Google+ Followers

Monday, 17 September 2012

The Economy of the States of Jersey is in dire peril


It is once more my moral duty to report the truth about Jersey's economic situation in the face of a week long propaganda barrage by the States of Jersey and the JEP.
On the 14th September the JEP reported the following:
STATES finances are doing better than expected, with spending slightly down and income slightly up on forecasts. 
Figures released in the run-up to November’s debate on tax and spending plans for the next three years show that the States are performing well, with spending £8.2 million under budget and taxes £13.5 million over the forecast.
Firstly it should be noted that 'spending' only counts for those amounts required from the treasury department, it makes not account of the increase in the various fees charged by departments, such as Planning Fees, Social Rentals etc. - any increase in these is actually a 'saving' in government parlance.
Secondly, in every annual budget there is a line of expenditure termed 'contingency' this is 'planned spending' to cover unforeseen circumstances, this line on the budget is the source of these now annual 'under-spends'. In each and every year some of the 'contingency' is actually used which is in fact spending over-budget.
Thirdly, one must assess whether the initial forecasts were realistic, or whether they were prepared solely in order for the JEP to be able to report the above. In fact this compares unfavourably to previous years where we have been as much as £56 million better off than forecast (co-incidientally the year BEFORE GST was introduced, but after it had been sent to the Queen for assent. A cynical man might suggest that the forecast had been doctored specifically to give a reason to introduce GST to Jersey).
Finally we should examine not the actual amount of money spent, but what benefit the public has enjoyed from the expenditure of this money. 
The island seems to be worse now than it was the year before with poor road maintenance, inadequate health services, less than inflation increases in pensions and social benefits - so where has the increased expenditure gone to? Perhaps the appointment of several new 'directors' in the department of health and to the soon to be corporatised harbours and airports explains it.
This report does not of course deal with the growing problem of declining returns on the social security fund, which was already due to run out by 2030 and its lifespan is shortening all the the time.
Departments are asking for most of the unspent money to be carried forward to next year’s budgets, because it relates to projects or spending which have been delayed.
This of course means that much of the money which was intended to be spent will still be spent but just next year instead of this.
This morning’s figures have been welcomed by Treasury Minister Philip Ozouf, who said that the new report should give the public confidence in the state of public finances.
The report should give no one any confidence whatsoever in the state of the finances of the 'Island of Jersey and its Dependencies', the contraction in income has now got to such a level that the 'safety zone' or 'contingency' is now having to be utilised just to prevent everyone from realising that things are spinning out of control.
Two other stories were buried in the later pages of the paper this week (and not reprinted on the website), firstly that Retail Sales slumped 7% in the second quarter of 2012. Bear in mind that commodity inflation is running at around 20%, with food inflation running far higher and this should lead you to conclude that profitability of these businesses is being squeezed which will have the effect of increasing unemployment and decreasing tax revenues.
The Velocity of Money (the amount of times that the same money is exchanged in a time period) is falling indicating a decline in confidence in the future as people try to hold onto their wealth.
The only good thing is that this does not mean that everyone has yet reached the realisation that the value of money is falling so fast that they will buy anything in order to exchange their cash for physical assets... this will be almost the final sign of the financial apocalypse we are steaming towards.
The Second Story was that BANKING DEPOSITS AND ASSETS UNDER MANAGEMENT IN JERSEY FELL significantly, now bear in mind that the amount of money in the world has increased by 200% in the past four years (and if Jersey was doing well it would have received at least its equal share of these) and it is clear to see that Jersey is falling out of favour as a jurisdiction in which to park your wealth. The over-regulation and strangulation by government continues apace. The foreign minister is failing to win new business for Jersey and Jersey Finance is just not doing a good job, one might wonder why either exists.