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The aid equation

Peter Roffey | Published:

HOW much should Guernsey spend on overseas aid and development? Should the budget for such state-run philanthropy be tied to a definite formula? Should we be guided by what the UN reckons to be a fair contribution or use our own judgement?

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These are hard questions but they are ones the States are going to have to answer in a few weeks’ time.

One thing is sure. There will never be a community-wide consensus on the subject. In fact, there are few more polarising issues.

In one corner you have the sceptics. ‘Charity begins at home,’ they opine. Well of course it does, but that is no reason at all for it to end there.

Others argue that we should give overseas aid only once we have met all the real unmet social needs in Guernsey. The trouble with that approach is that it would mean we would never give a thing to the developing world because there will always be pressing issues at home. Such an isolationist approach would be wrong in two ways.

Firstly, however much I care about poverty in Guernsey (I do and there is lots of it), the poor in the developing world are much, much poorer.

Secondly, for all of the ignorant denial of the new brand of populist politicians we see springing up all around the world, we are living in a highly globalised world community. So Guernsey and its economy benefit hugely from economic development in poorer countries. Particularly with our main industry being such an international one.

In the other corner you have the enthusiasts insisting that we should meet the UN target of 0.7% of our GNP in overseas aid programmes. That would represent a huge increase and would mean we gave the Overseas Aid and Development Commission a budget of more than £20m. a year to distribute. In many ways it would be great, but is it affordable?

The supporters say ‘yes, if other countries like the UK can do it then so can Guernsey’. Maybe, but only with a radical overhaul of our tax system, which might in turn wreck our own economy and ironically reduce our GDP. Our unusual approach to public finances mean we take a far smaller percentage of our total GDP in government revenues. So to afford the same spending pattern as bigger states we would have to tax far more and thereby probably destroy our competitive position.

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It was this conundrum that probably led to P&R and the Guernsey Overseas Aid and Development Commission (GOADC) agreeing a target of 0.2% of GDP for overseas aid.

This is far more affordable but I still think it is a mistake. In fact, any linkage to GDP, no matter how widely such a formula is used elsewhere, makes little sense in the Guernsey context. Why? Because the size of our GDP bears very little relationship to our ability to give.

It is true that in all countries the relationship between the size of their GDP and the level of government revenues is less than exact but in Guernsey the correlation is far looser still.

For instance our GDP may go up by 50% over the next decade – driving a similar increase in the overseas aid budget – while States incomes only rise by 15%. That would mean a steadily increasing proportion of our revenues going overseas while a correspondingly lower proportion was spent on services in the island.

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Conversely our GDP might go up by 15% and our government revenues by 50% because we tax some sorts of economic activity far more heavily than others. This would mean a dwindling percentage of States revenues going towards our aid programme which would be a bit mean.

So what is the answer? I think we need to be generous but cautious with our aid/development programme. The best way to ensure it is both affordable and sustainable is to use a formula linked to general revenue income.

For instance if we used 1% of that income it would represent a significant increase in our aid programme while still ensuring that 99% of every tax pound paid by the community was spent in Guernsey. Hopefully all but the most small-minded opponents of overseas aid would see this as a fair split. If they don’t, then tough.

More importantly it would mean that if total States revenues went steeply up or – heaven forfend – dropped significantly in future, so would the aid budget. That would ensure it continued to be affordable while allowing it to share in any economic success which was reflected in the States’ finances.

I know this is not what others countries do. It would be an example of ‘the Guernsey way’ rather than blindly following the pack. Personally I have never had a problem with such individualism. So that is why, together with Deputy Peter Ferbrache, I will be proposing just such an approach when the States debate the matter – probably in July.

Will it be a popular move? Probably not. The anti-brigade will attack it as too generous while the enthusiasts will claim it falls short. I think it is squarely in the goldilocks zone and what’s more our giving would rise or fall in such a way that it ensured that it stayed there.

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