‘Limited options’ to control Island’s high inflation rates
THERE are limited options to control the Island’s high inflation rates, the Assistant Treasury Minister has said.
Figures released on Wednesday by Statistics Jersey show that at 3.6% the increase in the Island’s rate of inflation is almost twice that of the UK.
Assistant Treasury Minister Lindsay Ash said that while it was welcome that the inflation rate was dropping, there were few mechanisms available to bring it closer in line with the UK. For example, raising interest rates makes it more expensive to borrow money and therefore decreases spending, and in turn keeps prices lower.
‘When it was up at 4.5%, everybody thought it was a blip and now it definitely looks as if it was a blip, so that is obviously good news but we are still above the UK,’ he said.
‘Obviously, that is concerning for everybody, because it affects food and drink prices but a lot of our inflation comes in via the UK and we do not have the control measures such as the ability to control our interest rates – if we did we would probably push them up higher.
‘However, we raised alcohol duty below inflation for the first time in about 20 years and we raised duty on petrol lower than we normally would.’
Deputy Ash added that it was almost inevitable that the rate of inflation would always be higher than the UK’s.
‘To an extent that is true. A large percentage of our food has to be brought in, along with other things such as cars, for example, and there is also a limited wage pool. You will probably find in the lower spheres of the financial industry that people in Jersey are better paid, as there are a lower number of licences given out and companies want to hang on to their staff.
‘That is probably the same with industries such as catering and they are usually paid more here than in the UK.
‘It is something that the government is looking at and the higher figure has focused our attention. We will be looking at measures to try to mitigate it, but obviously we cannot increase interest rates like the UK can.’
The St Clement Deputy also spoke about tensions between the States Employment Board and a number of public sector workers’ unions, which have been calling for pay rises in line with inflation.
Many have now accepted new pay offers made to them. However, some, such as JCSA Prospect, are still working with the States to reach an agreement.
‘The offers have risen as far as they can and we cannot commit to further costs over the next two years, as things are going to get tighter,’ Deputy Ash said.
‘I feel they are in the correct sort of realm and the offers are reasonable. They have been accepted by almost all sectors now and it is just basically teachers and a few others we are waiting for now and then we can move on.’
Housing was one of the main contributors to the overall 3.6% increase to RPI at one percentage point. Deputy Ash said there was still a lot of work that needed to be done to resolve the housing crisis.
‘There is a lack of supply of housing and if we suddenly had 10,000 houses built, then the pressure would come down,’ he said. ‘It is a question of planning, resources, financing – a number of factors. It is not just a click-your-finger exercise and it will all be sorted.
‘We need new developments wherever we can find them and we need more help from the Planning Department – a more liberal approach.’