Building a Future in Jersey: the Economy

Tom Holvey could be said to specialise in island economies. Before he came to Jersey, he worked for a time on a rather more remote island, as Chief Economist for the government of St Helena.

“There’s definitely something about an island mentality,” he says. “You feel you’re that bit more independent, more reliant on yourself. There’s a different mentality to what you do, and the economies are different as well. Our solutions are very different to what they would be in an area with a big population. Our problems are often the same, but the solutions need to be different.”

Today, as Chief Economic Advisor to the Government of Jersey, Tom is focused on the Council of Ministers’ priority of ensuring the Island has a strong economy that will enable people to build a future here.

“Jersey is in a strong position,” he says. “It has a very strong balance sheet. And we have very little debt, lots of strong assets, and reserves in place. Most nations aren’t in that position in terms of strength. That’s a really good starting position.

“But at the same time, the pressures are coming through. There’s an awful lot of global economic problems at this moment in time. There’s a shifting world order, which feeds through to the economy.”

The Future Economy Programme is the Government’s blueprint to ensure Jersey enjoys a better standard of living in 2040, and to address the challenges of the Island’s ageing population.

“This is not about saying older people are a problem,” says Tom. “It’s about providing for those people. But there is an economic reality. When they get older, people retire, and that generally costs the health system and other systems more than people when they are younger.”

Government research shows that without net inward migration, Jersey’s population aged 65 and over is projected to increase by 30% by 2040, while the working-age population is forecast to fall by 10%. On those figures, to maintain our current standard of living, we would need to increase the population to 150,000 over the next 15 years. So does that mean we have to reconcile ourselves to a more crowded island?

“Absolutely not,” says Tom. “What we did through the Future Economy Programme is say we don’t want to get there. We want to ensure that we can provide all these services and what is needed for Islanders within the constraints of where we want to be. I think we all accept the need for some population growth because we need certain areas of labour, but we want to keep that as low as possible.”

The answer, he says is productivity. “The reason that productivity is really good is it means we need fewer people to do the same jobs, and it means we actually get more output from those people at the same time. Productivity is directly linked to living standards. And the reason why a lot of economists, certainly myself, want to work in economics is to make people’s standard of living and people’s lives better.”

Productivity is something of a buzz word at the moment, everyone seems to be talking about it. But Tom says it is a concept that is often misunderstood.

“Quite often people think productivity means working longer hours and working harder. Actually, it’s the opposite of that,” he says. “Productivity means getting more out of exactly the same amount of hours you’re doing – or getting the same out of fewer hours. The exact measure of productivity is output over the hours you put in. So, if you put more hours in, you will get economic growth, but you’re not going to improve productivity. When we talk about productivity, we specifically don’t mean people working longer hours.

“We mean them getting more out of what they’re putting in. And you get that through better skills, better technology, use of capital, moving away from people doing certain roles into more automation. You can see that right through history.  Businesses are nearly always becoming more productive

“In offices we now all use emails and Teams, and that makes us more productive. It means that we can do more than we were doing before, because we no longer have to travel to a meeting. So that’s half an hour back in our day to do more productive work. It means we can communicate better, get answers to things better.

“And when you talk about automation, you can now start using certain tools to help you write reports, or help you do better calculations. I can do more on a daily basis than I could have done 20 years ago, and that makes me more productive as well. It doesn’t mean that the job’s not there. It means I’m able to do the things that are more important.”

The Government has just launched the Better Business Support Package, which will provide £20 million of grants over the next two years to enable businesses to invest in technology, apprenticeships and enhancing the skills of their workforce to improve productivity.

“We will continue to look at how investment cases can be made across the Island to ensure that businesses can invest where they need to,” says Tom. “There is no doubt the businesses are the drivers of growth. And businesses know what they need. We’re not telling them how to do it. We just put in the finances to match with them. Businesses know how to run their own business. That should not be government’s job. We need to enable them and try and provide the best environment we can for them to run their businesses as effectively as possible.”

Under the scheme, the Government will provide up to £75,000 in match funding for businesses to invest in productivity, plus up to a further £75,000 to invest in skills. To qualify, businesses must match the funding pound-for-pound.

There is no shortage of examples of successful productivity boosts in Jersey, says Tom. “We’re famous for the quality of our agriculture on the Island. And that has made significant productivity gains in recent years where you see automated shed cleaning, automation of milking, tagging cows to know where they are and how their health is at any given moment.”

Another issue Tom has been looking at is the so-called “Bean drain” – the high number of young Islanders leaving Jersey. He says it’s important to distinguish between those who are leaving to pursue their dreams and those who are going for economic reasons.

“I grew up in Lincoln. And I left Lincoln to go to university when I was 18 and I probably won’t live there again,” he says. “There’s nothing wrong with Lincoln. I love it, but it just means it wasn’t the right fit for me, and I couldn’t achieve what I wanted to, in a place such as that. So it’s not necessarily a bad thing that people are seeking to leave, to get different experiences.

“What is important is we want to make sure that if people want to stay on the Island, they can thrive and have opportunities. So we need to ensure we have a economy that enables that to happen.”

One of the factors young people cite as driving them to leave Jersey is the high cost of living. “The high cost of living is a phenomenon across the entire world at this moment in time,” says Tom. “The price of eggs is very political in America at the moment. In the UK, when people started to talk about the cost of living, it was about high energy prices, and changes in tax take.

“In Jersey it’s different, it’s very much about housing. It’s about that high base of housing costs before you even start to think about other costs of living. Once you have that eating into your monthly pay packet, it doesn’t give you a lot of room to manoeuvre.

“We have seen improvements. The gap between housing prices and wages has been narrowing. It has reversed the trend of the previous 20 years or so, which is very positive, but there’s still a long way to go.”

Tom has also been involved in looking at the possibility of an offshore wind farm. “I don’t think any nation in the history of the world has ever done badly out of energy production,” he says. “When we see the global economic turbulence at the moment, having your own energy production is really going to be important in the future. It buys you into market negotiations, if nothing else.

“What I’ve always said about wind is it has to make economic sense. And if it doesn’t, if we’re subsidising it, we should not do it because we should be doing it for an economic reason rather than any other reason.”

Tom remains optimistic about Jersey’s future. “Even with all the sort of stark area of economics around the world, there is real opportunity here because we’re in a strong position at the moment. Because actually we have all the right conditions,” he says.

“There are real threats coming down the road, but I think the opportunities outweigh them. It’s just on us to try and ensure that we grasp those opportunities and make the changes where necessary to do that.”

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