The Fiscal Policy Panel, who advise the Council of Ministers on economic policy, say that although they support the Medium Term Financial Plan overall, there is a risk that the proposed £70 million of ‘people savings’ – including mass voluntary and compulsory redundancies, pay restraints and restructuring – may not make States departments more efficient in the longer term, or resolve a predicted structural deficit of £145 million by 2019.
The four senior economists also flag up a ‘bottleneck’ in construction projects that could require more workers from outside the Island.
In a detailed report issued yesterday, they also recommend stronger controls on £20 million of public funding that has been set aside for economic-growth projects.
The report also states that freezing public-sector pay over a prolonged period – especially if it is below the private-sector trends – is a risk and warns that ‘constraining or cutting the public-sector wage bill is not the same as increasing productivity’.
Panel member Christopher Allsopp, the president of the Oxford Institute for Energy Studies, said that although Jersey had been through ‘a bad few years’, the 4.5% to 6.5% growth in the finance centre during 2014 had been well above the panel’s expectations. However, this was a ‘one-off’ gain that would not be carried forward.
‘Overall, the structural deficit is the same as before,’ said Mr Allsopp.
Fellow economist Tera Allas, an independent adviser to government and business organisations, said that although the measures in the States plan were good in principle – including public-sector cuts, changes to income support and other benefits and the new health charge – there was ‘some uncertainty’ about how that would work in practice.
Former Monetary Policy Committee member Dame Kate Barker said that overall the panel welcomed the work done by the Council of Ministers to ‘grapple with the problems of a particularly difficult economy’.
However, she stressed that ministers needed to be clear about how the measures they were proposing would affect different parts of the community.
‘We are not expressing any particular view, but if it is unfair, it will be less sustainable.
‘Jersey has taken commendable steps in terms of the ageing population and it important that work is continued,’ she added.
Chairman Joly Dixon added that the panel were ‘relatively optimistic’ and ‘reasonably upbeat’ about the States plan, despite the uncertainties both globally and locally.
Responding to the report, Treasury Minister Alan Maclean said: ‘We very much value the panel’s expertise and they bring an international perspective that is important for Jersey, as a largely export economy.
‘In terms of public-sector efficiencies, they recognise that we have a significant task, and as usual the devil is in the detail – departments still have a lot of work to do, not just cutting services, but removing duplication and redesigning – all that is still ongoing.’
Asked what could be done to ensure there were enough construction workers for new developments such as the International Finance Centre, Senator Maclean said the current bottleneck had been caused partly because of delays to projects such as the new police station, as well as an increase in private-sector developments.
‘That is good for the construction industry, and good for the economy, and for jobs,’ he said.
‘But we have to manage the flow from the public-sector point of view – we do not want inflation, and the Fiscal Policy Panel say that we should carry on, but manage it closely.
‘We may need to bring people in short term, but we have to be aware of unintended consequences. There is nothing wrong with bringing people in, provided they go back – it depends on how it is managed,’ the minister added.
