Government finances in "precarious" position, civil service head says

THE government’s finances are in a “precarious” position due to a weakening GDP, years of growth in the public sector workforce and increases in spending, the head of the Island’s civil service has said.

Interim government chief executive Dr Andrew McLaughlin, who has previously headed up Royal Bank of Scotland International and Gibraltar International Bank, described the current situation in the public sector as “a source of concern” and that the Island’s Strategic Reserve is “too small” for the size of Jersey’s economy.

He explained that despite attempts to curb sector growth, the public servant headcount had rapidly increased from around 6,000 in 2018 to nearly 10,000 by the end of 2024.

The result, he said, was government spending was outpacing the rest of the economy and estimated to be around a 33% increase in growth in cash terms.

“We are spending more than we are bringing in,” Mr McLaughlin said.

He used the phrase “precarious” several times in a quarterly hearing with the Public Accounts Committee, which was questioning him on the state of the public purse and his fiscal objectives going forward.

Despite his concerns, Dr McLaughlin did say that ongoing geopolitical events and the fallout from the Covid pandemic had exacerbated the Island’s financial situation, using the example of how the Stabilisation Fund had been mostly exhausted to mitigate the pandemic’s impact on Islanders and services.

The concerns come following recent figures which showed that Jersey’s economy had shrunk in 2024 for the first time since the pandemic. This was driven by a sharp fall in banking profits which the government blamed on a global drop in interest rates.

Dr McLaughlin added that the situation was not helped by Jersey’s reliance on the financial sector.

“The public sector cannot be the answer to economic growth,” Dr McLaughlin said. “We need to restore fiscal balance in the first instance and then restore our reserves.

“The Strategic Reserve is too small for the size of economy we’ve got.”

Further quizzed by panel member Karen Wilson on whether the island will soon be faced with austerity considering its current fiscal challenges, Mr McLaughlin said he believes Jersey “is not at that stage yet”.

Government finances in “precarious” position, civil service head says

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