Richard Digard: It’s last chance saloon

By now I think it’s safe to say that most people, except for what will turn out to be a majority of States members, think the States of Guernsey Budget for 2026 is what’s known in impolite circles as a crock of… That’s not, however, going to deflect me from making a bit of a case for it.

Before I do so, we note in passing that had we listened to Lyndon Trott when he presented his caretaker Budget just a year ago, with a temporary 2p on income tax, we’d not be facing a deficit of £117m., or £2,600 per taxpayer.

Stick with that last figure for a moment. It really does represent what you, as an islander, are in hock for. When the States approved the Budget, it did so in the full knowledge that it will make you poorer.

This, you will also note, is unfortunate. Real incomes for most here have failed to keep pace with the cost of living while government uses considerable amounts of your money to index-link the wages, benefits and pensions of its own employees.

That’s why total States pay costs are nearly 7% more than they were last year and why Scrutiny Management took the unusual step of publishing a three-page demolition job on the Budget.

All of which begs two questions – how did we get into this mess and what can we do to get out of it?

To answer this, you have to realise that the default position of a deputy is to spend (your) money. He or she, despite any artfully-crafted manifesto to the contrary, cannot spend less or save a penny.

The reason, more or less, is that they’re not in charge. When it comes to the important things like pay, terms and conditions, and staffing levels, Policy & Resources is the employer – but, bizarrely, not the boss.

In a conventional organisation, a head office faced with a financial haemorrhage, like the States now has, cuts spending, freezes recruitment and absolutely does not plan for above-RPI cost increases on staffing, especially funded from money it doesn’t have.

AnyCo Ltd has the power to implement that, with the expectation – reinforced as necessary by dismissals – that heads of departments will work diligently and effectively to make the necessary savings with the minimum impact on their customers. Note that, minimum impact on those on whom the business relies on for its living.

In the States, however, that breaks down completely.

The departments are effectively autonomous, executive units in their own right with their own boards (‘committees’), owe no enforceable allegiance to head office (P&R), and can band together in the Assembly to overrule any warnings from the finance director that there is no more money.

Five years ago this month, then P&R president Gavin St Pier and vice-president Lyndon Trott went to the Assembly with a comprehensive document breezily entitled The Review of the Fiscal Policy Framework and Fiscal Pressures then facing government.

Carry on as we are, they said, and in the next five to 10 years you’ll be spending anywhere between £79m. and £132m. more per annum with no idea of how to fund that. Well, well. Deputies carried on. And here we are halfway through that timeframe and the deficit (forecast cash outflow) is already £115m.

Consider that dispassionately and you’re forced into some uncomfortable conclusions. Either States members really haven’t a clue what they’re doing. Or they don’t care. Or both. Someone else’s problem and to hell with the taxpayer.

You’re seeing echoes of that in the UK and elsewhere where MPs view borrowing as the preferable alternative to reducing expenditure. Guernsey doesn’t borrow, of course, instead drawing down from what used to be called the rainy day fund, there for emergencies only.

But the consequences are broadly similar – passing the problem on to future generations.

The particular difficulty here, unfortunately, is we’re running out of future in which to transfer these debts. As ratings agency S&P Global warned in February:

‘Health expenditure has consistently exceeded the Budget and outpaced GDP growth, while the shrinking working-age population disproportionately affects the government’s finances, since revenue mainly comes from income taxes.’

So, to recap. We have a flatlining economy, uncontrolled government expenditure, a growing public sector but a shrinking wealth-creating private sector. That’s combined with falling birthrates and a shortage of housing, which in turn hampers immigration, the one thing which might ease that labour shortage.

If that looks like a mounting crisis to you – an actual doom-loop of a rainy day – then it’s most definitely not the time to be raiding your reserves, eh? As, indeed, we were warned five years ago.

Why, then, do I suggest the Budget isn’t as bad as everyone says it is? Because it has one purpose: to win time by showing the States that it can – shock, horror – spend less.

Go with this leap of faith, if you’d be so kind, because in many respects the interview/podcast the States’ chief executive gave this newspaper the other day is more important than the Budget itself.

Since top-down savings haven’t worked since 2009’s alleged financial transformation programme, the Budget is aimed at keeping things ticking over (expensively, but let that pass) so that bottom-up efficiencies from the staff can be shown to work instead.

That will be combined with trying to sort the mess that is States’ technology. Forget Agilisys v. in-house for a moment. Speak to staff and they’ll tell you that more often than not investment in better IT systems hasn’t worked. The promised improvements never arrived – like we’re working with one hand behind our backs, one senior manager told me.

In essence, this Budget is almost irrelevant – it’s the one that comes after it that will indicate whether the mould has been broken, that savings can be identified and introduced and it’s not simply cost-plus budgeting as usual.

So that of 2026 is a pause for breath, to show that government can learn to do things differently, that transformation can actually be business as usual – just like the private sector – and not a one-off.

P&R is on board with all this, by the way. It recognises that you can’t start stopping, reducing or modifying public services without first showing islanders that you’re in control of the organisation itself.

So there we have it. The underlying story behind a Budget that its own president described as ‘unspectacular’.

What I can’t tell you is whether it will work, but I do anticipate some pointers along the way, building up to the one that really matters – the Budget of 2027.

What if it doesn’t shake out that way? That’s easier to predict. More uncontrolled public sector growth, more general economic decline, more and bigger deficits. A bloodbath general election in 2029 followed by cabinet/executive/call it what you will government because someone or something will have to take charge.

So yes. Budget 2026 might be unspectacular. But in reality it’s last chance saloon.