Plan looks to marshal States' Wild West urges

WE WILL learn a lot about the new States this month.

In a fortnight we will find out what type of Assembly this is – one that believes in long-term planning and prioritising, or one that would prefer a step back to the dark old days of committees racing to get ad hoc recommendations before the States simply to jump the funding queue.

The first phase of the Policy & Resource plan is, in so many ways, all things to all people, but if successfully married with the detailed business plans of the committees next June it should help stop the States entering the Wild West again.

You can understand why some deputies have lost faith in the strategic planning process.

For them, in the last couple of terms, it must have felt like they spent all their time debating strategic directions and not putting the metaphorical spade in the ground.

While you can understand it, you should not sympathise too much with them.

This is an Assembly that has inherited the tightest finances of any in recent memory, there simply is no cash to spend on crowd-pleasing projects and members need to wake up to that new reality fast.

What money is spent needs to be spent in the right areas at the right times – and that will not happen without an overarching plan to hold it all together.

Or, it will leave that kind of thing to chance, and how is that any way to run a government?

True, it is an excruciatingly laborious process to get that plan in place – more than a year after the general election – which is symptomatic of the consensus model of government when no one can lead unless the majority wants to be led.

The Policy & Resource debate isn't just about signing up to goals of happiness, fluffy clouds and blue skies.

It also includes an update to the fiscal policy framework, which was first introduced in 2009.

Broadly it puts in place the rules that dictate whether this Assembly supports big government or small government, what restrictions it wants on borrowing, tax and spending.

It will put an emphasis on the new States to buy into and own the same types of controls its predecessors did. The overriding rule is that of long-term balance, so periods of deficit are replenished by periods of surplus.

Any deficits that appear need to be addressed within five years – given that the black hole has existed since 2008 the States remains way off this goal.

Policy & Resources wants to insert into the rules something that has formed part of the former Treasury and Resources Budget planning for some time – that while there is a deficit, spending on services will not grow in real terms.

This, in effect, puts a high barrier in place. If a committee wants to introduce a new service it will, for example, have to be balanced by savings elsewhere.

It's an unpopular straitjacket for those who want to be seen acting on the promises they made when trying to win election – but given the savings targets expected of the States – the 3%, 5%, 5% cuts in the next three years, it should be a moot point.

There's a tweak to the capital spending rule which is of note.

Another rule the States has failed to hit.

As it stands, capital spending is meant to be at 3% of GDP, a target set in reference to EU averages and designed to ensure that Guernsey's infrastructure does not crumble.

Recent Budgets have seen the amount of money put into the pot for capital projects limited as a means of trying to balance the books.

This remains a quick fix that is unsustainable, building up a legacy of underinvestment for the future.

Since the rule was introduced in 2009 actual capital expenditure has averaged 2% of GDP.

Because capital spending is volatile, with peaks and troughs as large projects get built, P&R is recommending the target is shifted from being an annual one to something to be achieved in the 'medium term' – which is five to 15 years according to the framework's definitions.

Now we have all seen what the medium-term deficit reduction target has meant and that has a short-term goal within it.

There is a danger that taking a longer-term view simply becomes an exercise in kicking the can down the road for the next States to deal with, who in turn can blame the previous one and send that can rolling on again.

In essence it takes the pressure off, making the occasional raid to cover the deficit even easier to pull off without breaching the rules.

Of course, these are rules with no direct consequence if they are broken.

The independent fiscal review points out shortcomings every year, which helps set the tone of the conversation but beyond that finger-wagging there is nothing – no one has lost a job as a consequence.

They are, though, a promise to the public and perhaps that is where their power is most potent.

Guernsey is better with these rules than without, just as it should be better with a fully functioning policy and resource plan than it is without one.