As George slashes, so shall Guernsey reap

IT IS a big week for spending cuts. UK chancellor George Osborne will on Wednesday announce massive cuts as the coalition rushes to deal with the £155bn budget deficit.

Closer to home, Jersey ministers want to strip £65m. out of States budgets by 2013.

Hard-line measures being considered include a two-year States pay freeze and reductions in overtime, pensions and sick pay.

That is on top of waves of budgets cuts already agreed in September and clear talk of tax rises in a bid to deal with a £100m. deficit.

In both the UK and Jersey there is a clear and potent desire to act now, but still some question whether, with a fragile economic situation, it is too much too soon.

So where is Guernsey?

Well, our chief minister used last month's States Strategic Plan debate as an opportunity to drop in a positive message.

The island's deficit was some £30m., exactly as planned under zero-10, and he later told the Institute of Directors that it could be dealt with by following the current plan to restrict States spending.

Guernsey seems still to be in its wait-and-see mode, not wanting to act fully until things such as the future of zero-10 are known - eyes on Europe in November for the latest on that.

A vastly different position from when Treasury minister Charles Parkinson announced in March 2009 that the department might have to raise an extra £52m. to tackle a cyclical deficit brought on by the faltering economy.

We expected in November 2009 to be talking about measures like introducing a Goods and Services Tax, adding 1% to income tax or doubling property tax.

So what has happened to this cyclical deficit as opposed to the planned structural deficit apparently addressed by Deputy Trott last month?

Is it a problem that has simply gone away? Perhaps our 2011 Budget will have the answer.

But you have only to go back to the message in July when Deputy Parkinson said States spending was unsustainable and revenue-raising measures were being considered alongside the efficiencies identified by the value for money review done by Tribal, to know there is pain on the way.

Will deputies become tempted to take the foot off the brake pedal now? Relax and think whatever replaces zero-10 will fill the black hole without the need to make the tough decisions to tackle inefficiencies laid bare by the consultants?

It is an ever-present danger but the mood in the Western world is one of austerity, however much better our position than that of other economies.

Guernsey should be watching Wednesday's announcement by George Osborne and the subsequent reaction to it with great interest.

There are some areas that will have a direct impact, but perhaps more importantly is the long-term health of the UK economy and the state of the markets that will prove decisive.

So much of our economic health is dependent on that of the UK that any faltering there would cause nervousness here.

So, who will be right? The left-leaning economists who have labelled George Osborne 'slasher' and are predicting a double-dip recession?

Or those in the centre and on the right who pledge not to be acting out of any philosophical position on the role of the state but instead out of necessity?

In areas such as education, there is a clear read-across.

What will happen to the cost of going to university in the years ahead?

Leaked information yesterday showed that the Ministry of Justice, the island's link with Westminster, would lose 30% of its budget.

Much of the talk in relation to that was of the reduction in the legal aid bill - something the Policy Council is investigating here and may be able to take some lessons from.

Will policing budgets being put on the chopping board have any impact on things like training?

If anything the lesson from Jersey and the UK is that it is possible to think and do the hitherto unthinkable, that if action is needed it can be taken and swiftly.