FOCUS: CEO's call to ‘Make Jersey ‘Jersey’ again’

Friday 24 January 2025

If Donald Trump’s mantra is ‘Make America Great Again’, the new top civil servant’s could be summarised as ‘Make Jersey Jersey Again’.

Once low tax and limited red tape, Jersey is now a bloated heavy public spender with too many regulators.

The answer? Time to return to the island’s roots, Government CEO Dr Andrew McLaughlin told a packed room of business leaders yesterday.

In a departure from his predecessors, Dr McLaughlin’s speech at yesterday’s sell-out Chamber of Commerce lunch – his first in public since taking leadership of the civil service in 2023 – strayed beyond the machinery of government and its relationship to business and into the key policy decisions that have shaped the island, and seen spending skyrocket, over the past decade.

Here are the five key takeaways…

1. Jersey has a “cult” of high spending 

Stepping away from the common narrative that Jersey's plummeting productivity is its main issue, he argued instead that Jersey's original principles – of low tax and regulation, which had enabled its economy to grow "100 times bigger" since the 1970s – were being "stress tested" by a quiet change in policy.

Pointing to a 53% rise in public spending in just six years, the former CEO of Commercial and Institutional for Natwest's non-ring fenced bank in London shared “a concern that a higher spending cult has taken root” and was now “hard-wired into our political system”. 

"We have this policy choice that we will spend all the tax we’re collecting. When we get it in, we spend it – we aim to spend it. That’s a policy choice,” he said.

Pictured: Dr McLaughlin's speech pointed to a bloated public spending system.

That culture, he said, was evident in discussions, debate and backbenchers’ attempts to tweak the Government’s £1.3bn Budget for 2025 and beyond, which Ministers had described as a “commitment to building a secure future in Jersey”. 

Several amendments got through relating to areas as wide-ranging as a public services ombudsman to apprenticeship funding.   

“If you look at the last Budget, I think the Chief Minister and the Treasury Minister were at pains to point out how tight the fiscal position was, how tight we were, in terms of available funds, but we started fighting amendments, which would have added another 30, 40 million to that Government,” Dr McLaughlin recalled. “Which is why, of course, the Chief Minister said, we need to curb spending, even in the short-run.”

If simple spending cuts aren’t possible as a remedy, he reasoned that instead “you can certainly start to take the edge off the rate of growth, and you can see in the Budget and out beyond the end of this year, it does start to flatten off much more in line with what we assume.”

2. We've let reserves run too low 

The reason this high spending matters, he said, is that “we’ve been running down the reserves” – Jersey’s ‘in case of emergency’ money pots.

“We spend what we get. We don’t go into debt – and that’s a good thing – but we don’t take much either.”

Pictured: Dr McLaughlin spoke to a room full of business leaders - and seven Ministers. (Paul Wright)

He went on to highlight warnings from the Fiscal Policy Panel – independent economic advisers to Ministers – that the Stabilisation Fund is exhausted. 

“It’s empty, post-covid and we haven’t yet begun to replenish it,” he said. 

“…These are some of the things that begin to take the lustre off our pristine model when it comes to strong public finances and prudentialism.”

3. Too much red tape, too many ALOs… and they’re stealing talent  

So, where is that overspending going? A good chunk – arguably, too much – sits outside Government, with the island now heaving under the weight of around 140 arm’s-length organisations dependent on public funding.

Since 2005 alone, Dr McLaughlin noted, 54 had been added to the list, whose specialisms are as wide-ranging as sport, tourism, finance promotion, property development and finance and care regulation.

Their existence, scale and purpose, he suggested, almost seemed a taboo.

“The third thing I want to raise which isn’t often discussed which I think needs to be… it does feel that Jersey has a default policy setting of setting up organisations with taxpayers’ money to provide some form of governance, oversight or service that for whatever reason the Government believes needs to be there, but doesn’t want to do directly itself." 

Pictured: Dr McLaughlin pointed to the number of ALOs, many of which he said weren't essential.

Having such a “multi-layered level of built into a nine by five, pretty small island, which wants to be nimble, wants to be fleet of foot as it makes its way in this complicated world” is inappropriate, and had only led to “complex and inconsistent regulation on the island”.

This, he observed, has been a consistent theme of criticism from the island’s spending and governance watchdog - the Comptroller and Auditor General. 

Previous reports have touched on everything from poor lines of accountability to queries over the sometimes opaque salary and bonus structures afforded to those sitting at the top levels of taxpayer subsidised organisations. 

And there’s another issue: “All of these bodies, are competing with the private sector for scarce, scarce human capital in conditions of full employment,” Dr McLaughlin noted. "In conditions of full employment, it's not clear when you can refresh the service.”

4. We're not investing enough in the future

A further "stark" concern is that this "over-regulation has found itself twinned with under-investment" and that there has been a "political preference" for spending on services in the short-run.

"If Jersey kept up with the OECD average on investment, investment would be double its current rate," the CEO said.

"We are currently investing about 500million short of what the average OECD country would invest on a comparable basis."

5. Look to the public realm for answers

While the CEO stopped short of providing a full suite of solutions, Dr McLaughlin's rallying speech did suggest looking in one direction as a starting point: investment in the public realm.

Drawing attention to Jersey Property Holdings, he noted that the island's £1bn portfolio's coupled with a £7.5 million annual maintenance budget was “asking for trouble”.

The government risked “degradation in public assets, a deterioration in your public realm, and frankly, a visual shabbiness that ill befits a wealthy, well-invested safe-haven financial centre, the Jersey business model,” he said.

In the hope of also providing "consistency" for the island's struggling construction sector and stimulating the economy, he said the "time has come to debate whether sustained investment in the public realm should be prioritised", as such investment "transcends individual governments".

Highlighting London's King's Cross or the South Bank as examples, he noted that "public realm investment done well... levers higher returns to the taxpayer".

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Pictured: Dr Andrew McLaughlin, who has been in his role of interim Government CEO since September 2023, speaking at yesterday's sell-out Chamber of Commerce event. (Paul Wright)