The theme of this year’s Annual Institute of Director Debate
was “The Ticking Time Bomb: What does growth mean for Guernsey?” This is a
suitable topic given that Guernsey is top in terms of world island
vulnerability scales for its demographic model. The members of the panel were
Mel Carvill, Wendy Norman, Deputy Jonathan Le Tocq, Geoff Miller and Jane St
Pier and the debate was superbly moderated by Sarah Montague. Before the debate
began there were excellent speeches from James Sproule, the IoD Economist, Tim
Harford, writer of “The Undercover Economist” and Chris Brock who delivered
some shocking statistics that really made you pause to think.
A statistic that clearly demonstrated the demographic time
bomb that Guernsey faces is that currently for every 100 people working there
are 53 people who are not working but this is due to rise to 80! The question
is how is Guernsey going to adapt in light of this demographic change? Tim
Harford demonstrated how key adapting to circumstances is through his telling of
John Maynard Keynes who accepted his mistake of not seeing the Wall Street
Crash of 1929 coming and made back his fortune compared to Eric Fischer whose
stubbornness betrayed him and he ended up losing the fortune he had made. In
their closing remarks both Deputy Jonathan Le Tocq and Geoff Miller emphasised
the need to take ownership of the problem at hand but to also recognise that
there is not one quick fix solution since it is a multi-faceted problem. There
is a need for not just a long term economic vision but also a long term social
vision!
Options outlined to deal with the expected increase in the dependency ratio- those not of working age compared to those of working age- were to increase contributions from those working, to reduce the size of the state pension or to increase the size of the working population through either increasing immigration or increasing the pension age. On top of this, improving efficiency of the civil servants and then benefitting from the money currently ‘wasted’ would benefit the island. Although, this wasn’t touched upon as it is a massive issue in itself. There were both concerns and support raised about these options:
Reducing the size of the state pension which is currently enough to live on provided you already have accommodation would result in people needing to put money aside themselves for a secondary pension in order to retire comfortably according to Mel Carvill. An auto enrolment scheme was proposed since behavioural economics expects that few will opt out as it requires effort on the individual’s behalf. In my opinion, this is a very attractive proposition but there is the concern of those who are working and struggling to make ends meet whom won’t be in a position to save for this secondary pension.
An increase in the pension age is inevitable. To what age though and what will be done about those workers with skills in manual labour who can no longer work in their current occupation? It would be fair to assume that people aren’t willing to work for longer but Pat Merriman pleaded for older people to be allowed to continue working. Despite being nearly 90 she still finds useful work to do!
The majority in the room raised their hands in agreement that Guernsey needs to increase its population. This could be achieved through immigration. When asked what type of people Guernsey should be looking to attract Mel Carvill responded “young high earners”. However, unlike in the past, we now need to “roll out the carpet” to attract people to Guernsey. For example, a company director revealed that for their company they would pay less in taxes if they were based in the UK!
The students’ table felt it unfair for our generation to be taxed heavily in the future to fund the current generation’s pensions who are unwilling to save for them themselves. Many students from Guernsey go to University in the UK and the desire for these young potentially high earners to return will be hindered strongly if those working have to fund the majority of the pensions of the generation that preceded them. Especially given that it was said during the evening that Guernsey is currently in an ideal position demographically and the States virtually have a license to print more money so therefore we should get more money from those earning now. Suggestions for how this would be achieved included revisiting GST, increasing the tax higher earners pay, and introducing inheritance tax.
The evening was intriguing and the fascinating debate really
opened up my eyes to the issues faced in Guernsey which I wasn’t fully aware of
since I’d been too busy looking at the issues other places faced neglecting to
realise the magnitude of the decisions that need to be made closer to home.
