For me, there is no greater challenge facing us than building a future that is economically dynamic whilst keeping a stable population. It is possible (Guernsey has grown its economy with a stable population), but it means a massive change in mindset. Increasing productivity has to become a top priority. That means investment in new technology and in education and training – supported by the government. There is no other way for us to grow our prosperity whilst protecting our environment. A few months ago I wrote an essay for the JEP about population policy – I reproduce it below. It’s a long read…
For 20 years, Jersey has allowed (or even encouraged) very high levels of net immigration. The result? In economic terms it’s been a disaster. In public policy terms it’s been an embarrassment. And in terms of democratic accountability it’s been a scandal.
We can – and must – do much, much better than this. How did we got to the present situation and how can we create a consensus around a new population policy?
Let us begin by traveling back to 2002. At that point, official government policy was to maintain the Island’s population at no more than 85,000. However, in July of that year, Senator Pierre Horsfall brought to the States a proposition to allow net immigration of plus 200 a year, and thereby allow the Island’s population to breach the 85,000 barrier.
Deputy Mike Vibert countered with an amendment that would have aimed for net nil migration, effectively continuing the existing policy.
Two main arguments were advanced for increasing immigration. The first was to grow the economy. It was argued that without net immigration the growth of the finance industry would be constrained, economic growth would suffer and government finances would be wrecked. The second objective was to head off a crisis caused by an ageing population: without net immigration, the proportion of elderly people relative to the working age population (the so-called dependency ratio) would increase.
In response, Mr Vibert argued that any increase in immigration would have little effect on economic growth, whilst the cost in terms of demand for services, rising house prices, the need to build on green fields and increased congestion would be high. As far as the dependency ratio was concerned, he warned that letting more people in would only increase the dependency ratio in the long term.
As it happens, neither Mr Vibert’s amendment nor Senator Horsfall’s proposition were passed by the States. It wasn’t until 2009 that the States finally agreed a net immigration figure, which by then had been pushed up to plus 325.
Since then, net immigration has climbed way beyond the ‘planning assumption’ of 325 a year, and in fact has averaged closer to 1,000 a year over the past decade.
There’s been no debate in the States about this shift in policy. There has been no democratic consent for the shift to mass immigration. That is something of which the States Assembly should be ashamed. (Incidentally, I use the phrase mass immigration advisedly: if Jersey was a country, its net immigration rate per head of population would be amongst the top 10 highest in the world.)
According to the arguments presented in 2002 (and repeated ad nauseam since), immigration is good for the economy and good for the dependency ratio. We’ve had much more immigration than was envisaged in 2002, so the benefits should have been even greater and we’ve had 20 years to run the experiment. How did it go?
Jersey’s economic performance has in fact been lamentable. Since 2002, once inflation is taken into account, there has been effectively zero economic growth per capita. In other words, the economy has only just managed to grow in line with the increase in population.
What would have happened had we stabilised our population?
Let’s take a look at Guernsey. Unlike Jersey, Guernsey’s population has been essentially stable for the past 20 years. In that time, Guernsey’s economic growth has been far stronger than Jersey’s. Don’t believe me? Here’s a graph produced by Jersey’s Statistics Unit.
GDP per head of population in real terms in Jersey, Guernsey and the UK, 2012 to 2018 (indexed 2012 = 100)
The graph takes 2012 as a base year, and compares economic growth per head of population since then. I’m afraid we’re bottom of the class.
So, let’s be very clear: Guernsey has outperformed Jersey. It is now comfortably richer than Jersey, and it’s achieved this whilst maintaining a broadly stable population.
What about the other major argument for population growth – the argument that was deployed in 2002 and is still being deployed today – namely that unless we allow net immigration to increase, we won’t be able to support an ageing population? Surely there’s good news here?
In the year 2000, the government published a report that examined the future of the Social Security Fund. It laid out predictions for the old age dependency ratio; that is, the ratio of people of working age to people of retirement age. A higher figure is obviously better; it means more workers paying taxes to support the elderly.
Assuming net immigration of 200 a year, the report said that the old-age dependency ratio would be 2.6 in 2060; in other words there would be 2.6 workers for each person over 65. Since then, we’ve had immigration much higher than 200, which should have substantially improved the outlook for the dependency ratio. So what actually happened? The most recent update of the dependency ratio figures was published in 2016. The nearest comparison to the predictions published in 2000 is for net immigration of 325 a year, which by the year 2065 yields a dependency ratio of 2.1.
So despite all those years of high immigration, we end up with a worse old-age dependency ratio than was forecast in the year 2000. Or to put it another way, had we stuck with net zero population growth in 2002, we would be in a better position regarding our dependency ratio than we are now.
It’s a con, folks. High immigration does not ‘solve’ the dependency ratio. It just kicks the can down the road, and makes the problem worse in the long term. Just like Mike Vibert said.
Pursuing a high net immigration strategy has been a stunning failure even in its own terms; no economic growth and worsening long-term dependency ratios.
But it’s even worse than that. The whole strategy is now collapsing under the weight of its own contradictions.
Massive population increases have driven an unsustainable housing boom. Increased housing costs are exacerbating a cost-of-living crisis. That’s fuelling a recruitment crisis, because people can’t afford to live here. Young people are giving up on the Island, in the knowledge that they’ll never be able to afford to buy a home. We’re engaged in an unedifying scramble to find yet more fields to build on. What a mess.
So why then, if population growth has been such an abject failure for the Island as a whole, does it still command such significant political support?
Part of it is no doubt a failure of imagination: it takes a creative leap in thinking to imagine a different way of doing things. But I suspect the main reason is because for a significant number of people, high immigration levels have worked to their benefit. Some people do well out of population growth. It works for many businesses. If you own property, rocketing house prices are good news. To put it very crudely, the rich have got richer. And that’s where political power lies.
None of this is sustainable. So what is the solution? Is there a way to manage immigration that maintains Jersey’s position as an economically vibrant place to do business, whilst protecting the environment, safeguarding long-term government finances and improving prosperity? I think there is.
First, we need to reframe our objectives. Our aim is to increase general prosperity. We are not interested in economic growth in the abstract, we are interested in raising living standards for all. The only long-term way to do this is to raise productivity. Unfortunately, productivity in Jersey has been declining for many years, and particularly so in finance. Raising productivity is the key to our future prosperity, not population growth.
Whatever you think of Brexit, it has forced Britain into a major rethink about its role in the world and its economic direction. It may be opportunistic, but Boris Johnson’s clarion call for a ‘high wage, high skill, high productivity’ economy strikes a chord.
Jersey meanwhile seems to be sailing on without any significant debate about its future. On population, all we’re being offered is more of the same, despite the manifest failings of the past.
So here’s my alternative. Rather than the chaotic economic changes underway in the UK, I propose a steady, organised change in population and immigration policy involving all sectors of society – a ‘Grand Bargain’ if you like.
First, we need to accept the need for a paradigm shift, a new approach. Our aim is a truly sustainable future, with prosperity driven by productivity growth.
Second, set a population limit. I suggest 110,000, a little above our present level.
Third, gradually reduce the level of net immigration over a period of time – let’s say eight years – to give the economy time to adjust.
Fourth, use this eight-year time period to put in place the policies necessary to adapt. Invest in education and training. Work closely with business to identify labour shortages and skills gaps, and seek to plug them. Focus relentlessly on increasing productivity. Build the homes we need for a population of 110,000.
Fifth, review the policy at regular intervals to make sure that adaptation measures are keeping pace with the reduction in net immigration.
Sixth, adjust immigration figures over time to keep the population stable. As the population ages and the birth rate falls, this means that immigration will need to increase in the future, to maintain the population.
I want to be clear about one thing. I am in favour of immigration. I am pleased that Jersey is a much more diverse island than in my youth. I’m glad my children are growing up surrounded by kids of different nationalities, with different languages and different skin colours. Jersey benefits from the talents of people who come here. We are an immigrant island – always have been, always will be. The issue is not about whether immigration is a good thing, it is about numbers.
The numbers show that approximately 2,000 people leave Jersey each year. This means that we could allow in around 2000 people every year, and have zero net immigration. That is not an island that is ‘closed for business’, or anti immigrant as opponents of net zero immigration argue.
The world is changing fast. For decades the priorities have been economic growth and efficiency. Now a combination of the pandemic, climate change, supply chain issues and deepening inequality have led to a major rethink. Economic security and resilience have become just as important as efficiency. Environmental goals have a far higher priority. And raising the living standards of ordinary people is now imperative.
Stabilising our population in a planned, carefully thought through way will help us achieve all these goals. It is the only way to drive down the cost of housing, whilst preserving the Island’s natural beauty.
It will value people in Jersey higher, and demand investment in their training and education. And it will allow us to protect the Island’s natural beauty, extraordinary heritage and unique identity.
We can either keep driving down a dead-end road or we can change direction now. It’s up to us.