Guernsey Press

‘The tide is rising’

GST might have been the best sticking plaster on offer, but it would only have delayed the inevitable. We need to focus on the real problem of an unstoppable juggernaut States of Guernsey, says Horace Camp.

Piggy bank drowning in water. Global recession bankruptcy 3D render concept. Financial and economy crises. Rising inflation. Piggy bank sinking in debt - savings to risk background with copy space (31832989)

IMAGINE, if you will, a sunny summer’s day in the 1960s. The Belle Greve Bay shingle bank is covered by a throng of happy tourists enjoying the sun. The tide has just started to come in and a few children are way down at the water’s edge splashing about.

A cheeky young local man decides to play a prank.

He runs down the beach and goes into the water until it is waist high. He quickly sits down on the hard sandy bottom until only his face and fingers are visible above the water. To all intents and purposes he appears to be drowning and he increases that belief by adopting a worried look and shouting help at the top of his lungs. He knows he is completely safe with his bum safely grounded and even when the tide comes up further he has some time before it will be too dangerous to keep the prank going.

At the top of the beach people can see his plight and hear his cries and they are all in a very panicked state and preparing to rescue him. Then someone shouts, ‘It’s that little beggar Ferbrache up to one of his tricks again’ and no one bothers to go to his rescue. It is true he is in danger from the rising tide but his current situation is good and he is just making it look bad for effect. Ultimately, if he chooses not to move, he will eventually drown.

Of course, this never happened and is all in our imagination and in no way conflates the GST debate with a childish prank.

But the story does help picture where we are now. Consider that the depth of the water is our tax burden, the sandy bottom is our economy and Ferbrache is the States of Guernsey. Currently he does have his head above water even sitting down, but the tide is rising and the beach level isn’t. The depth of water is increasing and GST is him standing up. He is now only waist deep in water.

But the water is still rising and the sandy bottom isn’t. Even with GST, the water is soon up to his shoulders.

If the beach level won’t rise, then we need to find a rock to stand on. I will call that GST2. Now he stands a little higher out of the water. But the rising tide just can’t be stopped and ultimately Ferbrache drowns for lack of rocks to raise the sea bed.

What should he have done? He could accept that to be able to sit in shallow water he needs to shuffle up the beach on his bottom faster than the advancing tide. Or he needs to devote time and effort to raising the sea bed faster than the tide is rising.

Now you are completely lost, I will sum this all up by saying, as at today, Guernsey plc is fiscally sound. Up until 2021 it was more than washing its face and in that year taxed more than it spent. I expect 2022 won’t come out too bad either. Guernsey has significant reserves and even a large chunk of borrowed money it has never got around to spending.

So nothing to lose your sleep over at the moment.

You might ask then why all the doom and gloom about the forthcoming apocalypse that will close schools and throw old people out on the streets? Pure rhetoric. There is a systemic problem. The cost of the States of Guernsey is rising at about 2% over inflation and the economy isn’t, possibly rising at 0.5%.

As it stands today there is no likelihood of seeing the cost of the States rising at less than 2% and it is indeed on a trajectory to increase that growth. As to the economy, well the western world is looking at a period of little or no growth – we may buck the trend, having done that in the past, but with Moneyval looming anything that involves risk will now be off the table.

Having established that GST is a temporary fix but not a solution to our problem, what should we do now?

Here I must just add that, as a sticking plaster, P&R’s option A, which introduces GST, was the least worst of all the options. Personally, I wanted all the options to fail to enable time to focus on the real problem of an unstoppable juggernaut States of Guernsey which will eventually bankrupt us if not stopped in its tracks. But if one had to pass, then A would have been the best.

People of Guernsey, the choice is yours. Do you want a level of services equal to or better than that of England, which means ever-increasing taxes? Or do you accept that we must have a level of services which we can afford, without making day-to-day life hell and increasing the queues at food banks?

A tough choice. Let me meander through some possible impacts of choosing low tax and affordable services.

We could remove the £12 subsidy from doctor’s bills. It was introduced to be a significant help but hasn’t risen for years while the doctor’s fee has.

The old-age pension isn’t a funded scheme but is paid out of current income with some assistance from the huge fund nominally called the pension fund. We could move the pension to a defined contribution basis, with the pension amount determined by what the fund could afford. Then we move away from the young generation having to support the growing number of pensioners.

It means the pension would drop and probably fluctuate year by year. Those who have nothing but the States pension could be assisted and those on work pensions who don’t need help would receive less, reducing the risk of the pension raising taxes.

An element of elective surgery could be charged direct to the patient. Say £10,000. Which could be paid over several years or charged against a property to be paid on the death of the patient.

In education, we could perhaps incentivise more parents to take children out of the States system and place them in the independent colleges. Nearly a third of children are independently educated – if we could make that half, then we could close schools and reduce the education bill.

Personal responsibility is not the modern way and it is nice to think someone else is going to help pay for your new hip but at the way it’s going we have too much fiscal risk on the States. We need to share that risk. Should the States of Guernsey get into a mess, then our independence we have had for the best part of a millennium is at risk. And we can’t let that happen.

Which path are we to take? The high or low one?