Earlier this week, the Fiscal Policy Panel, publishing its advice for the 2020-23 Government Plan, suggested that the Island should put enough money into its Strategic Reserve [rainy day fund] so that it is 30% the size of the overall economy.
At current levels, that would require an investment of £600 million.
The panel, which is made up of independent economists who advise the government, said that such a move would safeguard the Island’s economy, as finance faces external threats such as the fall-out from Brexit and the possibility that the City of London could become an offshore competitor rather than an ally.
They added that the funds should be included as part of the States’ long-term planning.
Speaking at the Institute of Directors mid-year review yesterday, States chief executive Charlie Parker indicated clear support for the FPP’s recommendations.
‘For those who have read the FPP report, it is quite clear and it follows the narrative that this government has had since day one,’ he said.
‘We have to be prepared for shifts in the global market and that will mean that capital is very portable. Investment decisions get made in a very different way nowadays and they are not locality-based.
‘Therefore there will be, like with Brexit, some interesting times ahead of us. We have to be fit-for-purpose and ready for that.’
He added that he had believed that more money needed to be pumped into the Rainy Day Fund since he first took over as chief executive.
‘My sense is people think that because the Rainy Day Fund has a few noughts on it that it is enough,’ he said
‘Actually I said right from the beginning that it was under-capitalised. The treasurers felt that as well, and this government recognises that it is going to have to do something.
‘In some ways [the FPP report] is only feeding back to us some of the things we were already aware of, and many of the [IoD] members are alive to the challenges involved.
‘We have to be forward-looking and we have to modernise and adapt. And Jersey is brilliant at that.’
Currently there is around £800 million in the Rainy Day Fund and 30% of Jersey’s Gross Value Added [economic output] would be £1.4 billion.
The FPP also recommended that Jersey raises taxes or cuts expenditure to see the Island through any economic problems in the future, and the government should generate surpluses to plough into the Strategic Reserve and the Stabilisation Fund, which provides funding to combat short-term economic downturns.
During yesterday’s review, when asked whether taxes would increase Chief Minister John Le Fondré said that he did not want the ‘headline’ 20% rate of tax to change as it is key to the Island’s economic stability.
He indicated, however, that other levies such as the long term care charge would be reviewed, as well as social security contributions, which are currently capped on employees’ earnings at £4,420 per month.
During his tenure, former-Treasury Minister Alan Maclean proposed the sale of States assets such as its shareholding in JT, which was worth £300 to £400 million, and sections of the property portfolio to raise funds to bolster the Strategic Reserve.
Treasury Minister Susie Pinel did not rule out asset sales being considered in the future but added that the FPP’s recommendations need to be balanced with other concerns.
She added that a ‘knee-jerk reaction’ was also not required as the panel had recommended that the Rainy Day Fund should be boosted over a period of several years and not immediately.
