‘No money’ battle lines are drawn

‘Go away. I’m busy. Want to do what?’

‘Say “I told you so”. Ram home the point that after years of warning the wheels were going to fall off, the States has finally spent itself into penury…’

Richard Digard reflects

WELL, it’s not without a certain temptation I must admit, but the situation is far too serious for that. You see, the fact that the last two governments, in particular, chose to spend beyond the capability of the economy to meet members’ cash expectations was screamingly obvious to everyone.

Yet here we are, just six months into a new political term, and our new leaders have turned around and said: there is no more money. As bluntly as that.

Policy & Resources’ warning needs to come with a warning of its own, however. There is money – and quite a lot of it by the standards of most folk. Next year, for instance, the States is projected to have a surplus of £16.2m. – a near £40m. turnaround compared with this year’s predicted deficit of £21.2m.

The thing is, that’s on the revenue account. So just keeping the lights on and doing what needs to be done day-to-day means we’re good to go and will have a surplus at the end of 2025 of £10m.

Doing anything else – giving staff a pay rise (‘What’s that?’ less privileged islanders ask), repairing the clapped-out harbours, restoring Covid-damaged reserves or even building back better – immediately plunges public finances into the red. Hence Peter Ferbrache and treasury lead Mark Helyar telling us that the magic money tree finally died.

Why I say it’s too serious to wallow in told-you-sos and finger pointing is because of what led us to this point and the fragility of us getting out of it.

Bluntly, past States put their own political ambitions ahead of the wellbeing of the island and agreed to do things without knowing how to pay for them. Some of the worst culprits have now walked away from the mess they caused.

This spectacular act of self-immolation – demanding an extra £80m. to £132m. per annum of new money over the next few years with no idea of where it was coming from or how – was deliberate, counter to advice and undertaken in gleeful ignorance of how the island’s economy works.

Pause there and consider. Broad brush, we have about a quarter of a billion pounds’ worth of civil and public service expertise advising 38 elected deputies of varying ability. Yet the system wasn’t able to head off a slo-mo train crash. In part, of course, because that same £250m. sector of society is heavily unionised, protective of its own interests and, as an example, when it comes to creating a new education regime, secondary teachers put parking for themselves as the number one facilities demand. More important, they said, than a grass field for the kids.

None of this happened overnight. In part it is a consequence of the growing prosperity of the island. A post-war, horticultural-decline-facing States questioned every expense, chased every economic opportunity. Their successors merely looked for ways to spend.

Even today, after the ‘no money’ warning, some States members are pushing back: ‘Perfect time to send a strong message of the need to invest in our people, economy and environment, not the other way round,’ said Sasha Kazantseva-Miller.

Many will agree with her, of course, because ‘austerity’ has ceased to represent a chronic shortage of government funds/crushing additional tax burden on the middle class. Instead it has bizarrely morphed into a political philosophy to be adopted or discarded, roughly depending on whether you like that nice Mr Corbyn or not.

Back in the real world, Ferbrache and Co. are blinking at some of their colleagues – and union officials sulking over not being consulted about a pay freeze – in baffled amazement, wondering what’s so hard to understand about the phrase ‘no more money’.

Regular readers will recall I’m unaligned, except in favour of taxpayer interests, as it’s easier to remain objective and critical. But unlike, say, Education, determined to take the line of least resistance whatever the impact on educational outcomes, P&R is trying to resolve some of the island’s deep-seated legacy issues, including restrictive civil service terms and conditions.

That’s a big enough task – look at the kick-back over denying another department immediate access to a replacement official on a six-figure salary – without factoring in Brexit, Covid, demographic issues, the Government Work Plan and the rest of the public sector transformation project.

The task ahead is dealing with the biggest fiscal crisis faced by the States since the Occupation ended – and how it’s tackled will be a generation-defining moment. Either the island re-recognises that no one owes it a living and any prosperity depends on its self-reliance, thrift and courage in seizing opportunities, or it continues on its merry way of spending what it doesn’t have, to the enduring detriment of its citizens.

Before you ask, I’m not sure of the outcome. It is early days, for all that we have the apparent emergence of a government coalition majority in those prepared to support Policy & Resources. That’s yet to be seriously tested and it’s before any ‘events, dear boy, events’ arise to trip up the best of intentions.

What I think is clear is that enormous resolve will be required, plus a widespread buy-in from outside the States that change is required. More pressingly, the public sector itself needs to recognise that it is part of the problem as well as a key part of the solution.

Some idea of the difficulties involved were demonstrated in Jersey, where then States chief executive Charlie Parker tried to make sweeping change in administrative process and it cost him his job. Here, it’s political, supported by the civil service leadership team.

So in short, the choice is between right-sizing government to adapt to today’s conditions or continuing to expand it by introducing GST and a health tax (putting up income tax by another name).

Your call. Personally, I’m hoping P&R succeeds. Not for me, but for the next generations.

u Richard Digard is a freelance writer, consultant and a former editor of the Guernsey Press.

Email: newsroom@guernseypress.com.