One of the first challenges put to candidates on social media was to explain our position on the deficit.
According to the T&R Minister, at the end of 2015, the States had raised £382m in tax and other income, but had used about £405m (£365m on public sector expenditure, and £40m allocated to capital) – resulting in a shortfall of about £23m between the States’ income and its outgoings.
Short-term measures were introduced for 2016 (Budget; Section 2) to try and reduce the deficit to £0 this year. But the measures aren’t sustainable in the long term – they include a reduction in the amount set aside for capital investment, and we know that investing in infrastructure is important for sustainable economic growth, so we can’t afford to hold funding back for too long. And the underlying problem – the mismatch between the States’ responsibilities, which cost it money, and the amount of tax which it is prepared to raise – is not likely to resolve itself in the space of a year, without a deliberate effort to tackle the issue. That will be the responsibility of the new States.
What’s more, I think it’s very likely that the overall cost of the public sector will increase over the next few years, especially as we seek to meet the health and care needs of the growing number of people who will live well into their 80s and beyond. That increases the challenge of closing the gap between the States’ income and its outgoings.
Public sector efficiencies are an important part of the picture – but they are not the holy grail. There is definitely scope to increase efficiency within the public sector, but, while pursuing reform, we should be realistic about how much and how quickly this can be achieved.
Increases in the tax base must be considered. I favour the current government approach to gradual evolution of the corporate tax regime, in consultation with industry. While government should not be bound by industry, it is sensible that we should recognise our mutual interdependence. In terms of individual taxation, I do not favour regressive taxes such as GST, which hit poor- and middle-income households hardest; but I’d be willing to explore other options – a decent tax regime must reflect ability to pay.
Strategic economic development is important. Our economic context is challenging (the UK economy is still doing all right, but we don’t yet know what effect “Brexit” might have) and our latest Independent Fiscal Review warned us not to pin our hopes on short-term growth. But we must continue to pursue a deliberate economic development strategy; and perhaps to revisit some of the research underpinning that strategy to explore whether areas (such as health tourism, retail and renewables), which have had only limited attention this States’ term, should be given a boost in the next.
But, most importantly, we need to have a conversation about trade-offs. Do the people of Guernsey really want certain services to stop, or new developments to be avoided? What levels of quality and risk are acceptable, and for whom? What are islanders’ shared priorities? I don’t foresee substantial growth in the government’s mandate, but I do believe there are a number of areas – perhaps most notably community and long-term care – where the States has under-invested at present, and may well have to spend more. And it’s likely that the general demand on services will increase over the coming years, to the extent that we’ll need to raise additional income just to sustain the public services that allow us to maintain our current quality of life. How far are the people of Guernsey willing to do so?
I would be surprised if this Election gave us a clear picture of islanders’ views on tax and spending, or the more subtle questions of risk and quality: it is usually the case that Elections in Guernsey return a range of candidates from every part of the political spectrum. The new policy prioritisation process will be a start – giving us a better idea of what it is that the States hopes to achieve, what it can afford, and the gaps between the two. But, beyond or as part of that, we will need a more specific, more meaningful way of engaging with the public on this fundamental question. If elected, I will seek to make that happen.
In sum: I recognise the need to shrink the deficit. I think this must be approached from both sides – improving our tax take and increasing public sector efficiency. The really difficult conversation is about whether any public services might have to be restricted or closed, or the trade-offs that have to be made if they are not. I don’t believe the States alone will have the answers to this, and – given its potential impact on people’s lives – I don’t think the States should try to solve it alone. The public as a whole must be brought into the conversation, in a democratic and meaningful way; and I will do my utmost to achieve this.