Dim twinklings of an economic recovery shouldn't mean spend

IT WAS inevitable.

As soon as there is a chink of light in the finances, some politicians leap at an opportunity to steer the States off the savings course it has rightly put itself on.

Debate in June will expose this Assembly's mood for all to see.

Will it think long term and big picture and stay the course of control, or be opportunist?

We are sure to see the political divisions.

In announcing the £15m. 2016 surplus, Deputy Gavin St Pier had to walk a tightrope.

Yes, progress had been made, the first surplus since the dawning of zero-10 in 2008 was to be welcomed, and actions taken in the year had help stave off yet another deficit.

But it all had to be qualified.

A healthy chunk of this was one-offs, of if they were not, there was no guarantee they would happen again.

The States' Trading and Supervisory Board gave back £2m.

Education handed over £1.6m. of money it had been keeping to maintain Les Beaucamps.

There was £1.9m. not used from the Budget Reserve – a pot of money held centrally for committee projects that are expected to come through, but which are not known in detail, how much they will cost or factors such as pay awards.

Better-than-expected investment performance on the reserves helped by £5m.

Claims for supplementary benefit were £2m. less than budgeted for.

It is easy to see why Policy & Resources has continued to council caution and use the line that we are not out of the woods yet.

Some people are quick to forget just how much Guernsey has eroded its reserves, too.

In 2009 the deficit was £19.1m.; in 2010 it was £37.2m.; in 2011 £24.3m.; in 2012 £20m.; in 2013 £27.8m.; in 2014 it was £10.4m. and in 2015 it was £24.5m., this last one against what was meant to be a balanced budget.

It's quite sobering when listed like that.

Allied to this was a sustained underspend against agreed targets in capital spending too, storing up problems for the future.

It is an interesting political dilemma to decide when Guernsey can start loosening its approach to spending.

One surplus after seven years of deficits, in a time of further economic uncertainty and the looming challenge of an ageing population, does not feel like the right time.

Or perhaps we can compare where we are now with where we used to be.

In 2006, the 'rainy day fund' contingency reserve had been built up to about 64% of annual expenditure – when it was established in 1986, there was an informal 50% target, which was hit around 1997.

By the end of 2014 that had worsened to 40% and Treasury put in place a medium-term target to return to previous levels.

It has been dented further since.

Now those targets are arguably quite arbitrary, they have a 'just feels right air' to them, but the trend is what counts – surely no-one can sustain an argument that we should continue eroding the reserves instead of building them back up again in a sustainable way.

Committee presidents met last week to discuss the 3-5-5 savings course the States is currently on.

This year each committee needs to cut spending by 3%, and while senior employees in the public sector seem set on transformation to achieve this, some of their political 'masters' are wavering – especially when they look to the next two years of 5% followed by another 5%.

But there are several important things to remember when you consider whether these savings are achievable without damaging services to an unacceptable extent.

While the 2017 slice has been targeted by committee, just where the 5% savings fall has not yet been decided.

There has also been a trend of persistent underspends in some areas.

Going back to the earlier positivity about 2016, Home Affairs had a 4% underspend of £1.4m., for example.

More importantly, for all the progress made under the financial transformation programme, there were opportunities that went begging.

And most of that was down to silo working.

Break the silos and efficiency follows.

In the FTP end-of-term report, it said that while around 50% of the benefits, or £15m. of recurring savings, could have been made through cross-cutting moves, only £3.1m. was delivered.

That is multi-millions being spent year on year that could be and should be stripped out.

Property is an area that is seen as a key to success.

Education, Sport & Culture is on its way out of Grange Road House – but it also has other rationalisation prospects that have already been identified – the College of Further Education, for example.

Under the banner of procurement, nearly £1m. went begging from the FTP.

The work done by the chief executive to restructure the public sector should make delivering these cross-cutting savings much more achievable too, as will advancing technology.

There is nothing wrong with States members challenging the orthodoxy, it is to be expected, and the scrutiny will ensure decisions are robust.

There may be dim twinklings of a wider economic recovery, but there certainly is no trend and only uncertainty lies ahead, especially with the impact of Brexit impossible to factor in.

And even if the economy was booming, that's no excuse for the waste or extravagance of the past to creep back in.

It is hard to find evidence that the States has done all it needs to do to make the public sector as efficient as it can be, delivering the value for money the taxpayer requires.