Guernsey Press

A surplus built on shaky ground

RULES are made to be broken.

Published

Or at least interpreted liberally if this year’s Budget is any guide.

Take the long-standing, and often missed, target that 3% of GDP a year should be spent on improving the island’s infrastructure.

The major upwards revision of the size of Guernsey’s economy when they changed how they do the sums created a bit of a problem – to meet the rule would require a major upturn in capital investment – some £15m. extra a year for 2019.

Policy & Resources’ response, which helped it present a 2019 Budget with a £1m. surplus, was to use the old GDP figure plus a bit based on the last two years of growth, arguing it is reviewing the fiscal rule anyway.

Presenting a Budget with a surplus matters, because it means, under the States rules, it does not have to be as strict with spending. So 2019 sees it propose opening the wallet with real term growth.

There is another one-off factor in the surplus, a tax settlement that the island will receive the final £5.3m. from in 2019.

Then there is the continual suspension since 2017 of a grant to the health service fund, that would have amounted to an £5.1m of spending – this fund is also being reviewed.

Budgets are always the art of presentation, but dig under the surface and this is not the solid surplus of old.

There are obvious pressures in the public sector, and they are reflected in the abysmal record of actually spending the money that has been put aside for infrastructure anyway and the lack of progress in some major policy areas, so the easing off of ‘austerity’ has some logic.

But the shaky foundations for this surplus, allied to the spending records at Education, Sport & Culture and Home Affairs, put even greater pressure on the States to ensure that the economy grows, and thus sustains income, and that the savings drive, so heavily now reliant on the structural reform of the civil service just announced, is a success.