DO you ever sit listening to a speech and find yourself wanting to interrupt and shout that the speaker has got it all wrong? Yes, so do I.

I wasn’t at the recent speech given to the Institute of Directors by Treasury Minister Philip Ozouf, and even if I had been, I probably wouldn’t have heckled him in front of such an august audience. But having kindly been sent a copy of his speech, I can now safely pull it to pieces without looking foolish in front of the directors or having the Treasury Minister fight back and tell me that it’s me who’s got it all wrong.

I don’t think the latter is the case, however, because I very much agree with nearly everything that the Treasury Minister said. There is really just one point where I humbly disagree, but it’s quite an important point.

The minister started off by explaining how fortunate we are to be in such a strong financial position. We just missed balancing the States books last year despite having paid £103m in cash for the new energy from waste plant, and ‘there are not many places that can manage such a significant piece of capital expenditure without incurring a penny of debt’.

That could have raised a small heckle at the IOD function. Perhaps it would have been better to use the £103m on something else, and borrowed to finance the EfW plant, which is just the kind of income-generating project which could attract private funding.

Anyhow, the Minister went on to explain that we continue to have very strong finances and large reserves and we’re able to put together a significant stimulus package to soften the impact of recession without having to borrow. I agree. That truly is remarkable. Many countries have been prepared to get into heavy debt because they know how important it is to stimulate their economies at this time. Jersey is able to do it without borrowing a single penny. If that doesn’t secure the Island’s economic future for several years to come, nothing will.

Then the Minister turned to States spending, which he knew was of particular interest to the directors, as it is to many Islanders, including JEP columnists.

After excluding the one-off costs of the historical child abuse inquiry and transitional relief for income support, States expenditure rose by 5.5% last year, or a total of £27m.

Some of the directors will have nearly fallen off their chairs at the revelation that States spending continues to escalate, despite the much-hyped efficiency programme and putting the screws on budgets.

But if you look at the accounts you see that the increase in income tax receipts alone was nearly three times the increase in spending. The Goods and Services Tax also brought in £32m in its first eight months, comfortably exceeding the growth in spending. In other words, we could handsomely afford the increase.

The Minister then went on to point out that almost all of the additional money was spent on the ‘frontline’ services of health, social security and education.

I’m a little worried about this argument, because although the money should obviously go to frontline services, not everything that Health, Social Security or Education do is ‘frontline’.

Perhaps some of the money has gone to areas which the electorate would not consider crucial, while a genuine frontline service is still struggling. It’s all a matter of priorities and perhaps we should be more specific when talking about how the money is spent rather than lumping it together under three large ministries.

This need to prioritise more carefully will become even more important because of the considerable cost pressures facing the Island in the next few years. According to the Treasury Minister this includes more spending on child care, a depositor compensation scheme (are there really that many financial institutions likely to go bust in the Island?), protection for staff made redundant and the long-overdue maintenance and repair of the Island’s infrastructure. That would all come to a double digit increase in expenditure.

It’s obvious that we can no longer rely on income going up substantially, so we have to make efficiency savings in public services, the Minister said, and that is where I begin to part company with him.

As he rightly points out, the easy fruit has already been plucked and the next wave of savings will be much more difficult to deliver. That’s obviously true, but he believes that savings and efficiencies are always possible with ‘hard work, drive and determination’. It’s a nice idea, but it’s wrong. Of course there are parts of the huge States organisation where efficiencies can be made and should be made, but just as inevitably, there comes a time when no more savings can be achieved without damaging services. Otherwise we could just carry on making savings until running the whole States administration didn’t cost anything.

Which brings us to the thorny issue of taxation, where I definitely disagree with the minister. He has already publicly stated that he will not raise taxes to help finance more spending in the next couple of years. There’s no problem there. Hopefully the crunch won’t come next year, or even the following year, but I wouldn’t like to put any bets on what happens after that.

Where I think there’s a problem is in ignoring the inevitability of tax increases at some stage. I’m sure it’s not done for political reasons for even if it was, it doesn’t work. To appear to be forced to increase taxes after you have promised not to just makes it look as though your efficiency drive in the States has failed. But the constant emphasis on savings and efficiency masks the reality of providing sophisticated public services in a small community where there is little scope for economies of scale.

Look, for example, at some of the recent examples where we’ve heard of problems providing highly specialised psychiatric care for just one or two very rare cases. Or the single family which required very complicated (and very expensive) social care. There aren’t many efficiency savings to be had there.

My confident prediction that taxes will have to go up is simply based on looking at the Big Picture.

Here we have a small island, with all the costs – or nearly all of the costs – of a nation state, where the population has become used to a very high level of public services. Islanders have been shielded from the realities of the true cost of providing those services by the extraordinary success of the finance industry, which has formerly picked up most of the tab. So we have been able to maintain very low taxation.

Even though taxes have edged up, we are still much more lightly taxed than just about anywhere else. So it’s inevitable that if we want to carry on receiving good quality health care, education, protection for low income earners and all the rest, we are going to have to pay more tax.

Hopefully not much more and hopefully not for some time, but trying to claim that we can avoid it by employing a few more bean counters to look at efficiency savings is self-defeating.
Peter Body is editor of Business Brief magazine