OPINION: Hobson’s choice?
Deputy Peter Roffey shares his thoughts on Policy & Resources’ three proposed scenarios for tackling the island’s funding crisis.
A LOT of people have been asking me if I support Policy & Resources’ latest plans for raising revenues and for capital spending.
The answer isn’t straightforward. Some parts are good while others are a complete disaster area. And I certainly can’t support any of their three options exactly as they stand.
Let’s dig into P&R’s three alternative solutions to our tax and spend conundrum for a few minutes – although I am sure other options (realistic or otherwise) will be added to the mix by amendment.
At the risk of making myself unelectable, I stand four-square behind the committee on the best way to raise revenues. It’s sustainable, it does most of the heavy lifting required over the next decade or so, and it’s fair.
Indeed, as a deputy very much focused on the travails of those trying to survive in this expensive island on modest incomes, it is better that I could have imagined. No way did I think they would come up with a package that raised the best part of £100m. while leaving those on lower incomes better off.
How have they done that? By focusing on raising money from the corporate sector and the wealthy. In particular the introduction of a social security contribution allowance is a game-changer. But we have already spent aeons examining this side of scenario three earlier in the year, because effectively it is unchanged from the February debate. So what about the capital spending side of the proposal?
Here I start to go a bit cold. I support the thrust of it but what part of ‘inert waste has to be dealt with, whether we want to or not’ do P&R not understand? And we can’t keep pushing the dairy project into the long grass or we will end up spending almost as much patching up the old one. That would be good money after bad.
On the other side of the coin there’s no way I can support borrowing £350m., and leaving that debt to our successors, partly to fund a secondary education system which doesn’t stack up either educationally or financially.
Somehow I will have to find a way of squaring that circle, but what about P&R’s other options?
Scenario two is probably the most irresponsible set of proposals I have ever seen appear in a billet. Shame on P&R for even including it as an option. While I have always despised the trite term ‘worst states ever’, if the Assembly backs this set of proposals they will have deservedly won that accolade hands down.
What is so bad about it?
Firstly, it proposes borrowing a further £200m., but with no significant revenue-raising measures to allow the States to service and repay that loan. So if our revenue budget is currently unsustainable in the medium term (it is – that is what all this political pain is about), we would, at a stroke, have made it a whole lot worse.
But actually it is much worse than that.
As well as taking on an additional £200m. in debt, scenario two proposes spending the whole of the Health Service Reserve to help fund the project to modernise the PEH. This is money which was built up through a special category of social security contributions and which was principally intended to service the MSG contract. These days it is being used as a buffer to meet some of the general burdens on HSC’s budget – like funding NICE TAs.
Of course, splurging it all in one go, as well as borrowing £200m., will allow the States to fund a bigger capital programme than simply borrowing alone. But where will it leave the States’ revenue budget afterwards? Well, those things currently being funded from the fund will henceforth have to be funded by general revenue instead. So the big, looming, financial black hole that P&R has been warning us about so graphically over recent months will, at a stroke, have been made a whole lot worse.
Madness. Wholly irresponsible. I am amazed that P&R have put it forward as their second-best option. They should know better. They do know better.
As for their third and final option, scenario one, this involves no borrowing and very little capital investment. Well, it has the advantage of being fiscally literate but the impact on the fabric of Guernsey and its capital infrastructure would be dire. That would be true even if we didn’t need to catch up on such investment after well over a decade of neglect.
Under this option, that irresponsible failure to maintain and modernise our capital assets would be exacerbated. Only a failing community would consider taking such a path of despair.
Not only that but this ‘do minimum’ option does nothing to address the issue that this whole unpleasant process was put in train to tackle in the first place. The fact that with changing demographics we will need to raise a lot more general revenue to maintain basic public services and pay the States pension. It would be a total cop-out, and the next assembly would have to revisit the whole issue as soon as possible, but starting from an even worse position.
So to summarise. P&R’s preferred option makes sense on the revenue-raising side, but is far from perfect on the capital spending side.
The other two options they put forward as alternatives are anything but. They are complete disaster areas and adopting either of them would be a total dereliction of government on the States’ behalf.