Honeymoon period to end for Government of change
Tuesday 11th September 2012, 5:00PM BST.
AN AIR of optimism and buoyancy that surrounded decision-making back when Guernsey nailed its colours to the mast of zero-10 has long since gone.
Last week, the Policy Council released growth forecasts that predict GDP will flatline in 2012.
The turmoil that rocked Europe and the world beyond after 2008 has had an inevitable impact on the island’s economy, so much so that it makes the levels of growth that the corporate tax strategy was based on now look foolhardy.
That, of course, is with the benefit of hindsight, but when it was introduced there were plenty of naysayers who doubted our ability to grow away the deficit, now down to some £30m.
Economic growth was not the only key platform of making the strategy work, giving it some much-needed flexibility – curbing government spending now looks ever more important – as does doing it in a way that does not stall the economy further.
We have seen a steady downgrading of forecasts over the last 12 months or so from 3.5% in the States Strategic Plan, to 1.9% in the Budget, and now to zero.
Grim reading, although on the ground there are some signs for timid optimism in terms of things such as new car and house sales.
Now there is another warning for policy makers looking further into future.
There may well be a new global norm of slower growth – and that has a major impact in the island.
All the work of government is based on a long-term growth in the economy of 2% – the latest Policy Council report for the first time questions this figure.
Remember that 80% of GDP growth has been driven by the finance sector with a smaller contribution of population growth – both are limited.
Perhaps we can expect a downgrading here to 1.5% – and that impacts on everything the government does.
It will also come at a time when spending pressures will increase because of the island’s population.
That is a conundrum many Western democracies are going to have to crack, but it is one that will not solve itself.
The States has by luck and judgement managed to place Guernsey in a relatively-comfortable position.
The island has no debt mountain, it has no sales tax acting as a short-term fix, and its £30m. deficit is seen as being comfortable.
But that should be no reason to take the foot off the gas of driving innovation and reform.
It would be sad to just sit there arguing there is nothing to be done to push the economy forward because of the lack of levers that bigger nations have.
So what is the innovation being shown by the States?
Well, the trouble is most of it is just ideas – or stuck in the legal drafting process.
Things such as the aircraft registry and image rights are meant to snaggle millions when up and running.
Fresh, large-scale ideas is where the new Assembly can make a name for itself – not fooling around with white van men.
The government of change has set high expectations from the public – will it just rely on the innovation shown in the past or will it drive through its own plans?
There has been no big policy announcement yet, no big bang that you would see with new governments elsewhere – that is not how the consensus system works.
But the honeymoon period where deputies talk a lot about learning is coming abruptly to an end.
The Budget is coming, and after that the States Strategic Plan debate.
Sadly, we could be more than a quarter of the way through a term before we even find out where this States believes we should be going.