Good morning ladies and gentlemen. Before I begin, I would like to thank the Institute of Law for inviting me here today to talk about a something that matters a great deal to us all – the sustainability of our financial services industry.
As many of you know, my main role in government is that of Treasury Minister, but I also perform the role of Assistant Chief Minister with special Responsibility for Financial Services. It is in both capacities that I will be speaking to you today. I am going to provide a review of key developments from the past 12 months, including developments with HM Treasury and the UK. I would then like to bring these developments together and explain what we now plan to do with the publication of a new Financial Services Policy Framework. I will then take any questions.
If I can turn the clock back to May 2013, Jersey’s engagement in the G8 marked a turning point with regards to relations with the UK and HM Treasury. The scale of the summit, and its importance to us, cannot be understated as it was set to change the rules on which international tax was based. Our aim at the time was to ensure that the United Kingdom and the international community had a much better understanding of what Jersey does. The message, reported widely across international media, including the Economist and FT was clear – Jersey is not a tax haven, we are not the problem, in fact, we could be part of the solution.
Capital Economics report
Published a month later, the Capital Economics report solidified this position, documenting for the first time the value of Jersey to the UK, in supporting over 180,000 jobs and providing approximately £9 billion of value to the UK economy. We subsequently attended all of the Party Conferences, where there was a clear change in the way Jersey was regarded by UK ministers, peers and advisors. The effort was enormous but 12 months on we can see it was clearly worth it.
The UK Prime Minister himself commented “I do not think it is fair any longer to refer to any of the Overseas Territories or Crown Dependencies as tax havens. They have taken action to make sure that they have fair and open tax systems.”
Our signing of both the US FATCA and similar UK style agreement later in 2013 helped to further improve positive relations with other governments. Jersey’s removal from the French list of non-cooperative jurisdictions in December 2013 was reflective of the support that Jersey had gained internationally and specifically with the UK government. Our standards in terms of tax and transparency were improving, but so was our financial position.
Jersey's credit rating
This was independently verified when Standard and Poors assigned Jersey a long-term AA+ credit rating with a ‘stable outlook’.
This is the highest possible credit rating for a jurisdiction of our size that could be received. This result served to underpin our strong international reputation.
This positive momentum has continued in 2014 – only two weeks ago, the Exchequer Secretary to the Treasury, the Right Honourable David Gauke described Jersey as being at “the forefront globally on the agenda for tax transparency”.
This follows a further positive endorsement from the Secretary General of the Organisation for Economic Co-operation and Development (OECD) Angel Gurria, who praised Jersey’s efforts in tackling tax evasion, stating “All of the UK's Crown Dependencies and Overseas Territories with financial centres have taken significant steps forward on tax transparency putting them at the forefront of this agenda globally. In addition to signing agreements with the UK for the automatic exchange of tax information, they have also agreed to be early adopters of the new global standard for automatic exchange. We will continue to work closely with the Crown Dependencies and Overseas Territories and will continue to press other financial centres to match the steps they have taken.”
The last five years have been challenging, but in the last 12 months, the perceptions of Jersey have significantly shifted. We have taken actions to reposition ourselves, through our engagement with international tax regimes and standards.
Jersey Financial Services Policy Framework
On 3 April 2014, we will be continuing this momentum by publishing a Financial Services Policy Framework, which sets out our future intention in terms of our financial services industry and commitment from government. This framework has drawn heavily on the review that was done by Mckinsey in 2013. Geoff Cook of Jersey Finance will talk about this in more detail later this morning, but in essence, four key priorities were identified.
The first priority is to protect existing business from the threat of competitive challenges. Our aim is to ensure the long-term prosperity of our existing financial services industry, while gradually diversifying into other areas. We recognise that a change of direction is required but that this change needs to be gradual and planned.
Secondly, we need to stand out as an international financial centre. Jersey must excel in the areas that determine investors’ choice of location: namely the legal, regulatory and business environments. These ‘business enablers’ are essential to our future success. We must enhance the governmental, regulatory and legislative framework and do all we can to improve the business environment, allowing innovation to flourish.
Thirdly, we need to work hard to support existing business to capture adjacent growth in products, services and markets. By this I mean providing more to our existing participants and attracting new entrants from both established and developing markets. We need to consider how we might replace any business that looks vulnerable to loss. We have already started the process of diversifying geographically, and will continue this work in the months and years ahead.
Our final priority is to explore more ambitious opportunities in less familiar business territory, repositioning our current offering and building new capabilities. These opportunities tend to be in the higher value added elements of the sectors and often require a broader set of stakeholders.
The strategy supports the continuation of an independent financial services regulator, the JFSC, which will assist with the growth of the regulated financial services sector. To achieve this strategy, both government and the regulator will need to be supportive and flexible.
Key objectives for the government
To support this work in government, our key aims will be to:
- uphold Jersey’s reputation as a centre of excellence
- provide support for the business environment to ensure that we remain competitive
- simplify the processes of legislation and regulation
- speed up decision making generally, and
- ensure that the financial services industry contributes to the wellbeing of the Island.
Government is committed to providing political support for promotional activities undertaken in markets where industry believes appropriate opportunities have been identified for growth.
At the same time as developing our services, we also recognise that the right physical infrastructure is essential if we are to attract new businesses and support the ones we have. In order to attract new financial services businesses to the Island, the infrastructure also needs to be in place at the level expected by international business. Jersey already has a significant number of modern office buildings, however we need more, which is why we have committed to the development of the new finance centre. It is also one of the reasons we have invested in the roll out of an Island wide fibre optic network.
While some questioned the decision to invest in fibre, the headlines in the local press over the last two weeks have shown that the rollout cannot come quickly enough for local business. Rollout in St Helier is now being accelerated and Jersey will soon be one of the best-connected places in the world to meet the demands from businesses and consumers for high-speed data transfer.
Education and skills
We also recognise that in order to diversify and grow we will require new skills and additional resources to meet our potential. This includes the continued international recruitment of highly skilled employees in accordance with our population policy. It also means recognising the importance of our home-grown talent. We are actively seeking the creation of internationally recognised local qualifications specific to the finance industry, which complement our growth ambitions in the industry. Our aim is to ensure the next generation of Islanders has the appropriate skills and qualifications to work within the finance industry.
Next week the Council of Ministers will be publishing a new skills strategy, which includes this important focus on the financial services industry.
In my role as Treasury Minister, I also recognise that a tax regime that supports the financial services industry and complies with international standards is key to ensuring the future sustainability of the Jersey economy. We are committed to providing a tax regime that is not only competitive with other international finance centres, but is also stable and certain. Fundamental changes to Jersey’s tax regime will be made infrequently and only after careful consideration and consultation.
The intention is that Jersey will maintain a tax neutral tax proposition. Maintaining a competitive rate for this industry will continue to be one of the government’s policies. In addition to low corporate tax rates, Jersey is mindful that personal tax rates are also an important element in attracting a highly skilled workforce in an increasingly mobile market place. The personal tax rates in Jersey are competitive with other jurisdictions and we are committed to ensure this remains part of the tax strategy in the future.
The government is committed to creating the operating environment in which businesses can develop and grow. We recognise that the application of legislation and the way in which it is brought into force and applied by the regulator is a key determinant for many businesses in their choice of location to base their operations. The government is committed to reviewing the legislative and regulatory process to improve the speed to market and experience of industry. As part of this process, government has retained additional resources to deal directly with legislation that affects the financial services sectors. Jersey will continue to review its proportionate risk based approach to regulation to take into account changes to target markets of the financial services sectors and recommendations from international bodies.
Jersey intends to remain a well-regulated jurisdiction that is respected both locally and by international businesses and governments. A sophisticated and proportionate regulatory environment can contribute significantly to economic development and sustainable growth. We will protect compliant businesses by enabling fair competition, promoting a level playing field and providing business with the confidence to invest, grow and create new jobs. We will support the regulator in the recruitment of sufficiently experienced resources to deliver the calibrated regulatory environment that the industry requires.
Over the last 12 years, we have achieved a lot of important milestones to ensure Jersey is a stable, transparent jurisdiction.
Over the last 12 months, we have transformed the perceptions of Jersey globally.
The tax agreements that we have signed, whilst challenging, have been the right thing to do to protect our industry. So now, the positive news for industry, and for Jersey, is that despite the fears of many people at the start of 2013 the future is both bright and sustainable. Concerns regarding the potential for an unlevel playing field and the persistent criticism of offshore centres, which have been a feature of the financial crisis, have been robustly challenged. There is wide acceptance and recognition that our global standards are the best in the world. The quality of the work that many of you in the audience do every day, has been the foundation for this change. As a result, we have proved to be a stable location for financial services.
Now, from this place of strength, we need to energise our business environment and our policies, for the long-term interests of the Island. We need to encourage excellence, innovation and growth to protect the industry, uphold our reputation and to remain competitive. In government, we are absolutely committed to working together with the regulator and industry towards this shared goal. I will now take any questions.