No magic bullet for the demographic time bomb

IT IS reality check time.

While this current crop of States members leave behind a culture of over-promising and under-delivering, the next are going to be facing some hard decisions.

They are being left with a fingers-crossed economic policy that, despite warnings signs to the contrary, the deficit in States funding – which will be pretty much the same as it was when this intake entered office – is cyclical, down to timing and not a sign of a wider malaise.

This will be married with the long-term funding problems brought by an ageing population, which – credit where it's due – this Assembly has spelt out in stark terms but not had the dubious honour of having to properly address.

The Annual Fiscal Policy

Review, out today, does not make for riveting reading, well, unless you are an economist.

They are not known for anything other than talking in the most understated tones about anything.

But pick between the austere language and a picture emerges that it is set to become unpopular decision time – both here and in Alderney – if the States is ever to balance the books.

'The projected demographic change has the potential triple effect of dampening GDP growth, reducing government revenue per capita and increasing public expenditure. It is a substantial risk to long-term sustainability,' the report states.

There is no magic bullet. It is, as the report spells out, unwise to rely on significant levels of economic growth to solve the long-term problem.

So a hark back to the almost hedonistic optimism of zero-10, that we can grow ourselves out of the situation, is not going to happen.

What has been done so far, increasing the pension age, will not be enough.

The report talks about the need for 'structural change in service provision,' so read a need for service cuts, because nibbling around the edges of cost savings in existing services 'is unlikely to be enough'.

This is not a business as usual scenario, and not one where the States can rely on an FTP part-two to solve the problem, or continue to simply pick the pockets of the public to raise extra revenue to fill the hole – especially as there will be fewer and fewer working pockets to pick.

Guernsey is obviously not alone in having to face up to these challenges, but it does so from a unique position both in terms of the resources it has at its disposal and the political system set up to deliver the changes that are needed.

Marry that big picture challenge with the day-to-day firefighting that goes with delivering government and you can see that the next Assembly is going to need some talented individuals with broad shoulders – and ones that can identify and recognise the impacts of their decision-making on all levels of society.

Guernsey's vision needs to be directed some way into the future, but there is a more pressing economic crisis sitting right on our doorstep – one that is a mirror to what may well happen here but on a smaller scale.

There has been some awakening recently to what is happening in Alderney and what it in turn means for Guernsey, which is in a fiscal but not political union with the island.

There is an economic spiral of decline that all wish to avoid, one where a declining population makes it harder and more expensive to deliver the services that are expected, which in turn leads to more people leaving and making the situation even more acute.

This year's Budget, in a rare move, makes some concession to the situation by targeting Alderney with a specific policy.

There is also much-needed work under way to properly understand the financial flows between the two islands.

There existed for far too long an almost gentlemen's agreement not to delve too deeply into that area in case it revealed something unpalatable to either island.

In times of plenty that approach, however short-sighted, could be sustained: now it cannot.

This could be a tumultuous issue to deal with in the coming administration, one that will test the boundaries of political power and the relationship between the two islands.

Can Alderney – and by proxy Guernsey taxpayers – expect and sustain the same levels of health care, education and air links in these times?

These are issues that need to be addressed alongside how to keep the island sustainable as a community.

The Fiscal report points out that there are small communities, such as the Scottish islands, where populations remain accepting that they will not get the full service provision that is available in larger communities.

Technology will have a role to play, giving remote access to health and education services for Alderney residents to services from Guernsey or elsewhere, for example.

When Health and Social Services is in such a tough financial position, the spend on Alderney's hospital, for example, should not be sidelined.

Both Guernsey and Alderney benefit from services that would be unimaginable in similar-sized communities elsewhere.

There is a new reality dawning that this position may simply be unsustainable – a question of not whether service cuts and changes are needed, but what is the least painful way of delivering them.