ONE of the consequences of what now looks to be a disastrously profligate pay settlement to around 2,500 local civil and public servants is to highlight how out of control government expenditure actually is.

In the run-up to introducing the zero-10 regime, islanders were assured that part of the deal in government giving away £80m.-£100m. by scrapping corporation tax, was that it would finally start to restrain its own expenditure in the light of the new economic reality.

That was no accident.

The public consultation process – the biggest then seen in the island – led to a single theme dominating the process: the need for public sector economy. Nor was that a knee-jerk reaction, but one that realised the need to remove waste, flatten management structures, outsource widely and remove unnecessary posts to maintain core public services.

Islanders wanted a careful approach that did not damage services.

Instead, government is sleep-walking into still higher payroll costs, leaving service cuts or tax increases as the only options because of its own lack of action in tackling these issues.

And this is not newspaper conjecture. Treasury and Resources has set it out very clearly in the Budget. Wages account for half of every penny taxpayers contribute and the department expects the wage bill this year to rise by approaching 3% in real terms.

In other words, not controlled at all.

Additionally, the department has said that so-called formula-led costs – like sending islanders to the UK for treatment not available here – is not subject to the ‘at or below RPI’ restraint policy.

But that accounts for nearly 14% of all States expenditure. So with salaries, a total of 64% of what departments spend is outside the net of control.

What can be touched is limited to supplies and services, grants and contracted out work. In all, little more than a third.

With the UK officially in recession, this is a desperately worrying state of affairs.

Guernsey’s go for growth policy is in chaos and government claims it cannot control the bulk of its expenditure.

So how is the Policy Council planning to steer the island through a rapidly developing financial crisis?