Peter Roffey: The States saving money... how hard can it be?

If there is one thing about the States which tends to irritate a big section of our population it’s their inability to make savings. ‘How hard can it be?’ many ask, ‘Why do States departments always talk about having to make service cuts if their budget is reduced?’

Such questions are often followed up by truisms about commercial businesses having to trim their costs when money is tight. Or observations that in an organisation the size of Guernsey’s public sector there simply has to some waste which could be eliminated.

In fact it’s not just the public who bemoan the lack of action to reduce public expenditure. It was clear during the recent Budget debate that many among the new intake of deputies find it puzzling too. They were sure there must be ways to drive efficiency and reduce spending. Admittedly mainly in other people’s departments, rather than their own, but I guess that’s human nature.

So, what is the answer? Why does the States find it so hard to rein in its spending? Are there no savings to be made?

Of course there are, loads of them, but even in a perfect world, where every possible saving opportunity was eagerly grasped, it would not mean that overall public expenditure would fall. It would only mean that it went up more slowly than would otherwise be the case.

Why is that? Very simple. Guernsey’s changing demographics are hugely increasing the demand for services such as health and social care, not to mention the cost of providing the States pension, and using income support to top up the incomes of those pensioners with little other financial provision. People just don’t seem to get the scale of this huge societal change.

In fact some resent it even being mentioned and suggest it is akin to somehow blaming Guernsey’s senior citizens for its government’s financial travails. That’s complete rubbish. No one is blaming anyone. But at the same time to ignore the change in Guernsey’s age profile, just to avoid upsetting my generation, would be very foolish. It is genuinely driving up the cost of public services, and will continue to do so, and therefore needs to be properly understood and planned for.

The number of Guernsey citizens aged over 80 is due to sky-rocket over the next few decades – and I very much hope to be one of them. And it is well documented that those over 80 consume far more health and social care than those aged, say, 30 or 40. Not their fault. Not a criticism. Just a fact.

At the same time the percentage of islanders of typical working age (although we really need to get away from that outdated concept) is going to shrink. That could, in theory, be mitigated by large scale inward migration of people of working age, but of course that would simply exacerbate other problems, not least the housing shortage.

So in reality Guernsey will almost certainly have a bigger percentage of elderly citizens and a smaller percentage of younger ones. I’m afraid that just will drive up the demand for, and therefore cost of, public services. So expecting the States total revenue spend to drop is completely unrealistic.

In no way does that excuse our government from seeking to make efficiencies and savings. Indeed it makes it all the more essential. But anyone who thinks the total cost of government can be reduced over the next few decades, except by making deeply unpopular, frontline, service cuts, is deluding themselves.

Of course Guernsey is not alone in this demographic dilemma. Most of the developed world is in the same boat. It will be one of the drivers forcing the UK chancellor to break (or at least severely bend) Labour’s manifesto promises at the forthcoming Budget.

Indeed some countries are in a far worse position than us. In 1970 the median age of the Chinese population was 18. In 2050 it is forecast to be over 50. How on earth does any society adapt well to changes of that extraordinary magnitude?

There are, however, a few exceptions – or rather latecomers – to this trend of ageing demographics and falling birth rates. Places like sub-Saharan Africa, India and Pakistan. For the next 30 years these countries will be the cradle of an increasingly precious and sought after commodity – young people. The rest of the world will be desperately trying to attract them. Will Guernsey be able to compete for those skills? I hope so for the sake of our economy.

Meanwhile we all need to remember that the much talked about demographic timebomb is no longer something which is predicted to happen years into the future. It is exploding now and has been for quite a while. So by all means demand greater efficiency from the States, but if you think that could actually lead to a reduction in the cost of government then I’m afraid you are fooling yourself.

Which I am afraid brings us on to the parallel issue of tax reforms. But that is a subject another day.