Things can only get worse

Forget a lean, mean States of Guernsey actively responding to the current cash crisis and tax review – the organisation can’t control its costs or headcount. Richard Digard explains why

(Picture by Shutterstock)
(Picture by Shutterstock)

STAND BACK from all the heat and fury of the debate over Guernsey’s tax review, future spending plans and size of government and one thing strikes you – the States really aren’t very good at looking after your money.

Much as deputies and public sector employees view it as theirs, virtually every penny comes from islanders, who have watched and read recent events with increasing concern.

From having loads ‘in the bank’, so to speak, Mr and Mrs Le Page are now being asked to bail out an organisation that has spent itself into the red, racked up debt and is wedded to an airline that haemorrhages money.

The reasons for this reversal of States finances are almost irrelevant. The spillover of the corporate world onto the popular news pages because of accountancy scandals, business collapses and fraud mean we’re conditioned to the loss of shareholder or customer money being A Bad Thing. It generally means the sudden exit of the chief executive or finance director and a turnaround plan being announced by the new leadership team.

Well, we’ve had some of the bad news and the added anxiety that government numbers can’t entirely be trusted.

The States Treasurer’s defence of them this week really rather confirmed that tax ‘headroom’ is indeed a mirage. And on top of that, such rescue strategy as we have – the Government Work Plan and tax review – is similarly underwhelming.

The thing here is that while governments aren’t businesses, taxpayers increasingly expect them to behave as though they were, certainly in terms of dealing with crises. After all, the Civil Contingency Authority has shown what can be done when the chips are down.

Now, however, there’s talk of tax rises, food prices going through the roof, inflation adding to cost of living increases, disturbing talk about unaffordable old age pensions and chronic staff shortages holding back local businesses just as they’re trying to recover from Covid.

And we know things are going to get worse. The UK’s fuel shortages, supply issues here already affecting supermarket shelves and worrying forecasts about too few turkeys and Christmas being cancelled all point in that direction. Oh, and islanders already struggling to meet high mortgage repayments are shortly to face increased interest rates and further pressure on their family finances.

And what’s government doing to make things better? Unfortunately, for the last eight to 12 years, not much. Having spoken for so long about demographic issues that we trusted they had accounted for, we now learn anyone over the age of 65 is the enemy, a bed-blocker, and is ruining the prospects of the younger generation.

Harsh, given government’s had at least half a century to plan for this, but hasn’t.

Turn this round a bit and the recent Policy & Resources-inspired ‘bonfire’ of extant resolutions – all the stuff well-meaning deputies wanted to impose upon us, like banning for-sale signs in cars on headlands – shows just how much past administrations have been fiddling around while failing to plan for the future.

If you think that’s being unkind, consider this. We’re told that about two-thirds of all expenditure (employment and social security plus health and social care) has a significant dependence on the age profile of the island.

Yet some of the biggest elements – States pensions, unemployment and other contributory benefits, specialist consultancy and primary care, prescriptions and long-term care subsidies – are funded in full or in part from social security contributions.

All of which means any funding ‘crisis’ is far from a surprise. Your elected representatives simply allowed it to happen, effectively wasting the years of plenty.

Mike Brown, when he was chief executive of the States of Guernsey before Paul Whitfield took over, always reckoned that complacency was the biggest danger facing the island and he was right. That’s why I’m less than optimistic for the next few years.

Look at it this way. Organisations that get through significant difficulty do so because of leadership and agility in pursuing a common purpose. Survival tends to focus the mind.

In this instance, however, it’s only taxpayers’ money and there’s little incentive on committees to make savings. PwC reported in 2017, for example, that many opportunities were lost through political inertia. It also noted that the HR function was lamentably unable to cope with severance or redundancy, resolve multiple pay discrepancies or transition employees with long-term leave issues out of the organisation.

Bluntly, P&R can tell committees to make savings and manage their people better, but not make it happen. Some presidents protect favoured staff – I had that a couple of weeks ago from a singularly well-placed source – and even if departments are minded to cooperate, they have no control over pay rates or payroll issues.

In short, the States is largely unmanageable, any new CEO coming in will have to adopt the existing Whitfield reform plan because there’s no time to devise a new one and he or she will have very few levers to make a real difference.

That’s why whatever tax increases are agreed to cope with this latest ‘crisis’, they won’t be the last.

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