Understandable accounts would improve chance of managing the economy
RICHARD GRAHAM’S article of 2 August [False narratives and empty promises] says that ‘…all promises made by candidates last year were made in complete knowledge of the state of the economy and public finances’.
Given the novel, mixed-up and complex accounting data that this States receive, this belief is hopelessly optimistic. Indeed, very few States members I have met can give a coherent account of the States’ deficits and cash flow.
However, any analysis shows a large and growing hole in the finances of the Bailiwick.
And it’s no use pretending that we have reserves ‘well capable’ of handling the cash shortfalls. The fact is that we have limited investments that can be sold to generate spending cash for a few years but we have much more in the liabilities (pension funds, Social Security, bank debt, the bond, etc.) that keep on growing and eventually have to be paid. The next generation will be paying off the debts that are being run up and they will have lower living standards as a result. And that is without taking any real account of the costs of an ageing population or any reduction in the critical financial services industry.
Our hole-extraction strategies are simple:
Increase taxation. Realistically, and electorally inevitably, from the richer portion of the population; and in the hope that they and their businesses and their tax revenues stay in Guernsey.
Borrow, and/or sell government assets, and hand a larger problem to the next generation.
Maintain a low tax economy (a key component of the Bailiwick’s historic success) and set the size of government to be within the funds available.
And finally, find a way to grow the economy fast enough to sort out the finances.
There is no sign of a working growth option and the low tax option involves too much in the way of expenditure reduction to be electorally doable. So, we are left with the first two options, which will likely be followed until a financial crisis (a drop in financial services and/or tax revenues, too much borrowing to get any more etc.) forces the imposition of austerity at some time in the coming years.
An understandable set of accounts for the government that just follows normal accounting rules would give the deputies a better chance of managing the economy better. It’s not a lot to ask for and it would help us get better policies.
JON MOULTON
Director GPEG