The fourth way

HOW to arrive at the right balance for funding our new, expensive, waste strategy?

It’s not an easy question. The total cost of the strategy is now pretty much fixed so any attempt to make one part of the charging mechanism more reasonable will only increase the burden inflicted by another part. What helps those who put out very little waste, such as a single pensioner, will tend to increase the charges levied on large families.

I know a few of my colleagues would far prefer to debate whether the strategy itself is the correct one than decide how to pay for it. Frankly, that debate is over. I was one of those who would have preferred to see us dispose of our own waste here in Guernsey, rather than exporting it to be incinerated.

We could argue for hours about whether or not an on-island solution would have been cheaper but what’s the point? An export contract is to be signed, a waste transfer station is being built, the die is cast.

For the next 10-15 years we will be exporting our residual waste. The initial contract may only be for three years but the capital cost of the related infrastructure demands we export for a lot longer than that. The cost of that strategy is pretty much known, all that remains now is to decide how to fund it.

Even that question has been half resolved.

There are only three funding mechanisms laid out in the relevant legislation, although I believe it is not too late to introduce a fourth, fairer, funding source even at this 11th hour. More of that in a moment, but first let’s look at what has already been agreed.

You will continue to pay your parish for waste collection but those bills will typically be cheaper in future as they will only cover the parochial contract with the bin man (or woman) and no longer pay for the ‘gate charges’. That said, that bill may not come down for everyone. Sadly the last States decided this parochial charge will in future be levied at a flat rate per household instead of linking it to TRP.

That will mean that very big properties will see a massive drop while very small ones may actually see an increase. If that’s fair, then I’m a Jerseyman.

It would alas be very hard to reverse at this late stage, but hopefully it can be in future. The average bill will be about £85 a year.

Then we have the similar flat charge per household to be levied by the States. When provision was first made for this charge in the legislation it was supposed to be a nuclear option held in reserve.

The States were told that it needed to be there in the background just in case people reduced or recycled their waste so much in future that the income stream from black bag charges was insufficient to pay for the strategy. But then its introduction was proposed from day one at a whopping £116 per household. Once again with the mansion and the one-bedroom flat paying exactly the same.

Lastly we have the bag charge. This is perhaps the part of the charging mechanism which splits opinion most starkly.

At one end of the spectrum we have those who believe it should bear most, if not all, of the financial lifting. They argue that the whole strategy was sold on a ‘user pays’ principle. Certainly proponents at the time did claim that households would be able to control their own bills by changing their behaviour. It is very hard to see how that would work for small households under the initial proposals put forward at the December States Meeting.

At £2.50 a sack the household which puts out one sack a fortnight would be paying £65 in bag charges but £200 in standing charges. Their opportunities to control their own costs would therefore be absolutely minimal.

The obvious response to that situation is to increase the bag charges and reduce, or even eliminate, the States standing charge. Opponents of that approach argue that it is hard on large families on modest incomes – which is quite true. They also claim it will spawn a spate of fly tipping. I’m not so convinced over that one.

Guernsey is, by and large, a law-abiding community. We have seen a few mindless examples of fly tipping recently but, weirdly, very few of them have been ones where the culprit has saved any cash in the process. These anti-social acts have often involved the unlawful tipping of goods which would have been accepted free of charge at the Longue Hougue recycling centre.

Obviously a user pays charge to dispose of waste will increase the temptation to fly tip a little. But the idea that at £2.50 a bag we will all religiously put out our rubbish for the bin man but that at £3.50 we will reach a tipping (sorry) point and just start throwing it over the nearest hedge seems fanciful to me.

Of course, it has been suggested that if the States is to avoid levying a household poll tax then the bag charge will actually need to be about £4.30. That is where the fourth possible funding source comes in. About 20% of the cost of the strategy is capital. If these costs were met from our accumulated capital reserve then the bag cost, with no States poll-tax, would be about £3.35.

Is this such a revolutionary idea? No, until recently it was commonplace to fund infrastructure projects out of accumulated reserves. It is only recently that the fashion has been to borrow instead and then load the cost of repayment and interest on the user. The old system was also far fairer because general revenue is far better aligned to islanders’ ability to pay than any user charge.

Would it leave us short of cash for schools and hospitals? Not at all. Or rather, only if we completely fail to meet our target for putting new cash into that reserve. The balance in the capital reserve is currently far higher than any of us had any right to expect. On top of that we are committed to putting a large amount of extra cash in every year. In fact that target has just gone up in cash terms due to the redefinition of GDP. So, unless P&R know something we don’t, such a prediction that we won’t meet our own targets, then the capital reserve won’t run dry anytime soon.

So my recipe for meeting those very high waste strategy costs?

1. Parishes charge for collection but hopefully soon revert to a fairer basis.

2. No States poll tax – at least in the early years.

3. Capitalise those costs which legitimately can be.

4. Charge about £3.35 per sack.

Discuss.