Economy shrank by 5% in 2010
Wednesday 28th September 2011, 3:00PM BST.
J
Treasury Minister Philip Ozouf.
JERSEY’S economy shrank by five per cent last year and was worth less than at any point since records began 13 years ago.
The decline was largely driven by an 11 per cent decrease in the value of the Island’s biggest economy – the finance industry.
Figures, released today by the States Statistics Unit, show that Jersey’s gross value added (GVA) – the value of economic activity in the Island – stood at £3.5 billion last year. And the GVA was the lowest in real terms – when discounting inflation – since the unit began compiling the figures in 1998.
Treasury Minister Philip Ozouf said that Jersey’s economy had moved on since 2010 and that the States had made a number of decisions – including introducing savings and tax rises – which had strengthened the economy.
• See today’s JEP for full report
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“Treasury Minister Philip Ozouf said that Jersey’s economy had moved on since 2010 and that the States had made a number of decisions – including introducing savings and tax rises – which had strengthened the economy.”
BOLO*
Go now. Youve done enough damage.
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Hi said we weren,t affected by the Global meltdown!!! Idiot, did he really think there wasn,t going to be a knock-on effect.
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Really Phillip and the sun will come out tomorrow?
Interest rates are going to remain on the deck for the next five maybe ten years as the world tries to shake off what is almost a banking collapse.
It is only that governments pumped collossal amounts of money in to the system that banks like RBS and Lloyds are not dead in the water.
We are far from out of the woods yet.
Low interest rates and flat exchanges will not make a happy finance industry.
It is time that the Evening Post started asking questions instead of treating Phillip Ozouf like Moses!
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classic. “introducing savings and tax rises” to strengthen the economy???? which school of economics is that? taxes are not going to help the economy grow are they. in fact quite the opposite.
perhaps mr ozouf should turn on that computer and he may find some answers
(ps try looking under the desk for the switch)
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… and the population grew by?
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Which is much better than the USA, most of Europe and the UK.
Thanks Ozouf!
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Tax rises stimulate the economy??? How?? the more I am taxed the less I have to spend in the economy. My taxes pay for the (inflated) public sector, spent either on wages or capital projects, so net effect on the economy is the same. Its the same amount of money being spent!!
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yeah yeah ,and soon it will be so good that we won’t need GST anymore… right!
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Think you better check your boots my boy, you have trod in something . . .
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Bad Economy… savings and tax rises. Just leave the economy crap please
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yet still our food is taxed.
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Marc Jones (6) Thanks Ozouf!
Dear Marc, you are clearly lost in Cloud Cuckoo Land with Philip Ozouf, maybe you two could take a trip together to Never Land. Or is this yet another attempt by you at satirical brilliance.
Just for the record the UK Economy grew by 1.7% in 2010. Since when has growth at -5% (Jersey) been better that 1.7% (UK). Grow up will you.
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its just a blip
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Whilst the Private Sector suffers amazingly candidates like people like Southern, the Pitmans and Tadier want wage increases for States Workers.
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No 6.
Actually a 5% fall is a lot worse than the UK, USA and nearly all of Europe.
We must be about the only place in the world with a smaller economy in 2010 than 1998 and if GVA/head is used as a measure the figures are even more dire.
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Nero – Rome – Fiddle
Adios Companeros
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Yes Marc Jones… While a lot of stuff has been written about the UK economy, all the problems are with regard to it not growing by very much, not by shrinking.
A -5% growth figure is pretty bad to be honest. Worse than most places in the world.
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Another power cut just as I was trying to write.It’s on again but presumably another paper bag shorted the French nuclear electricity grid. Forgive me, but doesn’t the introduction of GST also have a bearing on skewing these statistics?
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There is rather too much complaining about the government and little acceptance of responsibility by the community. I am afraid that there are a few deeper cultural issues that need to be challenged by all islanders, rather than blaming one Minister, although not a perfect one, I am sure. There are a lot of problems in all economies, but Jersey faces a particular type of challenge. We are creating a problem where remittances overseas are growing because too many young islanders are being brought up to believe that they must expect jobs in finance or some other well paid existence, and refuse to get their fingers dirty and take jobs in the tourist industry or agriculture. This curious balance of unemployment yet many unfilled jobs, therefore, requires short term immigrant labour, which in its turn increases net overseas remittances, which is very damaging for our economy (some US data shows that temporary migrant workers send out about 5 times as much momey as they bring in). The same applies, incidentally, to any transfer payments (including benefits) paid to persons resident overseas. This reliance on temporary overseas labour needs to be reduced. This comment has nothing to do with long term immigrants who spend their money in the island, and nor is it a reflection on any individual hard working temporary immigrant, who after all are only doing work that islanders do not want to do. So let us think about how we get stuck in as a community, get fingers dirty and stop blaming everyone else.
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14. Nick
Not sure where on their manifestos they said they were only for wage increases for States Workers… they were some of the only States Members who were willing to debate and vote for a pay cut for States Members.
Also, it would be good for the economy for workers (private and public) to have higher wages! It’ll put more money in their pockets so they can spend it which will lead to economic growth!!
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When he says ‘strengthened the economy’ it is clear that he means ‘made sure the government can continue to grow’.
Can someone please explain to him that the ‘real economy’ excludes the public sector?
Whilst you’re at it can you please explain to him that the more the public sector grows the worse the ‘real economy’ gets?
.
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We’re a long way from clear yet, anyone seen this – http://www.youtube.com/watch?v=lei0wVtlczQ
2 trillion Euros pumped into the global economy won’t stop the crash, think I’m gonna cash in my pension while I still have one and go experience some of the hospitality of those friendly Thai ladies.
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I see that we are only 21st. best finance centre. Does this mean there are 20 others in a worse predicament than us?
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This is a crises, as trends go this is a catastrophe. How do we stop this being a 4% next year then a 3% and by the time we are out of the crisis the economy has shrunk by a full 10%.
It will be a measure of of Government how strongly they react to this news.
I am concerned that P.O. says “we have moved on” like the job is already done. I hope he is right.
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Did anyone see this baffoon on Channel Report last night?
Economy down 13% in 3 years, and his whole strategy is waiting for interest rates to rise!
Wake up. whats plan B, C, D and E?
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23 Nigel –
I see that we are only 21st. best finance centre. Does this mean there are 20 others in a worse predicament than us?
Maths not a strong point, it means that there are 20 in a better position than us hence us being 21st.
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Nick (14) & Sam (20)
I fear that you have both missed the point. The size of individual pay packages is almost irrelevant, it is the bloated size of the Jersey civil service which should be the key issue.
There are too many civil servants and too many ineffectual senior managers on large pay packets at the top.
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I personally see little prospect for growth. Salaries are not increasing, whereas inflation is ! Also, where many working persons tax bills were 10 to 12% of total income, under 20 means 20 it is becomming closer to 20% i.e. ones tax bill has doubled over the past few years !
I fail to see how the economy is going to grow. We have less in our pockets to spend, and the situation is not going to imporve any time soon.
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Clearly you who criticised my comments have no understanding of economics!!!
JERSEY HASN’T BORROWED A THING!!! Only stupid people don’t realise this!!!
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Philip Ozouf is not qualified to be in that job so why do we allow him to continue? He clearly does not have a clue!
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@23 Nigel:
Professor Michael Mainelli, executive chairman of the GFCI’s publisher Z/Yen Group, said: “Most industries are sensitive to production factors, but finance seems to be increasingly sensitive to regulation.
“This tenth edition of the Global Financial Centres Index shows the increasing divorce of the financial services industry from today’s economies, but increasing entanglement with the turbulence of today’s governments.
“A good example is the eurozone crisis hitting financial centre ratings, while Europe outside the crisis does well.”
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“JERSEY HASN’T BORROWED A THING!!! Only stupid people don’t realise this!!!”
Jersey is currently using the Stabilisation Fund to meet the current account deficit and boost the economy.
This fund is now mostly spent but we do still have a deficit between income and expenditure that will almost certainly be larger than predicted next year.
Then we wil have four choices;
1) More cuts, this could result in further decline so maybe not
2) Raise taxes, 8% GST plus something on fuel duty, etc could just about do it but it would be inflationary and would result in a bit of a loss to the economy
3)Start using the Rainy Day Fund
4) Start borrowing a little while waiting for the good days to return
Which alternative do you favour, Marc Jones?
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26 Mathama Tician
The JEP stated ‘most of the decrease was caused by the decline in the value of the finance industry, which itself was caused by a decrease in interest rates which have reduced the value of deposits’
Presumably the better the finance industry, the more it has been affected, therefore there I would expect there to be 20 centres to have been affected more percentage wise than us.
(for the record, Maths was my best subject).
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No Marc Jones, he has not borrowed a thing he has simply robbed the people of Jersey!
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Ozouf waiting for interest rates to rise to get us out of the hole, what a joke. the only reason i am not going under with 20% means 20% is purely because interest rates are so low my mortgage is low. As soon as rates climb and my payments go up, with no mortgage interest relief any more, I fear the worst. There will be many many people in the same predicament.
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Pip, that is the point, there are no BORROWINGS!!! Every other western nation is in debt by issuing bonds which is draining them big time.
We have a stabilisation fund for the exact reason we can draw on it when required.
Some people are stupid, others uneducated, and as above, occasionally BOTH!
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No 36. Whether we have borrowings or not, our economy has not grown in real terms since records began in 1998 – Probably the worst performance of any economy in the developed world.
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36. marc jones
i agree borrowing increases risk especially if its short term.
however will you address the point that jersey is running a massive budget deficit compared to gdp (figures anyone?) and this situation cannot continue indefinitely.
given jerseys reliance on finance – such a high % of gdp – and the potential risks to the finance industry globally (just consider what the transaction tax will do to volumes) i shouldnt think jersey could borrow in the markets anyway so tax increases are the only way forward. 200% gst anyone?
the 2012 budget statement states there are no real increases in tax revenues. it doesnt mention spending cuts either. a case of ‘lets deal with the issue once its happened and not before’!
link:
http://www.gov.je/Government/Pages/StatesReports.aspx?ReportID=654
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if you want to see how bad local business is doing take a look at figure 7 in the attached:
http://www.gov.je/SiteCollectionDocuments/Government%20and%20administration/R%20EconomicOutlook%2020110916%20JN.pdf
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Marc 36, interest rates are not going to rise for at least two years Ben Bernanke (US Fed chair) has told us… there is a currency war going on and the UK is not going to kill growth by allowing the pound to strengthen against the dollar.
Look at Japan and you will see that you never get out of the 0% interest rate corner with a fiat (unbacked) paper currency.
There are $9 trillion in the world which funnily enough is the value of all the gold in the world, coincidence? I do not think so.
The US printed $1 trillion in the last year and has just agreed to print at least another $2 trillion in the next twelve months which means all commodities will rise by double what they did this year.
So with food up 25% in the last year, energy up 35% how much more is it going to go up next year?
Do you not understand this is the end of the global financial system as we know it! The American empire is over.
Every bank and every Western country is bankrupt – Jersey uses the pound and that is going to be devalued right along with the dollar.
Eventually normal people who do not understand global economics, such as yourself, will lose all faith in paper money and we will go back to using copper, silver and gold as currency.
In the mean time I have made a fortune by selling my property in 2008 and buying gold and silver.
It has always happened whenever governments interfere with the market and replace gold with a mere promise – Rome, Weimar Germany, Zimbabwe, Belarus – what makes you think it will be any different now?
So everything you own which is denominated in pounds – your house, your pension, your stocks and shares will similarly be significantly devalued.
The only, and I mean the only chance Jersey has is to significantly reduce the size, scope and cost of government radically.
Jersey is not a country, Jersey does not have its own currency, you cannot compare Jersey to countries – we do not have the option of hyperinflation to reduce the value of our debts, but we will suffer when the US and the UK do exactly that.
Ozouf has not got a clue and nor have any of his lackeys. Vote for them and we are in serious, serious trouble.
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Hate to say this but its still shrinking.
The only things that are still growing:
Jersey’s population
Number of Civil Servants
Number of unemployed
States expenditure
TAXES.
The States MUST stop spending. More tax revenue is spent on supporting our bloated civil service and inefficient states departments than any thing else.
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Marc Jones (29) Clearly you who criticised my comments have no understanding of economics!!!
Thank you. Maybe you could refer me to the economic text or theory (peer reviewed?) which claims that negative growth of 5% (Jersey, 2010) is better than 1.7% (UK, 2010). Your quote “Which is much better than the USA, most of Europe and the UK”..
You, Marc Jones, clearly have lost the plot and do not understand your own use of English or economics! Nor can you justify your unjustifiable claims.
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The Strategic Reserve is very healthy, the Stabilisation Fund is running low but that’s because it has been used for the purpose it was intended; to smooth the peaks and troughs. It never was expected to smooth-out the mother of all recessions that’s the job of the Strategic Reserve (nee Rainy Day Fund). The stabilisation fund worked in two ways in order to smooth the peaks and troughs:
1, It supplements the economy when it is struggling
2, It dampens an over-heated economy because it turns people’s spare cash into savings (the fund)
So, it has two effective means of making a difference but because we have continued to top it up as we have been drawing from it the effect has not been quite so fantastic. The money that tops it up comes from taxes which suppress growth. It is rather like trying to push-start a car with the brakes on.
The figures are quite delayed and the true picture is possibly much more cheerful, hence the Treasury Minister announced tax breaks recently. He gets to see money coming in and it isn’t that difficult to predict the total tax take for 2011 at the start of Q4 2011 with ITIS. I still think he left it too long.
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There is very little of the Stabilisation Fund left and the budget surpluses predicted for 2012 and 2013 are tiny.
If the recession does turn in to a double dip, income is a bit lower or expenditure a bit higher, then raiding the rainy day fund, tax rises, cuts or borrowing is inevitable.
My prediction is that the gilt will start to come off in January when the elections are out of the way.
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The Oz land of economics stricks again. If he had not started the 0/10 taxation, which benefited only non residents and the super wealthy then this Island would have been £85 Million better of and the rainy day fund would have been nearly a billion. When will he and his followers be voted out. Get rid of his cronies at the election, half the house are afraid of him and he needs taken down a peg or two.
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“Do you not understand this is the end of the global financial system as we know it! The American empire is over.”
IS IT?! REALLY?! You may not bother to look but last time I checked the rising Chinese empire seems quite happy to work with the mechanism’s of the western financial system. The fact that it has no plans to interfere with Hong Kong’s financial systems (its let HK’s government carry on as usual post British handover) and its desire to see Shanghai regain its place as an elite financial capital suggests its only just the beginning.
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I would like those who doubt a continued deep crisis to watch this
http://youtu.be/Bp-MQhssCqI
The BBC were shocked at the honesty of this trader.
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Yes Ben, China will provide the new global reserve currency in a couple of years time and it will be backed with gold as the dollar was until 1971.
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Warren@28 you say Salaries are not increasing,
They certainly are and it is costing the taxpayer according to the article I read, but probably not many pay rises for those in the private sector that cannot feed off the GST tax take.
There is a lot of good information floating around on the internet.
http://planetjersey.co.uk/forum/index.php/topic,1372.msg52200.html#msg52200
Davey West
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I guess gilts are something to consider but the reason these could be an option is because we have a AAA credit rating. The only reason we have that rating is because we have money in the bank. Why would we borrow only to incur charges?
There’s a cost associated with gilts that we wouldn’t have if we simply used our savings so the only way it could be beneficial to us is if there were some advantage to us which I just don’t see.
A crude analysis suggests that our savings would be tied up in other government gilts whilst Jersey gilts would need to compete with the returns offered by them in order for anyone to be interested. That would cost us money.
Returning to the focus of this article; another way of looking at is that our economy contracted by 6.7% when compared to the UK. We would be doing so much better if the hand brake had not been left on.
There was a cost of the stimulus, and assuming that it improved matters by, say, 2.5% our true contraction (less counter measures) would then be closer to 9.2%.
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mine has shrunk by 98%
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If the island needed £100 million we could issue a gilt at a really good rate, maybe a few per cent on a five or ten year bond.
We can get around that on deposit at the moment so we would be close to break even, if interest rates rose then our payments would remain fixed while the interest on our deposits would rise and could cover the interest on the money borrowed plus some.
Interest rates are in the pits at the moment so there would not be a lot of downside and we would be paying our lenders back with inflated pounds at maturity.
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There are a number of possibilities and I do get your point, Pip C.
It appears to me that if what you suggest was a safe bet then the Island could issue gilts even if it didn’t need the money at all. It could issue, say, £450M gilts knowing that it would make money on it AND would be able to dip-in if ever there was a need at some later date.
Meanwhile the additional £450M would also be on deposit. Yet more money could be made if the gilts were expressed in Jersey££’s since that money would also be investable as already is the case – yup, twice!
The possibilities are endless but generally borrowing money rather than using savings is more expensive or more risky.
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If you all remember, it was borrowing too much by governments and individuals that caused the credit crunch and recession.
I am against our glorious government borrowing money – look at what happens when they spend £100 soon becomes £200. ( Althoug I was told that there was borrowing to fund the airport development – it might have been called ‘leasing’ but that is borrowing)
They need to cut back and a good way is the insane welfare system. I know locals who have been denied benefits whilst having paid for years, but immigrants come here to work for low wages, pop out a benefit token and the handouts begin!
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“Jersey hasn’t borrowed anything”
How about time, for a start? The clocks are ticking!
Also, what has been paying for so many luxury lifestyles?
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Borrowing against the whole of the Rainy Day Fund and reinvesting it would be extreme but private equity funds do similar business making money on the turn.
It can make sense to maintain long term investments while borrowing against those assets to fund short term investment.
We may find out how the States want to play it next year as the Stabilisation Fund is spent and I think we could have anywhere between a £10M surplus and a £50M deficit.
If we have a deficit then the cash will have to come from somewhere and I doubt that tax rises or emergency cuts will be able to be put in place fast enough.
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Only in JINSY would a -5% economic growth rate be considered a success. And only in JINSY would Ozouf stay in charge.
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Well there is a surprise less than one month after the latest Greek bailout and the news is… Greece has not met its targets and will need more money.
Why? Because they simply will not cut government expenditure and surprise, surprise when they raise taxes people find ways of working around them and they do not raise as much as they think.
There is only one solution… slash the size and scope of government.
The same applies to Jersey. Government is never the solution, it simply creates more and more problems.
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Ozouf is the right man in charge, Pip Clement you are as usual wrong again and again. Jersey is in fact it’s own country, and guess what, Jersey does have it’s own currency. We have the Jersey pound which is fixed to the UK pound. This might be a technical argument for you, but it is a fact nonetheless. Jersey can pass a law to un-fix the exchange rate, and allow it to compete international with our own interest rates. We don’t because it is in our interests not too, nevertheless my points are valid. We are considerably better off compared to the rest of the world, and your arguments haven’t weakened mine at all.
The key is this. Ozouf has done the financial stability of Jersey a great favour, just because YOU don’t like him, doesn’t make what he did as wrong. He has been one fo the worlds greatest Treasurers, and it is in our interests for him to stay in government for a long time to come.
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Marc Jones (59) Pip Clement you are as usual wrong again and again.
Marc you are the last person to pass credible comment on anybody. Can you answer my post at 42? No because you are plain wrong, time and again. Now read the others who have passed comment your nonsense’s. They all say much the same thing.
All you do is stick you head in the sand, arse in the air and pas more hot air.
Before you above yourself, you should note that even the Swiss has now pegged their currency against the Euro. Jersey is a fine island, but it is just that, a small island irrefutably tied to the European economy because of its geographical location.
The worst performing economy in the EU is Greece with negative growth of -4.5%. Please explain why Jersey with negative growth of -5%. should not be regarded the economic pit of Europe?
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Pip, why shoudl they slash? We are not in debt, we are not going into debt. Thgere are swings and roundabouts, and Greece is a very different beast.
JErsey has had the benefit (whether you like to admit it or, most likly not because of your one-eyed nature), that Walker et al created a stabliliation funnd for ths purpose. Greece never did, they just spen recklessly. We saved. The purpose of the fund is to be used.
We are not in debt, I wonder what it would take for Ozouf to be regarded as a decent Treasurer? Give you handouts? Become straight? What is it, because I doubt no matter how much better off we were (which is difficult considering how good it is relative to the world), you would still be negative to him.
Why is that Pip? Why do you have this irrational vindictiveness towards one of the gtreatest Treasurers ever in Jersey?
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Jersey’s currency is only notionally independent.
Each pound in issue is backed by a pound deposited with the Bank of England.
Thus the Bank of England is the ultimate issuer and acts as the guarantor of the currency.
Should anything go wrong the BoE would step in and replace the island’s currency out of this reserve.
It would not be a case of unfixing the exchange rate but isssuing a new currency that would have to be backed by the island authorities.
Quite how this currency would be viewed is moot but the degree to which we could vary interest rates away from those in the UK would be very small as we would risk ruinous in or outflows of capital.
It would raise costs in the island as we would have the added costs of foreign exchange to contend with on a rarely traded currency and would make investment in the island a lot less attractive.
My guess is that it would be a recipe for economic stagnation or worse.
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There is some confusion in your statements ‘we’ to my mind means the people of Jersey, not the government. They are distinct, the concerns of one, are not the concerns of the other.
‘We’ are paying more than ever in taxation, so I do not see ‘our’ finances as being in good shape.
Keynesian economics promotes big governments and fiat currency (and I mean national governments not Jersey) rely on high spending followed by inflation.
Fiat currencies have always suffered the same fate, but the basic laws of economics are ignored by governments so long as their is an avenue to increase their power and control.
You can tell when a bubble is about to burst because Keynesian economists proclaim that governments and central banks have repealed the laws of business.
Through the continued debasement of fiat currency governments can pursue their pet projects, wars and corruption. The people work for and save the very fiat currency that is continually debased. The only option for people who wish to maintain their wealth is to swap their unsound fiat currency for sound assets such as gold or silver.
It is fantastic that Jersey only spends money that it actually has, that is how all government and personal finances should operate – debt is after all the currency of slaves.
The greatest period of world peace and prosperity between 1945 and 1971 was founded on a stable exchange rate between gold and the US dollar of $35 per ounce. Today one ounce of gold will cost you $1,650 and has been as high as $1,900 in the last month.
It was the Vietnam war which bankrupted the US and the continued denial of the financial unsustainability of the multiple wars in which they are currently engaged is just proof of their avoidance of reality. The system will collapse as their is no sign that the spending will stop – and it will drag the world down with it.
The war in Afghanistan bankrupted the Soviet Union and despite the propaganda this was not intended or desired by the US. Jersey actually has a higher level of government spending than the Soviet Union did. Which is strange since we have no foreign office, no defence, no interest payments etc.
What we spend our money on also needs to be examined – what are the social consequences of giving ever larger handouts to society? The youth of Jersey are suffering from the disease of benefit dependency. Welfare is no longer a short term safety net, it is now a career option.
In Buddhist terms the welfare state is the mud which prevents the lotus blossom from opening, which clogs the development of a person’s soul, preventing them from flowering.
In Christian terms – God helps those who help themselves.
Worse the ever increasing level of taxation is trapping more and more people in the dependency trap.
What is the point in taxing people only to give it all back to them in benefits? That just seems like a whole load of work which would be better not done at all.
I guess it depends how much you value freedom and liberty… I will take liberty, even if it is just the freedom to starve.
I do not want a government telling me how to live my life, what to do, when and how to do it.
God gave me free will and government has no right to take it from me. Government does not dictate morality, Christianity does.
Jersey to me should content itself to sit quietly at the side of all this madness, we don’t need to ditch the pound, let’s just legalise gold, silver and copper as alternative currency. Let’s just let people use whatever currency they prefer. If people want to use Swiss francs what is the big issue?
Jersey should not even attempt to compete on the world stage, our success lies in being sleek and efficient, obscure and reactive, able to take advantage of whatever opportunities are available.
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The reason your economy has shrunk is the same as ours Quantative easing or rather the lack of it. At the start of QE the islands had 3 choices.
1. Float a Island or Crown dependancey Pound.
2. Quantative Ease ourselves on a Pro Rata basis.
or
3. Completely fail to grasp the concept, do nothing and take it on the chin as the increased money supply outside of our juristictions eroded the size of our slice of the Sterling pie.
Wake up! Sterling has been debased along with the Dollar, Euro etc, had Guernsey done the same as the Uk we would have £350 Million extra sloshing about, you even more. Almost £6000 per head has leached out of Guernseys economy into the wider Sterling area and still not a peep from our Treasuries. When will we act, half a Billion (you must be pretty close), One Billion, Two Billion because the moment we set a limit the absolute folly of even following option 3 is laid bare as totally untenable from the beginning.
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Pip Clement (62)
Pip we could join the Euro. Now there is a thought
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Perspicuous – I’m afraid that you are mistaken – Jersey does not have a credit rating (unlike Guernsey, which does have a AAA rating). Therefore all this talk of issuing gilts is total nonsense.
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Mark, I did answer your ridiculous comment. We can easily achieve major growth by borrowing. The fact we can sustain an economic downturn WITHOUT borrowing is the key. What is holding up the UK and Greece is the borrowing which we don’t have. Therefore we are much better off, since we have no repayments to make.
Let me try and make it simple fopr you and Pip. Woudl you rather A. Be paying a mortgage on your house, or B. Own it outright, so when you make money you get to invest/spend/save as you wish?
Pip: You are completely wrong, there are no deposits paid by Jersey to the BoE, this was scrapped in 1984, when the UK paid this back instead of Jersey taking a loan.
Pip: You clearly HAVE NO IDEA WHAT YOU ARE TALKING ABOUT!!! You have been shown by many on this forum to be devoid of facts/knowledge of even the most basic items. In this case, I understand your ignorance, but why make such a ridiculous, false and spurious claim just to further the wrong agenda?
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We will not have to wait long to find out who is right.
We are at the end of the Stabilisation Fund, there will be about £10M left at the end of next year.
I predict that interest rates will still be on the deck in 2013 and the predicted small surplus of £6M will be more like a deficit of £30M.
Phillip Ozouf will then try to raise GST to 8% to cover the shortfall while using some rainy day cash to fund it short term.
The facts and figures are on page 8 of the draft budget statement.
http://www.gov.je/SiteCollectionDocuments/Tax%20and%20your%20money/R%20Final%20draft%20budget%20statement%20110922%20WM%20v1.pdf
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The States budget is looking a lot more optimistic than it should.
It was written before the current turmoil started in the financial markets, if Greece defaults then there will be waves not ripples across the pond of finance and even Jersey will be affected.
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Marc Jones (66) Mark, I did answer your ridiculous comment.
Marc I think you have lost the plot. -5% negative growth (Jersey) is not better than: -4.5% negative growth (Greece); or, 1.7 positive growth (UK). You have no answer for that, nor did you attempt to address the irrefutable nonsense that you spout.
Spending ever more money that we are not earning (taxes) is a receipt for economic catastrophe. Look at Greece, it has a better economic growth than Jersey.
Borrowing is a red herring. Jersey went into this rescission with cash in hand, a legacy of the boom years in the 1980s and 1990s so the need to borrow money can be deferred. But with budget overspends and negative growth the day will come when the kitty is empty.
I have never seen the Jersey economy in such a mess and I lived and worked through the recession of the 1970′s. It has all gone wrong on Ozouf’s watch and he should go and go now.
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59 & 66 Marc Jones: The only link (peg)Jersey Pounds has to Sterling is by virtue of being exchanged with it, thus for every £100 issued there are £100 received. It is thereby 100% backed by Sterling which is fiat money. The States make interest on/invest the sum on deposit so it is a beneficial arrangement.
65 Gary: I actually rather doubt gilts would happen and have not been promoting the idea but I have been participating in the discussion, it is not nonsense at all and could theoretically yield double returns if expressed in JY£, what’s your contribution? Read my posts, ask questions. Yes, you do have a point to make; Jersey does not have any rating, but that does not mean it wouldn’t equal Guernsey.
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Perspicuous – OK, I see that you were not actively promoting the issue of gilts however, the point is, without any credit rating it is not possible to issue sovereign debt. So, why is Jersey not rated? I believe it may have something to do with the fact that 1/ It has been running a negative growth for some years now, and 2/ Our reserves don’t look too healthy when future pension payment requirements are factored in.
If we applied, we would get a rating, but I doubt if it would be AAA. And, of course, the lower the rating – the higher the risk – which would result in a smaller potential investor market for any borrowing that we wished to make, with higher rates of interest to pay.
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While ill-fitting metaphors only deepen confusion, I think this is apt enough to help. Jersey has surfed on the world’s wave for the last half-century, but that wave has now broken. Climbing back on top of the board won’t get us anywhere, it is now time to paddle again.
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I suspect that Jersey would get a good credit rating if ever it wanted one. Selling the gilt would not be a problem as I think a lot of islanders would buy some and probably most would be held to maturity so the market would be rather thin.
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Gary, the reason Jersey is not rated is simple. Firstly it costs money to get rated and Jersey so far do not need it.
If Jersey required money by borrowing, the lender will not loan unless a ratings agency undertake an analysis. Accordingly this analysis does not look at recent growth/decline, but rather review the balance sheet (what is currently borrowed) as well as a 10, 25, and 50 year domestic performance trend.
On this basis, with weight given to indebtedness, Jersey will automatically receive a AAA.
In short, until such a time as we need a rating, then no point getting one if not borrowing.
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I gave the matter some thought and it strikes me that AAA rating could have its benefits; however, if ever that was eroded it could be detrimental to our credibility generally. We should, perhaps, be careful what we wish for!
Thankyou Gary, if our government debt (gilts) was 100% backed there would be no risk.
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David, I appreciate that as an older man you might try and get your points across with misguided examples, but as you are far from the world of finance, you fail to note that Jersey has still the same value of deposits under management.
We are not on any ‘boards’ for ‘paddling’ – get with the program and speak in real terms. We have the funds under management to ensure Jersey retains the required work required in the finance industry.
Anyone can ‘compare’ Jersey’s state to make an invalid point.
Go back to selling property, and leave the debate to people who know what is going on.
Real Estate salesman, politicians, and lawyers … The world would be so better off with out them
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