States a long way from delivering on the economy

IT IS easy to spot a troubling trend in States finances.

When the Budget rolls around we are promised that things are improving and the books will be balanced, confidence is returning to the economy and we will move on from the deficit years which began in 2008 after the birth of zero-10.

And then things begin to slide and when the final sums are calculated and released in the accounts, we are back to square one.

What happens?

Well, the States quickly creates a narrative that it is acting to address the issue and hopes everyone moves on.

But let's have a glance at the record of the last Assembly – something this one would do well to study.

They had inherited a £20m. deficit recorded in 2012, when Health and Social Services overspent, total pay costs were £198.6m. and overall reserves were £582.6m.

For their first full year in charge – 2013 – the deficit was £8m. more than they had budgeted for at £25m.

Income tax receipts were lower from business and individuals, document duty suffered because of the housing market. Health and Social Services was some £2.3m. over its original budget.

Total pay costs were £204m.

Move on to 2014.

There was a positive tone being struck, the deficit continued, this time at £10.4m., but that was £3.6m. better then expected.

Treasury, led by Gavin St Pier, (pictured), said this was expected to be the last year with an underlying deficit.

They moved money put aside to cover the shortfall into different pots where they were available for departments to spend on new initiatives.

But revenue income was still £1.6m. down on what had been expected, mostly because of document duty.

Total pay costs virtually held at £203m.

HSSD's spend was some £7m. over its original budgets.

And then we come to 2015 – the year of the balanced budget.

Or, uhm, not.

The overall deficit was £24.5m. – so actually up on what they had been handed by the previous States.

Income tax receipts were £17.5m. worse then expected, document duty was down.

And while Policy & Resources, who inherited these accounts, say it was purely an income issue, the public will note that Health and Social Services came in with another overspend, despite being given a significant boost in its budget to ensure it would not.

Total pay costs were up more than £10m. to £213.7m. with the States employing the equivalent of 72 new full-time posts at HSSD following the midwifery crisis.

Overall reserves were now £538.1m.

So in the end the last Assembly, in the budgets it had total control over, never delivered a balance, had grown spending on pay by £15m. and spent a total of £60m. more than it received in income.

To achieve balance in 2016 it had already planned to cut spending on capital projects significantly.

Now the wheels have come off even further, with predictions of a £15m. deficit unless action is taken.

A series of emergency measures have been announced and crucially, there has been an admission this isn't just a 'timing issue' with tax receipts, or problems that were one-offs, but a structural issue that cannot be ignored.

Those holding the purse strings love to argue this is all about revenue income and try to divorce States spending from the equation. The simple answer to that is that if the States was spending less, a balanced budget would be achieved even if income struggled.

Accountants' arguments do not sit as easily with the public.

We have been promised action – we were promised action last time and look where we are, it was not enough.

Thanks to the work last term on the tax, pensions and benefits review the States has a great understanding of the demographic pressures that are coming – and the levers it could pull to create a balance.

Its major challenge is going to be convincing a public and business community that it has cut its cloth enough, is delivering efficient services in the right places, so that it is fair to come to them with tax hikes, fee rises or benefits cuts.

The indication within the measures announced, and within the review of health spending that happened last term, is that the States remains a long way from delivering its side.

P&R announced restrictions on paid overtime and a tougher stance on recruitment – the very fact it had headroom to do this indicates the States could have been done before.

Even with the roots of confidence Deputy St Pier sees in the general economy, the fanciful days of believing the island will grow its way out of deficit have gone.

There is a significant programme of reforms being promised within the civil service, but the urgency of the need for change has been heightened by the sobering prospect of the ninth year of running a deficit.

Many in this States cannot be blamed for the position the last Assembly oversaw, but plenty more were there and all can ask whether enough was really done.