By Ben Shenton
OVER recent years the debt levels of most countries have increased substantially. Politicians are often inclined to borrow because it enables them to deliver immediate improvements in public services, infrastructure, and welfare without raising taxes – moves that tend to be popular with voters. With short electoral cycles politicians chase applause today and leave the bill for tomorrow’s taxpayers.
The debts of most nations are eyewatering. The Western economies have been run for many decades like a giant Ponzi scheme where we just take on more debt to benefit from the living standards and wealth this creates.
The debt levels of the USA, France, and the UK, for example, are unsustainably high. The USA’s debt stands at approximately $37 trillion, which is about 122% of its GDP. France’s debt is around €3.3 trillion, equating to 114% of its GDP. The UK’s debt is approximately £2.7 trillion, which is about 101% of its GDP.
The figures illustrate how these countries have borrowed extensively to maintain a lifestyle that far exceeds the levels justified by their economic output. This borrowing has allowed for higher living standards and wealth creation in the short term, but it poses significant risks for future generations who will have to bear the burden of repaying these debts. Eventually a future government might be forced to cut public services, raise taxes, sell heritage assets, or borrow even more money to manage the debt.
As stated above, the UK debt is £2.7 trillion. Low numbers are easy to comprehend. We all understand if our favourite chocolate bar goes up in price from 85p to 95p, or if our property falls in value by £20,000. We can get our heads around this. However, when we get to billions and trillions, they just become words which are difficult to visualise. One way to grasp the enormity of these numbers is to translate them into time:
- l100,000 seconds ago is approximately 1.16 days.
- lOne million seconds ago is about 11.57 days.
- lTen million seconds ago is roughly 115.74 days.
- lOne billion seconds ago is around 31.7 years.
- lThree billion seconds ago is about 95.1 years.
- lOne trillion seconds ago is approximately 31,709.8 years.
For most of my life Jersey was an outlier with no budget deficits, no debt – an economy living within its means. In my opinion this changed with the introduction of ministerial government, a disastrous move where we gave more power to the civil service and reduced politicians to the role of front of house maitre d’ – there just to give a false impression of democracy.
The cumulative deficit – the amount Jersey has spent over the past six years in excess of the income generated is around half a billion pounds. Incidentally we don’t know what the total government expenditure is as it is not reported. They only report net revenue expenditure so a department can make a “saving” by simply putting up charges.
If their costs are constant and their income is increased their net cost is lower – hence a saving. Many of the “savings” announced over the years have simply been because of charging the public more. I’ve always wondered why members of the Chamber of Commerce and other bodies rarely complain – is it because they have either gone native or because they simply don’t understand?
I am currently working on a comprehensive report to be published in a couple of months. This detailed analysis was triggered by the discovery that the States are deliberately using accountancy tricks to mask the true debt picture, presumably in the aim of maintaining public-sector spending and employment at unsustainable levels. In collating the information, I have asked a Freedom of Information question regarding the questionable purchase of the new government building for £91,000,000 using our Social Security Fund (the one that pays our pensions) – a trade that looks both dubious and a lousy deal for us pensioners. I await the reply with interest.
By my calculations debt levels could reach £3 billion within the next decade and thanks to “de-consolidation”, using the Social Security Fund, and other questionable practices, this debt could be hidden until it’s too late. If interest rates stabilise at 5% in ten years’ time this could result in an annual interest bill of £150,000,000 which our children will have to pay. Just to cover the interest will cost the taxpayer just under £5 per second – that’s faster than most people can say “fiscal responsibility”. To put this into context the total amount raised by GST in 2024 was just £126,560,000 so you are looking at a GST rate of well over 10% if the loan interest is to be covered by increasing GST (which includes food).
It almost seems like the majority of Islanders, the politicians, and the public sector, dislike their children. I love my children, and I don’t want to burden them with massive debt because we have no ambition to run the economy in a prudent manner. We don’t have money to spend on vanity products such as Broad Street (£3 million with no economic benefit or payback) and Fort Regent (is this a joke?). Furthermore, the current size of the public sector is unsustainable and needs to be both leaner and more productive (AI can help if embraced).
When taxes were raised under “20 means 20” (2006) we were promised that public-sector expenditure would be controlled – this proved to be a blatant lie. Instead, we have seen an 80% increase in the public-sector wage bill over the last five years. I have little confidence in the abilities of those in power and their comprehension of the realities of the situation. It’s the lack of openness and transparency that fills me with real concern – the public are often treated with absolute contempt – even when their concerns are justified.
For example: The public are rightly moaning about the high cost of living, and the government are neatly blaming the private sector. Yet Ports of Jersey have increased freight charges by 61.15% over the past five years (thank you Economic Development Minister – is your title a misnomer? ) and the politicians have agreed that over the next four years government-owned Ports of Jersey can increase them by Jersey inflation plus an additional 7.4%.
Given that the majority of their independent directors on the board live in the UK I cannot be sure they understand the inflationary implications of their actions. None of the directors of States-owned entities should be UK-based – they need to have skin in the game and fully understand the Jersey economy.
Incidentally, Andium, Ports of Jersey, and the Jersey Development Company all compete with the private sector in the provision of some services, but unlike their private-sector competition all three are exempt from tax under dubious rulings that I am investigating. Weirdly the private sector competition just quietly goes broke rather than complain, perhaps out of politeness, or maybe they’re just too exhausted from reading worthless government reports.
The ignorant will be dreaming of big ideas like tunnels, bridges, cannabis farms, wind farms, and time-machines that will bring back 1980s tourism. The selfish and the left will be saying we want everything we currently have plus more, and we should just borrow to achieve it, and a minority will say “let’s stop the waste, get our house in order, live within our means, don’t pass a massive debt on to our children, and keep taxes low compared to other jurisdictions”. Which camp are you in? The dreamers, the spenders, or the realists who still believe that fiscal prudence isn’t just a quaint idea from the past?
Ben Shenton is a senior investment director. He is a former politician, Senator, who held positions such as minister, chair of Public Accounts Committee, and chair of Scrutiny. He also assists a number of local charities on an honorary basis.
