, he said. I think it was mostly urban myth and dogma.

Once again, Senator Alan Maclean was clutching at straws and claiming that the solution to many of Jersey’s problems was to make the public sector more efficient. That’s a euphemism for cheaper.

If that’s the basis for an economic strategy, perhaps we really are in trouble.

It shouldn’t need to be repeated, but of course we must save money where we can, and of course the government must strive for efficiency. But that applies at any time – not just when we are in a recession. Rearranging the deckchairs and restructuring won’t, in itself, help to grow the economy. It could do quite the reverse.

The minister’s belief, of course, is that there is a pot of gold to be found by cutting government services, reorganising departments and making everyone work harder for less. That pot of gold will then be used to provide the new services the government needs to help grow the economy.

Otherwise we would need to raise taxes, and noone wants that, even if we are still one of the lowest taxed jurisdictions on the planet. So calling for ‘a consistent and prolonged downward pressure on the cost of public services’ is something we need to do at all times, and I would be surprised if there are many people in the private sector who didn’t realise this a very long time ago.

The trouble is that the pot of gold from restructuring the public sector might be no more than a thimble, because as everyone acknowledges, it’s the costly essential services that take by far the largest chunk of taxpayer’s money. So it’s not easy making significant savings without damaging essential services. That’s unless you consider public health, law and order, and education to be not essential.

Yet the minister seems to expect this restructuring to free up millions of pounds as if by magic.

It would be too much to expect him to acknowledge the pressure the public sector is already under in order to meet the £65 million savings plucked out of the air by the previous Council of Ministers. After all, it just needs a little bit of restructuring.

However, the minister expects cuts in public spending and ‘a smaller, less intrusive government’ to do the trick. He is right, because it may indeed prevent an increase in tax as well as posing some danger to the services the public so obviously want. But it won’t help to grow the economy.

However, it’s not even clear that the minister believes what he’s saying, because in the next breath he acknowledges that considerable public investment will be required to foster economic growth. He didn’t mention it, but we will also need to repair the damage caused by failed policies in the past, such as a lack of effort in the skills and employment areas.

Instead, his speech praised Israel, which he visited recently, for its entrepreneurial spirit, partly due to the amount of government investment in research and development which he says Jersey should take notice of.

So what is it to be? A smaller, less intrusive government, or one that actively invests in the future of the economy? It seems that the minister wants both.

He also wants to promote economic development by innovation, a faster law-drafting process and a whole host of other things that require government money. Presumably this will come out of the pot of gold produced by a restructured public sector.

The minister has already requested an extra £2.5 million for his department to fund the delivery of the new economic growth strategy. This is not for more staff, he says – it’s to support business. So he’s going to hand over £2.5 million to start-ups and businesses without having the staff to ensure that the policy is correct or that the money is spent properly. That’s small government for you.

At least Senator Maclean practises what he preaches (to such an extent that ‘Economic Development’ is becoming a bit of a misnomer): he is confident that by the end of next year his restructured, slimmer and more efficient department will deliver only core functions such as strategy, policy and legislation.

How he’s going to do this with less money, when what’s required are more resources in these areas, is a question left hanging. He will certainly be spreading the extra £2.5 million very thinly if the Treasury Minister actually agrees to give it to him. It will no doubt be used as another wonderful example of how the States are helping to boost economic growth, when Jersey Finance could quite easily swallow up the whole £2.5 million on its own efforts promoting the finance industry against stiff competition.

Part of the process to make Economic Development more efficient includes the amalgamation of Harbours and the Airport, which the minister presumably thinks is a restructuring example for others to follow. It might make some areas more efficient (and perhaps others less so), but I for one fail to see how significant savings will be made, other than a salary or two.

Then the department is supposed to become more efficient because some of its functions will be hived off to public-private partnerships on the JFL model. This has proved successful because it brings the government and industry together in a joint effort, but it has required considerable taxpayer support and will require even more if the finance sector is to flourish as the minister assumes.

And that’s in a sector where the industry can afford to chip in.

It will be interesting to see how the attempts to create a PPP for tourism pans out. This is very unlikely to produce more resources for tourism, and is perhaps an unnecessary distraction at a time when everyone should be concentrating on turning the industry round.

There’s also not much scope for additional private funds for the new PPPs – Location Jersey, Jersey Business and Digital Jersey. But then the first two are only a rebranding exercise, despite the hype, and the third is a long-overdue attempt to catch up with the competition, which requires resources to be successful but is unlikely to get much.

But that’s the problem with small governments – they don’t have the resources to ensure that the Island can compete internationally, and so the economy suffers.

Perhaps we can’t expect anything better in a small Island with a small public sector, even though the public sector costs less as a proportion of GDP than in most other jurisdictions. Certainly we don’t stand a snowball’s chance in hell of growing the economy if the government gets any smaller.

Peter Body is editor of Business Brief magazine