Back in the day when we had ministers instead of committee presidents, the then Treasury Minister Lyndon Trott told me that it was only towards the end of his term that he had really got a grasp on the state of the island’s public finances and how they worked. They really are that complex and convoluted.

Unsurprisingly, then, they’re open to misunderstanding and even charges of being misleading – just look at some of the criticism there’s been from the think tank run by Jon Molton and Digby Jones (available here).

As a result, the Guernsey Press asked me to take a look at public finances as one of three pieces in the run-up to the general election next month. So here’s my own idiot’s guide to things:

After next month’s election a simple question about the island’s public finances will dominate the next four-year political term. And the answer, if deputies aren’t ‘stupid’, says Richard Digard, is the economy

ONE of the first things the newly-appointed Policy and Resources president [insert name here] will do after next month’s general election is to call together States CEO Boley Smillie and States Treasurer Bethan Haines and say: ‘Right. Give it to me straight. How deeply in the sh*t are we?’

In turn, these worthy individuals will stiffen slightly in their seats, glance at each other for a moment, and say, ‘Well, chief, it’s like this…’

The reality is that no one really knows how shot to shreds the island’s finances are. Look at the last published accounts, for 2023, and the updated figures presented in the 2025 Budget and you’ll see there are material differences between them.

When last year’s numbers come out in the 2024 Audited Accounts they’ll tell a different story too, not least because they will for the first time be fully compliant with IPSAS, the International Public Sector Accounting Standards. And, anyway, tax receipts are always in arrears. Just like audited accounts. 

Forget technicalities, however. Understanding the finances of an organisation of the size and complexity of the States of Guernsey is extraordinarily difficult and ‘giving it straight’ can only ever be a snapshot of a particular point in time. And even then it will depend on a whole range of predictions and trends.

For example, P&R was confidently foretelling in this year’s Budget that revenues would soar and we’d finish the year with a surplus of £37m. Hurrah. However, that was based on a 2% increase in income tax, which never happened, so back in the poo we go with a looming black hole of £100m. or so. 

I’m not making light of this because the 38 deputies you’re about to vote into office have to make sense of it and put it right without bankrupting Guernsey families through tax rises or making the island uncompetitive. 

But they also have to do it without going to war with the public sector. For that’s the other issue they face – controlling the steadily rising cost of government, expected to be up by 6.5% (wow!) to £650m. this year alone. That’s hard without slashing staff numbers, cutting pay or services and tackling the public sector pension scheme. Plus, the 14 separate unions in the public sector have a lot of clout and a legitimate interest in protecting and improving their members’ interests.

And as if that wasn’t bad enough, there’s the island’s stagnating economy, the housing crisis, a failing States education system and collapsing air connectivity. These issues have united the island’s business community, via the G8, to urge government to do things differently and finally tackle some of these mission-critical problems.

So, unfortunately, dear deputy, it’s not as simple as ‘GST, yes or no?’ Some estimates I’ve heard suggest you could have 18-20 new colleagues (yes, half the Assembly cleared out, woo-hoo), which means making the case for a goods and services tax will have to start all over again.

How – or even if – this happens will dominate the next four years of the new Assembly. The reason is simple. Guernsey is running out of money. It spends more than it brings in, has no credible cost-control programme and has already been warned that even a 5% GST won’t be enough.

Add to that decades of under-investment in public infrastructure, the need to spend millions on new homes and Aurigny Air Services haemorrhaging unknown millions (note to new deputies: you might want to end that cover-up) and, to quote former chief secretary to the Treasury Liam Byrne from a decade ago, there is no money.

Well, there is, obviously. Reserves, assets, funds, future revenues… But making sense of that – and more importantly, use of that – is an arcane art and most deputies will never understand it. Alas, they will remain totally reliant on what they’re told by Treasury officials, among others.

That’s not meant to be offensive to States members, by the way. But not even Guernsey resident Jon Moulton understands the States Accounts and he’s made millions as a venture capitalist by reading balance sheets better than the rest of us.

So it’s no coincidence Charles Parkinson, himself a lawyer, accountant and previous Treasury Minister, is also calling for believable (he called it ‘more candid’) information on government numbers. Without credible help, neither voters, candidates nor deputies will understand what’s really going on.

What we do know is that ratings agency S&P Global reckons the island’s economy shrank by 3% over the last two years, that labour shortages are holding back growth and old people (those blighters again) are bleeding the island dry. As you’d expect, however, S&P’s a bit more measured than that and puts it this way:

‘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 forget actual numbers for a moment. What we should all by now understand with total clarity is the island spends more than it earns, has nothing in place to address that or increase what it earns, but has promised to spend more on infrastructure and housing.

And that, dear deputy, is where you come in. S&P’s generally benign outlook for the island is predicated on GST being introduced by 2027. And if it is, you and your colleagues will become hate figures for significant numbers of islanders, many of whom can’t afford a house or the rent now. Rough trade, politics, but you volunteered…

I mentioned the G8 business lobby earlier, which is also saying the island’s at a crossroads and needs change now. But as new deputies are shortly about to learn, the States does nothing fast – housing crisis? Leale’s Yard? – and even if it tries to spring into action, it hits capacity constraints.

So what’s the poor beleaguered voter to make of all this as they scan the ‘manifesto of death’ booklet?

Personally, I’d be looking for someone assessing priorities. GST or trying to get the economy humming again? If, as I expect, disenchanted voters are looking to clear out some deadwood, the next step for the Assembly is to prevent the business community from also turning against it – a tipping point that’s actually closer than many realise.

Re-visiting 2p on income tax for a limited period to tackle housing affordability and availability seems a no-brainer to me, not least because lack of accommodation is hamstringing business and the economy. It’s also holding back those other enablers, transport and connectivity, while we need a shot in the arm for an education system so it finally produces youngsters with the skills employers need. 

So, in short, it’s the economy, stupid. That mantra worked for Bill Clinton in the 1992 US election. Let’s hope it can for us too in 2025.