3% of GDP ‘should be spent on infrastructure'

Its recommendation to spend 3% of gross domestic product is a significant step forward from the current target of 2%, which in itself has been consistently missed over the years.

And the panel is pushing the States to address the way it handles infrastructure spending too.

‘Chronic underinvestment in Guernsey’s public infrastructure is an increasingly binding constraint on growth, fiscal sustainability and living standards,’ it said.

‘Delays and slippage in the progression of major capital programmes is common, but this has been particularly evident in Guernsey. The panel recommends that the States seeks to enhance its existing prioritisation process for major projects and implement a longer-term planning horizon to support a more stable flow of projects through the portfolio, and minimise “stop-start” disruptions.’

The panel has also warned again that the States needs to do more to raise revenues, but said that even with GST assumed to be coming in from 2027, that would not be enough to meet its 3% spending target.

It has also recommended that this should include taxpayer-financed investment in critical infrastructure from States trading assets, which would be a wider definition of capital spending than included in the States current fiscal policy framework. It has also excluded spending on housing developments.

The States is currently modelling on the basis of spending 2% of GDP and a £1bn pipeline of projects.

Some will not get prioritised but if half were to make the grade over a four-year electoral term, the States would be facing an annual infrastructure spending bill of some £125m. a year. That is more than one and a half times its current target and well over twice as much as it has been spending.

The panel has also noted that the States’ focus on projects tends to be shorter-term than other jurisdictions, with little consideration given to the state of the construction industry particularly, and that cost often seemed to warrant stronger consideration than the potential benefits.

It said that stopping and starting large-scale infrastructure projects was inefficient and costly, and frequent and unpredictable changes to the public investment pipeline – as experienced in recent years – harms delivery and often raises costs.