Guernsey’s big question: what next?

It’s a good question. Especially for this States, allegedly committed to action this day; and past States, supposedly committed to learning lessons from previous mistakes, especially of the costly variety.

There’s so much coming down the track that you’d suppose government would be concentrating on getting through the cost of living, energy price, and labour shortage crises, and working out how it was going to kick-start things again when the storms pass, as they will.

Peter Ferbrache and Co may well be straining all the sinews on this for all we know, this being one of the least demonstrative States known to humanity. But if they are, there’s remarkably little sign of it.

What we do know – or can deduce – is that this Assembly has largely given up on trying to contain the cost of the public sector. The remarkably generous pay settlement offered by Deputy Dave Mahoney wipes out at a stroke the £12m. ‘saving’ P&R was claiming the other day in pension funding. And it leaves the taxpayer holding all the risk for the following two years with its RPIX link.

If inflation rises as forecast, that could add approaching £50m. to payroll costs, with no element of reform or productivity gains to part-fund that huge rise. But then, we can also deduce this Assembly has given up on public sector reform.

Previous chief executive Paul Whitfield carried the can for being too slow in modernising the civil service and making the public sector fit for purpose, but at least he had a plan. His successor doesn’t appear to. Or if he has, he’s keeping schtum about it.

So’s Deputy Mahoney, who leads for P&R on employment matters. But then Deputy Mahoney also leads on property rationalisation and we haven’t heard much about that either, so perhaps there’s a pattern emerging.

Deputy Rob Prow, for instance, heads up the effort to ensure we get through Moneyval safely but I’m pretty certain we’ve yet to hear him stand up and say, ‘don’t worry citizens, I’ve got this…’

You see, the ‘what next’ question is so important because Guernsey plc wasn’t in great shape to begin with. Yes, a little bit broad brush, but what concerns you and I is how much government takes out of our back pocket, and that was set to rise – before the latest unquantifiable pay settlement.

As we know, the gap between what the States spends and what it receives is scheduled to be about £85m. a year. Cutting expenditure to reduce that now seems to have been ruled out, so it’s only a hope to ramp up corporate taxes, or economic expansion and productivity gains left to mitigate a looming raid on your wallet or purse.

Hence my nervousness: where are these gains coming from? How many more shocks do we need before starting to do things differently, to recognise that human capital is our greatest asset and that we have to employ it more efficiently and more productively? Especially in the public sector, where every post removed saves the taxpayer an average of £54,460 and releases an individual to work and pay tax more productively in the private sector.

That, after all, is one of the reasons Maggie Thatcher privatised huge swathes of formerly state-owned industry in the UK back in the 1980s, reducing the overall size of government spending as a share of GDP, reducing civil service numbers, and sharply reducing the power of trade unions.

The writing is on the wall here.

As S&P Global Ratings said in January when revising down Guernsey’s credit rating to negative from stable, ‘We could lower the ratings within the next 24 months if we forecast government fiscal deficits to remain elevated… This could happen, for instance, if… losses at key state-owned enterprises were to widen further. A similar action could also occur as a result of a significant shift in the global regulatory, tax, and competitive environment that undermined Guernsey’s important financial services sector.’

The other reason for a possible further reduction cited by S&P was if the island’s capital investment programme was implemented more aggressively than it forecast. To remind you, the 2021-25 plan was to spend up to £580m. (17% of GDP), with S&P anticipating the island would manage only £380m. over that period because we’re not very good at public investment.

Looking around at progress to date, I don’t think much has changed.

As an aside, since we’re considering how well government looks after islanders, someone on Twitter wondered why we have such a high percentage of people in private rentals here. It’s at 27%, compared to the UK’s 19% and France’s 17%. Are rapacious landlords benefiting from a shortage of States-provided social housing?

To a degree, but the big change has been in the decline in home ownership. The 2001 Census, for example, showed that 72% of all islanders were owner-occupiers, way ahead of Jersey at 51%.

Then, fewer than 20% of islanders were in private rents and under 10% in States’ accommodation. Today, owner occupier figures are down to 60.8% while the number of privately rented has risen to 26.7%. A further 8.7% were affordable social rented units and 0.9% were partial ownership units.

So not only has the States overseen a significant drop in owner occupation – it has increased generation rent – its own social housing programme has failed to keep pace with the demand thereby created. Instead, it has relied on private landlords to pick up the accommodation shortfall – and now criticises them for charging market rents.