On this island the speed limit is 35 miles an hour. We keep it low because the roads are narrow, the lanes are blind, and there’s probably a sticky-out bit of granite cloaked by the overgrowing hedge just waiting for the unwary. Faster is simply too dangerous for the driver and for everyone else.
Now imagine Charles Parkinson is stopped by a policeman for doing 50. He winds down the window and says, ‘Oh officer, don’t worry at all. It’s not my speed that’s the problem. It’s the rule. So what I’m going to do is change the rule so that 50 is allowed on this road.’
That is exactly what is happening with the fiscal rules.
Gpeg, a local think-tank that bothers to do the sums, has already said the States has gone over its own 24% limit by at least £23m. Most people heard that on the radio and just carried on with their shopping. A few of us stopped and thought – why is it always the rule that has to move?
The limit was put there for a reason. The economy has got to keep moving and the people have got to be able to live, and therefore the government cannot just continually keep taking more and more from Mrs Le Page’s purse. So a sensible division was put in place. That is what the 24% was meant to be.
Start with the 24%. In 2020, the States agreed that its total revenue should not go above that share of the island’s economy. The official answer to Gpeg is that GDP was restated downwards for technical reasons, so the claim is only ‘technically true’, and that one of the reasons for rewriting the framework is to stop this sort of awkward claim being made at all. When the measuring stick shows you over the line, change the measuring stick. Or, as Charles might have it, change the speed limit.
Then there was the January resolution. The States told Policy & Resources to bring back a stricter framework by the middle of July. That date has come and gone. The explanation is the usual one, the work overlaps with the tax package, the team is small, resources have been prioritised. The tax package – and make no mistake, the big item in that package is GST – is already on the floor of the Assembly. That is the new collecting tin. The framework that was supposed to set the long-term rules will arrive later. Who designs the collecting tin before they have finished deciding how large the household is allowed to be? And not only have they put the horse before the cart, the tax reform package they have cobbled together, at a cost exceeding £1.5m. I might add, is a dog’s dinner. If I was marking it I would give it an F.
The GST mitigations that sit at the heart of that package are based on the 2018-19 Household Expenditure Survey, simply inflated forward. The brand new 2023-24 survey, published earlier this week, shows just how far that assumption missed the mark. In real terms, after adjusting for inflation, overall household expenditure is now 6% lower than in 2018-19 and real gross incomes are 12% lower. Private market renters are now spending 26% of their gross income on core housing costs, up from 22%. Affordable-market renters and partial owners remain stuck at 33%. P&R has defended using the old data by claiming its inflation updating was so accurate it came within 1% of the current position. The new survey shows that claim is wildly out. Why not wait for the proper figures instead of spending officer time and money updating eight-year-old numbers that no longer describe how people are actually living? The mitigations have been sized against an outdated and far too optimistic picture.
That matters because the big public campaign for GST was built on those same outdated numbers. The figures pushed to islanders about how households would cope, how much discretionary spending remained, and how the mitigations would leave people better off were based on a picture of Guernsey that no longer exists. Real incomes are lower, real spending power is lower, and housing already takes a bigger bite, especially for renters. The campaign numbers were therefore false. We know the downside of the package. Income tax take falls by £28m. and contributions by another £8m. What we do not know is the upside, because GST revenue will almost certainly come in lower than claimed once you tax a population that is poorer in real terms than the model assumed. Without a complete reworking of the whole package against the new survey there is simply no reliable way of knowing whether the numbers still add up. At the same time this committee has failed to deliver the revised Fiscal Policy Framework the States specifically required by mid-July. These are not minor technical slips. They are a clear demonstration that this committee is advancing a structural tax change on incomplete, outdated and now demonstrably wrong evidence while ignoring a direct States instruction on the fiscal framework itself.
Most islanders have been told the reserves are shrinking and that we will need to borrow another £250m. They have no reason to doubt it. Look a little closer and the story softens. A good deal of what is presented as unavailable has simply been ring-fenced or committed to projects inside the capital programme. Once the label ‘committed’ is stuck on, the money is treated as gone. There are still substantial unallocated proceeds from the old 2014 bond sitting in the system, earmarked for the same pipeline. Changing the label is a political decision, not an act of God.
And all the while the highest practical need on the island is houses, the States already owns a large land bank bought for that purpose, a Housing Committee was created specially to get them built, and the money is there if only the States would reallocate it from some far-away project they have in mind so that spades could be in the ground tomorrow. Instead, in 2025 not a single affordable home was finished, the big sites in the north are sitting idle. They are sitting idle. One project is finally moving, while the rest of the money stays locked up while young people leave and the shortage continues.
Put the drifts together and the pattern becomes hard to miss. Rules are adjusted when they constrain the preferred path. The collecting tin for GST is pushed ahead of a settled plan, and the package itself is a dog’s dinner produced at considerable cost on outdated evidence that has now been shown to be wrong. Reserves are declared tight because they have been labelled for lower-priority work, borrowing of £250m. is discussed while bond proceeds and ring-fenced cash remain available, and housing waits. This is a spending Policy & Resources Committee. At a time when the island’s greatest threat is a government that spends beyond its means, they are more interested in finding new ways to fund the States than in curing the spending addiction itself. They look at the public less as the people they were elected to serve and more as a source of funds, and in doing so they fail to instil the trust that any government needs if it is to ask hard things of the people it claims to represent.
This is not a government living within its means. It is a government managing the appearance of scarcity while protecting its own project pipeline and the size of the state. The addiction is funded, the cure is deferred, the measuring sticks are moved, and the urgent work is postponed. Guernsey cannot afford another term of this.
The best thing that could happen on 30 September is that the tax reform package is thrown out without further debate. A vote of no confidence should then be brought against this Policy & Resources Committee so that a more competent set of leaders can be put in place. Their job should be simple and hard. Stop the spending addiction. Get the statistics and the population numbers up to date. Prepare the ground properly. Then, in 2029, hand that work to the next Assembly and say the hard preparation has been done. Now go and design a real tax reform that this island can actually afford and that reflects the people who live here today, not the people who lived here eight years ago.
These are not those people. It is time for this Policy & Resources Committee to stand down before they are pushed.
