The penny and the bun

NOT to put too fine a point on it, I am genuinely worried about where the governance of our island community is heading.

For many years I’ve been used to members of the public demanding more public services, but being reluctant to pay for them through higher taxation. But now I am scared that their government is joining in that impossible game.

How would those people who advocate for more being done with less suggest we square that circle? Usually through a bit of wilful self-deceit. By claiming the States is incredibly bloated and could easily save millions without any damage to services. This despite the stats showing clearly that our government has the lowest spend, per capita, of any comparable jurisdiction.

Or possibly by pointing to services that they don’t use and therefore suggest could be axed. Trouble is everybody has different services they either rely on, or think can be done without. It all depends on their own personal circumstances.

Frankly, I don’t complain about such contradictory demands from the public. It is simply human nature to want both the penny and the bun. It’s impossible to satisfy of course, but it’s the same challenge facing those in government anywhere.

What really frightens me is when members of government start echoing those unrealistic demands when they know – and they simply must know – that what they are asking for is completely undeliverable. If States members stick to their populist guns then we are really heading up an unnavigable financial creek with a very dodgy paddle.

Standard & Poor's has already indicated that they are not wholly convinced we are capable of tackling the financial challenges facing the island. I would like to say I think these outside commentators have got it badly wrong – but I am not at all sure.

Why mention this now? Because I think this catch-22 is likely to be graphically highlighted by forthcoming States debates which will straddle the summer recess. In July we will effectively be asked how big we want Guernsey’s government to be. Likely answer: ‘quite big’. Then in September we will be asked how we want to pay for it. Likely answer: ‘we don’t’.

I am really not focusing on capital spending here. Yes, that too will demand cash. And one suggestion is borrowing, which is a pretty dodgy strategy unless one is convinced the States is willing to raise the extra revenues needed to both service and repay that debt. Otherwise it’s simply a path towards a spiralling national debt.

So caution is needed over the level of capital spending but at the same time we really do need to invest in our infrastructure. And we have been pathetic at doing so for well over a decade now. So slashing the States' capital programme is definitely not the silver bullet for balancing our books going forward. Particularly when capital costs are one-offs and, in many cases, can create new income streams.

What really frightens me is the seeming unwillingness of the States to either constrain revenue spending or raise extra revenues from the community.

Of those two options I am pretty sure a vox-pop of the people of Guernsey would favour the former. But they would be wrong. We are in a unique situation (in our history, although one shared by most other developed countries) of rising costs being driven 90% by changing demographics. So it is no good dragging out the old cliche of ‘do what’s is needed and not what is simply wanted’ because the vast majority of the extra spending coming our way is absolutely necessary.

For example, more older people = higher states pension expenditure. And no it is not a ‘funded scheme’, where pensioners build up their own personal pot throughout their working life. It has always been a ‘pay as you go’ scheme where today’s contributors pay for today’s pensions. True, unlike some other territories, we are prudent enough to hold a modest buffer fund but it is still basically an unfunded scheme.

Then there is the rising cost of health and social care. This would be happening to a degree anyway but it is vastly aggravated by our changing age profile. I’m not blaming the elderly, it’s definitely nor ‘their fault’. But the facts are the facts, however inconvenient.

Could we cut spending elsewhere to balance the books? Yes, of course, if we were willing to think the unpalatable. But are we?

The proposed new Education Law would rule out charging for state education. I support that. A free and universal educational offer was one of the biggest achievements of our Victorian forebears. And what else is tax for if it’s not to pay for such basics of a civilised society?

That said, if some of my colleagues are unwilling to raise the cash needed to run the island, in the face of rising costs brought on by demography, then perhaps they should think the unthinkable? We could means-test for free education and charge the better off, say, 50% of private school fees for a state education. Yes, it is a pretty rotten idea, but to my mind better than denying sick islanders the sort of effective new medical treatments available in the UK and Jersey.

That is just one example of where we could cut. There are lots of others but they would all be equally unpopular. We could hit ‘middle Guernsey’ by just scrapping family allowances, saving quite a few million. We could insist better-off islanders pay a ‘hotel charge’ if they need a stay in hospital. I could go on.

Do I personally support doing any of those things? No, definitely not, but then I’m willing to front up the difficult message that taxation needs to go up. My fear is that too many of my colleagues will be equally averse to a slash and burn approach to public spending but will still vote against any significant tax raising measures.

To be fair it is probably a minority who hold such contradictory views. The trouble is that it is a big enough minority to stymie unpopular but necessary revenue raising measures. How so? Because the majority who do see the need to raise extra revenues can’t agree on the best way to do it.

So it will be an interesting few months ahead. My prediction is that this States will demand they have both the penny and the bun, and as a result they’ll get neither. Worse than that, they will leave one heck of a fiscal mess for the next lot to inherent in two years’ time.

Of course I hope my prediction is wrong. I’ll do my absolute utmost to ensure I am proved wrong. I am genuinely worried, though, because if we don’t see a lot more realism soon we will be in considerable trouble.