We need to look at what we can afford now and in the future

The latest available States accounts for 2020 show income of £527m. and expenditure of £545m., a deficit of £18m. However, due to changes in how the States accounts for itself, which is opaque to most observers, these two sets of figures may not be strictly comparable. Nevertheless some comparison may be made, at least at a high level. Clearly, and sadly, 2008 pounds are not the same as 2020 pounds; the compound inflation rate over that period is about 34%, so the 2008 figures, to be comparable, need to say revenue income £466m. and revenue expenditure £398m. in 2020 pounds. Over that 12-year period the States has increased its income by some £61m. but expenditure has increased by £79m., both in 2020 pounds. That is to say, the demands by the States of Guernsey have increased by 20% in real terms.

The proposal now is that the expenditure should increase by a further £85m., or another 21%, overall an increase of over 40% on the real terms expenditure only 12 years ago. And remember this is in real, inflation-adjusted terms. In unadjusted terms those rises are 84% and 101%, respectively. The States wants to nearly double in size. This suggests either a total lack of financial control or a willingness to live way beyond our means. Others have commented on the States’ willingness to pass wholly uncosted legislation, especially in the recent past, and the consequences are now before us.

For a number of years, as part of the Financial Transformation Programme (remember that?), the States employed Professor Geoffrey Wood to carry out an annual review of the States’ finances. The professor highlighted the costs that Guernsey was facing through its inaction on the provision of pension and long-term benefits, pointing out that there needed to be a conscious decision about how much of this burden should be shouldered by the States, with consequent implications for the size of the state, and how much by the private sector. The States has failed to initiate that debate; rather it is drifting to a position of total state provision. The options are not being put to the electorate.

The debate currently initiated by the States is concentrating solely on how to raise more taxation. As other correspondents have suggested, the debate actually needs to be about where the State is spending the money it already raises, whether this is value for money and, more simply, what we can afford now and in the future. It is a truism that people tend not to favour taxes which they will have to pay and to promote taxes which are borne by somebody else. There have even been calls in your pages for a wealth tax (surely we already have one – it is called TRP) or capital taxes. Corporate tax rises are simplistically suggested to be a great idea as they are not directly paid for by voters and are a simple way out for deputies.

To quote Professor Dominic Swords in his 2014 paper on the adverse effects of GST on a community such as Guernsey, ‘... the key point here is that a tax has the potential effect of reducing the very activity that it depends on to be successful in raising government revenue…’

It is a hard commercial world, much as some people wish that were not the case, and Guernsey affords its lifestyle by being attractive to businesses that do not have to be here. Change that without due thought and the lifestyle will vanish very quickly.

RICHARD BATTERSBY

St Jacques House

St Peter Port