‘There is no more money to spend’ States reveals
GUERNSEY’S public sector finances are set to plunge to a £56.2m. deficit by 2025 as policy initiatives from the previous States, the consequences of Covid-19, and the island’s rapidly ageing population combine in a perfect fiscal storm, Policy & Resources warns today.
The cash crisis means that the island’s income is now less than its day-to-day revenue spending, and that will worsen steadily over the next five years unless significant action is taken.
‘There is no more money to spend,’ said P&R treasury lead Mark Helyar, as he outlined a baseline forecast for the island’s public finances.
‘One thing we cannot do is keep acting like costs don’t matter because, as the gap grows between what we can fairly raise and what we need to spend, they really do.’
The general revenue deficit is predicted to be just more than £21m. by the end of this year.
While States’ income is expected to improve over the medium term, funding capital expenditure – investment in the island’s infrastructure – means the island will be in the red by approximately £50m. a year for the next five years.
This is before allowing for any costs of implementing the Government Work Plan, to be discussed by the Assembly in July, or giving pay rises to public sector staff. These immediate and long-term fiscal challenges must be addressed on multiple fronts, Deputy Helyar said.
These include the forthcoming tax review, to be published in September, reforms of the public service, and enhancing the economy.
While the tax review will be wide-ranging and designed to give States members revenue-raising options, Deputy Helyar confirmed that GST – a goods and services tax – will be among them.
By 2040, the number of islanders aged over 85 will have risen by 123% and those aged between 65 and 84 by 40%.
Those in work, however, will have reduced, as the relative size of the workforce shrinks.
Combined with falling revenues and increased spending on public services, especially on health care and pensions, States’ finances are under severe pressure.
The problems of the tax system, with its reliance on a small tax base and vulnerability to an ageing population, could not continue, said P&R president Peter Ferbrache.
‘While we continue to deal with the very immediate crisis of the Covid-19 pandemic we cannot lose sight of this very serious challenge.
‘If we do not prepare now and make some difficult decisions, it could prove to be even more of a crisis than the pandemic itself.’
