Jersey had four years of historically low inflation between 2013 and 2016, but the rate picked up in early 2017, peaked at 4.2% in mid-2018, and at times has been double the equivalent rate in the UK in the past few years, according to the report published by the Inflation Strategy Group.
The group was established in response to the high rates of inflation. It is led by Economic Development Minister Lyndon Farnham, and includes Chief Minister John Le Fondré, Treasury Minister Susie Pinel and Education Minister Tracey Vallois.
The first report they have published says that rising housing costs, oil prices and Brexit were key causes of Jersey’s rising inflation rate, measured by the retail price index that records the rising cost of a ‘basket’ of selected goods and products.
‘The biggest driver of inflation in recent years has been housing costs, though there were also significant contributions from household services, leisure services and motoring,’ the report says.
It adds that the government has limited means to control inflation, due to interest rates being set by the Bank of England, but does have influence through indirect taxes, the prices set for government services and ensuring healthy competition and productivity in the economy.
Senator Farnham said that the strategy would be an ongoing piece of work with additional reports to be produced in the future.
‘We have to realise that it is mainly external global economic forces that we don’t have control over that cause inflation in Jersey,’ he said.
‘But what we need to do is make sure that we control the inflation rate in the small ways that we can and that is through decisions made by the States Assembly and arms-length bodies.
‘For example, we might make a decision in the States to increase impôt duties due to health reasons, but we know we will also consider the inflationary impact of such a decision. We need to do what we can to control the cost of living for Islanders.’
Action points to control inflation outlined in the report include:
- Considering the inflationary impact of any indirect taxes, such as impôt duties, alongside broader policy objectives, such as reducing carbon emissions.
- Keeping the price increases in government fees and charges within an average of 2.5% per year.
- Developing a ‘fees and charge policy’ to assess the annual impact of government price rises on inflation.
- The government should consider the cost-of-living impact of any ‘significant’ planned new charges.
- The Jersey Competition and Regulatory Authority to consider the impact on cost of living of price rises set by bodies such as public utilities, social housing providers and schools.
- The government to support the JCRA in its work monitoring market competitiveness in Jersey.
