St Helena : One More Million to Pay
Submitted by Saint Helena Herald (Juanita Brock) 13.07.2008 (Article Archived on 27.07.2008)
H. E. the Governor Mr Andrew Gurr writes that he feels that it is his duty as Governor to talk to Saints about fuel.
One More Million to Pay
HE Governor Andrew Gurr
THE WORLD ECONOMIC SITUATION
I feel that it is my duty as Governor to talk to you about fuel. As you know from my reports on Executive Council meetings I am keen that you are properly informed as to what is going on in the government of this island, and I want to be clear concerning the situation that has developed in the world economy and the impact that has on St.Helena.
This week’s headlines in the UK press make grim reading:
Ø “Economy is running on nearly empty”,
Ø “Disastrous reports pouring in from every sector”,
Ø “Recession fears send London in to bear market”.
Just this morning we hear of a survey that tells us that house prices fell by 2% in the last month. All this is very negative news for anyone that has any connection with the UK economy.
There seems no doubt that the UK is entering a period of recession, and that means that most people there will find themselves poorer over the next few years. The problem is not confined to the UK. Hard times are forecast for much of the western world.
The major reason for this downturn is the sharp rise in the price of oil. Several factors are blamed for that increase – demand from China and India, a lack of supply, or even financial speculation by those who influence such matters. This problem is obviously not of our making, so what has it got to do with us?
As an isolated island we are particularly exposed to the impact of a rise in fuel costs. You may remember that only last week I spoke to you of the electricity price rises and also forecast hard times ahead with petrol and diesel as well as the cost of sailing on the RMS. Following work done on this problem this week, we now have a clearer idea of what all this will mean for this island.
I have to be careful not to be alarmist, but I do want to let you know the truth and bring you up to date on what action we propose to take.
As far as the electricity tariffs are concerned, significant rises are coming. These have already been discussed at length by Legislative Councillors and EXCO. The proposals are designed so that the high users will pay proportionately more per unit. In addition to that, we now have to deal with the inevitable rise in the cost of diesel and petrol. As you may know, the price of these is based on what the oil actually costs per shipment.
The most recent shipment in to Rupert’s was far more costly than any previous ones, and so the price of fuel for our vehicles will have to rise sharply. To add a further burden, the bunker surcharge on the RMS will have to increase and that will add more to the cost of travelling to and from the island, as well as increasing the cost of freight.
I cannot provide precise figures for you, nor should you rush to the filling station, as nothing has yet been finally confirmed to me as the advice of EXCO, but the additional money that we must pay for energy in the remaining 9 months of this financial year is likely to be in the region of £1 million. That is calculated taking in to account electricity (which remains heavily subsidised), diesel, petrol, and anticipated rises in the cost of goods, services and other transport related items. The impact on individuals will of course vary depending on your use of electricity and oil in whatever form.
So who should carry this burden? What about government absorbing the increase? Are there not savings in prospect that will help pay for the rise? Can we get away with having no rise at all? I know that it has been said around town that it is about time “Councillors stood up for the people and oppose any increase”.
Such a comment is unworthy of our level of understanding of such issues. In our democracy, politicians are elected to represent the people. However that does not mean that they can always give us what we want. Unfortunately government is more complicated than that, and is generally about the allocation of scarce resources. As the leaders of our society Councillors have the responsibility to advise on the delicate balance that must be achieved in government expenditure. For example, it is not easy to decide on whether say an occupational therapist for our senior citizens should have precedence over bolstering our under-manned police force, or whether we should have additional nursing staff rather than spend more on developing the private sector. Yet this kind of choice is common for our Elected Members.
Your government is quite unable to absorb this kind of rise. We are working to a balanced budget. That means our expected income during this present year (from last April until next March), will be virtually the same as our expenditure. An increase of £1 million in the cash going out creates the need to find that sum either in savings or in increased income. From looking at our commitments at present, I know that we would find it hard to locate savings of £10,000, never mind £1 million. Having no rise in income would drive us in to a heavy deficit and that would be decidedly bad management and irresponsible government.
So, what do we do about this – indeed is there anything we can do?
Possibly our first instinct is to ask DFID for additional funds to cover the cost of this substantial rise. I am sure you will have realised by now that the way that DFID provides subsidy has changed over the past few years. Their policy is to support local initiatives and to make sure that where they invest, that money actually helps towards sustainability. What that means is that a simple cash handout is not an option, and there are very sound reasons for that. Such a grant would merely mask the problem, which would presumably still be with us next year. It would be dealing with a symptom rather than handling the underlying cause. In any case we signed up to the DAPM agreement in 2007, and that allows us to keep any savings but also
means that we have to fund any increases in cost.
Nevertheless, we have been making exceptional progress along the pathway agreed with DFID and to be overtaken by this sudden urgent surge in the requirement for funds is beyond our meagre resources and reserves. I am confident that DFID will be prepared to consider requests that demonstrate improvements that we can make in our use of energy that have lasting consequences. So we must approach DFID with such plans, but that is not an immediate solution. To deal with today’s problem we must act with speed and resolution now.
A fundamental principle is that we are making sure that the vulnerable in our society suffer least. I am not promising that they won’t suffer at all, but we are trying to ensure that it is those who can afford to, who pay most of the increase. However there is also a balance to be struck here, because we do not want to create disincentives for business, nor do we want to see rises in the transport cost of goods merely passed on to he consumer. We have to be as fair and as thorough in our approach as possible.
The incoming increase in Income Related Benefit will obviously improve the situation of those receiving it. In addition, Councillors have asked, and I am happy to agree, that we take steps to ensure that families where there is only one wage earner are helped.
Because the price of fuel is rising and because government takes a percentage of that price at tax, it means that if that percentage stays the same, the government would receive more tax. We are recommending to Councillors that the percentage should in fact be reduced, so that there will be no rise in the actual amount of tax income. However, the impact of this goes only a relatively small way to reducing the problem. It has been said to me that forty years ago this kind of crisis in the world outside wouldn’t have been a problem for us. The world could have suffered a huge increase in the cost of energy and we would have been quite happily burning our own wood, walking from place to place, eating our own fish, meat, fruit and vegetables, and travelling abroad less. There would have been no television, no washing machines, and possibly less consumption of alcohol.
I am not advocating a return to those days, but it only right to emphasise that it is those features of modern life that are most at risk from this situation. I also feel that we must make a concerted effort to grow a far higher percentage of our own food as this will attract far less transport cost. We will renew efforts to stimulate this internal resource.
We will also press on with all speed to get our new wind turbines operational while looking at how we can obtain more as soon as possible. Obviously the potential savings figures that I gave you when I “called in” the wind turbine planning application are much higher now as a result of the price of fuel.
As individuals we are actually quite low users of energy. Although it may seem cold at present we do not spend much on heating, few of us have air conditioning, our cars travel short distances and our carbon footprint is very feint. But we can benefit from becoming even more efficient in this area, and we will be looking at the options that are open to us as soon as possible.
Let me summarise the actions that we are proposing:
1. An increase in the Income Related Benefit, to be paid from September,
2. Introduction of temporary support for single wage-earning families, as soon as possible but also hopefully September,
3. A reduction in the percentage tax on the increased fuel cost, to coincide with any such increase,
4. Fresh resolve to introduce more home produced food. I had already arranged for a meeting with growers on 16th July.
5. Possible speeding and expansion of wind turbine programme. Here we hit the problem of lack of resource, but I will look in to how we can progress this.
6. A review of alternative power options, including solar and wave, along with a study of potential cost efficient energy saving measures. I will set up a Working Group by the end of next week.
7. A move towards the automation of the power station sooner than anticipated. Discussions with DFID will take place.
8. Possible acceleration of the bulk fuel arrangements that are part of the airport project. This has the potential to reduce the cost of oil. Initial discussions with DFID will take place before the decision on the airport is known.
DFID will be interested in these kinds of initiatives, and working on them now is bound to improve the situation. However, the next few months will be hard for most of us, and it is at such times that our strength of character and the quality of our approach to problems is most apparent. We are going to work hard to make progress through this dark economic tunnel. So does this tunnel have any light at the end? Will the cost of energy reduce?
No economist can answer that question. But I can assure you that if and when the cost of fuel does reduce, then the savings will be passed on in a similar manner to the way in which the increases are being dealt with.
However we may feel that this is hitting us hard, we are actually more favourably placed to deal with it than many parts of the world, and we remain on course for the construction of an airport here in the near future. Not only will that mean that we have the opportunity to import fuel in greater bulk and at some reduced cost, it will inevitably lead to an improvement in our economy. I am not just referring to the easier supply of tourists after it is open, I am certain that as soon as the contract is signed a confidence in our future prosperity that is lacking at present, will emerge. Then we can begin to deal with the challenge of wealth creation and the level of wages.
We have a Legislative Council meeting tomorrow, when I am sure your Councillors will be expressing their views, and we have an EXCO next Tuesday, when these issues will be discussed.
I hope that I will be able to be positive in my report to you of that meeting.
AMG
10th July 2008
|
