Budget amendment would prevent £40m. spending increase while shaking up public sector pay and pensions

Friday 25 October 2024

Major downward pressure would be applied to States spending under a Budget amendment which looks to halt a proposed £40m. increase.

Former Treasury lead Deputy Mark Helyer will front the bid which would hold committees’ budgets at this year’s levels, axe jobs that have been vacant for months without justification, ensure new staff are employed on a salary which ends yearly incremental rises and quickly brings in a new pension scheme.

“Guernsey has now entered into a deficit position which was widely predicted for the past four Budgets but which has been accelerated by a sudden and unforeseen drop in income taxation from within the finance sector,” an explanatory note to the amendment says.

“There is no prospect, absent some unforeseen and very unlikely economic upturn, of reversing this deficit position, Guernsey has effectively reached a permanent tipping point where rising government costs can no longer be covered by our revenue income.”

It says that while there is a widely understood need to fund frontline public services, the requirement for additional taxation remains highly contentious and potentially damaging to Guernsey’s long term economic future.

“The public sector will have a new leader from the beginning of 2025 with a very important role in ensuring that the civil service is delivering value for money in essential services and ensuring that there is no further expansion of public sector activities (and therefore expense) given that resources are finite (and now shrinking) and there is a strong public expectation that government will live within its means,” it states.

“This amendment seeks to address several issues. The first is the Budget itself. In any organisation, an emergency funding pressure such as those being experienced needs to be dealt with by a number of responses, not merely an increase in prices (or taxation).

“This must include committees managing their service provision within the means available to support them and making decisions about what is essential to the public and what is merely ‘nice to have’.”

Policy and Resources has no central savings target in its 2026 Budget with a key proposal of increasing income tax from 20% to 22%.

It already faces one major amendment which looks to bring in a GST package with mitigating measures instead.

In contrast, Deputy Helyar’s amendment, seconded by Deputy David Mahoney, challenges members to in effect look at major cost-cutting.

“Irrespective whether income taxes are raised, or a revised tax package approved which will be implemented in years to come, government must demonstrate that it can act responsibly and frugally if the public is to accept, however reluctantly, that more revenue is going to be required.”

The amendment proposes keeping committee revenue spending at 2024 levels of £610.3m, preventing the £39.7m. (6%) increase proposed by P&R.

It makes no provision for salary rises.

“If committees approve salary rises which in aggregate exceed the proposed reduction of £8m in employer pension contributions and wish to stay within budget limits they will have to find savings elsewhere in their mandates. This is the unfortunate but real consequence of the Assembly failing to agree a sustainable tax package.”

It also proposes a requirement that new appointments are made at a specified salary.

“Currently employees are appointed to a scale and these scales include increments which we have been advised are a contractual entitlement and which rise every year. This means that irrespective of any salary negotiations, the salary bill of the States of Guernsey rises by more than £450k per annum. This is out of step with employment practices in the private sector where base salary rises result from improvements in productivity, qualifications, or the assumption of greater responsibilities.”

All roles that have been vacant for six months would be deleted.

“These can be reapplied for but they must meet a test of being essential to service delivery of frontline services.”

The amendment, if successful, would also direct P&R to close the defined benefit pension scheme for new joiners with effect from January 2026 and replace it with a defined contribution scheme. The aggregate cost of employer contribution be set at no higher a rate than the defined benefit scheme upon termination.

“This work is already advanced with a policy letter due in early 2025 for which this proposition gives clear guidance – in other words the costs to the public should not rise further under any circumstances.”