Deputy shows how States has dug £30m. hole into its own finances

SO WHAT has this States ever done for us? Well, according to one deputy, it has landed us with a £30m.-plus hole in our finances.

At a time when Health and Social Services has finally had to face up to the reality of cutting services, and the fundamental spending review has highlighted the 'fat on the bone' elsewhere in the States, members might just want a chance to rethink some of their earlier decisions.

Now some of the financial difficulties this Assembly has run into were not of its own making, the financial crisis bit hard everywhere.

The scrapping of zero-10 was in some ways a fall-out of the downturn too as all countries look to maximise income.

The consequences of the regime change on the horizon are not known yet, although some are still questioning the competitive advantage now being taken by the Isle of Man and Jersey after Guernsey played its hand so publicly.

But Deputy Mark Dorey's analysis of the 2010 deficit, predicted at £42m., shows that the States fiscal policy decisions this term have bitten very hard.

Deputy Dorey is at pains to point out that he is not making judgement on whether the decisions were right or wrong, but most of them were proposed by Treasury and Resources and supported by this States.

It breaks down like this:

Capital expenditure:

States policy is £20m. per year on capital expenditure.

In the previous Assembly the £8m. spent on capital allocations, basically more low-level spending, such as on computers, was included in the definition of capital expenditure. So only £12m. would have been transferred to the capital reserve.

This Assembly is transferring the full £20m. to the capital reserve – this is £8m. more than the previous one.

Tax allowances:

The previous States supported the old T&R in freezing allowances. The current T&R, supported by this Assembly, have increased them for 2009 by 5.5% at a cost of £4m., and for 2010 by 4%, costing £3m.

This makes a total of £7m. for 2010.

Revenue expenditure:

The previous States Government Business Plan policy was to contain expenditure to RPI or less.

On page 24 of the Budget report for 2009, debated in November 2008: 'The objective set out in the Government Business Plan is to contain increases in revenue expenditure to RPI or less. It is anticipated that during 2009 RPI will fall to 4%.'

In fact, the June 2009 RPI figure was -1.3%. Therefore revenue expenditure budgets for 2009 increased by 5.3% more than policy and was not corrected for 2010. This amounts to £13.45m. extra revenue expenditure.

Contributions to the Superannuation Fund:

The present States also agreed with the current Treasury to fully fund future benefits – the cost of increasing employer's contributions is £6.9m. per annum. The previous States decided not to fully fund benefits as they considered they were not affordable.

The total contribution of the above is £35.35m. to the £42m deficit.

It makes stark reading.

With these mounting pressures it is perhaps unsurprising that issues such as paid parking are firmly back on the agenda, as supporters try to take advantage of a swing in the Assembly.

Deputies must now be bracing themselves for ever more intense public scrutiny as the cuts start to bite, and the prospect of increased or new taxes looms large as Treasury works to plug the deficit.