YOU have to admire the optimism of the chairman of the Tourism Development Fund.

In his annual report for 2009 he says: ‘As far as the future of the fund is concerned we are in discussions with the Ministers of Economic Development and the Treasury to secure the next round of the funding originally granted to us by the States.

‘We are also in discussions to expand our remit to enable us to make grants to the private as well as the non-profit sectors of Tourism. We are confident that further funding will be forthcoming in view of the continuing importance of Tourism to our economy.’
All I can say is: ‘Good luck.’

Of course the health warning attached to investment products says that past performance is no indication of future results, so it’s possible the ministers of Economic Development and the Treasury will suddenly have enthusiasm for spending a considerable amount of taxpayers’ money on the tourism industry.

That was certainly not the case even when States finances were in reasonable shape.
Now that we are in a financial crisis to end all financial crises (or at least that’s the message coming out of the States), it’s hard to picture the ministers suddenly being supportive of tourism and spending money on anything but finance.

They were certainly not supportive enough to ensure that the Tourism Development Fund received the £10m allocated to it by the States at the end of 2001 – it has only had a measly £2.2m, and quite a lot of that has been spent on items that should have come out of the budget of EDD or other departments.

To now cough up some of the missing £7m at a time when we’re talking about compulsory redundancies in the public sector would demonstrate a remarkable transformation in their support for tourism.

It won’t happen, obviously, and it pains me to admit that if the States finances are indeed in such deep crisis, then it shouldn’t happen anyhow because we can’t afford it. We will just have to sit back and accept the continuing decline of our second most important industry.
I personally don’t believe it, of course. The financial crisis is by no means as bad as some people paint it.

There is undoubtedly a problem with States spending, mainly because States Members have continued to pile new services on top of existing ones. There is also a moral obligation to ensure that taxpayers’ money is spent as efficiently as possible, so there’s quite a lot of work to be done there. And there’s also a significant budget deficit looming, because spending is growing faster than income.

However, if we hadn’t paid for a £100m plus energy-from-waste plant out of petty cash, there wouldn’t be anything like the current crisis.

The problem is that it’s very difficult to keep your head when all about you are losing theirs.
When you see the brutal austerity programmes being introduced in Greece, Spain and now the UK, it’s natural to assume that something similar is necessary in Jersey. But the problem is on a completely different scale. Unlike the major economies, Jersey doesn’t have any debts and if we’re not going to borrow at a time like this, we’re never likely to have any debts.

We have £500m in the bank and a further £1 billion in what the Treasury Minister calls ‘unencumbered assets’.

The economy is still relatively strong, and the pending deficit represents just 1.5% of GDP, which is minute (again the Treasury Minister’s description) compared to other jurisdictions.
So we might have a problem that needs tackling, but it’s nowhere near as severe as the problem in just about every country surrounding us. It would therefore be foolish to adopt the same draconian measures being adopted there.

So our real problem may not be the size of the deficit, but our reaction to it.

As I noted in last week’s column, we seem to be obsessed with what goes on in the UK and we tend to look north for inspiration and example.

So I imagine that there will be many in the Island who believe that we need to be as tough on tackling our deficit as the new UK government is being in tackling theirs.
But there are dangers.

I don’t normally quote the Chartered Institute of Personnel and Development, but their chief economic adviser recently praised the new government for proposing £6.24 billion in public spending cuts.

Quangos, IT, consultancy, advertising and property have all been ripe for cuts, he said, and it makes sense to freeze civil service recruitment as well.

However, he went on: ‘While the scalpel has been applied with considerable skill, one must nonetheless question whether now is the right time to begin major surgery on the UK’s fiscal deficit.’

CIPD’s chief economic adviser estimates that a recruitment freeze in the civil service coupled with reduced spending elsewhere will probably reduce total public sector employment by around 50,000 this year. That will also have a knock-on effect in the private sector and likely have a detrimental impact on unemployment, he said.

Few tears will be shed in Jersey at the prospect of losing public sector jobs if we also wield the scalpel as they have in the UK, but perhaps more people would be worried if they also realised the impact it will have on the private sector.

This could be particularly acute in Jersey when the fiscal stimulus money runs out and the ‘make jobs’ schemes have to end.

Hopefully the economy will have picked up by then, but of course there’s little money available to try to help ensure the economy does pick up.

Jersey Finance has been given £2m, so hopefully that will produce some fairly immediate results in terms of new business, but other sectors – notably tourism – have been given little support.

So our political leaders have an extraordinarily difficult job to ensure the right balance between cuts and investing for the future.

Unfortunately some States members, quite a few businessmen and a section of
the public seem to believe that only the scalpel is necessary.
Peter Body is editor of Business Brief magazine