The current Treasury Minister is obviously very keen not to go down in history as the ‘chancellor’ who had to put up taxes. He’s doing absolutely everything in his power to avoid this unhappy event, and we must all be grateful for that.

However, let’s hope he also does not go down in history as the ‘chancellor’ who couldn’t face facts. That’s because on the face of it, higher taxation seems inevitable – perhaps not next year, or the year after (we’ve got savings to cover that), but certainly within the term of this current Council of Ministers. It will be as important to act decisively then as it is to try to put off the inevitable now.

This will seem like heresy to those Islanders who point to the fact that Jersey’s prosperity is largely due to its low taxes. There’s also a lot of hogwash peddled about the impact taxation has on economic and social success. Low taxes are said to promote enterprise and innovation, but that doesn’t stop some of the most highly taxed jurisdictions in the world from being both wealthy, innovative and even happy.

In any case we should try to maintain a sense of proportion about this. I know the States can spend two days arguing about duty increases that will bring in the measly sum of just over £4m, when a structural deficit of £50m is looming. But the kind of tax increases that could be required to get us over our medium-term problems, would most definitely not shoot us to the top of the list of most-taxed countries on Earth. We would remain one of the lowest taxed jurisdictions anywhere.

But of course, getting any kind of tax increases through the States will be a mammoth task. We only have to cast our minds back to the riots in the Royal Square against GST to appreciate the hatred there is for any tax increases (perhaps riots is a slight exaggeration, but then I am a journalist).

Now there are a limited number of ways in which the Island can avoid the need for more taxes. It’s possible, although not very likely, that the economy could suddenly take off again and that revenue grows to wipe out the deficit.

Another way, which is probably even more unlikely, is that the good people of Jersey suddenly decide that they no longer require a decent hospital, don’t want so many teachers, don’t want to grow the economy, don’t want any bobbies on the beat, don’t want higher pensions than they have in the UK and don’t want to receive high levels of welfare support. Then a third way would be to borrow to get us over the immediate financial problem, but that only tends to put off the inevitable The fourth way is to chase rainbows.

Now the Treasury Minister has announced a Comprehensive Spending Review to see how savings and efficiencies can be achieved throughout the public sector. This particular rainbow is very appealing, of course, because there is a belief that there are huge savings that can be made in States spending without there being a significant impact on the quality of services provided.

What Treasury Minister would not be tempted by the prospects of providing the same high quality services at less money, or at least, not much more money?

That would be wonderful, if only it were true. It would be presumptuous to suggest that the highly-paid accountants needed for this review are wasting their time, but the signs for success don’t look good. We may not have had a Comprehensive Spending Review as such, but there could not have been a closer examination of States spending than that suffered by every department in the past few years. No doubt a few items have been missed, but it’s inconceivable that this amounts to millions of pounds.

When pushed to make further savings, the departments were forced to come up with cuts that not only damaged services but had the public up in arms. So there is no evidence of massive waste in the States and every review and benchmarking exercise undertaken in recent years has shown that.

But what happens if the CSR comes up with areas where more spending, not less, is required? Is the Treasury Minister going to ignore that because his aim for the review is only to save money, not to determine the right level of spending?

I mention this because there are already doubts about whether Jersey is spending enough on the most important and therefore most expensive area – the health service.

While Jersey’s Treasury Minister was putting his Budget to the States, his opposite number in Guernsey was doing the same. Guernsey’s Treasury Minister had more success in getting his duty increases through, but he had to fend off criticism that the health department was suffering because of strict spending limits.

To justify his position, the Treasury Minister produced figures comparing the amount of money spent on health services per head of population in Guernsey, Jersey, the Isle of Man and the UK. This showed that Guernsey spent the most at £1,887 per capita, followed closely by the UK at £1,808 (which includes sums for depreciation which are not included in the island figures). Jersey came in at £1,737 per capita and the Isle of Man figure was just £1,210. That means that Jersey should spend an additional £13m or so to come up to the same level of spending as Guernsey.

There is no direct link between what is spent and the efficiency or quality of the services provided, so it might just be that Jersey’s health service is more efficient.

On the other hand it could mean that we are falling behind Guernsey and the UK. That would mean that we are also not coming up to standards in Germany and France, which generally have a better record of spending on health than the UK.

Comparisons are so difficult and all we can say is that there is a possibility that Jersey is not spending as much on health as other similar jurisdictions. The Comprehensive Spending Review should be able to come up with a more accurate picture which could also be exactly what the Treasury Minister does not want to hear.

Now that would really bring the prospect of higher taxes into sharper focus.

By Peter Body, Editor, Business Brief magazine