OPINION: Put your money on a health tax

CONGRATULATIONS and welcome to your new job as chief executive of the States of Guernsey. All we need from you at this stage, I think, is an indication of your priorities and timescales for achieving them – and I hardly need add that some quick wins are required…

Obviously I’ve invented that little speech of welcome from chief minister Peter Ferbrache, not least because we don’t have a vacancy for a CEO, but mainly as you can’t help but wonder whether Foxy looks back on the last 10 months or so and thinks, ‘reshuffle’.

After all, until last week when his treasury wingman went rogue and said the tax review was asking all the wrong questions and so getting all the wrong answers, everything that was rotten in the state of Guernsey could be blamed on the other lot, the previous free-spending Assemblies.

Alas, no longer. Trying to extricate themselves from the difficulties created by Mark Helyar’s attack on tax rises and poor States governance, Policy & Resources had this to say: ‘The committee also recognises that cutting costs alone cannot provide enough to meet all of the revenue and capital requirements we will have, which are largely a consequence of our ageing demographic.’

What? Public finances aren’t in the red because of lavish civil service salaries, a bloated public sector and unaffordable pension scheme but because Great Aunt Mabel’s still with us? Golly, who knew?

This pretty public slap-down for Deputy Helyar – which the media generally rather kindly refrained from pointing out – stacks up another potential problem for the chief minister. Unless Deputy Helyar publicly recants his creed of ‘slash and burn’, it means P&R’s treasury lead is presenting a keynote tax policy for them in the States next month which he says was misfounded at outset.

Perhaps other deputies will refrain from asking why he’s proposing to put an extra 8% on people’s food, heating and transport bills while government remains unreformed and too costly, but somehow I doubt it. But then, perhaps the chief minister doesn’t care.

Any discomfort will be Deputy Helyar’s alone and the real objective – rejecting GST and instead going for a 3% ring-fenced health tax – will be achieved anyway. That’s a prediction incidentally. I can’t see any way there’ll be the necessary 20 votes in favour of something that’s regressive, needs to ‘waste’ some of the money raised mitigating its worst impacts on the less well off, is costly to administer and requires extra civil servants to operate.

A health tax alone brings in £39m.-worth of the extra £75m. government is looking to raise. Restructuring social security contributions – something that definitely hasn’t received enough scrutiny – raises another £20m. while business is expected to contribute a further £10m. That’s a tidy £69m., so job done.

Well, almost. When Deputy Helyar says, ‘No attempt has been made to comprehensively solve the underlying problems which are largely structural and governance based – we have a system where it is easy for officers and members to commit to more spending and very difficult to cut cost because we have no centralised control/brake,’ it’s a very compelling narrative. We want to believe.

So without any credible process demonstrating that the public sector is reasonably lean (although latest available States’ figures show government itself at 8.7% now makes more than twice the contribution to gross domestic product* than construction does), Guernsey’s ‘bloated’ civil service remains in the crosshairs.

Which brings me back to my opening remarks and priorities for the States’ chief executive. Such empirical studies as we have suggest that government as a whole has no idea of its impact on the island’s economy – for good or bad.

Equally, there’s little comprehension of how damaging pursuing narrow self- and committee-interests by civil servants can be to the island generally and that’s because, Government Work Plan or not, ‘the States’ still doesn’t operate as a single public service.

All of which dictates an overarching need to renegotiate existing employment terms and conditions for all staff to introduce much greater employment flexibility and to ensure contracts of employment are fit for today’s circumstances and Guernsey plc’s economic performance.

It also means government – finally – gaining control of payroll costs and ending what States Treasurer Bethan Haines calls ‘incremental drift’, or

extra pay simply for having remained in post a while.

In fairness, that process has started – or at least was going to – but Covid has clearly slowed it down. The other thing that’s been delayed is the removal of at least 200 public sector roles, a process begun under the 10-year Framework for Public Service Reform rolled out in 2015.

Lose the bodies and that’s a notional saving of around £10m. a year, but the main driver was up to a quarter of all States employees were eligible for retirement by the end of last year and half – call that 2,750 individuals – by 2026.

Look at that the other way around and the problem isn’t actually too many public sector employees, it’s the risk of having too few, losing key knowledge and skills and having the wrong people in the wrong job at the worst possible time.

Hence the need for employment flexibility and establishing what are essentially non-political priorities at the same time as P&R is focusing on delivering its Government Work Plan and tax review. Tall order, eh?

Anyway, more on this shortly from what I hear.

*Actually GVA, or gross value added, but it’s a good proxy for GDP.