Sorry, Gavin, the spending dragon still lives

IN THE 10 minutes or so it will take you to read this, the States will have ripped through nearly £13,500 of your hard-earned wonga. That’s correct, as you may have picked up from the protracted and generally pretty awful Budget debate. Government burns money at the rate of £2m. a day.

 (Picture by Melkor3D/Shutterstock)
(Picture by Melkor3D/Shutterstock)

Now, I’m not going to argue with Deputy Lyndon Trott, who produced the figure to demonstrate what splendid value taxpayers and islanders get for that amount, because public services are by and large pretty good here.

But I will take gentle issue with his boss, Gavin St Pier, who used his Budget address to chide critics that there is no ‘mythically inefficient spending dragon’ in the States to slay.

That’s for a few reasons. Firstly, in a budget that big, there’s always room to spend less. Secondly, he also highlighted in the Budget report itself that committees have failed to meet previously agreed economies. And as the underpinning Medium Term Financial Plan identified, the range of savings available is up to £37m.

Thirdly, and perhaps more importantly, committees – that’s the deputies you voted into office less than four years ago – aren’t playing ball when it comes to spending less.

As Deputy St Pier put it, while some of the initiatives are styled as ‘corporate’, their success ‘is dependent on the commitment, co-operation and contribution from all States committees’.

In other words, not just down to Policy & Resources.

In case you think I’m reading too much into this, there’s worse. Most of the pressure on what’s called baseline expenditure – the day-to-day stuff – ‘is generally where committees are already incurring ongoing expenditure without having ongoing funding in place,’ Deputy St Pier said.

Put more simply, departments are making savings but instead of banking that, they’re clandestinely taking on extra staff and thus generating additional and unplanned expenditure in future years.

‘The inevitable result of these lapses in process and discipline, is to present what now amounts to a fait accompli,’ Deputy St Pier said.

I’ll be more blunt. It’s playing fast and loose with your money and not one of those doing so would get away with it in the private sector.

So, we can see that the commitment to savings and economies is largely lip-service and one of the defining aspects of this Assembly is for a number of members – for their own narrow reasons – to undermine and work against Policy & Resources as it attempts to hold the line on fiscal prudence and discipline.

Beyond that, the island is already being warmed up for tax hikes – we’re told that the amount we’re relieved of to date is ‘just’ 21% of GDP, while in Jersey it’s 26% and 38% in the UK.

I mentioned the top saving forecast by the MTFP earlier, £37m. Coincidentally, that’s just about the amount that would be generated if Guernsey was taxed the same as Jersey, around £900 extra per taxpayer.

Since we’re a bit more progressive these days, that would be shunted more on to those who can best afford it – unless GST comes in – so the squeezed middle and above would face the brunt.

Now, while some (many?) would happily pay extra to fund some of the planned service improvements, we’ve already seen that committees aren’t playing ball in meeting identified savings, so the additional tax take would partly be subsidising lack of efficiency commitment by States members.

Pay more for poor deputying, anyone?

But we already know that there’s an additional burden looming of ‘service improvements’ planned by committees that P&R weeded out of the Budget. That will instead be debated next year but totals around £40m.

Sorry about all these figures, but just a couple more if I may. Fail to make the top end savings identified by the MTFP, add in the extra spending wanted by committees and you’re up to around £75m. of new money that has to come from somewhere.

That’s as near as dammit £2,000 extra per taxpayer. Some would doubtless be pleased to make that additional contribution too, States inefficiencies notwithstanding.

What all this really means is that taking Guernsey up to UK levels of taxation equals an additional £3,000 per taxpayer, but this Assembly is already on the threshold of taking us two-thirds of the way there now.

So ignore the numbers and the point I’m trying to illustrate is that depending on the outcome of the spending review next year and the actual implementation of any new initiatives, Guernsey could have gone from being a low-tax to a higher-tax jurisdiction in the space of an Assembly and a half.

That’s quite an achievement – all accomplished by stealth with no attempt to involve islanders in what sort of tax regime they want.

This is why P&R has split out the wish-list stuff from the Budget so that we can have a proper debate on the consequences of some of the Assembly’s more fanciful spending aspirations: ‘If you do X, Y will happen.’

So not only will the outcome of that be crucial for the future of the island, it will also help define the forthcoming island-wide general election next June.

The reason is that, traditionally, Guernsey has been small c conservative in outlook and its approach to public finances. The States has generally followed that lead, while being largely pro-growth and business-friendly.

Right or wrong, that implicit ‘manifesto’ approach has never before been under such challenge as by this Assembly. Which means candidates attracted to stand next summer will either want to try to maintain the old ‘small c’ ways – or continue this Assembly’s work and completely overturn them.

I’ve never especially been persuaded that party politics could emerge in Guernsey, but the evidence now suggests we’re on the brink of ethos-driven government with electoral choice falling towards pretty traditional Left-Right lines.

Which means the outcome’s going to be especially interesting for a tiny, self-governing, low-cost and, wrongly, so-called tax haven.

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