OPINION: Broken Guernsey
Look at the numbers and the only guarantee is this week’s Tax Review debate won’t raise enough money because of unresolved cost pressures the island faces. That, says Richard Digard, is why we need an early general election – or a fresh P&R
FOR the very sound reason of trying to avoid making an idiot of myself, I generally avoid predictions. Today, I’m happy to make an exception. For whatever the outcome of the taxation review and the GST v. no GST arguments, one thing is certain. Whatever extra money the States raises, it won’t be enough.
That’s nothing to do with the merits of the various funding strategies being proposed. Nor is it directly linked to the size and cost of the public sector. Instead, it’s down to something called the island’s dependency ratio.
This cheery little statistic indicates the proportion of the island which is economically dependent on the rest. Pensioners v. workers if you will. More accurately, it records those eligible for retirement and who are thus 65 or over and those who are still in compulsory full-time education – in other words, kids under the age of 16.
This matters because if you are dependent, you obviously need someone to be dependent on – i.e. those working and paying tax. Before 2012, the dependency ratio was 0.48, meaning that for every 100 people of working age here, there were 48 individuals reliant on them for their health care, education or other needs.
While that’s clearly a significant burden, it had been static for a while. Today, however, it has worsened significantly. There are now 57 people of dependent age for every 100 workers. This is bad. The global average, according to World Economics, is 40.
To make matters worse, the Guernsey trend is set to deteriorate – as more of the ‘baby boom’ generation born after the Second World War until the 1960s stop working and retire – and actually appears to be accelerating.
Bluntly, the demographic costs government blames right now for wanting more of your earnings in tax and GST are going to get worse and so the debate the States is having this week about plugging the alleged fiscal deficit is already out of date. As the States expenditure chart below shows, two-thirds of all spending is on health or benefits and the bulk of that is age-dependent. The numbers are genuinely frightening.
Cast your mind back to 2019, and a chap called Gavin St Pier led something called the The Review Of The Fiscal Policy Framework and Fiscal Pressures. This highlighted that the Assembly was planning to pile on between £79m. and £132m.-worth of additional cost over a five- to 10-year period without any idea how to fund the initiatives.
That, of course, was before the current legal challenge to the public sector pension reforms of 2016 which, if successful, could have additional massive financial implications for taxpayers, and before this P&R’s giveaway 2023 budget, which increased committee baseline costs.
Jersey has similar age issues and an expert speaking at a Digital Jersey event last week described that island’s age pyramid as one of the scariest he’d ever seen.
Guernsey’s is arguably worse.
Now, unless you machine-gun all the over-70s, this is inescapable. The cost-crunch P&R is highlighting now is merely the hors d’oeuvre for what’s to come. That’s why the size and cost of the public sector is so important.
Before Covid and Brexit, Guernsey could rely on around 4,000 people a year coming here to work and a similar number leaving. Today, immigration has dropped by a thousand or so and employment in the sectors of wholesale, retail and repairs, transport and storage, information and communication, finance, real estate activities, human health, social and charitable work and other services have all declined.
Following my last column on how working for the States is now very nearly as big an employment sector as finance, I’ve been assured that Guernsey is still actively attracting new business – but it can’t service it here because there aren’t the staff to do so. It’s either lost or outsourced.
At the same time, government has hundreds of vacancies which it’s aggressively trying to fill – at taxpayer expense – and competing toe-to-toe with finance for available bodies.
This is why I say in the headline here that Guernsey’s broken. Not its spirit or its people (despite the odds) but in the way it’s being led.
The last seriously unpopular move, the introduction of zero-10, was carefully and methodically sold to the island as unwelcome, costly but essential by Deputy Lyndon Trott and others. It took them an impressive roadshow of 117 public meetings to get there – but they did it. And after a bit of prodding from this newspaper and business and other lobby groups, the States accepted that it, too, had to do its bit and make proper savings to help mitigate the corporate tax being given up under zero-10. The pain was shared.
In contrast, the GST debacle was dropped on islanders with no softening up or partnership approach. The antics of P&R trying to avoid parliamentary defeat and what will be a touch-and-go vote of no confidence if they demonstrate that there were fiscal alternatives, while the hard stuff of civil service pension and contract reform hasn’t been attempted.
More fundamentally, however, successive States members wanted to increase services and costs faster than the growth in the economy could bear.
What is now horribly apparent is that this Assembly has given up on that number one basic – the economy, stupid. Economic Development’s claim to fame is clamping down on hedge veg spider crab sales and fracturing the hospitality sector over its efforts not to be responsible for producing a strategy for the visitor economy.
Growing the cake and improving productivity to pay for more and better public services is what every developed economy attempts to do. Even Jersey. But not here. Higher taxes and more government is seen as the answer to everything.
There’s been no delivery on the Government Work Plan, on building back better, and just about the only initiative this Assembly has achieved – apart from those put in train by earlier Assemblies – is agreeing to spend £26m. on Alderney’s runway.
If Guernsey is to have a future it’s by increasing the number in non-civil service jobs, addressing the cost of its public services and recognising that it can’t afford to morph into pensioner central.
These are, of course, difficult things to tackle and this Assembly, as the GST debacle demonstrates, is less equipped than previous ones even to try. The harsh reality is that nothing will change until the next general election, which is two years away, or we get a new P&R.
Depending on this week’s GST debate, that could be much closer than anticipated.