By Sir Mark Boleat
THE cost of living will be a significant issue in the 2026 election campaign. In a survey conducted by the Policy Centre Jersey in January last year, 29% of people regarded it as the main issue facing the Island and 64% rated it as the, or one of the, most important issues. These figures were similar to those in a Government of Jersey survey a year earlier and are likely to be similar in a Policy Centre survey now under way.
Vote.je, the confusingly named website that is one of the bodies with responsibility for running Jersey’s elections, recently reported the results of a survey it conducted, suggesting that cost of living and housing would be important election issues.
The issue is living standards
The issue is not so much cost of living but rather living standards, that is the ability to meet living costs with income. Most people would accept a 10% increase in their cost of living if it was accompanied by a 20% increase in their income. The reason why cost of living is such an issue in Jersey, and in the UK, is that living standards have not increased for 20 years. After the 1990s, when real incomes consistently rose, since 2000 real incomes, that is incomes adjusted for inflation, have been virtually stagnant.
Inflation in Jersey mirrors that in the UK
Economic trends in Jersey depend essentially on developments in the UK economy. While Jersey is independent for many purposes it is closely tied into the British economy and is part of the UK monetary system. Contrary to what is sometimes suggested, Jersey does not have its own currency. Rather, it has its own banknotes as do Scotland and Northern Ireland. Jersey has no control over the level of interest rates, and factors that influence the British economy equally influence the Jersey economy.
Statistics Jersey’s quarterly reports on retail prices include a chart comparing the inflation rate in Jersey with that in the UK. It will be seen that they are closely correlated. In the year to September 2020 the inflation rate in the UK was 0.7% and in Jersey 0.9%. Inflation then rapidly increased such that in the year to September 2022 the rates were 8.8% in the UK and 10.4% in Jersey. In the year to September 2025 the rates were 4.1% in the UK and 2.8% in Jersey.
Inflation has been falling
These figures also show how the rate of inflation in Jersey has declined, again well illustrated in another chart from the Statistics Jersey report. The figure for the year to December will be published later this week and is likely to show little change. Jersey’s Fiscal Policy Panel has forecast a slightly higher rate of inflation in 2025 and 2026 – 3.7%.
Government can do little to reduce the cost of living
So, what can the government do to tackle the cost of living issue? The blunt answer is not a lot. The government can take steps to reduce the headline figure but only at the expense of compensating increases in taxation. In 2026, it is estimated that GST will raise £132 million and the taxes on alcohol, tobacco and fuel £68 million. If these taxes were abolished there would be a significant one-off reduction in the cost of living, perhaps as much as 5%.
However, the £200 million hole in the public finances would need to be financed by tax increases. There would therefore be a significant redistribution effect, the results of which would be unpredictable and at the very least highly disruptive.
From time to time, it is suggested that GST should be removed from food so as to help poorer people in particular. This has consistently been rejected because it would complicate a simple tax system, not least in defining what should and should not be exempt. More importantly, expenditure taxes raise most money from those who spend most. If the intention is to help lower income groups, then the best way to do this is by direct payments to them not by attempting to identify which items they are most likely to buy. This is already done in Jersey through the Community Cost Bonus, which provides an additional £516 to low income families, which can be seen as compensation for the GST they pay.
Housing costs
Housing comprises 26% of the weight in the retail prices index, as it accounts for about a quarter of household expenditure. However, the proportion of their income that people spend on housing varies enormously. People who have paid off their mortgages and tenants whose rent is met by income support pay very little. The groups who pay most are tenants in the private rented sector receiving no income support and people who have bought homes in the last few years.
Mortgages
Mortgage rates seem to be about one percentage higher in Jersey than in the UK. This might not seem much – but it means that Jersey home buyers are paying 25% more in mortgage interest than if they were in the UK.
Jersey banks are outside of the UK retail banking framework, but the differential seems difficult to justify. Perhaps there is scope for the government to explore options for bringing Jersey mortgage rates into line with those in the UK?
Initially, the reasons for the differential need to be analysed so as to assess options. A radical option would be for the government itself to become a lender, outsourcing the administrative functions to one of the banks. The Jersey government can borrow more cheaply than banks and does not have to meet capital requirements. Generally, governments should not be in the business of mortgage lending, but then neither should Jersey homeowners be paying a premium for their mortgages.
Rents
Tackling rents for those who do not qualify for income support is more difficult. The solution is not rent controls as they do not reduce the level of rents generally and run the risk of reducing supply. Rather, the concentration should be on increasing supply which will have the effect of reducing rents. This means having a planning system that facilitates development rather than frustrates it and removing obstacles facing those who want to rent out accommodation.
One obvious step that should be taken is to allow the development of smaller units without car parking spaces, which would serve a particular need among young people whose first move into the housing market generally involves sharing with others. This suits many people, but young people should not be denied the option of having a small place to themselves rather than having to share a bigger place with others.
Groceries
The second area where government action is possible is food, which accounts for over 10% of consumer expenditure. A comprehensive Competition Authority report concluded the price of food is about 12% higher in Jersey than in the UK for the same supermarkets. This is not because of profiteering but because of the additional costs of operating in Jersey. But Jersey does not have a low-cost supermarket such as Lidl or Aldi, which means that those who would use such shops in the UK can be paying 40% more for their food in Jersey.
Aldi or Lidl are not prohibited from operating in Jersey, but they have chosen not to do so. I can claim no inside knowledge, but I suspect the reason is the totality of the setting up and additional costs of operating here.
Jersey is a large enough market to accommodate a Lidl or Aldi, and their standard unit is no bigger than some of the large stores in the Island. However, for them it is not a question of adding a new store in the same way as they do in England. They cannot add another stop-off point for their delivery vehicles in the south of England but rather would have to make special transport arrangements. The staff they employ cannot be added to the UK systems because Jersey has different taxes and employment legislation. And they would need to get approval to bring over a manager from the UK. Finally, the operation of the planning system leads to uncertainty that could result in abortive expenditure.
It may well be that Lidl or Aldi has looked at Jersey and decided that if it was a community of 100,000 people in the south of England it would certainly open a store, but that the additional costs and uncertainty of operating in Jersey make it not worthwhile. It would not be appropriate for the government to subsidise a low-cost retailer, but it is appropriate for the government to explore how the obstacles that such a company might face could usefully be reduced.
Raising incomes
The cost-of-living crisis is really about the difficulty that many families have in meeting the cost of living in Jersey. The families most affected are those with dependent children.
The government should explore how housing costs can be reduced and longer term whether there is scope for a low-cost retailer in Jersey. Otherwise, it should focus on removing the obstacles to economic growth as it is increased incomes that are more likely to help people tackle the high cost of living than action which seeks to address the cost of living directly.
Sir Mark Boleat has held a number of leadership positions in companies, public bodies and charities in Jersey and in the UK. He is senior adviser to the Policy Centre Jersey.
