In 2010 – as Chairman of the Public Accounts Committee – we tried to force through expenditure cuts. With no support from the Council of Ministers, who represent the Public Sector rather than the public, and no support from the left, who never support expenditure cuts, we were heavily defeated.
Everything we predicted came true, the forecasts of the Council of Ministers and highly paid Civil servants proved to be absolute over-optimistic rubbish. Sadly there are more political sheep in today’s States Assembly than there were then. We had the usual cynical shroud waving – just as we have today.
This is the transcript of an ‘off-the-cuff’ unwritten speech in 2010 – 5 years ago.
9.1 Senator B.E. Shenton (Chairman, Public Accounts Committee):
This proposition is brought by the Public Accounts Committee, a committee set up of politicians and members of the public. I think the reason that we have brought this proposition to the Chamber today is there is genuine concern among the Public Accounts Committee that not enough is being done to make the States and the public sector an efficient spending machine where money is not wasted and the real concern that the future fiscal deficits will ultimately lead to much higher taxation for the members of the public. I think it was always said that we would, as an Assembly, as a body, make sure that we have got the public sector efficiency the public so necessarily desire. What we saw after the fundamental spending review is quite a large increase in government spending over the last 5 years. There is no doubt that if you spend more money than you actually are receiving in it does cause short-term problems. If you do it over a period of time the problems become quite dire and quite drastic. We have seen in Ireland and in Greece and in other areas what the effects of overspending are. The Public Accounts Committee were a little bit concerned that the States Assembly and the Executive were very good at the sound bites with regard to them saying that they will control spending but not particularly good at making sure it does come under control and that difficult choices are made. We have, to be honest with you, seen a slight improvement over recent months. The Comptroller and Auditor General produced a very damning report about financial efficiencies within the States and the way the Treasury was run. It was always the idea of Ministerial government that the Treasurer should act almost in a non-political role, as a hand on the tiller, to make sure spending did not get out of control and departments were run within their means. Unfortunately, since 2005 and the advent of Ministerial government, the Treasury never really got hold of this role and, as a result, there was no one particularly with their hand on the tiller to make sure that spending did not increase. As politicians you do need someone independent to keep spending under control because, believe me, keeping spending under control is not popular with the majority of the public that tend to want all the services that they have had in the past and tend to want even more services in the future, without necessarily thinking how it should be paid for. It is very easy in life to think that someone else will pay, that you can have improved services and there will be someone else somewhere, some multi-millionaire or some large corporation, that will pay for it all for you. But ultimately, at the end of the day when the pack of cards comes tumbling down, it is not the multi-millionaires and the corporations that pay. It is the people on benefits that pay. It is the people on low incomes that pay and it is the people of Jersey who pay because, at the end of the day, it is them that – as we have seen in Greece and Ireland – will get their benefits cut and will get their taxes increased. We quoted from Charles Dickens in the report, David Copperfield (Mr. Micawber): “Income 20 shillings a week, expenditure 20 shillings and sixpence; result misery. Income 20 shillings a week, expenditure 19 shillings and sixpence; result happiness.” This is what we have to bear in mind. We are, for the first time – certainly in my memory – going to be running fiscal deficits. The solution to those fiscal deficits, by some Members, seems to be: “Let us keep our fingers crossed. Let us hope that the boom times return and let us hope that by the time the boom times return we have got enough money left to keep us going.” The Fiscal Policy Panel urged the States not to increase spending going forward. They urged prudence and caution and they urged us to undertake the sort of hard medicine that we need to make sure that we do not have to take much deeper medicine in the future. What we are asking for is for the expenditure to go down to the levels in 2011 that we thought the levels of expenditure were going to be in 2011 way back in 2008. In other words, only a few years ago we thought that we could get away with spending what the figure is that we are putting forward, without any significant cut in services and without any significant loss in efficiencies. What we are taking off the top, basically, is the added expenditure that we have added to the last few years, the last few years when we have been in the Chamber. Furthermore, the Public Accounts Committee feel that this reduction in expenditure should be done over 2 years rather than 3, although it does obviously concede that this will be much harder to achieve and cause more pain in certain areas but the fiscal deficit is with us today and tomorrow and it is something that does need to be addressed and even if we do address it there is, in our opinion, no doubt that further tax increases would also be necessary. We were disappointed, although not surprised, that the Council of Ministers did not support our proposition. What we are really worried about is that efficiency savings and other savings that the States make going forward will be spent – spent on the public services – and we want to make sure that this does not happen. We are of the opinion, I believe, that higher taxation is almost inevitable but what we want to do is we want to lower that burden and certainly we want to lower that burden on the hard-working people of Jersey. I was watching CNBC last week and they were talking about the Greek situation. Greece has got a socialist government that has run into enormous financial difficulties, although I should say that their fiscal deficit is probably in line with the U.K. It is just the U.K. get away with it because they are bigger.[16:00]
The overwhelming response of the population was: “How did we get here? We are where we are but how on earth did we get here?” and they were blaming the government of previous years for not taking the action needed to sort out the fiscal situation. It got to the point where they had to go cap in hand or otherwise go into bankruptcy. What they have had to do is in fact put in place a pay freeze until 2014, a cut in salaries, a cut in allowances, raise the retirement age, raise taxation and G.S.T. or V.A.T. (Value Added Tax) to 23 per cent and increase all other taxes by 10 per cent. That is because they would not take the action in the past, probably because it was politically unpopular and, as a result, they are in a much greater mess today than they should have been. Similarly in Ireland, we have seen cuts in the public sector pay because of an unsustainable public position and let us not kid ourselves about the U.K. The U.K. have got incredible problems. This economic focus report from Capital Economics says: “Whatever the outcome of the 2000 general election (because I do not think we still know) it is likely to mark the beginning of a new phase for the U.K. economy. After the great moderation and the great implosion, the next Parliament, and perhaps the one after that, looks set to be defined by the great squeeze.” We have our neighbours, the U.K. – the mainland as some people tend to call it although I personally, as a Jerseyman, do not like the expression – are in deep financial trouble and yet we seem to believe that the boom times are just around the corner. We can carry on spending as we have done in the past, when we had money coming out of our ears and the boom times will bail us out. This is highly unlikely and it is putting the economy… chancing it for luck, when in fact we should be more prudent. The response of the Council of Ministers, if I can just find the paper … and I do believe that there is commitment from the Minister for Treasury and Resources to try and bring forward savings, going forward, and most of his Ministers. Firstly, they are holding out a comprehensive spending review which is a view which is shared by the Liberal Democrats in their mandate as how they would solve the U.K. problems. It is not the review that is important, it is what the review brings and whether the actual recommendations can be carried out. I think where the P.A.C. did have some concern was in the Emerging Issues Report, produced by the Comptroller and Auditor General a few years ago. Here we had savings that had been identified, some of them by the Chief Officers themselves. The question was asked: “How would you save money in your department?” and then working with the C. & A.G. (Comptroller and Auditor General) they came up with the answer. Then, when asked to implement those savings, they came out with all manners of reasons why those savings could not be implemented. You have to question the commitment and you also have to question whether the public and the politicians really understand the need for those savings. The fact is we are a wealthy Island. There is no doubt about it. We do not have any borrowings. We do have a strategic reserve but will we still be a wealthy Island in 3 or 5 years’ time and that is the question that this House has to address. Secondly, the Council of Ministers say that they will grow the economy by improving productivity and driving new business. This will only be achieved if we do see an improvement in the global economy and, in particular, in our economic neighbours. Given the depths of the problems in the U.K., given the depths of problems in Europe, any recovery is likely to be fairly weak and certainly we are unlikely to see the re-emergence of the boom times. I work in the finance industry and certainly I am not seeing the recovery. There is some recovery there but I am not seeing the strong recovery that we had in the past. I think 30 years ago, when I started off in the finance industry, Jersey had probably 8 or 9 or10 real competitive advantages as a offshore finance centre and these have been eroded over the years to the point where our competitive advantage is actually quite weak. We are seeing banks close. We are seeing trust companies close. We are seeing trust companies moving elsewhere citing over-regulation. Certainly, if the tax system changes, we may well see some more. The Council of Ministers state that we will have need to consider tax increases. I do not think we need to consider tax increases, I think tax increases are inevitable but the size of the tax increases tomorrow are very much dependent on the actions of this States Assembly today. We do not want to get into the Greek situation where they are asking the previous politicians why they took no action. In terms of the economic cycle we are the previous politicians and we need to take action. It is going to be tough to take action and it is not going to be popular and we need to have everyone working with us. We need to make sure that people do not get paranoid, that they are being picked out or that we are picking on the lower paid or we are picking on the medium paid or we are picking on the higher paid. People have to justify their jobs and they have to justify their earnings because taxpayers’ money is being used to pay their wages. This is not an attack on the unions, it is not an attack on the civil servants, it is just management – prudent financial management – that we have to undertake. The Council of Ministers gave a list of benefits and so on that may need to be cut if this proposition goes through and said that this was not shroud-waving. I think there was an element of shroud-waving because it will be interesting to see how the same degree of cut can be achieved over 3 years, without any of the cuts mentioned, whereas they cannot be achieved without shroud-waving over 2 years. The trouble with Jersey is it has been too successful. In the good years we perhaps got a little bit too fat. We took on services and paid people salaries that were perhaps a little bit too high but at least, unlike the U.K. during the good years, we had the financial sense to put some money aside. May I just say I do find it slightly laughable, the amount of consultants we get from the U.K. to tell us how to run our Island when they seem totally incapable of running their own. We put this forward as a P.A.C., as a committee. It is financial management. It is not particularly political; we have a relatively broad church on P.A.C. It is not saying where the cuts should come from, that is not the job of P.A.C. All it is saying is before we get the tax increases, which are inevitable, we must make sure that our expenditure is at the right level. We must not be in the position where in 4 or 5 years’ time, when the economy is in a hell of a mess, that we turn back and say: “What on earth were the States Assembly doing in 2010?” I put forward the proposition. Without the support of the Council of Ministers it will be interesting to see how long the debate is but I believe, and the P.A.C. believes, that it is the right thing to do at this time and hopefully we can all work together on this because, believe me, the financial problems that we have are shared among all 53 of us. It is not us and them, it is all of us. I put forward the proposition.