Andy Sloan: Time to get a grip

I see my good friend Javier Milei did well in the Argentinian mid-terms at the weekend. He claimed a landslide victory after defining the first two years of his presidency with what the BBC described as ‘radical spending cuts and free-market reforms’, having in 2023 pledged to take a ‘chainsaw’ to the state.

Javier, as regular readers will know, is the man who cheerfully laid into the audience at Davos two years ago, accusing his hosts of being ‘co-opted by a vision of the world that only leads to socialism and poverty’.

The Grauniad, naturally, couldn’t resist labelling Milei’s political movement as ‘far right’. Right-wing, sure – his agenda is pretty much textbook 1980s Thatcherism – so what? But far right? Really? That’s a deliberate stirring of the emotional pot, conjuring images of the Brownshirts in 1930s Germany. Smearing those with whom you disagree is, I’ve noticed, sadly quite a common political trick nowadays – particularly on social media (and particularly by the left).

Last month, in A Cultural Shift, I wrote a reflection on immigration and culture, discussing, albeit without naming it, an aspect of ‘acculturation’, a recognised social-science phenomenon where immigration can affect local culture. I noted, in my opinion (for that is what my columns comprise), that we’ve perhaps lost a little of the Guernsey way over the last 15 years as a result, particularly in the public sector.

For this, I received a rather bombastic letter accusing me of ‘dog whistle politics’ and of ‘lamenting an imagined cultural purity’. I did nothing of the sort. But this is how debate is now often shouted down by many ‘progressives’. It demonstrates a worrying intolerance for a plurality of views – and, I might add, a distinct lack of self-awareness.

Perhaps we could do with a bit of Javier’s energy here in Guernsey. Or at least a calculator. Because if there’s one area where we’ve really lost the Guernsey way, it’s fiscal discipline.

Go back to 2008, the year I moved to the island, but more significantly the year we introduced zero-10. I recall people being up in arms because zero-10 was reputedly creating a ‘black hole’ of some £60m. Yes, that’s right, roughly half, in nominal terms, of the £115m. cash deficit in Policy & Resources’ proposed 2026 Budget.

What actually happened that year? Despite a £42m. fall in corporate taxes, the States ran a revenue surplus of £52.1m. in 2008, driven by buoyant ETI receipts from a booming economy and, yes, expenditure restraint. Net revenue expenditure grew by £2.2m., just 0.7%. That’s equivalent to about £4.5m. of today’s spending and compares with the £28.5m. rise now proposed by P&R. The past really is a foreign country; as the saying goes… they do things differently there.

This picture of creeping spendthrift complacency was laid bare last week in the Scrutiny Management Committee’s letter of comment on the budget. The letter was reported in several quarters as coming as a surprise. It shouldn’t have been. The surprise isn’t that Scrutiny raised these points, in my opinion, it’s that they needed to be raised at all.

I thought, the numbers spoke for themselves: a £115m. cash deficit next year, a £77m. structural deficit, and pay costs up nearly 7% to around £360m. Revenue is forecast to rise by 3.4%, spending by 4.4%. That’s not fiscal management, that’s drift.

The letter also questioned why the budget books in £40m. of Pillar 2 receipts that haven’t yet been charged, and pointed to the lack of context or explanation behind the surging costs of both Health and Corporate Services. Promised efficiencies seem to have evaporated, while the capital programme – supposedly one of the States’ key priorities – remains as opaque as ever.

None of this should be contentious. It’s simply about transparency, context and arithmetic. But the fact that the letter caused a stir rather proves the point – we’ve become so used to living beyond our means that even pointing it out sounds radical.

If the States is serious about restoring fiscal credibility, we have to start by facing up to our own numbers. When you’re more than £100m. short, you don’t solve it with optimism, you solve it by spending less. It’s not ideology. It’s arithmetic.

That’s why Haley Camp and I laid an amendment calling for what’s essentially a nominal freeze in committee spending. Perhaps we should call it the Future Guernsey amendment (you know, that party which promised real change and accountable leadership) because it mirrors almost exactly the £25m. spending reduction it proposed in its manifesto.

When your outgoings outpace your income, wishful thinking isn’t enough, you stop, reassess, and bring spending back to reality. Or, to put it more bluntly: when you’re running out of money, the answer isn’t more spending – it’s to get a grip.

Of course, this won’t be popular, or easy. Freezing budgets never is. No doubt names will be called – we’ve reached the point where financial realism is branded cruelty and arithmetic mistaken for ideology. And pretending we can just keep spending and that the tax review next year will somehow arrive in the nick of time – like General Blucher at Waterloo – is exactly the kind of wishful thinking that got much of the Western world into the fiscal mess it’s presently in.

It’s a shame Theresa May gave the magic money tree such a bad name, because frankly, we’ve become wedded to the fairy tale of its existence. For the last decade, QE and the era of free money really did make people believe that money grows on trees.

Voters have grown used to the idea that there’s always another bailout around the corner. No one’s prepared to accept fiscal or economic pain. Can you imagine today’s voters accepting the mantra that unemployment is a price worth paying (to slay inflation)? Anyone for Schumpeter’s creative destruction? Forget that, just give me even more government spending to help with the latest crisis.

As Ruchir Sharma put it in What Went Wrong With Capitalism, one of my all-time favourite summer reads, we’ve become addicted to excessive government spending as a crutch to avoid economic realities. But all this deferral has a cost: zero growth, falling standards of living and deficits we can’t manage. P&R’s £115m. 2026 cash deficit is the local variant of the wider Western disease.

As I wrote in my book This Is What A Rich Death Feels Like, for years we’ve indulged the myth that we are a low-tax, low-spend, agile jurisdiction. The truth is less flattering. Our spending has surged. Our tax base is narrowing. Our competitiveness is eroding. And our politics has become a client service, handing out benefits, avoiding reform, and pretending trade-offs don’t exist.

So no, I’m not calling for an Argentinian-style revolution, just pointing out a little fiscal discipline is necessary. The decade of free money is over. It’s time to grow up, balance the books, and rediscover that quaint old notion that you can’t spend what you don’t have.

It’s time to stop pretending the magic money tree was ever a feasible part of the plan and start living within our means.