The changing economic face
This article was published in the Annual Bulletin of La Société Jersiaise in 1984. It was based on a talk given to La Société on 2 February 1983 by Colin Powell, then Economic Adviser to the States of Jersey
It was Goethe who said 'life belongs to the living, and he who lives must be prepared for changes'. This is true not only for us as individuals but also for the body economic of Jersey. In looking at the changes that have taken, and are taking place in the economic face of Jersey, it is helpful to start with a glance at the present position.
The island's economy at this moment is relatively successful, if compared with its larger neighbours, and extremely successful if compared with other small islands off the coast of western Europe. By tapping its natural resources and the labour of a resident and immigrant workforce, the island has achieved a level of economic activity which supports a population of 76,000 and a standard of living equivalent to that in the United Kingdom and neighbouring France, with public expenditure on social services (health, education, social security and housing) at a high level without any public debt to speak of, and relatively little unemployment in spite of the fact that the economic winds now blowing through western Europe are the harshest we have experienced since the 1930s. The standard of living in the island is reflected in the standard of dwellings constructed, hospital. care, education and in the material possessions of the islanders at large most noticeable in the extremely high level of ownership of motor cars, horses, yachts, consumer durables and all those things that go to make up our present material- some would say too material -society.
The economic face of Jersey has not always had such a smile on it - in the 18th century the supply of food was not always sufficient for the population and in many years the poor suffered deprivation through not being able to afford the price of flour, inflated because of shortages. On 18th September 1769 the Salisbury Journal reported' ... there are great disturbances in Jersey on account of the exportation of corn'. It is of interest that those who joined in the revolt at that time included in their demands not only a reduction in the price of wheat, but also the banishment of all aliens.
The problems that have flowed from the economic success story of recent years have arisen from a high rate of net immigration and from affluence. The environment of the island has suffered not only because of a growing population but also because its residents have had the money to engage in expenditure on items that through their ownership and use have an adverse impact on the environment, for example more cars, more houses. If only the population to-day could accept the life style of 1881 when there were nearly six persons to a house, on average, compared with three persons per house in 1981, we could do away with 11,600 houses out of the present total of 24,500; and if we could persuade people to turn the clock back still further to 1851, when the population had just grown by 28,420 in thirty years, an increase that may be compared with the 20,000 increase in population that occurred between 1951 and 1981, the present housing stock could be reduced by 14,000 units.
The force of this point can also be conveyed by comparing the population and dwellings by parish between 1881 and 1981, a period over which the population has grown in total by 24,000. The northern country parishes of St Martin, Trinity, St John, St Mary and St Ouen over that 100 years have experienced a growth in population of just 2,000, the Parishes of St Saviour, St Clement and St Brelade, on the other hand, have had a population increase of nearly 20,000, and the population of St Helier has in fact fallen by 2,500. But if you look at the number of dwellings, the northern country parishes have experienced an increase of 2,000 to more than double the number that existed in 1881. St Helier, despite a drop in population, has had an increase in the number of dwellings of 3,600, and St Clement, St Saviour and St Brelade together account for an increase of7 ,500.
The affluence of the population, and the ownership of the motor car in particular, have had a marked influence on the pattern of the population. In 1821, when the economy was still very dependent on agriculture, St Helier accounted for 35 per cent of the total population. With the burst of trading activity in the next thirty or so years the proportion increased to over 50 per cent. There were no cars in those days to allow those working in St Helier to do other than live close to their work. In 1981 the proportion living in St Helier had returned to 34 per cent; not because of a return to agrarian activities but because of the opportunity that affluence and the motor car has given to the population at large to disperse their places of residence away from their places of work. For example, in 1981, of the 975 journeys to work made by those resident in St Ouen, 865 were in a car either as a driver or as a passenger.
It is not just people who are attacking the environment; affluence is also to blame. It is right that the island should be concerned about preserving its environment - one of the key elements in the success of the economy. For this reason it is important that the States should have taken powers to regulate the rate of growth of the economy and to stem the flow of immigrants. But what must not be assumed is that Jersey has found the key to permanent economic good fortune and that it can afford to interrupt without question the process of change that has been so evident over the centuries, and particularly over the past two hundred years, without running the risk of cheating future generations of the basis of their own economic survival.
The 19th Century
As an example of this process of change consider shipbuilding which, in Jersey in the first half of the nineteenth century, was a successful industry. It was founded on a factor that is still the key to the island's success story to-day - low taxation. No taxes on the materials used and plentiful labour meant that the wooden boats produced were cheaper and of better quality than those produced in the United Kingdom and therefore much in demand by British merchants. The first permanent shipyard appears to have been established in 1821 by George Deslandes; by 1826 there were eight yards in existence, and at one time or another twenty-six yards existed. One of the largest, Clarke's, employed 400 men at its peak in the period 1840 to 1850, but by 1876 St Aubin's Bay was deserted of this activity. In its heyday with blacksmiths and foundries, sailmakers etc. the industry must have supported several thousand people and contributed greatly to the wealth of the community, a wealth reflected in some fine new houses built at that time.
The opportunity presented to the island by shipbuilding and the advantage taken of that opportunity is a very good example of how Jersey must continue to act if it is to maintain a thriving economy. Jersey can be likened to a man sitting on the bank of a great river. He can take water out of the river if he wants to and how much he takes out will depend on how well equipped he is to do so but he has no influence over the amount of water that flows by or the speed of flow. Who can tell what the equivalent of the shipbuilding opportunity will be in the future? Whatever it may be, a failure to take advantage of the opportunities presented could be to the detriment of the well-being of the island's residents. The response of the Island Development Committee today can be imagined should someone propose to build shipyards from the Albert Pier to First Tower. One wonders what industries of the future are being strangled at birth through the present panoply of controls.
There are occasions when a number of business opportunities may coincide in their impact on the economy. The result is considerable pressure on the island and a significant growth in its population. Such a situation occurred in the 1960s and 1970s when the growth in tourism and in banking, and a keen interest on the part of many in taking up residence in Jersey for tax advantage, combined to produce a population growth of 20,000 in thirty years. There has, however, been another period when a number of favourable events corresponded to produce a growth in the island's population, a growth which was even greater both absolutely and relatively than the recent one - the 28,000 increase in population which occurred between 1821 and 1851. By studying the years which followed that period of growth it can be shown that if favourable events can correspond so too can unfavourable events, and it should perhaps not be assumed that the growth in the population in recent years will be a permanent feature of Jersey's economic scene.
In the first half of the 19th century, Jersey experienced:
- 1 an influx of 'wealthy' immigrants in the form of officers retiring on half pay after the Napoleonic war. By 1841 there were said to be 5,000 English residents, and their relatively high incomes brought in their train traders to provide the services they demanded and speculators to build the houses they required;
- 2 a shipbuilding boom;
- 3 a reasonably good period for agriculture - between 1828 and 1832 30,000 tons of autumn-dug potatoes were exported and in 1839, with a quarter of the island still covered with orchards, 270,000 gallons of cider were exported;
- 4 an import and re-export trade because of the favourable tax treatment of materials¬Jersey was a significant exporter of boots and shoes at that time;
- 5 a continued expansion of the trading links with Newfoundland;
- 6 an oyster boom with 2,000 seamen employed in 1834, and another 1,000 women and boys engaged on the shore, and with the States itself spending £4,000 on laying down new oyster beds (the equivalent of £80,000 today). Gorey was like a frontier town. From a few huts, a town sprung up quickly. A church was built in 1832 to provide services in English for the English families, to which the States contributed £200 (£4,000 to-day) and a pier was built. In 1857 the oyster fishery brought in £50,000 even though it was past its peak - a sum equivalent to £1 million to-day;
- 7 the influx of 800 workmen brought in for the construction of St Catherine's breakwater, which was begun in 1847;
- 8 a steady stream of refugees coming to the island following the revolutions of 1848 in Europe.
Little wonder that Jersey was booming. At a time when government was unprepared and the basic services were ill-equipped to deal with population growth the more than doubling of the island's population within 30 years must have had a dramatic effect on the community. But despite the impression of a golden age, it should be remembered that while these were certainly good days for the traders they were far less so for the workers, as the bread riots of 1847 demonstrate. (Manual workers' wages of 60 pence a week in the 1840s are equivalent to £12 in today's money values compared with the present average manual worker's wage of some £100.)
After 1851, the bubble was pricked: shipbuilding disappeared before the advance of metal ships; the oysters were overfished; financial crises in Europe and poorer trading conditions in the 1870s helped to produce a sequence of local banking failures; the export trade in potatoes had dwindled to a trickle by 1858; there was a stream of immigrants from France but these were refugees rather than wealthy immigrants. As a result between 1851 and 1881 the island lost 4,600 of its population. When account is taken of the rate of natural increase (births over deaths) net emigration over this period was nearly 500 a year. At the end of the nineteenth century there was a steady stream of English residents settling in Jersey and some tourism -in the 1890s there were said to be 30,000 visitors a year- but the main feature was the new potato with 67,000 tons exported in 1891 worth nearly £lh million (in today's money that is more than £13 million which can be compared with the £10 million earned in 1982 which was generally considered to be exceptional). But this was not sufficient to provide work for a population with a high birth rate, and net emigration continued apace - at a rate of 400 a year between 1891 and 1901. This situation showed little change up to the First World War. The mainstay of the economy was once again agriculture, and this contributed its traditional year to year fluctuations with 81,500 tons of potatoes exported in 1907 and 48,500 exported in 1911 (figures which can be compared with the average of 30,000 tons today).
Post World War One
The inter-war years were a period of little growth against the background of a world economic climate that from the end of the 1920s was most uncomfortable. For those who were in work living standards improved. For the haves looking back those years may appear as golden years. For the have-nots, those out of work, the age was not quite so attractive. During the 1920s the States found themselves faced with a cash shortage and in 1928 introduced income tax at a rate of2lh per cent. Some measure of the conditions of the time is shown by the level of States expenditure in 1932 at £373,000 or £7.40 per head of population or £173 in today's prices, compared with the net expenditure of non-trading committees today which stands at £785 per head of population.
During these years Jersey's agriculture benefited from trade protectionism in the United Kingdom and exports of potatoes and tomatoes were reasonably buoyant. The level of exports of potatoes was around 60,000 tons and that of tomatoes touched 33,400 in 1933, a significant growth from the 2,500 tons exported only 25 years before. It might be appropriate at this point to dwell a little on the changing face of agriculture. A measure of the changes that have occurred since 1939 are provided by the following figures of areas cropped:-
Another point of interest is that, whereas in 1939 there were 184 holdings of more than 50 vergees, by 1981 that number had increased to 268. The only element that does not appear to have changed much over the period is the number of cows in milk.
The 1920s were also a period when many wealthy immigrants forsook the high tax in the United Kingdom and came to Jersey, so much so that the British Government of the day produced a report in 1927 on the problem and called a conference with the representatives of the islands to see whether there was not a way in which they could co-operate in limiting their use for the purposes of avoiding U.K. tax. (The case of Sir Robert Houston, the Conservative Member of Parliament for Toxteth, who had considerable wealth was a particular thorn in the side of the United Kingdom and the Inland Revenue proposed that U.K. tax laws be changed so that British residents would remain liable to U.K. tax on emigrating to Jersey.) The islands said they would co-operate if everybody else did likewise, but His Majesty's Government found it impossible to get the agreement of other countries and the scheme died. However, what was agreed was that the island would not allow British residents to form companies to avoid UK tax and from that time until the early 1970s this embargo remained through the inclusion in the Memorandum and Articles of a Jersey company of what became known as the Bailiff's Clause.
There was a steady growth of tourism in the inter-war years and by 1937 there were 170,000 passenger arrivals, although not all of those were visitors.
For those Jersey residents with academic ability or who did not have a father's business to go into, the job opportunities in the island were limited and the attractions abroad beckoned. The result was continuing emigration, although the rate of net emigration at 100 a year was considerably lower than that before the First World War.
The period following the Second World War saw Jersey's fortunes improve immeasurably. It was, of course, a period of expansion in western Europe generally, years of 'you have never had it so good' with considerable improvements in personal living standards. Immediately following the war food shortages in the United Kingdom offered excellent opportunities for the island's farmers. In 1949 there were 9,258 vergees down to outdoor tomatoes (compared with 389 in 1981). As after the Napoleonic war, those unsettled by war took the opportunity to move to more congenial surroundings and there was a steady stream of immigrants producing a need for the 1949 housing laws to protect the interests of local residents. Tourism began to pick up again and by 1951 there were 250,000 passenger arrivals.
Jersey then entered a period again when a number of favourable business opportunities coincided:-
- 1 Increasing affluence in the United Kingdom and western Europe generally together with cheaper travelled to an explosion in holiday taking. In 1951 the British took 1.5 million holidays abroad, in 1961 this had increased to 4 million, by 1971 to 7 million and in 1981 to 13 million. Jersey offered a holiday abroad without the risks and was therefore well placed to take advantage of this trend. The number of passenger arrivals doubled between 1951 and 1961 and doubled again by the early 1970s.
- 2 This increasing affluence focused attention on the significant difference in tax treatment of that affluence in Jersey and in the United Kingdom. With the ending of the colonial era many U.K. expatriates also looked to Jersey as a happy half way between the countries in which they were then living but which with the gaining of independence were becoming increasingly unattractive, and the United Kingdom with its unattractive tax rates. In 1968, the Housing Committee granted 130 consents for the purchase of properties priced in excess of £25,000, mainly to newcomers.
- 3 The buoyancy of the western economies, and the consequential growth in international trade, led to international monetary movements on an ever greater scale. Those U.K. expatriates remaining in the now independent territories of Africa and elsewhere were also looking for a haven for their funds. These trends together with the removal of interest rate restrictions in the Code of 1771 led to the burst of banking activity from 1962 onwards. At the end of the 19th century there was about £1 million deposited with Jersey banks, by 1939 this had grown to £6 million and by 1961 to £30 million. By 1971 the figure had increased to £470 million, and the island's role as a finance centre had become established.
The effects of these pressures on immigration were marked, as they had been in the early 1800s. They coincided with a significant increase in the birth-rate in the early part of the decade and in the ten years from 1961 to 1971 the population grew by 10,000, not quite matching the increase between 1831 and 1841. This growth, together with the success of the economy, produced great pressure on the social services - education and housing in particular - and the rate of business development generally increased. The difference from the past was twofold. On the one hand the wealth being created was being generally enjoyed and those concerned wanted to exhibit their material well-being. In addition, the island now stood in a sea of welfare states. What social services were available to residents in the United Kingdom and in Europe were naturally demanded by the local population. The age of Government was with us and the number of persons employed in public and social services increased significantly.
It might be instructive here to make some comparisons of the occupations of the population in 1891 and in 1981. In 1891 there were 476 teachers and 222 persons engaged in the medical professions. On a simple pro rata population basis those numbers would now be 666 and 310 respectively. In fact in 1981 there were 1,056 teachers and 1,376 in the medical professions. Comparisons between the two years throw up some other interesting contrasts. Farmers and agricultural labourers have halved in number. There is no separate number of domestic servants in the 1981 census to compare with the 3,000 in employment in 1891, nor with the 2,750 tailors and dressmakers in that year, nor with the 735 employed in 1891 in the washing and bathing service. On the other hand, in 1891 there were only 9 accountants and only 37 bankers. Another indicator of the changing economic face is in the growth in the number of hotel and guest house proprietors and managers from 370 in 1891 to 1,070 in 1981.
So to the present day. Where does the island stand now and how might its economic face be expected to change in the foreseeable future - if there is any period ahead that can be said to be foreseeable in the prevailing conditions of uncertainty?
Jersey is undoubtedly affluent. The total income per head of population is above that of the United Kingdom, and the island has little unemployment. The key to its economic success in the past remains: the low rate of taxation. The present structure of the economy is made up of tourism, accounting for 36 per cent of the island's income, banking and finance accounting for 26 per cent, those who have taken up residence for tax reasons and depend on investment income from abroad who pump in some 25 per cent, light industry making a small but useful contribution, and agriculture. The agricultural industry is most constant in its participation in the features of the island's economic face - albeit the subject of considerable changes over the centuries - but is presently struggling to maintain itself in its traditional markets and only succeeding in doing so with the help of Government support, the present level of support from the taxpayer being nearly £30 per head of population.
The island is travelling in troubled economic seas affecting the western economies generally, seas likely to remain unsettled through the rest of this decade. One result is that the controls that were needed in the 1970s to stem the flood of immigrants may now need to be applied less rigorously because the economic climate is doing the job required; or if they are needed it is not so much to limit the growth rate of the economy but to ensure that jobs are filled by local residents.
Tourism is running hard to stand still. The island has a lot to offer visitors but is not the cheapest of destinations. The number of persons able to be accommodated in hotels and guest houses is slowly declining as guest houses are converted to other uses and hotels lose bedrooms to provide improved facilities, the number of registered beds now being a thousand lower than in 1971. The number of staying visitors in 1982 would appear to have been no higher than that of 1974. The industry still makes a considerable contribution to the island's economy, however, with £130 million being spent last year by 750,000 staying visitors and finding its way directly or indirectly into the pockets of most island residents, or supporting services enjoyed by all. The future of the tourism industry is not without hope but only if Jersey offers for sale a quality product and provides the necessary supporting facilities.
The number of wealthy immigrants is being maintained at a rate of fifteen a year in accordance with States policies, and there is little reason to expect this to change in the foreseeable future.
Banking and other finance centre activities are currently the growth industries and it is upon them that Jersey has depended in the past few years to support the steady growth in demands from the population at large for more and better public services. In 1981 the States spent on social security, housing, education and public health some £550 per head of population. In 1964 the figure was £45 or £255 in 1981 money values. So in 20 years in real terms expenditure on these services has more than doubled.
Bank deposits which were less than £1;2 million in 1971 now total £13 billion. The number of companies incorporated in Jersey in 1961 was 134, in 1971 561, and in 1981 2,474. In 1961 there were twelve corporation tax companies; by 1981 there were 5,670. The banking expansion has required a steady inflow of those with experience to staff the businesses involved. But only through the arrival of these experts has it been possible for this sector to create the 100 or so jobs for Jersey residents each year for the past ten years. This growth has, however, put pressure on the housing stock. The development of business has also put pressure on office accommodation and led to considerable redevelopment of the commercial area of St Relief. The town has changed generally through the influence of economic forces. The tourist and the wealthy immigrant have supported jewellery shops, restaurants, clothing shops etc. while the economics of food retailing, the availability of refrigerators and deep freezers (91 per cent of households had a refrigerator in 1981 and 50 per cent had a food freezer) and the ownership of a car have created the age of bulk food purchasing in supermarkets and freezer centres to the detriment of the smaller retailer. These changes may be unwelcome to some but it should not be forgotten that over the years the island has experienced a continuing process of change at times more rapid than others but change nevertheless. There is a temptation to want to recapture times past, to preserve what is as if it had always been when it was itself the product of change. When the growing population of St Helier, including immigrants with relatively high purchasing power, led Abraham de Gruchy to establish and expand his shop in King Street, described in an 1854 tourist guidebook as 'this immense block of buildings', how many were there who regretted the pace and form of the development taking place and the change in the character of the town?
If, therefore, Jersey's economic future is to be assured, and if the economic face is to wear a smile and not a frown, change must take place; adapted where possible to accord with the best interests of the island, certainly; regulated where necessary to protect the environ¬ment and the quality of life that in themselves are an important part of the economic attractions for tourists and new residents, certainly; but not totally frustrated.
The 1980s are expected to be a difficult decade: a time when the business climate will be less buoyant and the income needed to support personal living standards and the standard of public services less plentiful - conditions which in the past might have been reflected in the emigration of the native-born in search of better opportunities abroad. But now with the conditions abroad even less attractive than those at home this flow is discouraged. Indeed the prospects are that many who emigrated in the past will want to return to take advantage of their Jersey residential qualifications, as some are already doing. The island is therefore faced with a problem of an increase in the number of local residents looking for work, looking for houses, owning a car - because of the 1961 to 1964 birth-rate bulge - at a time when new job opportunities are likely to be more limited. To help provide the job opportunities required, action is being taken to extend the training of schoolleavers to ensure that they are better equipped to take up jobs that would previously have been filled by immigrants. In addition there will need to be a greater degree of business encouragement, or at least encouragement of the necessary process of business change.
The island should continue to be presented with business opportunities, so long as it retains its low tax status. This may require some belt-tightening on the part of the States in the immediate future, but there is no reason to doubt Jersey's continued ability to adapt to the changes that will inevitably take place in the economic climate.
Success to date has been due in large part to two preconditions for ecomonic success having been met: stability and flexibility. Stability lies in a firm economic and political framework; and flexibility in a willingness to promote and adjust to economic change. With a positive response to the economic climate from all who have a contribution to make to the island's well-being there is every reason to be cautiously optimistic about the future. The share of the markets which the local industries require if they are to sustain and enhance the present level of economic activity is relatively small, particularly if the market place is extended beyond the United Kingdom to western Europe generally, and in the case of finance centre activities to the world at large. If proper emphasis is placed on the quality and price of the goods and services which Jersey offers for sale there is every reason to expect this share to be obtained. There is therefore a reasonable prospect of the island's being able to provide sufficient job opportunities for its residents, and for its young people in particular, and to support a prosperous economy if the needs of the market place are properly identified and the messages received acted upon effectively.It was Sir Winston Churchill who said, 'No one can guarantee success; only deserve it'. That message is as relevant for the future economic face of Jersey as it has been in times past.