It was budget day in Jersey this week and I could not help but take a quick look. I found something even more bizarre than I expected. This is the overall budget forecast:
So, Jersey will apparently get out of its black hole in about five years time. That, of course, was George Osborne's perpetual story about the UK deficit as well. And just as the UK found this is not going to happen. How do I know? I think two other graphs tell the story. First there is this on Gross Value Added (the Jersey equivalent of GDP):Which is another way of expressing a part of this (form the 2016 budget):
Both GVA trends make clear that the Jersey economy is in a long term downward period of decline, the run up to the global financial crisis of 2008 and the 2014 -15 years apart, which are now seen as aberrational. Despite this table 35 of the current budget shows that the economy will not now shrink, which is quite extraordinary given long term trends, the oddities of 2014 and 2015 which Jersey does not expect to be repeated, the global economy, Brexit and other major uncertainties. I may be wrong, but that really looks optimistic.
But it is not as plainly odd as another characteristic of the budget which is in this table:
So, let's be clear: there is no growth and there is no inflation. Almost every tax revenue line flat lines as a result, bar one. This is personal income tax. This grows at rates of up to 5.5% per annum. In addition, from 2018 additional revenue raising measures are put in place.
The growth in income tax revenues cannot come from growth, because there isn't any. And it can't come from inflation, because there is almost none. In that case they can only come from increasing taxes.
The message of this year's Jersey budget is very clear: the people of Jersey are to pay more tax so that it can survive as a tax haven. They are going to be asked to, in effect, subsidise the tax cheats who use the place. And unless the people of Jersey learn to start voting, for the first time in decades, against the finance industry's nominee's who form its government there is nothing they can do to stop this.
Will they? They just might given these supposed tax increases.
They might do so even more readily when the assumption of zero growth turns out to be wildly optimistic in a place where long term decline is the actual trend.
Jersey's plan to get rid of its black hole is far from viable. And the biggest threat of all will come when the people of Jersey have had enough of it.
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Richard
I understand your economic assessment and don’t disagree with it, but I can’t reconcile your comment about the politicians being “finance industry nominees”. You make it sound as though “the finance industry” goes out of its way to select all the candidates and that nobody else can stand, which is complete fiction.
I am well aware that there are those like Geoff Southern break the mould
But those who do not do finance’s bidding rarely become ministers
But anyone can stand for election, and democratic voting decides who get in. The elected deputies then elect the ministers.
If the electorate of Jersey want anything different from what they get then they can get it.
Isn’t that how democracy works?
Not in a captured state
And Jersey is
Richard
My brother is very anti-finance industry and successfully stood for election in Jersey in recent times. The reason why he did not get put forward for Minister was because of his own shyness and lack of confidence – nothing to do with his beliefs.
There is nothing “captured” about Jersey. Those of the population who are anti-finance generally don’t feel strongly enough about it to stand for election. There are 4 or 5 deputies who are anti-finance but they all seem to have character flaws which prevents them from becoming ministers, and the House overall is made up of pro-finance deputies which are representative of the wishes of the electorate.
Are you suggesting that the elections are rigged?
Of course the elections are rigged
Just look at the different styles of membership and most definitely the role of the Constables
This is not a democracy
I’m sorry Richard but you are clearly reading too many conspiracy theories.
Do you think that Constables have any political decision-making power?
How can the elections be “rigged”? I think you’ve got some considerable explaining to do in order to make such an outrageous claim.
Oh come on
They vote in the States
Don’t be stupid and pretend otherwise
Richard
You’re suggesting that the election of Constables is not democratic. Anyone can stand (if they have a proposed and seconder) and everyone on the electoral roll can vote, so how is that undemocratic?
The people of Jersey get the government that they democratically vote for. Just because you don’t like the end result, and that Southern and Mezec and Co aren’t Ministers, does not make it undemocratic!
Respectfully, Jersey makes many single party stares look democratic
Your claim re the Constables is wholly contradicted by the reality, for example
They represent a very now interest group and are a perpetual block to any progress, whatever fiction you promote
Richard
For goodness sake, take your anti-Jersey blinkers off!
Nobody is forced to stand for election and nobody is prevented from standing for election. Nobody is prevented from voting or is forced to vote in a particular way.
If there aren’t sufficient anti-finance candidates wanting to stand, and not enough anti-finance voters to vote for those who do stand, then that’s because the population of Jersey is not as anti-finance as you think.
Do you honestly expect there to be lots of Southerns and Mezecs and tens of thousands to vote for them? The reality is that the electorate of Jersey does not support their views, and lots of those who do support their views think they are appalling politicians with no charisma or gravitas whatsoever.
You are seemingly painting a picture of 10,000 finance workers holding the entire island to ransom!
What you seem to be wanting Jersey’s government to be would be entirely undemocratic – totally unrepresentative of the electorate’s wishes!
I am absolutely certain the finance industry holds Jersey to ransom
This is precisely what the Finance Curse is all about
With 50% of its GVA finance related what finance says Jersey does
Open your eyes
I am the realist
And the one who has always been right
Richard
Your logic is entirely flawed.
Just because the finance industry generates so much of its revenue does not mean that it isn’t democratic. Nobody is disputing that the finance industry generates that level of revenue – it very clearly does.
Please explain exactly how the finance industry is somehow selecting candidates to stand for election and blocking others from standing, and then ensuring that they get elected. You actually said that the elections are “rigged” but you cannot back that up.
But all the time finance industry puppets become Chief Minister, without amy opposition on tiny turnouts from an electorate who know they have no choice
Sorry Trevor: facts speak for themselves
Richard
No – the “facts” are that the elected deputies represent the voting will of the people.
If the electorate wanted anti-finance deputies then they would propose them, second them and vote for them. If there were enough of them, then they would control the Assembly.
But there aren’t, so they don’t. That’s democracy.
Do you only accept democracy when it gives the outcome that you want?
If you really think Jersey works like that I think you are, well, naive, to be kind
Trevor, you don’t honestly believe the nonsense you’re talking do you?
Do the basic maths –
St Mary – population 1,752
St Helier – population 33,522
Both get one Constable in the States with one equal vote.
That’s not democracy. That’s a rigged system.
So – Jersey could very well be seen as a laboratory depicting what could/can happen to America or even the UK if the rich are just left to their own devices by Governments?
Inflation would account for the rise in income tax receipts. I’m not saying it does ( further checking would be needed ), but it could. Inflation is officially 2% in Jersey ( Sept 2016 ); not sure where you got the zero figure from Richard. And due to the exchange rate peg to the now devalued sterling, and the higher % of consumption due to imports, then the expected additional inflation to work through the economy in the next year is higher than the UK.
No other tax shows an inflationary rise of almost any significant sort 1% at most – so that is just not true
Look at the data: the income tax increase is wholly aberrational, as I said in the blog
I beg to differ. Income tax comes with personal allowances, so it’s perfectly possible mathematically for 3% inflation to result in a 4.5% increase in nominal income tax receipts, if around 1/3rd of income is already untaxed due to the allowances, and the allowances are frozen.
That doesn’t apply to consumption taxes where there is no allowance and you are taxed from the very first £ you consume. The consumption pattern would also change marginally towards essentials and away from luxuries if after-tax real income reduced.
So you could expect below inflation growth in consumption taxes, and above for income taxes.
I’m not saying this is definitely right, just that it is possible.
I’m still unclear Richard where you got your zero inflation figure from though.
Zero inflation is what inflation in sterling is
And there is no way your claim is viable at a macro level, in my opinion
http://www.gov.je/Government/JerseyInFigures/BusinessEconomy/Pages/Inflation.aspx
It’s 2% in Jersey. And expected to rise further. You wouldn’t use the Eurozone inflation rate to analyse say Ireland’s budget, you would use the Irish inflation rate.
What’s controversial at the macro level about spending switching away from luxury goods when real income taxation increases?
If it is 2% then most of the data shows real tax falls
Implausible one tax will rise significantly when no other dies and there is no growth without an increase in tax rates. The implication otherwise is effectively 100% savings rate on income growth
That is ridiculous
I’ve read that four times and it is reads like a riddle. Could you start by accepting the official jersey inflation figure of 2% over your claim of 0% please ( i.e. no need for the ‘if’ clause ) and then explain it again?
No, I can’t
You explain why all taxes but income tax have less than inflation increases if you after IHT and growth = zero and how this is consistent with significant overall income tax rises from a population who however do no additional spending desire their obviously well avid inflation income rises
the people of Jersey are to pay more tax so that it can survive as a tax haven.
Not quite. The States are adamant that tax will not rise: but they are adding what they are pleased to call a charge to pay for waste disposal and a charge to pay for the new hospital, just as they imposed a charge to pay for long term care for the elderly. I will leave you to ponder the semantics (and actually there might be real impacts, as income tax is capped for the very wealthy, but it’s not clear whether the charges are).
But really economic decline is irrelevant. What is far more relevant than any mere economic voodoo is the simple fact that as the price of oil increases, the cost of importing goods into Jersey will rise such that it makes it impossible to sustain living here. Most people on island are blind to this, and will remain blind until it is far too late.
But tax HAS to rise for this budget to work
It is not possible otherwise
Your politcians are dissembling, in my opinion
I’m pretty sure taxes in Jersey will rise. That’s what has been happening continuously over the last few decades, social security rates are up, income tax rates are up, duties are up, plus we have new taxes such as GST.
The only real growth in Jersey is the population, that of course increases tax revenues, but it also increases expenses, and the creates need to build more and expensive infrastructure such as the hospital and schools.
The States of Jersey have been bundling-up all their assets in to corporations for a reason. So they can sell everything at short notice.
Do not listen to their PR. Watch what they are actually doing and decide for yourself why that is.
Housing is already bundled for this reason
Some have already been sold
One runs out of family silver one day
PSR says:So — Jersey could very well be seen as a laboratory depicting what could/can happen to America or even the UK if the rich are just left to their own devices by Governments?
Reply
I rarely give my views as I am an outsider (I am French),but PSR’s question seems to me a brilliant suggestion. It actually coincides with the constant observations of comparable political entities (tax havens, in short) made by movements like Attac, Oxfam,Friends of the Eath, Survie,etc. This was one of the most surprising findings when we started visiting Jersey and trying to understand its essence almost twenty years ago: Jersey indeed can be seen as a laboratory of the way democracies can be turned into plutocracies,increasingly run by the wealthy for the wealthy. Democratic politics and its essentially conflictual working nature simply have become “irrelevant”. “Governance” and “politics by consensus” have replaced it, even if formal aspects are kept. The trick has simply been achieved by a gradual addiction of the general population to the quasi monoculture of “Finance” and the hegemonic narrative it has imposed through its “soft power” (See the ownership structure of the Jersey Evening Post for many years, for instance). Also through a deliberate ignorance of the parasitic nature of its real activities that deprive other nations of their due ressources by offering tax evasion and tax avoidance schemes like trusts and other SPV’s…
Jersey is booming and new business is coming in all the time, tax takings are up, employment is at record levels and the new Finance Centre is filling up.
I enjoy reading your deluded, sour grape posts Richard because you have such a big chip on your shoulder about Jersey I am surprised you can even walk with it.
No doubt you’ll be saying something similarly depressing to write around the next budget, this whilst Jersey just moves on as if your views are totally insignificant.
Jersey is not booming
I published the data that shows that is simply not true
It came from Jersey
Why lie in the face of facts?
Well sorry to disappoint you but 2016 has seen record employment.
You keep on preying we go bust.
I don’t prey
Or even pray
I just stick to the fact that Jersey says there is no growth prospect in its economy
And since 2000 it has been in overall decline
“2016 has seen record employment”
Sounds like you’ve been taking our Economic Development Minister too seriously as he is the main one on tv making this point over and over again. (he’s the same guy who has overseen our tourist numbers drop by 50,000 btw!)
Yes, Jersey has a record number of people employed. That, as a unique statistic void of any context, is true.
However, we also have the highest population levels we have ever had, with the greatest level of inward net migration we have ever had, whilst at the same time the numbers of people unemployed has remained static over the past few years at around 1,400 people.
Over half of the new jobs being created are zero-hours contracts.
The jobs being created are crap jobs (by and large) and they are aiming to improve tax revenues and growth by just importing more people to take up jobs in finance (and are failing at delivering growth anyway).
Anyone who can’t see that the economic model is completely broken is either on the States payroll or a complete fool or both.
Richard you told us we’d be bust by 2015 and you refer to a black hole that is a deficit after capital spending projects, and it’s already shrunk due to higher than expected tax intake anyway.
You really need to get out a bit more and stop trying to desperately predict gloom for successful offshore operations like Jersey on a Blog 24/7.
Take up a hobby!
Maybe you have not noticed that I was right
The hole was as I predicted