Do you have a spare £1,200.00 in your back pocket?

In this series on Guernsey, I am looking at different sets of statistics to understand what makes Guernsey tick and what the opportunities and threats are faced by the island.  In this article, I am focusing on the economy.

As we approach this year’s election, what are the key things you will be thinking about when you decide who to vote for?  Some people will be most concerned about things that affect them or their local parishes.  Others will be focused on island wide issues like the future of education, whether we should extend the runway or how we can protect the environment. I want to encourage everyone to think very carefully about the economy because the revenue that Guernsey receives, in tax receipts, pays for public spending on all of our key services like education, social care and pensions. 
The more money the States receives, the more money the States has to spend.  Equally, if tax receipts go down the States has less money to spend. On the face of it, the economy has performed well.  According to official statistics*, GDP increased by 1.7% to £3,272m in 2018.

However, public spending was higher than revenue resulting in a deficit of £77m*.  That is equivalent to more than £1,200** per islander.  Do you have a spare £1,200 in your back pocket?

Clearly, this is unsustainable so you are going to hear a lot about the economy and, in particular, about income and expenditure. Put simply, the Government cannot continue to spend money it does not have. 

Let’s look at the economy in a bit more detail. As these articles are limited to around a thousand words, we will focus on a few key economic indicators that might interest you. 

Guernsey has grown into a successful economy driven, predominantly, by its Finance and Professional Services sectors.  They have
created many thousands of direct / indirect jobs that have helped the island to thrive.    Using official statistics, we can look at what
has driven that success by looking at income and expenditure in more detail.

Income - The value of goods and services by sector.  

Based on 2018 figures*, GDP increased by 1.7% to £3,272m.  The Finance sector generated the bulk of GVA at 40% (£1,318m) with Professional Services next on 11% (£351m).  Administration services delivered a further £124m (4%).  All three sectors saw an increase in GVA compared to the previous year.  The Wholesale / Retail sector generated £259m (8%) of GVA but this was lower than the previous year.   The truth is that the Wholesale / Retail sector has been in decline for a while due, in part, to intense on-line competition. One obvious sign of this is the number of vacant shops in town.  Hostelry, which should be a success story, given the islands natural beauty and climate makes up only 2% of GVA.  It actually declined in 2018 despite the publicity generated from the release of The Guernsey Literary and Potato Peel Pie Society movie. 
The construction sector, often used as an economic barometer, was flat at 4% of GDA.  To put these number into context, the Agriculture,
Horticulture, Fishing and Quarrying sector GVA was 0.5% (£14m).  

Employment

We can also measure the importance of each sector by the number of people it employs on the island.  The official number of people in
work in 2019 was 32,247*.

Based on 2019 figures*, the Finance sector employed 6,307 (20%), making it the largest employer, with Professional Services on 2,827 (9%) and Administration Services on 1,707 (5%). Wholesale and Retail was the second largest employer at 3,898 (12%).  We already know that the
Wholesale and Retail sector is under enormous pressure so we should be concerned because so many people’s jobs depend it.  Construction employed 2,785 (9%) and Hostelry 1,909 (6%).  Another interesting fact in the statistics is that the public sector appears to employ circa 5,663***
people (18%) and employment in that sector grew much faster than in the private sector (2.3% Vs 0.6%) between 2016 and 2019.

Expenditure – how our money is spent. 

Whilst Guernsey is a small island, it is also a nation state which means it has many of the complexities of a far larger economy.  This means that whilst it has the population / needs of an average sized U.K. town (think Scarborough / Maidenhead), it also has many of the responsibilities of any other country (think U.K. / France).

Based on 2018 figures*, the biggest areas of Public Expenditure were Health and Community Services, Old Age Pensions and Social Welfare Benefits.  Health and Community Services cost £177m (29%), Old Age Pensions cost £123m (20%) and Social Welfare Benefits came in at £87m (14%).  Together, these three areas made up over 63%* of public expenditure.  There is a longer list of categories but these three are important because they are going to increase.  One of the key reasons for this is Guernsey’s ageing population.  The simple truth is that public expenditure will need to increase as the baby boomer generation gets older and needs to access these important funds and services.  We need to come up with solutions

Finding the right balance.

The answer should not be to simply raise taxes every time there is a hole in the finances because that will damage Guernsey’s hard-won reputation for being a ‘stable’ and ‘low tax regime’.  Instead, the government should manage expenditure and increase revenues by supporting
business and growing / diversifying the economy.  If we can retain existing business and encourage more people to expand / start-up companies in Guernsey, more people will be employed which means more tax for the government and more consumer spending in our local shops and restaurants.  The same is true of tourism.  If more people visit Guernsey, it will help to drive the economy which will generate more jobs.  Where we can’t fill roles with local talent, we should be able to fill them with talent from elsewhere.  If we don’t, we will starve our businesses of
workers, damaging both Guernsey’s competitiveness and productivity.  

Use your vote wisely  

*Source: States of Guernsey Facts and Figures 2019

**Source: States of Guernsey Facts and Figures 2019.  2018 Deficit divided by Population (March 2018)

***Source: States of Guernsey Facts and Figures 2019 and feedback from the Data and Analytics Team.