THIS columnist has not always agreed with the pronouncements coming from the local branch of that august body, the Institute of Directors.

On occasions the group has sounded like an old boys’ club railing against the threats of creeping socialism.

The sticker they used a few years ago proclaiming that ‘Capitalism Works’ might have looked all right in the back window of a BMW or a Merc, but it wouldn’t work for the unemployed cyclist.

As neither pure capitalism nor pure socialism has been found to work, organisations like the IoD have begun to take a much more reasoned approach and perhaps some union leaders might eventually follow suit.

In particular the local branch of the IoD has in recent months made a significant contribution to the debate about serious issues facing the Island. The latest IoD newsletter is a case in point.

In it the current chairman calls for a more strategic use of the States economic stimulus package.

Calling it ‘an historic opportunity to reposition our economy to thrive to 2020 and beyond’, the chairman says: ‘I would like to see more discussion about the big strategic issues facing our island. The fiscal stimulus package should then be used to support business development activity which helps to develop and diversify our economy.’

The chairman calls for ‘new ideas about how the government could stimulate the growth of new industries or encourage expansion of existing industries’.

For example, he points out that in the past few decades other jurisdictions have used tax incentives to attract new industry sectors.

He’s perfectly right, of course, and there does need to be a much more detailed, and informed, debate about the future of our economy. However, there are problems in the detail of what he proposes.

The current economic stimulus package has got enough problems already, as it tries to do what it’s supposed to do, which is help the Island through the recession. Diverting some of that money to ‘reposition’ the economy would not be the correct use of the Stabilisation Fund, which is where the money is coming from.

There are already problems in ensuring the money is actually spent as it should be.
Comprehensive checks have been introduced to ensure the money goes to where it best protects local jobs and local businesses, which means that it must meet the criteria set down by expert economists.

They, along with other economists looking at other stimulus packages elsewhere, say that any spending from the Stabilisation Fund has got to be ‘timely, targeted and temporary’.

Unfortunately this is not easy to achieve. Already there is some evidence that items are creeping in that would usually be considered part of States departments’ normal budgets.

There’s obviously a temptation in times of need to use that stimulus money to top up those budgets. After all, it’s difficult to cut hospital transport for patients to meet strict budgets, for example, when there’s money available to paint a few States properties because that will contribute to an economic stimulus.

It’s therefore going to be extremely difficult to maintain discipline in States spending or, as some people would say, introduce discipline into States spending.

So the IoD’s idea that some of the stimulus money could be used to ‘reposition the economy’ could make the situation worse. It certainly doesn’t meet the mantra of being ‘timely, targeted and temporary’. But the IoD chairman is quite right. It’s necessary, if not vital, to find funds to help the Island reposition the economy once this current fuss is over.

The funds should be used to assess the opportunities and threats facing us and to devise a plan (or a number of alternative plans) to diversify and develop new industries. And as the IoD chairman says, there should definitely be more debate about it.

Perhaps this should be part of an overall strategic plan for the Island… but, hang on, haven’t we just spent many days of States time coming up with an all-singing, all-dancing Strategic Plan? It’s just that the plan doesn’t seem to include something so apparently insignificant as the future of the economy.

That comment is perhaps a bit unfair, but it’s nevertheless true that few of us knows what the Island’s economic strategy is, if indeed we have one. Perhaps the States is operating on a ‘need to know’ basis. Certainly the comments of the IoD chairman would confirm that few of us know how the Island is to meet the considerable economic challenges facing it.

We do know what the States is trying to do to get over the current economic difficulties. After all they can’t really ignore them. But we have no idea what the strategy will be after that.

Obviously it’s difficult to plan for the medium and long term, when we don’t know what’s going to happen in the economically difficult short term. But the two are obviously connected and should not be looked at in isolation. Although it is difficult, we do have to think about what happens when we come out of the recession.

We have to look at the bigger picture, but unfortunately it’s a common States problem to get bogged down in detail and miss the wood completely.

We are lucky that the States does show foresight on occasions and that’s why we should come out of this recession much stronger than our competitors. But we need to be able to capitalise on that advantage.

Turbulent times also obviously provide an opportunity to look at new opportunities, and that could mean in a significantly different economy.

But if we don’t take notice of what people like the chairman of the IoD says, we could miss this golden opportunity to strengthen our economy which faces a very uncertain future.
Peter Body is editor of Business Brief magazine