It was while I was enjoying a quiet pint that it suddenly dawned on me that the whole Island was going mad.
Like everything else I blamed it on the recession.

I’d just been told that the aforementioned pint of beer had gone up by four or five pence, making it even less of a value for money item (most of it is water, after all). It wasn’t even the fact that another increase in prices at the pub makes Jersey even less attractive for tourists. It’s been many years since we could boast that our pub prices were cheap in comparison to most of the UK.

No, what really made me conclude that the pub company had lost its senses is the fact that they have put up their prices just as everyone tells us we’re going into a recession. Perhaps they have squeezed every ounce of efficiency out of their business and don’t have any alternative but to pass on increased costs. Whatever is the reason, putting prices up at a time like this will only make the recession worse.

And it’s not just pub owners that are acting irrationally. Anecdotally you hear of businesses who are cutting back on their training and marketing as though these were optional extras to doing business in the Island. They don’t seem to realise that if you cut back on training you reduce your options for coping with a recession. If you cut back on marketing, people (including your customers) won’t know whether you are still in business.

Costs should obviously be cut at a time like this, but cost cutting on its own isn’t a strategy. If you cut costs and that doesn’t damage the quality of what you are producing, then why didn’t you do it before? If you cut costs and it does damage the quality of what you are producing then it’s going to be very difficult to claw back your competitive advantage. The bottom line is that if you keep on cutting costs eventually you don’t have a business.

Wise companies will have put money aside for just such an eventuality as this, so that they can continue investing in their business, just as other people have stopped investing in theirs.

But there are other signs that the Island is going mad. For example, you would have thought that a company like Pound World would be looking forward to a huge increase in demand during these cost-cutting times. But no, it’s gone into administration.

Then you have the States talking about cutting costs so dramatically that jobs might have to go. No, that can’t be right. Aren’t the States talking about investing so that jobs can be saved?

The truth is that they are saying both things at the same time. It’s no wonder we’re confused. That’s not really the States’ fault because it is true that they are going to have to spend and cut back at the same time. They are going to have to spend to give the economy the stimulus it obviously needs, but they can’t let their budget get out of control.

They have the Stabilisation Fund to help them deal with the, hopefully, short-term economic problems. But in the long term and particularly when there is little, if any, economic growth, if they can’t control recurring costs then the only option they have is to raise taxes.

Where I would take issue with the States is in some recent statements from ministers that appear to pander to those who believe that States spending can be cut without any dramatic impact.

You know the argument. There’s enormous waste in the States, get rid of that and we can save money and still provide the level of services the public demands. I would put that in the ‘losing sight of reality’ category.
There has been so much pressure put on States departments in the past few years that just about any savings that could be made have already been made.

This is proven by the large number of complaints from the public about various States departments that have had to make minor cutbacks or can’t afford to provide new services. The recent fuss about relatives of patients being means-tested for subsidised travel to the UK, is a case in point. Yes it would be wonderful if the taxpayer picked up the travel costs, but in the absence of a blank cheque from the States, what area of the health budget would those who moan about means-testing like to see depleted?

Significant savings in States spending have been made without any dramatic impact on the quality of services so far, but that was the low-hanging fruit. Any further cuts are undoubtedly going to mean services will have to be cut or taken over by the private sector. The fact that there are very few private sector companies clamouring for work currently done by the States would indicate that privatisation is not a realistic option in most cases.

So what we are talking about is cutting these services altogether because they don’t make money and they probably never will. Those States members who hold out privatisation as a possibility in many cases are either trying to fool themselves or fool us.

So presumably the threat of cutting States jobs was just a shot across the bow of the unions, who can also be prone to losing their grip on reality at times.

These are indeed scary times, but only because we read and see so much horror in the media. With a little planning and a little courage, Jersey could remain largely immune from the worst of these economic problems.
That’s if we don’t panic.

It may be difficult to calmly plan for the future at a time like this, but it has to be done. It’s absolutely fantastic that we have £140 million in the Stabilisation Fund to help us over the recession, but we shouldn’t rely on blowing it all. We also have to make sure the Island is in good shape after the recession is over. That won’t be helped by featherbedding local companies now simply because they are local companies.

They have got to be good local companies which, ironically, could probably survive a recession, but may need just a little help to prosper. Perhaps I’m being unfair, but in these unreal times, I don’t see many of them ready to cope with the challenges ahead.
Peter Body is the editor of Business Brief magazine