Alas, the Guernsey Press crystal ball is currently at the menders so I can’t predict the outcome of next week’s debate on GST-lite or any of the other permutations that might arise. Yes, Deputy Collins, I am looking at you.
Neither can I get close to the number who’ll turn out for Sunday’s ‘big public protest’ against the widely hated consumption tax that’s guaranteed not to fill the financial black hole created by the States spending more than it receives.
But looking at Policy & Resources’ rather desperate ‘stick to the facts’ headline earlier this week – since that was triggered by widespread scepticism about its own numbers – I think we can safely say the debate outcome is going to be closely debated. Especially since Scrutiny’s bruising encounter with the committee on Monday suggested poor families with kids will be even worse off.
And whichever way it goes, there will be some pretty serious consequences, not least for P&R, which is expected to face a vote of no confidence if it loses the day.
So while we’re waiting for the fun to start, I thought I’d let you into a little secret about GST itself. It’s irrelevant. A mere sideshow. In fact, you could go so far as to describe it as displacement activity. A way of keeping busy (and maintaining spending as usual) while ignoring what’s really dragging the island down.
And that’s three things – an ageing population; rising healthcare and long-term care costs; and weak underlying economic and productivity growth. As in, not keeping pace with the States’ own increasing expenditure.
We’ve known this for 20-odd years, of course, but never hit it head-on. Hence GST being a bit of an irrelevance. Why? Because Guernsey has proportionately fewer workers supporting more retirees. Introduce what you like, say an eyeball tax or a charge on breathing or a goods and services tax, and you’re still largely hitting the same declining group of economically productive citizens.
In Guernsey’s case, that’s made worse by the increasing number of staff being employed by the States and the declining numbers in finance, although we’re being denied the actual numbers because of the current problems with producing what are called national statistics. Cover-up or incompetence? Sadly, the answer doesn’t really matter. Either way, decision-makers are running blind.
In short, no amount of financial engineering – be that GST or Deputy Collins’ Plan G of cuts, an employment tax and big increases in TRP – alters that fundamental. We don’t have enough working folk to support the weight of government.
So what we need is simple: more economically active residents, better retention of young islanders, faster recruitment in key employment sectors and a clear population strategy that’s directly linked to economic growth.
Ah, but we can’t do any of that because of the housing crisis. The island having watched this particular frog come to the boil over 20-plus years, the-then Environment & Infrastructure Committee president Lindsay de Sausmarez announced in 2023 a need for 1,565 new homes by the end of next year (313 per annum). But the actual build rate has been nothing like that. In fact, I think it’s going backwards against annual target.
All of which means housing is probably the biggest constraint on the one thing we really, really need – economic growth. The current squeeze on businesses recruiting because of accommodation issues mean tax revenues are growing more slowly than they could, the States is having to offer expensive sweetheart recruitment packages to mitigate this for its own employees, and it’s particularly hitting healthcare staffing.
At the same time, healthcare costs are continuing to rise because, we’re told, people are living longer. According to P&R’s tax reform report, anyone over 65 takes out more from the system than they put in – in excess of £40,000 if you manage to struggle on to 90.
What’s less clear, of course, is if we’re doing health right. Whether costs are rising because of how we deliver care rather than how many require it. It sounds simple put that way, but the most expensive patient is usually the one who ends up in hospital unnecessarily or is kept there for lack of facilities elsewhere. Which happens loads.
Plus there are the well-documented tensions between primary health care – where at £90 a pop it’s in the interests of a GP to see you as often as possible – while an MSG specialist gets paid whether they treat you or not and, financially, definitely prefer to see you as a private, paying patient.
This, in theory at least, has been in the fiscal crosshairs of the States since Bob Chilcott was president of the Board of Health back in the 1990s. But despite the previous partnership of purpose reforms (which the last president of Health & Social Care totally ignored) one of the Government Work Plan’s super-priorities of this Assembly now promises to ‘agree and advance a sustainable health and care system’.
That root and branch overhaul of the system that’s going to be even better than the partnership of purpose which wasn’t implemented (keep up) will be overseen by the founder and former chairman of the, er, Medical Specialist Group. This obviously raises no issues of conflict of interest, imagined or otherwise (I impugn him not). As a medical man, he well knows the importance of optics, but at least he knows where the bodies are buried, I suppose.
My point here really, however, is the important distinction of whether reform of healthcare happens in Guernsey proactively and for the right reasons or simply to meet financial pressures. As indeed currently appears the case with OAPs potentially walloped with prescription charges or being forced to take out a second mortgage (AKA equity release) to pay for care. Note: no talk of renegotiating the £25m. MSG contract or GP fees. Patients, like taxpayers, are the go-to.
So you can see, I hope, that the debate about GST is largely about applying a sticking plaster to these deep, underlying issues. Yes, they’re known. But not discussed in policy terms or as something that a serious States is prepared to tackle.
Which is why the other biggie – productivity – never gets a mention. Your beloved government doesn’t measure this directly whereas Jersey, with similar demographic issues, does. And its Fiscal Policy Panel has repeatedly flagged declining productivity and highlighted it as a recurring structural warning for that island.
I doubt we’re doing better than Jersey and yet our only official response to the productivity benefits that might be gained in the public sector from AI is a government work plan action point, ‘Artificial Intelligence Strategy – Understanding Island Impact’.
Yep, correct. We’re commissioning yet another report while the NHS alone is spending £10bn over the next three years to reduce admin for staff, reduce waiting times and speed up patient access to the most appropriate treatment.
So there we have it. Introducing GST avoids confronting what’s really wrong with the island. And here’s a prediction I can make without a crystal ball. Whoever is running P&R will be back with a begging bowl outstretched at each and every Budget until the core demographic problem is addressed.
And that’s getting more people into work, seeing their wages rise in real terms and providing affordable accommodation.
I understand the argument about being too reliant on income-based taxes (about three-quarters of all revenues), but once upon a time that used to keep deputies laser focused on the economy, employment and maintaining Guernsey as an attractive destination for businesses.
Now, not so much. So with GST to fall back on, how much easier will it be for deputies to keep on ignoring what’s really happening to the island while pretending everything’s fine?
