After all, there are plenty of other people around – mostly politicians – who will tell you everything is wonderful (there I go again).
Which brings me neatly to the Deputy Chief Minister, Senator Lyndon Farnham. No, I am not suggesting he is failing to do a good job, it is simply his ability to exude confidence in the face of disaster that I sometimes find counterproductive. Of course, we should all be grateful for the extraordinarily difficult job he and his colleagues do, but there is no need to exaggerate the success they have had so far in helping the economy to recovery after Covid-19.
What got me onto my hobby horse was the minister’s press conference last week in which he talked about the extensive measures to support the economy and prevent further job losses. Up to now, he said, what used to be known as the States, has spent more than £75m in the second phase of the co-funded payroll scheme and approved £3.2m in loans under the Business Disruption Loan Guarantee Scheme. That’s fantastic news, but he then goes on to say: ‘These are indications of a positive direction for the Island economy, and reflect the resilience and agility of our local businesses. While we cannot be complacent as we enter the winter period, we should recognise the continued progress.’
Progress it might be, but evidence of resilience and agility is very doubtful. After all, if you throw money at a problem, some of it is going to do some good, but it is not evidence of a strengthening economy as the OECD pointed out last week (see page 37). It will undoubtedly help some employers to adjust to the new reality post-Covid, but at the moment many are still relying on taxpayers’ support.
Unfortunately, this appears to be evidence of the government trying to talk up the economy without actually doing anything much more than what just about every other jurisdiction in the western world has been trying.
A similar exercise in over-confidence has followed the government’s decision to give us all £100 whether we need it or not, or whether we deserve it or not. As one of those who does not deserve it, I was happy to take my card (which appears to have cost about half a million pounds to produce) and spend it on an afternoon’s food shopping. This is what many Islanders will do and in my case that consisted mainly of buying consumables including only a small amount of Gordon’s gin.
It made me happy for a while, though, and now I’m looking forward to the next instalment of the great giveaway. It also made me think about the government’s belief that this is good for the economy as it gets us spending again. In my case, I have never stopped, but I wonder whether my additional free spending has done much good to Jersey’s economy.
Of course, the businesses in which I spent the £100 will benefit, and some might even pay some of it back next year in increased taxable profits, but who else in the Island benefits? So I tried to calculate how much of what I spent will go on all the different stages required to produce my shopping basket of food and gin. Unfortunately, very little was manufactured or grown in Jersey – apart from a litre of milk and some mushrooms – but obviously the money circulates around other parts of the economy, although not necessarily Jersey’s economy.
There are the manufacturers or growers to be paid, wholesalers, transport companies, landlords, cleaners, profits to shareholders, and a host of other people involved in bringing me my groceries. Of course, I gave up on the calculation, as it is far too complicated to work out the multiplier effect of my unearned £100. But my hunch is – and it is only a hunch – that only about a third of the £100 I spent stayed within the Island economy to be circulated to local individuals and businesses. The rest went overseas to everywhere from venture capitalists in London to the tea growers of China. There it will no doubt be of great benefit to their economy, thanks to the Jersey taxpayer.
Other people will have spent their £100 differently, some that will have greater benefit to the local economy and some that will have even less benefit.
This little investigation, however, made me conclude that the free £100 was more an exercise in psychology than economics. It made us feel good, which is perhaps a noble target for the government, but it did little good for the economy unless the experts find differently.
When the feel-good factor wears off – and it will – we will still have an economy in crisis to sort out. We did not cause that crisis, but we are going to have to deal with it, and so far, apart from the £10m loan to the airline Blue Islands, there is precious little evidence of any real progress in that respect. Giving away a lot of money is not the same as investing.
