Finance leads way out of recession
Wednesday 14th April 2010, 3:01PM BST.
The head of the States Statistics Unit, Duncan Gibaut
THE finance industry is showing signs that it is poised to lead the Island out of the economic doldrums, according to the results of a survey of businesses published today.
But much of the rest of the economy is struggling, and in most cases confidence is lower than it was at the end of last year.
The survey also shows that prospects for future profitability remain strongly negative in all sectors. However, there is some good news for workers, with nearly half of Island employers saying that they are likely to give a pay increase this year.
In the finance industry, optimism is growing, with new business expected as well as growth in future business activity levels. But six of ten measurements taken were still negative, even in finance. The sector makes up half of the Island’s economy and employs a quarter of all workers in Jersey.
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Today the potential, although unlikely future Prime Minister Nick Clegg of the Lib Dem’s said he will clamp down on tax avoidance to make a fairer society if winning. Now where will this leave our finance industry which is pretty much entirely based on tax avoidance?
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Annie, given that Nick Clegg has no prospect of being in power, I would think this makes little difference to us.
Also, the reason the big parties have not and will ‘clamp down’ is that offshore centres like jersey actually benefit their economy, for two reasons:
(1) if big business in the UK was not able to create tax efficiences, they would base their operations elsewhere. That would create more unemployment and lose more tax than offshore costs; and
(2) tax competition is to be encouraged as it has been shown to increase the productivity of the global economy: forcing coutnries to keep taxes relatively low, thereby encouraging production etc.
Nick Clegg is just trying to jump on to what he thinks is a vote winner. The reality is that tax avoidance is a non-issue. This is plain to see when he talks about avoidance costing £4bn when the UK budget deficit of £167bn! No party will risk suffering larger losses (i.e. through (1) or (2) above) for the sake of covering such a small part of the deficit.
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Thanks for spouting that received wisdom Jonty. Offshore jurisdictions also encouraged the wreckless lending of the bubble period via disintermediation of the lending decisions from the holders of the debt. Billions, if not trillions of Euros/Dollars were misallocated around the global economy and wiped out as a result. Kind of negates the “Economics lecture 1″ stuff.
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Wow Claire. Thanks for the allowing me to receive more ‘wisdom’. Personally (and this is the point I was making), I can’t see any reason other than (1) and (2) in my original post, why successive UK governments don’t ‘clamp down’ on offshore. Can you?
I also think (if I’m allowed to?) its a bit strong say offshore encouraged wreckless lending. It may have had a role to play in the various structures used, but there doesn’t appear to be any argument that the lending and investment models used by the banks were in anyway encouraged or initiated by subsidiaries offshore. Besides, “disintermediation of the lending decisions” would have occurred regardless of an offshore element, as the essential problem was excessive securitisation and the overrated badly packaged debt being bought and sold around the globe.
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Jonty
Both of your points are provably false.
Tell me where this has occurred and what the benefits have been. Last time I looked everyone was moaning that UK taxes were going up all the time. Yet it controls a large number of secrecy jurisdictions with ‘tax competetive’ legislation.
Yours is a tired and defunct argument that has led to increased wealth disparity, reduced democracy and has hindered development.
I would go back to school if I were you.
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Arnald, provably false? Do you care to explain how the points might be proved false? Can you put forward an alternative reason as to why successive uk govts. have not prevented avoidance altogether? They’ve had over thirty years to do it.
Even Claire before you suggested that the points were economics 101 – indicating that they rely on basic principals. Perhaps if you don’t understand basic principals, its you who should go back to school.
Alternatively, why not enlighten me? I’m more than prepared to consider an alternative view – just not without reason. Its sad how many people like you are so dismissive of any opinion that doesn’t suit their political views.
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