Mortgage relief to be phased out by 2021

HOMEOWNERS will be hit hard by this year’s Budget, after Treasury announced plans to scrap mortgage interest relief.

Treasury Minister Gavin St Pier confirmed mortgage relief would be phased out over the next seven years in his budget. (Picture by Adrian Miller, 1283908)
(Picture by Adrian Miller, 1283908)

HOMEOWNERS will be hit hard by this year’s Budget, after Treasury announced plans to scrap mortgage interest relief.

In an otherwise tame Budget, released today, Treasury minister Gavin St Pier confirmed the relief would be phased out over the next seven years.

The benefit is currently available for mortgages up to £400,000 – any amount above this is not subject to relief.

But from 1 January 2014, if deputies approve the proposal, interest relief will be provided only on mortgages up to a top limit of £350,000. The maximum mortgage level will then be reduced by £50,000 each year.

Deputy St Pier denied it was an attack on middle-class islanders.

He has published an Audioboo to explain the rationale behind this Budget, as well as a second one in which he talks about the mortgage relief plan specifically.

Comments for: "Mortgage relief to be phased out by 2021"

Carlos

Oh that's fine then I'll just knock 50k of my mortgage every year so I am not affected that’s reasonable!

The average house price in Guernsey is over 445k so reducing to 350k will have an impact.

With the fees associated with moving there are also a considerable number that decide to increase their mortgages to develop their existing property.

This currently provides a substantial amount of work for the local building trade (and you tax their income) which will rapidly dry up if no one can afford to increase their mortgage.

The guern

I would like to know how many of the States members who are going to cast this vote, actually have a mortgage? and live in Guernsey and not cloud cookoo land.

Open your eyes and see how everyone is struggling. employers are not giving pay increases, electric gone up by 75% in the last 6 years, all other services either costing more or being cut and all this since the introduction of zero 10. Bring back the old tax system and if the companies don't like it let them move back to the UK, they can take their high paid employees with them, then less posh cars on the roads, more room in our schools and give Guernsey back to the Guernsey man. Any none Guernsey people should not be allowed to run our island

Backchat

I agree well said

chris

you shouldn't have borrowed so much then !

You are crazy to depend on a system of tax relief that the world is phasing out. How could you think Guernsey would be any different ?

Sorry for you, but the bubble has burst.

James

Hilarious! "Give Guernsey back to the Guernsey man"...

so when the finance industry leaves, taking its high paid employees with their high spending in local shops and on local employees and services, just how are you going to earn your money?

Do you fancy going back to digging potatoes and trying to sell tomatoes in competition with EU-subsidised Spanish growers?

Hey, at least your house will drop in value to make it more affordable - except of course if you've already got a mortgage you'll be in negative equity.

The Guern

Sounds like I hit a nerve with a finance worker?

Hey I like potatoes and if I had to dig them, well at least i don't mind getting my hands dirty in real dirt, not money.

I am old enough to remember when Guernsey was full of growers and yes it is hard to for growers in the current climate,

But yes the finance industry has brought a lot of work to the island and if the zero 10 was dropped many would stay, but the finance industry does bring along a lot of ties like high paid staff i.e. if you bring in a high paid manager he probably has a wife and a couple of children, the wife decides she wants to work so takes a local job, the kids go to our schools and then into other local jobs taking employment away from the true locals and as a finance worker he probably gets a lower mortgage deal so Touche!

Finance win all the way.

I myself have a mortgage for a good few years yet a partner and 2 grown up kids, I will survive but with the extra I wil have to pay on my tax I will not afford to buy a drink or a meal out, my shopping will probably be done online so all around the local shops and eateries will suffer, well done Mr St Pier and good luck in 3yeras or so when the elections come around!

pastafarian

yes James , believe it or not there is, was and will be life WITHOUT the fiance industry.. Not everybody is after driving Chelsea tractors, hanging out in cocktail bars, private schools, living in the "right" parish etc.

To quote Jose Mujica:

Poor people are those who only work to try to keep an expensive lifestyle, and always want more and more.This is a matter of freedom. If you don't have many possessions then you don't need to work all your life like a slave to sustain them, and therefore you have more time for yourself"

Real World

Yes prices are going up and times are tough for US ALL but open a National Newspaper or turn on the TV and you'll see that this is a world wide issue. We are where we are and tough decisions need to be made.

If companies "move back to the UK" or more likely corporate friendly alternative tax havens, then it wil be Guernsey people that will be out of jobs and local businesses that will be closing down. Like it or not we are ALL dependent on the income brought to this Island by the Finance Industry.

Mortgage relief inflates house prices and is not just there for those that need it but for everyone... Wealthly individuals make the most of this relief.

Evelyn

I am really disappointed to see that we are trying to scrap mortgage relief. So many young guernsey people struggle to get on the property ladder because they live on an island with highly inflated property prices. However they acheive this by determination and hard work and now this means and they are penalised. The sad part about it if you dont bother, you dont work, you just have children when you feel like it because "it is your right" then you are totally supported by the system.

PLEASE KEEP ON ENCOURAGING THE YOUNG PEOPLE TO STRIVE FOR THEIR OWN HOMES DONT KNOCK BACK THE ONLY HELP YOU GIVE THEM.

Ill-informed

If it is not an attack then just what is it? Did Mr St Pier say what it was in his view? I suppose he has to get that 2.6m plus the cost of the ensuing investigation back some how.

concerned

I agree its not an attack on middle-class islanders. It is an attack on everybody apart from the rich. Whoever voted for this bloke should hang your heads in shame...

Shortstraw

So who's manifesto supported this during the last election? I don't remember voting for anyone who said that they supported the scrapping of mortgage relief!

serafim

Shortstraw - you are quite right, I do not recall a single manifesto supporting scrapping of the mortgage relief, but i suspected it would happen as its an 'easy target'. However it is extraordinarily short-sighted of St Pier considering the awful state of the economy and the housing market. Now there will be no chance for 1st time buyers getting onto the housing ladder!

Confused

So our treasury and resources 'Minister' reckons that getting rid of mortgage tax relief will actually help people to get on the property ladder.............HOW?

I'm not mathematician, but even I can't see how this will help.

Perhaps in the future we should only give the ministerial jobs to people who are actually qualified to do them.........in commerce a company would not make joe bloggs head of finance if he couldn't prove he was qualified and experienced enpough to do it !

DARREN MANN

THE WAY IT WILL HELP TO GET PEOPLE ON THE LADDER IS WHEN BANKS AND MORTGAGE COMPANYS FORCLOSE ON LOANS WE CANT AFFORD PROBLERY BEING IN NEGITIVE EQUITY BY THEN,THERE WILL BE MORE HOUSES ON THE MARKET. WHEN I GOT MY MORTGAUGE THE TAX RELIFE WAS PART OF THE LOAN WITHOUT IT I WOULD NOT OF GOT IT! THIS STATES HAS GOT TO BE ONE OF THE WORST AS A GURNSEY BORN WITH A MORTGAUGE AND A MANUAL JOB WITH NO WAGE INCREASE NEXT YEAR HOW CAN I BE ASKED TO GIVE MORE ELECTRIC GAS WATER AND RATES ALL GO UP STANDARD OF LIVING DROPS MY SON HAS ALLREADY LEFT THE ISLAND BECAUSE OF HIGH LIVING COSTS I CAN SEE MORE AND MORE LOCAL HAVING TO FOLLOW

#whatthe....

Can someone please clarify that it is 1st April today???

Cause this must be some sort of joke?

forest

Genius idea. So you're going to make home ownership in Guernsey even further out of reach by shafting the people that can least afford it.

Mortgage relief has always been an essential factor for many people buying their homes and yet this seems to have been completley ignored in this proposal as yet again our useless government goes after the the same soft targets.

Gavin, People are REALLY STRUGGLING OUT HERE what are you thinking!!!!!!

st.sampsonite

Yet another case of an out of touch with reality deputy, only thinking about the minority elite.

Instead of taxing us more, get a grip and stop the inherent incompetence in the states. lest we forget the 2.6m

forest

Absolutlely.

HSSD and SSD have overspent by 3.5 mill this year not to mention scamgate (2.6mill) It's never going to end until they've bled the Guernsey man dry and we're all living in f*cking tents.

Bob C Wilderbeast

Rent payers get no tax relief on what they pay, why should home owners.

Um! shot myself in the foot there, bet my landlord will put up my rent to claw back the loss of tax relief.

Why is he putting up the tax on fuel when the UK government is facing pressure to postpone it.

Reverse the 0-10 changes and tax the evaders before the EU shut down operation Guernsey as the surely will.

Shortstraw

Bob

Unfortunately I think you may be right. I suspect that those in rental properties will suffer as rental costs will be increased to make up the defecit. I believe that this is what happened in the UK when Gordon Brown did a similar thing in 2000.

dotdotdash

Perhaps if States departments didn't exceed their budgets without consequence, allow themselves to fall for scams and waste money on consultation reports on things they have already had consultation reports on then we wouldn't have to look at things like mortgage relief. If this is a method to lower the entry price of housing then surely this will devalue existing property and put some people in a very tricky situation.

Neil

A phased reduction in what effectively is a subsidy on an asset that many of us have made money from is entirely sensible.

Scarlett

absolutely, fairs fair, Neil...

how big is your mortgage, btw?

Neil

Scarlett

I have a mortgage, I also have children. I'd drop Family Allowance as a benefit too; or at least phase it out.

Scarlett

get off the cross Neil, we need the wood.

chris

Neil is right. You shouldn't have taken out a big mortgage that you coudn't afford without the taxpayers subsidy. Overstretching is not a good plan as you never know the future.

Spartacus

Neil

You are exactly right. I feel the same.

It reminds me of the OAPS who are struggling to survive on a pension and refuse as a matter of pride to put their hand out for supplementary benefit which they are entitled to.

And yet here we have perfectly comfortable home owners claiming they "need" MIR in order to maintain the lifestyle to which they have become accustomed.

Its a case of attitude and perspective.

Radical

This is shocking.

The biggest problem we have on this Island is the cost of housing. So our leaders feel that scrapping mortgage relief is a good move?

Whilst those on social security get a inflationary increase, the police get 3 shiny new cars, the eductaion department is run wastefully, the States lose £2.6m and the civil service (all 4,500 of them) continue to enjoy full job security and great pensions the mug on the street who works hard, pays taxes, spends most of their life trying to afford to get on the housing ladder gets.......That's right - nothing.

It is up to the people of Guernsey to stop this from happening - let's stand up for what we believe - cut the waste before increasing taxes / reducing benefits.

We need to rise up together to stop this.

George Head

So the rich get richer by making the poor poorer.

This island really is going badly wrong!

Wake up people!!!!

Geoff

No wonder so many of our young are leaving the island. Seems every obstacle possible is being put in their way. My son like many sees his future away from here as the cost of renting or buying a home is gradually being pushed beyond his reach.

We are gradually becoming a have and have not island.

ridiculous

soon guernsey will be solely populated by rich people in their 50s as all the island's youth are forced to leave because they can't afford to live here. "oh i've got a great idea lets make it even harder to live here" because that's a great plan. thanks...

Gavin St Pier

Banks and borrowers of course factor in tax relief, which is precisely why it would be inappropriate to withdraw the relief too quickly. The proposal is to lower the current £400k limit on which interest relief can be claimed by £50k each year, starting a year from now in 2014 until 2021.

In 2014, it will raise only an additional £100k as the vast majority of borrowers are nowhere nearer the current limit. Most borrowers will not be impacted before 2016.

Mortgage Interest Relief costs £8m p.a. This is effectively a subsidy from all taxpayers to a smaller group, those currently buying a home. Providing taxpayer support to a property market which is already very expensive is an odd policy objective and the outcome – increasing prices in the long run – is not in first time buyers interests either.

This is not primarily a revenue raising measure but rather a redistribution or equity measure. The intention – subject of course to the economic and fiscal needs of the day – will be to redistribute the revenue raised. It is the equivalent broadly to raising personal allowances by about another 9%.

It is a radical change in policy which will affect many, which is precisely why it is appropriate that it should have 9 year lead time.

http://audioboo.fm/boos/1062536

concerned

Have you got a mortgage? Are you a middle income earner? Or low earner? Will you be affected by this? I have a sneaky suspicion the answer is no to all of the above.

st.sampsonite

Which is it a subsidy from all taxpayers to a smaller group or a radical change in policy which will affect many.

It is the later, if this is allowed to go through it will have a major effect on the lives of many.

The cost of living is already out of control, annual pay does not come close to keeping up with inflation.

This proposal will leave the average household at breaking point.

Dwb1873

"This is effectively a subsidy from all taxpayers to a small group" - mortgage relief is hardly alone in falling into that sweeping statement.

So, are you going to apply this logic to all the other things that are subsidised by taxpayers who may or may not use them?

Thanks for making Guernsey even more expensive to live in if you're in the middle and for putting home ownership even further out of reach for those who don't yet own a house.

The rich? Those who have benefitted from the 'good years'? Virtually no impact, as usual.

Hopefully our other deputies stand up to this nonsense, however I won't hold my breath.

Radical

Gavin, thanks for your comments. I have a couple of specific questions:

1. You state that the mortgage relief is a subsidy from taxpayers to those with mortgages who are a smaller group. If we had a low cost rental sector with plentiful supply and no restrictions on children etc then I might see your point as why should people renting subsidise those who choose to have a mortgage. However, as most people in Guernsey will know, rental prices are often higher than the mortgage would be for the same property. Therefore most in the rental sector would like to buy their own property if they could to try and escape the escalating rents. So if removing the mortgage relief doesn't help those renting as it pushes the affordability of a mortgage even further away then who else is there to 'redistribute' the revenue to, i.e. who are the majority who dont have a mortgage or wont have one in the future? I can only think you mean those living in states housing or those lucky enough to have no mortgage. Am I missing something?

2. The fact that the housing market is expensive is not the fault of the working population. Cutting mortgage relief will have little effect on house prices, the only effect will be to make life harder for a large portion of the Islands population

3. You seem to state that the revenue raised by the reduction / removal of the benefit will be redistributed in the future. Effectively you are reducing benefits now to put back into the states 'pot' and then decide how to redistribute. This is crazy. You don't even have an immediate need for the revenue!

Mr St Pier - I think this is the wrong decision, and I think the vast majority of Islanders will agree with me. If this is really necessary I would support you if you did the following before implementing this change:

1. Make far reaching changes to States expenditure - cut staff and costs in the civil service, police, education head office etc. Only when the expenditure is completely streamlined can you start trying to increase taxation on taxpayers.

2. You need to explain how additional revenue will be used before you take the benefit away. If you were to be pumping £8m per annum into frontline education resources then this might be easier to accept. You cannot just take this away and put it in your rainy day fund.

Gavin St Pier

Radical - in the long run, MIR increases the debt people take on and the prices they pay; redistribution may take the form of increased tax allowances; the Financial Transformation Programme is intended to make the changes to States expenditure you demand and I have reemphasised again that we have to deliver against the FTP.

serafim

Politicians the world over say that "next year will be better and we will be able to help the tax payer" and how often does that happen...!

Questor

To be fair, I know the Income Tax Authority/Advisory and Finance Committee were considering this around 20-25 years ago.

In terms of cost, as far as I can work out, somebody with a £300k mortgage over 25 years at, say 5% interest, would be paying around £1,750 per month in repayments. Of that, a maximum of £1,250 would be interest. At present, they would effectively receive £250 in tax relief per month. So once mortgage relief is phased out completely they won't be more than £250 per month worse off.

I have a mortgage of this sort of magnitude but, due to the £50k reduction phasing and the likely increases in salary over the corresponding period I'm nor sure it will actually make a significant difference to me, although there will inevitably be an overall loss in comparative disposable income when considering increasing costs of living.

Whilst understanding the view that the reduction in relief may have an adverse effect on property prices, presumably it could be argued that the presence of mortgage relief has had an inflationary effect thus far - both directly on the cost of houses and indirectly on the calculation of RPI figures.

I think the budget is a good one considering the Island's financial position, although it would, of course, have been preferable if the States had been quicker at bringing its own spending under control. Fair play to you and your board for proposing this budget... should be an interesting debate!

Sam

Gavin, I strongly disagree with your assertion that this will cause a drop or slowdown in property prices. The property market is not inflated by mortgage relief it is inflated by a small stock of decent housing and in general a fairly affluent society.

I understand that the states have to make cuts, but it seems crazy to me that this relief is being looked at as it is about the one benefit in Guernsey that allows young first time buyers any help when buying a home. If you cut this relief, they will still have to raise the massive deposit to buy a house and take on the massive mortgage to buy what is quite frankly a bedsit in most cases. Even taking this into account, house prices are currently so high that it is almost impossible for young people to buy a house on their own without any assistance from their parents! Many young people are also not able to buy a house until they are settled into a long term relationship where they can both commit to such a purchase.

It is my humble opinion that this cut will only further serve to disenfranchise the many talented young people that this island produces.

Many places have subsidies for first time buyers such as relief on stamp duty relief etc. and most of those places don't have such ridiculous house prices! It you were introducing some sort of scheme which would help first time buyers or low income families I would understand your position and surely means testing mortgage relief would be a fairer method so that it is claimed by those who actually need it?

Also and completely separately, I personally do not understand why the islands 20% income tax band is enshrined in gold. i believe it would actually be more equitable for you to look at introducing a higher rate of income tax to raise this money. Surely a 25% tax band for over 50k would raise much more than £8m and be a fairer way of resolving some of the islands issues.

Please rethink this thoroughly

Minister

Your assertion may be correct, and if it is, it does not necessarily follow that it is the same group that will suffer the loss of tax relief and enjoy the reduction in debt / repayments you pursue for homeowners.

So what you seem to be proposing is to stuff the current group of borrowers (pardon my french)and transfer the benefit to another generation - those who do not yet have mortgages - and only then if your policy has the effect of reducing house prices for the next generation of first time buyers before they enter the housing market. And nobody seems to think that is in fact likely, and if it does, to be tax neutral on first timebuyers the market will need to see house prices fall by towards 20%. Is that what you want, do you think that will help us all?

Anyhow to target harshly one group to the benefit of another group in this way seems very unfair to many hardworking existing borrowers.

If your board cannot bear the imperfections in this tax relief then wind it down in a way that does not hurt one group too hard who can do NOTHING to mitigate their loss.

For example close it to new entrants at some future date but let anyone who has a mortgage run their mortgage out over its natural life with this benefit intact. This will put less purchasing power in the hands of new buyers which may reduce house prices, but it will only hurt existing buyers once - by devaluing their house price and not a second time by heftily increasing their tax bill. That would still be one group helping another, but not quite as catastrophically as you currently favour.

You know that other rises in the cost of living will erode what if any pay rises most people will get in the coming few years and so you know that this measure you propose, albeit deferred and phased, will bite hard into people's disposal income, with all the recessionary effects that will have.

If you want to fiddle with the tax system ideally why not major on things that will help people and stimulate the economy. Your current proposal will at best be immediately recessionary for those likely to be affected and only capable of stimulating economic activity about 3-4 years in the future by which time you may have already with this measure choked the economy.

We assume that you are still reflecting on the many good points raised in all the posts in these past few days as your comments last night ' so far today disregard most of the points made and are giving only shallow analysis and superficial responses to the points you do address.

I think most of us do not envy your position - most difficult economic times - and we really want you and your board to succeed - you have to for all of our sakes - but we are bemused by your focus on such an issue as this and hope that you can put it back in the box, remove the uncertainty you have created - that can only be harmful - and move on to the really important stuff where you can make a positive difference for all of us.

Thanks and Good Luck

forest

"This is not primarily a revenue raising measure but rather a redistribution or equity measure. The intention – subject of course to the economic and fiscal needs of the day "

What complete b*llox Gavin.

Government is not in control, has no intention of changing its spending ways, and you are going to shaft the Guernseyman yet again for every penny you can to pay for a civil service that is hooked on spending beyond OUR means.

There will never be any 'redistribution' subject to economic and fiscal needs and you damn well know it.

Trying to buy a House

We Our currently waiting on our mortgage approval, As first time buyers with 2 children we have worked hard to save the required deposit, and will continue to do so to be able to repay it.

What happens "if" this goes through and House prices do drop! how many people will be left in negative equity?

Where is Guernsey going to be in 30 years time if you keep forcing young tax paying local families to move away!

bcb

And to those who are really struggling to pay their mortgage and now with this extra expense which could in some cases push people over the edge and may have to sell up you say what to them???.

Disgusting.

Dave B

Based on Gavin St Pier figures.

You Borrow per £100,000 interest 4% = £4,000

Tax relief 20% £800 the true cost of scrapping this tax per household.

Are you saying the cumulative interest paid for all mortgages to banks in Guernsey is only 40 million pounds per year.

The subject of personal allowances there seemed to be no issue with freezing personal allowances for 3 years, that put an additional £50 per year per tax payer an extra £150 out of everyone's pocket into general revenue and keep it.

Iv'e Missed A Year !!

As Quoted Above..

The proposal is to lower the current £400k limit on which interest relief can be claimed by £50k each year, starting a year from now in 2014 until 2021.

Sorry but I thought we were in Nov of 2012

(and he's in the treasury dept?)

Malcolm

Gavin St Pier, Which is better in your warped thinking? Taxpayers subsidising the finance "industry" which we have all been forced to do by our amoral government, or taxpayers subsidising underpaid workers homes? Resign now please

no problem

Hear Hear

Alex M

Gavin St Pier has already proved himself not so much a man of the people as a man of his kind of people. So what does he care? He's hardly poor so the abolition of tax relief won't affect him.

Tax relief is absolutely essential for the majority of home owners, especially the younger ones, who are struggling as it is. The housing market is hardly buoyant at the moment - if he wants to kill it off completely, then he's doing a fine job.

This "new" States was voted in because people wanted a change. I'm guessing that this isn't the kind of change we were all hoping for, or expecting.

MP

What a good job that I am now living in St Sampsons thanks to my new mortgage of over 400k so I can now have a chance to vote this idiot out next time around and hopefully this short sighted idea which in the long term will do more damage than good can be reversed.

What next?

Jeff

It’s been on the cards for ages now and shouldn’t come as a surprise to anyone. The first sign should have been the removal of the allowance on 2nd homes to be honest.

To be fair I think GSP has done a reasonable job so far under really quite appalling circumstances, e.g. mess from previous States, £2.6m fraud, zero-10, runaway spending, huge capital projects underway etc. Not saying I agree with all decisions so far but it’s an impossible job under difficult circumstances (and I did vote for him).

For us, I would say our household income would be around average earnings and we have a middle of the road mortgage (between £200-300k). If the mortgage relief were to go today it would make around £100 a month drop to take home pay, which is a lot of money! The black hole has to be filled in somehow and I don’t see many viable solutions that won’t impact us all similarly.

Unfortunately things are going to get far more expensive with things like TRP and parish rates inevitably having to go up and up. At least we have a few years before the full impact of mortgage interest relief is felt and if nothing else it should prepare people for the change. At the end of the day mortgage rates are the lowest in living memory so best bet is to pay off as much as you can now before rates go up and interest relief goes!

markB

You names not "Jeff St Pier" by any chance?

chivas

If you want to do this fair enough....but don't deceive voters and not mention it in your manifesto. I understand money needs to be raised but why weren't you honest with voters.

just for the sake of transparency, this change will affect me in lost money and probably a lower house value.

Maybe it should depend on your household income or value of your home.

Anyone know how much this will raise?

when interest rates rise people with low earnings will be hit hard and poverty will ensue

Fermain

I'll be paying more tax under this rule change, but I think it is fair. I don't see why friends of mine who are forced to rent can't tax claim relief while I get mortgage interest relief. In this environment it would be too much to ask and too complex for the relief to be extended to cover rent as well, so best to scrap the relief altogether.

However I would like to see the funds raised used to reduce the deficit and rebuild reserves rather than being redistributed

wineman

good post fermain

about time this subsidy was closed.

from a lot of post it seams only home owners work hard how funny is that.

James

I agree. Mortgage interest relief is a strange form of benefit which gives more money to you the richer you are, and has the effect of increasing house prices, making them even less affordable to new buyers.

I've claimed the full amount (which means the States pays me going on for £3500 a year). Nice, but not really fair for Guernsey society as a whole. I'd rather we as a society use that kind of money to protect services like respite care for disabled adults (recently in the GP), or to prevent other kinds of tax rises (like VAT).

bcb

Maybe those who rent do already get some relief ? if the landlords suddenly lose the tax relief then maybe rents will rise to offset the tax relief they were getting?. Who do you think will burden the loss from the landlords pockets?.

They will want a return on their investment most likely in terms of a percentage and will want to recoup this the same way any business does. By passing it on to the customer.

Fermain i think that D Jones was talking about a subsidy for those in private rental that are on low pay and struggle? which i think is right. But you get no such help if you have a mortgage. If you cant keep up the payments then your stuffed.

jj lehto

Landlords will not feel any impact from the changes. Interest paid is fully deductible from rent received before tax.

Unintended consequences!

Maybe your friends will be competing with a lot me people wanting to rent because so many more people will not buy (or will delay buying) a first time house!?

I am sure this policy is well intended and it may look OK if one does not look at the actually likely impact.

How perverse will it be when middle income borrowing households are hit hard AND those also struggling in the rental sector are hit hard by the same measure.

Our T&R have a duty to work out what all the impacts might be and not mess up the finances of so many mortgage holders and renters.

They should remember too that homeowner / borrowers are also doing a "favour" to those that need to rent by exiting the rental market and in that way reducing demand in the rental sector. Raise the bar to that exit and who knows what mess the rental and housing market may get into.

Bit like playing with fire. They should be very cautious - and this has all the hallmarks of rushing to make a decision and little on the cautious side.

The 8 year delay is but a small concession in the context of a 25 year mortgage - who can get out of their mortgage (especially if the Minister were to achieve his objective of reducing the property price on which your mortgage is secured?)

Maybe T&R will reconsider this more thoroughly or Deputies will vote to require T&R to do so?

Soon to be ex home owner

Well at least the banks will have more work repossessing peoples homes who will no longer be able to afford the repayments! This government is a joke, shaft the middle class and the youngsters who will be trying to get on the property ladder. Again, protect the rich who can afford it.

Sean Anon

I would like to thank the government for completely screwing up everything they possibly could for the middle/lower class!

We have recently been arranging a five year plan to get us out of social housing and set a home for the family. This will now be completely thrown out the window and will now have to line the pockets of the already rich.

We want to be independant and not rely on anyone else, but it is becoming more and more impossible.

You will see more people moving away from the island as there is nothing to keep people here.

Local market tenant

An even playing field at last for home owners and private sector renters! House prices will hopefully stabilise in the future, particularly after yesterdays bad news of +4% increase in house prices over the past year. £445,000 for an average house, so affordable for locals.....! Tax breaks of this kind are unrealistic given the current economic situation (worldwide and local), hard choices have to be made and I applaud Gavin St Pier for having the gumption to make a difficult and probably unpopular (for mortgage holders) decision.

kat

Are you trying to get rid of our hard working home owners?

This is a nail in the coffin for many hard working middle classed couples

if this is debated i want a recorded vote

those who say pour . i hope will never be voted back into the states again

if they want to raise the millions that was LOST by the states tax the companies .

they can afford it

the states voted to keep there pay packet with rises ,

Was this because they knew this was coming up

the middle working class are being the scapegoat here

i hope all will rise up and stand outside the states chamber to protest on this

it will be worth the time off from work

as this could destroy so many who are starting out .

Karen

Thanks Gavin - thank you so much!

How on earth is this going to help the average working (and taxpaying) family who may already be struggling to juggle the costs of mortgage, childcare, healthcare, higher fuel and energy costs and a lesser salary thanks to having had no pay rises for the last 3 years (and below inflation ones for the 2 years before that?).

How is this going to help young people starting out who are wondering how on earth they will ever afford to buy their own property, (never mind rent one) at today's rates?

Why should people even bother working hard and aspiring to something that seems to be coming ever more and more out of reach when it seems to be more beneficial to sit on your backside, work the system and get everything handed to you on a plate.

Had that little nugget been on Gavin's manifesto then I would never have even considered voting....I feel duped.

local guernsey man

This deputy must go, why do they always rip off the people who are lower earners and making a go at life, it is making my blood boil. All these one parent familys who have never worked in there lives are the ones getting it easy and the states cant see this.Talking to one of these people they only have to pay eight pound rent electric free, heating, water ect, and they get enough money infact more than i do working a 40 hr week to go spash on booze and good life, what is the world coming to.

James

If you have a £400,000 mortgage, you're really not a lower earner - you're spending more on running your house than the median income earner gets net in their entire pay packet.

Me

You're all a touch dramatic.

PB FALLA

Very good call,should be scrapped from now and not over a period of years

Freedomfighter

Thanks Gavin - another depressing blow to a middle class family. Do you know what its like for a family of four with a mortgage these days? I watch on as the rich can afford everything that I cannot and the poor get given everything I struggle to pay for.

Uniform subsidies, dental care, the list goes on.

I already feel I at a point where I have to ration the amount spent on food to afford the other bits and pieces. Every year the bills increase and my wages cannot keep up. 9% on the electric now, 9% again in the coming April. Where will it end? If this idea goes through you had better start using the funds to build more social housing. Perhaps we'll all need it!

Nick

How does St Pierre come to the conclusion that this will only effect a small proportion of house holds?

He states that Guernsey will save £8m that's only 1,000 house holds at the maximum cap of £400k......

What a joke

My partner and myself both work full time in reasonable paying jobs and still cannot afford to buy a house over here. This is only going to make things worse. Its hardly suprising that the younger generation are moving away!

I dont recall this being mentioned in Gavin St Pier's manifesto!

Mike

Gavin St Pier

This is exactly a tax on the middle class!

This will effect those aspiring to improve themselves. The current allowance of £400k assists the middle earners (already the group that pays by far the highest proportion of taxes) to get on or move up the property ladder.

If you believe this is fair and equitable - why was it not in your manifesto?

Also: are you going to remove mortgage interest deduction on companies which have rental income? If not this will be simply driving property to corporate landlords? (For those who didn't know: property companies, which should be paying 20% tax, can deduct all mortgage interest from rent received. There is no cap!!)

serafim

Mike - well said. Of course we could all transfer our houses into companies...!

Fed up!

What a good idea, NICE ONE!

Herbert Roth

It seems to me we are being misled by some of Mr St P's comments. The reason Guernsey has such high property inflation is not down to a mere £8M of mortgage subsidy, it is (mostly) down to the simple laws of supply & demand: There are not enough affordable houses in Guernsey. Build enough houses in a suitable timeframe & property prices will decrease, this is fact. Added to this we have overseas investors buying up local market properties for rent. The reason they do this is because our high property inflation makes this a win-win situation for them, they are not bothered about 'paying over the odds' to buy a property, because for them it is a long-term investment. In fact, adding to property inflation actually will benefit them in the long run. And don't forget of course, overseas property investors may well not even being paying tax on the rents they receive.

Brunette

Who voted in this man get him out I have just been diagnosed with a serious illness like many others I am sure but I have worked hard since I left school and now have this illness to deal with so things are hard right now but Gavin had you not noticed in the news yesterday we are heading for a triple dip recession!!! More people losing jobs, families suffering how much more can the less fortunate people take!! Really planet mars is where you should go!

Neil Martel

There is no personal income tax in Nevada USA. They let the income from their casino's pay their bills so why cant we do the same and give all of the people in Guernsey a tax free lifestyle? Following this announcement I am leaving the Island. My children could not afford a house before this and me and my wife have been trying to save to help them get on the ladder. With this announcement the only house we have in our family is devalued and paying more tax takes away any chance of me and my wife helping them out.

You should be ashamed GSP, you have not thought this through, it must not be allowed to get through. My children are all renters but had some belief that one day, with our help, that they had a small chance of being property owners in Guernsey. That will now never happen, I hope you can sleep at night!

Is this the best way?

So let see, with a mortgage rate of about 4.5% say, with a £50,000 reduction in allowance each year. That would come out as 50,000 x 4.5% = £2,250pa interest, of which tax relief would be 20%, i.e. £450pa, or £37.50 per month. So that is a tax rise of £37.50 per month for those affected. Those wealthy enough not to have mortgages will be unaffected. Those able to get lower rates because they have a higher equity in their property will get lower interest rates, so they will be less affected.

Regrettably this is likely to (badly) affect the Guernsey economy directly. It is money out of people's pockets. The argument that the State will spend it, so it makes no difference is probably rather weak. I understand that there is evidence that money in the hands of the public has an up to 3 times more stimulative effect on the economy than money in the hands of the state. By this argument any increase in taxation results in a reduction in economic activity. Thus the more reliable route to economic growth would appear to be to reduce the size of the state so that taxation can be reduced. That would require reductions in spending by government, which seem to be very difficult to achieve in practice. Maybe there is a problem with asking an organisation to cut its own spending? However that is what is needed at this time.

The argument that it evens the position between (often poorer) renters and wealthier home-owners may also be weak. Although superficially appealing, unfortunately, and as commented on by others, it is likely that property-owning landlords with mortgages will attempt to recoup their losses by increasing rents.

These arguments and interpretations may or may not prove to be the case. One thing for sure, these tax changes will generate unintended and unforseen consequences.

I am worried that this measure is significant and I am not aware that it has been put directly to the electorate. Would it be unreasonable to suggest therefore that it should be voted down by the people's representatives? That is until such time as a package of proposals (this and others) has been properly put to the electrorate so that they can debate the issues.

Fed-up

I,m a ashamed to admit that I voted for Gavin St Pier. Thinking he had a good business background would give him some kudus not normally held by previous states members. Unfortunately he has well disguised himself as a true Tory toff! Do you know the cost of a loaf of bread Gavin.???

I don't believe it

Shock,a rich politician decides other homeowners must be loaded too.

I can hear the conversation between HSSD, Education and 'Saint' Gavin now: 'We can't be bothered to save the money under the FTP next year, be a good boy and push it on would you.'

St Gavin: 'Oh no problem at all, even though me and my predeccesor said it would be unfair to take more money from taxpayers until the States has saved some dosh, that was just political speak. I've got a big pot of easy money i can pinch from hard-working homeowners to make up for your shortcomings'

Deputies should beware over this one, a lot of homeowners rely on that relief to afford their mortgage. Take it away and you could be left with an even bigger need for social housing.

Not to mention homeowners make up a rather large portion of the electorate - and you all want to keep your cushy £34k a year 'part time'job don't you???

SamT

I lived in the UK when mortgage relief was scrapped. There, it was simply removed and when I first heard about this, I thought it was a huge mistake by GSP.

What happened was that there was a rush to buy to beat the deadline. Here, a 7 year withdrawal makes it less likely to inflate house prices.

What it does mean though is that homeowners will see their annual APR pay rise ( or at least those who are lucky enough to get a pay rise )be swallowed up by the increased payments due on their mortgage. While in general I think that what GSP proposes is reasonable, I have huge concerns that increasing interest rates over the period will make the £50,000 steps too large in the future and some thought should be given to this problem.

Having given a cautious recognition that the proposal is reasonable, I cannot help but observe that this was never flagged up by anyone standing for election as a possible policy and that this could be seen, at best, as an oversight and, at worst, a deliberate attempt to deceive.

Gavin Get OUT!

He has lied to us all in getting his position.

Redistrubuting from those who try and make something of there lives and struggle to pay there way, to the ''needy'' who don't pay for anything yet have sky and pleasures in life (drink, fags, sky)

Why should i get a second hand pram for my baby when if i was on benefit they'd by me a new one!

This should not affect those who currently have a mortgage as they have been duped and Mr St PIer is probably unable to realise this is not a zero sum equation. Take away mortage relief and up the cost of providing social housing etc goes up. He is trying to be Gordon Brown....what i man to aim to be!

Finally Mr St Pier please can you let us know what your present primary residence mortgage is? I assume you ar ehappy to let people know how this affects your situation.

Gavin Get OUT!

why not just remove it for those earning x amount?

i suspect as it will most affect the lower earners!

All Guernsey revenue raisers such as paid parking affect the squeezed middle. Joke!

SamT

One last thought, the whole idea of mortgage relief is not for all taxpayers to subsidise house buyers, it is for the government to offer a financial incentive for people to buy their own properties. Having declared a policy that flies in the face of this, does that mean GSP will give extra funds for social housing instead?

Freedomfighter

For years, whilst struggling on I have been reminding myself of my mothers words that the first years on a mortgage are the hardest and then it gets easier as your wages go up. Seven years on and it's tougher than ever and threatening worse. At least when we all take to the streets to riot like they are in Europe the police will be ready.

me me

When the states stop wasting cash and paying fat pensions to themselves then they are more than welcome to have my mortgage relief........

I can say this as I know the waste in our unaccountable departments will never end

mrspinthepantry

Oh noes!

This is now twice within 24 hours that I find myself agreeing with the establishment.

Bearing in mind I have so far been disappointed in this deputies efforts I agree with him on this.

Removing this relief was always going to happen eventually, it's been talked about before and other allowances have already been taken away. If you are mortgaged to within an inch of your life then it's your look out, in anycase the long winded implementation should take most of the sting out of it.

Mr St. Pier was very vocal about hard money saving decisions having to be made so I think this fits in precisely with what he said during his campaigning.

It's easy for those 'in the middle' to whinge on about so called benefit scroungers, single mums being giving houses etc. But when THEY are the ones targeted the middle class start screaming 'unfair' the loudest.

We as an island need to wise up and stop wasting money, those that don't like this minor change be aware that it is still only the tip of the iceberg..............

Sigmund

Strongly agree!

Mike

@ mrspinthepantry

"Mr St. Pier was very vocal about hard money saving decisions having to be made so I think this fits in precisely with what he said during his campaigning." - NO! Hard money saving is that States making savings not increasing tax revenue.

"If you are mortgaged to within an inch of your life then it’s your look out, in anycase the long winded implementation should take most of the sting out of it." - Have you struggled to get on the property ladder? Not by the sounds of it! You need every penny of it and then some. £50k a year reduction is about £500 of additional tax per year for 8 years. By the time the full allowance is removed it will be costing the individual about £4000 per year in increased taxes.

"We as an island need to wise up and stop wasting money, those that don’t like this minor change be aware that it is still only the tip of the iceberg…………." - Saving means cutting costs not increasing taxes! And to me £4k per annum is anything but minor.

Local market tenant

What she said! This is not a new tax, as some seem to be saying, but the removal of a now unsustainable tax break for those with a mortgage. Should've never been implemented in the first place!

Tulip

Gavin, why don't you implement legislation that prevents people from owning more than one home on the Island instead?

This will affect the rich instead of the middle income earners and will also assist in reducing the average cost of housing.

I suppose there would be no immediate benefit to the budget, however perhaps it will help reduce housing subsidies to those currently unable to afford a home? If house prices go down, it stands to reason that the mortgage subsidies would gradually decrease as well.

It's insanity that it's almost impossible to buy even a one bedroom flat for less than £200k.

guern abroad

Add to that that you can not buy on the local market if on a 5 year license or less.

tulip

I agree with you there.

Gsy Gooner

Seem to be a fair few people moaning about something that has been on the cards for quite some time, the level of mortgage interest relief available in Guernsey has been pretty generous really.

If some of those commenting can genuinely only afford their mortgage due to the current tax relief then I would suggest they've seriously overstretched themselves.

What are they going to do if (when?) the interest rates start to rise?

Tax relief on the interest is handy but it should only be a nice bonus to get the benefit from rather than the rock on which you plan your finances. Maybe these people have interest only mortgages which still seem to be peddled by some IFAs over here but they ceased to be a sensible option quite some time ago, not that the IFAs involved would admit that of course.

Gsy Bloke

You would seem to be able to handle a lot of calculations and financial analysis in your head Gooner....so why don't you work out the average house price, take the average salary, take an average interest rate and calculate an average mortgage for an average person in an average house on the Island earning an average salary. Take a look at the number of Gsy residents in the 'average' bracket, then you will see that unlike you, the average is cutting a fine line to balance their finances. Recession-free Gsy isn’t so recession free, it was always sure to impact the public and SME’s more than the big corp’s we have over here, you know the ones that pay nothing for their mutli-million/billion/trillion/gazillion pound profits or losses and there ‘free’ money taken from the UK tax payer. The ones that think it is great to use the infrastructure of the Island but not pay for it…..the finance sector demands a new airport, or longer runway, this that or the other, at the cost of the taxpayer in exchange for jobs and our affluence – but where has that gone. These same jobs that they threaten the island will lose if they are taxed and have to pay their own fair way.

It doesn't take a genius to work out that when the corp's don't pay tax, freeze pay and reduce the number of jobs available (or cut back workers to part time) that it reduces tax receipt and just when you need your government to support you, the last thing that you should do as a government is take more from the consumers, customers, the workers, your public. This government has failed to recognise the power of the customer, yes that is the average man, for too long. Elsewhere in the world it is recognised to look after your public, hey its democracy! Look after your customers, they are your workers and they are the ones who contribute to the public purse. The detrimental effect of a zero 10 tax regime to the majority is evident in what our government can afford....nothing. And when the public purse is short what do we do? We tax the public rather than generating new revenue streams. For over 40 years we have flourished as an offshore finance centre of excellence.....for what? What can we afford and how is this affluent island with zero crime and all such happy campers? Yea....I thought not.

Gsy Gooner

Funnily enough I also have a mortgage and fall into what is known as the middle income bracket, from a distinctly working class background, so don't lecture me about average earnings etc.

Maybe I'm just better at living within my means, having been brought up not to rely on credit and so on to finance my lifestyle?

st.sampsonite

out of interest how old are you and do you have children?

Are you sure this is a good idea?

A mortgage is typically a 20-30 year debt.

And for those that need one, it is typically the single largest investment / spending decision of their life.

The debt is based on the price of the house at the time the borrower buys it.

This budget proposal will increase the current interest charges to each and every current mortgage holder by 25% per year when it comes into full effect.

Although it is suggested to be introduced gradually over the next 9 years, that period is only, say, one half to one third the length of the debt repayment period to which most borrowers have to tie themselves.

So, to take some rough numbers, if you have a mortgage of £300,000 now with 25 years remaining with interest rates at their long-term trend rate of about 5%, this equates to paying an extra 1% on the annual outstanding amount. Roughly speaking, that is about £1000 per year over the first 9 years (as it is phased in) and then roughly £1500 per year over the last 16 years.

Compared to the amount of income tax such a person might typically pay, this proposal is, in plain English a very large income tax increase (even if deferred slightly). In terms of total loss over such a mortgage period it could easily be more than £30,000 of extra tax paid just by the tax payers affected - many of those struggling already with their current high mortgage costs.

And after suffering these hefty tax increases the asset in relation to which they arise (your home) should go down in value if the Minister's policy objective is achieved.

So, under the Minister's proposal, if adopted by a majority of Deputies, (i) a hefty tax increase will be imposed on those homeowners affected on the biggest investment / debt they make in their lives and (ii) the value of their home will be driven down too - a DOUBLE TAX WHAMMY to those affected.

Is it not also the case that quite a few people borrow to make home improvements as they cannot afford to sell and purchase in this market (in part as transactional costs are very high)? This policy could have a marked downward effect on the amount people will be borrow for such building works. And so there will be less business for those local trades and suppliers who benefit from this activity. And they pay taxes too (which may go down as a result). And any person who loses a job as a result of this reduction in building work will potentially claim benefits to the cost of all tax payers and certainly will pay less tax and social security contributions.

There do seem to be potential serious downsides and inequities in this proposed policy and these need to be rationally and objectively weighed in the balance -surely it is not acceptable to focus only on certain of the (not even necessarily positive or proven) aspects of the proposed tax increase and overlook the inevitable or inherent downsides.

If the full economic and personal financial impacts of this proposed policy are modelled it may bring into question either the policy as a whole or the manner in which it is being proposed to be delivered.

But beyond that, could it not be considered that it is fair and right to let those with existing mortgages run their course without loss of the relief (which was a given when they took out the debt) - why should they suffer a double whammy of (i) higher tax and (ii) lower property value?

And there is one more critical factor to bear in mind - interest rates now are at an all time low, but that will not last and rates will inevitably move back to long term trend (of about 5+%) at some point.

That could mean within a few years many borrowers will see (i) their interest rate say double (as general interest rates move up) and then (ii) go up effectively significantly again as this policy for a deferred income tax increase on home owners with mortgage bites (over roughly the same period) and (iii) see their property value go down (as a result of (i) and (ii)).

So this could be in fact a TRIPLE WHAMMY, materially (but not exclusively) of our own government's making if it implements this income tax increase which would risk causing a significant disruption to our property market.

Such a disruption (e.g. negative equity, repossessions etc) could be very bad for many people and businesses, not just homeowners, and affect the wider economy and government revenues too.

Please can those with the relevant economic, taxation, financial and policy expertise work through the finer details and undertake a full impact assessment, if that has not already be done, and ensure that the current, however well-intentioned proponents of this proposal, do not come regret this policy a few years down the line and inadvertently cause considerable economic problems for this island far greater than the benefits they sought to achieve.

And finally, if there is to be a tax increase of such a monumental amount (levied in particular on those already stuck with high mortgage debt which they cannot realistically get out of now or over the course of the tax increase), then in view of the pretty big structural deficit, at least please use any additional government revenue to bring government income and expenditure more into balance and do not "redistribute it", whatever that means.

And as has been commented by others already, surely you need to tell the taxpayers (and the Deputies that represent them) exactly what you intend to spend this additional new tax revenue on rather than a nebulous "redistribution"?

Especially as it appears to be a massive change in policy and contrary to statements made by many candidates to the electorate earlier this year.

Mike

@ Are you sure this is a good idea?

Great, well reasoned post.

Please ensure your thoughts are sent to all Deputies.

Radical

Well said - agree 100%. GSP please respond.

If interest rates were higher at the moment the £8m GSP refers to would be an awful lot more. This is a stealth tax - take it away now as the States know that sooner or later the interest rates will rise and that is how the States will increase their tax revenue.

Toolbag

Good observations in there.

The point well made is that interest rates are at an all time low, the only way is for them to rise. I well remember the struggle we had when they hit 17% years ago, which resulted in me any my wife both working two jobs.

My three children have left the Island, and have no plans to return; talking to them, they tell me many of their contermporaries are now seriously thinking of leaving too, given the future here and the States policies.

pp

Mrs P In THe Pantry, firstly how big is your mortgage and what is your household income, secondly this is raising taxes not saving money

Employed

I'm a home owner with a mortgage but I have to agree this is the right thing to do. It will make it easier for people to get on the ladder as it will result in house prices remaining lower or falling as more expensive houses are then out of reach of some people. We have to accept that the island needs income and this is one way we can help.

pp

Insanity, why would an one agree with a plan to raise what you have to pay a year for your home ownership and reduce your house value. Great! Sure all the local shops and tradesmen i can't afford to use now will be thrilled

Mr St Pier you are out of your depth

Geoff

House prices will continue to rise and this idea will not make a lot of difference. All these new developments like the breweries, Cobo Bay etc. will not help our housing shortage as some seem to thing as they are always aimed at the higher market.

If that was the case all the housing developments over the last few years would have helped the problem but house prices have continually gone upwards. This will only make thinks even harder for locals.

Main crux of the problem is a small island, too many people and more coming so there is the fuel to our problem. Problem will get worse not better.

Sigmund

Currently, if you have a mortgage well over £400,000, say of £1 million or £2 million, you have still been able to claim interest tax relief on the first £400,000 of that mortgage. In other words, the States of Guernsey has been giving tax relief to very wealthy people, including millionaires, for many, many years. Strange priorities. I don't think that this state of affairs was fair or equitable. However, I do have a bit more sympathy with those who have more modest mortgages; they will lose out and end up paying more in income taxes, although admittedly the reduction of relief is being phased in over a relatively lengthy period of time; i.e. over 8 years. It would be logical for the States to offer some new forms of help to first time buyers if they don't want to totally disincentivise home ownership as a concept. Maybe follow Jersey in this respect.

We all knew that there were going to be difficult, tough decisions taken by this new States. They have been saying it over and over. May be people weren't listening, or choosing not to listen properly. Maybe people felt it didn't apply to them. It seems that this truth may only now be dawning on people in terms of what this actually means in reality for them.

Sara Thompson

Tough choices in the eyes of this States means imposing more taxes nothing else. Not difficult really, is it?

Sara Thompson

The straw that breaks the camel's back?

Only way this could be introduced in my view is on any new mortgage otherwise it's a retrospective tax and would not have been factored in fully.

Aurignylad

Working and lower middle class people who struggle so hard to get a place of their own and who used to be able to rely on the government understanding how hard it is to get a place of your own in our lovely island have been shown what st Pierre thinks of them.

Words can not express my sadness of what that man is doing to our poor islands!

barneyb

Better go out and buy some more Christmas lottery tickets then...

vincent

Im currently looking to get a mortgage and have never even thought about tax relief. Renters pay huge sums and get nothing out of it, do they get a relief.... no! Unfortunately we live in a rubbish economy and there has to be reductions somewhere. We have to face up to that! At least people who have a mortgage own a property, which is a hell of a lot more than a large number of the population can say!

tootnc

Yes, at least they own a property - but this tax 'adjustment' and it's knock on effects will make it practically impossible for some homeowners to keep their houses - the facts/numbers tell the future story for many people!

Why not start this 'no tax relief' for new homeowners? Leave the rest of us alone to get on with paying off our mortgage as it was when we made the purchase!

Mike

GSP believes that removing Mortgage interest relief will make housing more affordable. How does he get to this? You are removing a direct allowance meaning the net cost of borrowing is reduced.

Assuming interest rates at 5%

Mortgage £400,000

Annual interest £20,000 and tax saving £4,000

Net Cost is £16,000

Over a 30 year mortgage you will be paying about £2,200 per month or £26,400 per year of which you will receive a tax allowance worth £4000.

Net cash out to the individual £22,400

Removing the allowance means net cash out will become £26,400 – an 18% increase in the cost of housing!!!

Will there be an 18% reduction in the prices of houses to offset this?

If yes – well we are all in lots of trouble. This will destroy Guernsey’s economy.

If no - then this will make housing less affordable.

Another potential impact which will could actually make property less affordable and take property ownership further away from young locals. –

If young people can’t afford mortgages they will have to rent. After all they need accommodation.

Rental demand will increase and it therefore follow that rent prices will increase.

Corporate landlords will buy more property (and continue to be able to offset 100% of borrowing costs against rent).

The effect of this will make it harder for people to afford mortgages as a result of decreased tax allowance AND rental prices will increase making it harder to save for deposits.

The very rich landlords with corporate structures will flourish. The rest will struggle!

Concerned

This is very concerning analysis.

If you are right then this policy could be terrible for most, those renting, homeowners, those trying to get on the ladder and probably the rest of the economy too. It could favour inadvertently those that were not meant to benefit!

It begs the question how carefully has this policy been worked through before it was announced?

Have all these valid economic points raised in this and other comments been identified and then rigorously evaluated?

This is far too complex and risky change to implement without very careful consideration of all the possible wider personal and economic impacts, both short term and long term.

Smacks of policy development on the hoof.

bcb

good post Mike.

I think that could well be a very accurate analysis of the situation we could find ourselves in.

Dani

I have no opinion on whether he should have resigned or not from the Scutiny committee but I bet Matt Fallaize is happy with the timing of this! Yesterdays chip paper already.

Penny

I have always been a great supporter of you, Gavin, and was pleased when you got into the States. However, you have got this policy seriously wrong and I hope the States debate this proposal and throw it out.

We are a professional couple with two young children. Our income in real terms has been going down over the last 3 years. We are both on pay freezes, and have been for the last 3 years, meanwhile expenses go up and up.

If we were civil servants or States Members on the other hand, we would have had an RPIX rise each year and a final salary pension. I hear civil servants/ teachers are getting 3.2% this year. You can imagine how we feel when yet again we get no rise as our (separate) companies have chosen to freeze pay rather than make staff redundant.

This is a real attack on us and we cannot keep absorbing these attacks on our income. Please rethink - you will really be hurting hard working families who contribute the majority of tax already, and who are already hurting in this financial climate.

The sign of an intelligent person is when they admit they misread the situation and are big enough to change their mind. Please reconsider this.

Yours very disappointingly

Penny

it is not a tax rise...

It is not a tax rise it is an abolition of a relief. Without the the relief you are paying the same 20% income tax as everybody else. Why should mortgage holders have a subsidy? By artificially lowering mortgage borrowing costs it encourages people to overstretch and contributes to the overheating of the property market. The long term abolition of the relief can only be a good thing.

If the states administration could be trusted to apply it fairly there would be merit in limiting the availability of the relief to 1st time buyers / low income families who would have a valid case for a subsidy.

(btw I am mortgage holder currently claiming full relief currently so will feel the full impact of its removal)

Concerned

I would not disagree with you, but I think that one has to look at the effect at an individual level.

(1) What tax does someone pay now who has this tax relief?

(2) How much more will that person's tax bill be after the relief is abolished.

(3) Divide one by the other and you can easily get to some massive numbers like a 50% tax increase.

Regardless of the fairness of the existing policy, it is there and many people are therefore affected by a change.

If politicians or government said to their electorate (or a significant section of it) - we will increase your marginal rate of income tax by 50% in the next few years, it would not be well received.

This is the impact of this proposed change on quite a few people.

And it is those people (as well as others of course) that spend money on other things and services which we all benefit from even if not everyone is "lucky" enough to have a mortgage.

In other words the practical effect of this change is to massively increase many homeowner's tax bills and to cause potentially large adverse ripples through our economy that could hurt many others in the pocket (as homeowners rein in their spending on many other things and sevices).

Imagine if all homeowners stopped buying the Guernsey Press because they were so hard up from massive tax increases! It could hurt that business and its employees regardless of whether or not they are homeowners, high, medium or lower earners. A silly example granted, but the point is this change will cause far more harm than just to those "lucky" enough to be in debt to their bank.

We entrust the running of our tax system and the economy to our politicians and they have a duty to take decisions of this magnitude that are well thought through and evidenced-backed.

Maybe that will follow?

It seems to me that it may not be helpful for the public discussion to be polarised between homeowners and non-homeowners and higher, middle and lower earners.

I think it is simply the case that this policy could have counterproductive effects for all these people, either direct or indirect and so it is hard for anyone to think that they could not be harmed from the fall out from this proposed effective tax increase (albeit that it only applies directly to some people).

[Please that most of these comments are general not directed at your post, although initially prompted by it!]

mike

GSP believes that removing Mortgage interest relief will make housing more affordable. How does he get to this? You are removing a direct allowance meaning the net cost of borrowing is reduced.

Assuming interest rates at 5% and Mortgage £400,000

Annual interest £20,000 and tax saving £4,000

Over a 30 year mortgage you will be paying about £26,400 per year in repayments and receive back a tax allowance worth £4000.

Net cash out to the individual £22,400

Removing the allowance means net cash out will become £26,400 – an 18% increase in the cost of housing!!!

Will there be an 18% reduction in the prices of houses to offset this?

If yes – well we are all in lots of trouble. This will destroy Guernsey’s economy.

If no - then this will make housing less affordable.

Another potential impact which could actually make property less affordable and take it further away from young locals –

If young people can’t afford mortgages they will have to rent. After all they need accommodation.

Rental demand will increase and it therefore follows rental prices will increase.

Corporate landlords will buy more property (and continue to be able to offset 100% of borrowing costs against rent).

The effect of this will make it harder for people to afford mortgages as a result of decreased tax allowance AND rental price increases will make it harder to save for deposits.

The very rich landlords with corporate structure will flourish. The rest will struggle!

ehq

Not sure what renters' arguement is really! I don't say to people on benefits you get £200 pound a week that i don't so you shouldn't get it

St Pier, maybe if you hadn't lost us £2.6m we could phase this over a longer period

Have the impacts on everyone been explained?

Simple example shows increase of personal income tax by 50%!

£300,000 mortgage

£50,000 salary

Mortgage interest rate 5%

Removal of relief means about £3000 extra tax per year

Equivalent to an increase in marginal tax rate of 10% (taking into account of personal allowance) - or tax going from 20% to 30% (once changed phased in)

That is a 50% increase in marginal income tax!

On a debt that the borrower cannot easily get out of, and if he / she tries to - by selling down - the policy is also trying to reduce his/her house price and the house sale and puchase transactional fees have to be incurred too (many thousands). Could be a financial catastrophe for many people.

If it has to go, maybe just close the scheme to new entrants? Then over time, as existing borrowers pay off their loans the scheme will eventually close itself completely.

The scheme has been in place a long time and should be phased out in a long term way also - 8 years is not long term given the loans tend to be for 25-30 years.

Anything else may be considered punitive and even almost retrospective.

And if borrowers suffer an effective 50% increase in income tax, you can expect all sorts of other adverse economic impacts - like those affected will pay the mortgage in priority (to not lose their home) but stop spending on other things such as in shops and on other trades and businesses.

This could be quite a nasty economic time bomb, affecting in pracice people of all income levels in many areas of work and those that do not own a house too. If your job depends on other people spending money, you may be affected by this tax change even if you have no mortgage.

Please can the proponents think this through very carefully before dropping a bomb?

jj lehto

Most banks in Guernsey have a max multiple of 5x salary, so on a 50k salary you would not get a 300k mortgage.

Seems to be a lot of people claiming to be medium income earners on here with 400k mortgages. If a bank is willing to lend you 400k (or more) then you can afford this gradual phasing out of this relief. You are not a medium wage earner.

kevin

Those same 'medium income earners' probably consider £70-80k a year a normal or average wage - they are well out of touch with the real world.

PB Falla

This is a very good decision,why should homeowners get tax relief? The response on here isa joke,guernsey people are such self self self its unbelievable

ITS TIME YOU STEPPED OUT OF THE BOX AND LOOKED AT THE BIGGER PICTURE

You can always join the exodus if you are not happy chappys and lassies

AD Locke

http://www.facebook.com/groups/465713203467494/#!/groups/374770762611010

Over 2500 members in one afternoon!

Think that says it all, this is one big mistake and a step too far!

AD Locke

Correct Facebook page this time lol

http://www.facebook.com/groups/465713203467494/#!/groups/374770762611010/

Scarlett

Looking at things slightly differently for a moment, is it just me, or is it that this 8 mill's worth of additional revenue p.a. will start to come in about the same time as the gaping chasm in the ol' civil service pension scheme starts to become so obvious that not even the idiots who run this island can't ignore it any more?

Wonder if this additional revenue is going to be 'redistributed' straight into the gold plated CS pot, perchance, Gav?

Oh, don't tell me, nothings been decided yet, never mind, I'm sure that matter will just coincidentally be top of the agenda once the readies start to role in, ay.

Neil Forman

Scarlett

£8M the taxpayer has subidised homeowners.

We subsidised THAT pension scheme to the tune of £27,485,000 last year.

That is the savings we should be making

Portlandgrey

Well said Neil.

Gavin, you should be making the tough decisions, like shutting the civil service pension to new entrants & cutting States spending.

Those are the tasks you were elected & paid to do.

If you have a massive hole in your bucket, you can't solve the problem by topping it up.

By scrapping the relief you will screw the housing market, house prices will fall & repo's will increase.

I don't think you have any idea how close to the edge some families are at present, with continual rises in gas, petrol, electricity, food prices etc.

If the States keep on the current course, you can look forward to the Finance industry sending you a postcard from afar, & increased unemployment & a social security/ benefits cost that'll make your eyes water.

Gavin, you have some tough decisions to make.

This is the wrong one.

Scarlett

Thanks for the info,Neil, my math was so out, it's laughable...

You've got to laugh, crying and tearing ones hair out isn't really socially acceptable.

Good greif.

guernseyal

Well I voted for GSP and I am absolutely disgusted at his plan for phasing out mortgage relief. Looking back at his manifesto I cannot see any mention of this idea mooted. In fact a quote from the man himself reads.....

"Therefore I will oppose the introduction of new taxes (direct or indirect) until we are genuinely satisfied that we have – where possible – eradicated waste and inefficiency in public spending."

Now before everybody jumps on me, I know that the loss of mortgage relief isn't a tax as such, but anything I have to pay to the authorities is in every sense of the word a tax of some sort. If it walks like a duck etc.

Methinks that the waste and inefficiency is continuing apace and has not even begun to be tackled. I see reports that the targets for saving money by the States have been missed - and it was said that AT LEAST THINGS ARE MOVING IN THE RIGHT DIRECTION (sorry for shouting but I am livid). So, if the States missed their targets then never mind there is always the public to milk for extra cash.

I am one of the lucky ones - I received a 35p per hour payrise this year, so as the recession is scheduled for the foreseeable I am sure I'll be in a position in the future to happily lose £2,500 when the mortgage relief is stopped - and the house will be worth less - just to add salt to the wound.

Posts above have pointed out the disconnect between the politicians and the public - if you travel in the same financial circles as GSP then it is inevitable that this will occur. Having worked in finance myself before getting out (got a conscience!), the people I met hadn't the first idea what a less than stellar income was, and the higher up the tree you went the more pronounced this became.

This is a really novel way of handing in your notice 3 1/2 years early. I just want to ask the rest of OUR representatives in the House to make sure this is voted out in the most comprehensive way possible.

STOP WASTING OUR MONEY AND EXPECTING US TO PICK UP THE TAB

Theo

I am glad to say that I didn't vote for Mr St Pier, so I can sleep at night without the anger and regret that so many who did give him their vote must feel !

This proposal is an audacious and calculated piece of social engineering designed to deny a huge number of middle class Guernsey families a chance to own their own home.

To claim that as fewer people will be able to afford to buy a home,that will have the effect of reducing house prices is plainly ridiculous.

What will happen is, all the people that can no longer afford to buy their own home will be forced on to an already overheated rental market, causing a large increase in rents, as the law of supply and demand kicks in.

Any slow down in house purchases as a result of a drop in demand as prophesised by Mr St Pier will be taken up by new capital flowing in to take advantage of the greater returns offered by the private rental sector.

This is not only bad news for young aspiring home owners, but also for existing tenants that will feel the cold wind of rent increases as the scramble for rented properties hots up.

Anybody ( other than investors ) that supports this proposal, must be compared to a turkey voting for Christmas !!

Backchat

Another rich boy out of touch with the working class.

TargetPractice

The introduction is staged, the earliest it will bite is 2014 for 400k mortgage, 2016 for a 300k mortgage, etc.

Each year, it's a loss of 50k allowance. At 5% that's £2500 interest, or £500 in real tax, ie £41.67 per month. That's cumulative every year, so year 2 it would be an extra £83.34pm over previously.

Obviously no-one wants to pay more, but if this is about affordability, what about interest rates? A 0.25% increase in the base rate on a 400k mortgage is £1000 a year, or £83.33pm. If losing tax relief is enough to push someone over the edge, then even a small change in interest rates would be a problem. What banks lend in those circumstances? I realise there are fixed rates, but those are likely to expire far before the whole of MIR is removed in 2021 (the longest I had was 5 years). Is the real problem that banks are over-lending and the resultant vicious circle of price inflation?

Billythefish

Yes, and people will have planned for potential rises, either in their budgeting or fixing rates.

This will have come as a shock and won't have been planned for - that's the point!!

Astounded

It's difficult enough for a normal family to buy a home here as it is. Removing the relief will surely have consequences for the economy when families have less money to spend in shops, on home improvements etc. An ill thought out proposal. I don't see the renters argument either as childless people still pay taxes that fund our schools, we all contribute to the benefits system and most do not receive benefits, the list goes on....

AM

Any reason why you decided to put this proposal forward rather than, say, increasing/ removing the social security cap? Oh, of course that would target high earners - silly me.

Time to panic Mr Mainwaring!

Stands to reason a generation before us have had it so good, and now look to make a huge gap in class by taking mortgage relief away!

You should be ashamed of yourselves as Deputies to even consider this.

The price of everything has gone sky rocket, petrol is almost the same price as the UK and food has gone the same way, yet peoples wages are shrinking so much something is seriously wrong here!

Tell me Deputies this money you will save will probably go straight to the bottom of the chain to fund more unemployed than ever before.

I hope you are proud that this era of Deptuties goes down as the worst on record!

So Angry with you all!

Unemotional response

Some of these attacks are becoming very nasty and personal both towards the minister, civil servants and other posters.

Noone whether renting, paying off a mortgage, living on benefits, public sector, private sector, young, old, deserving poor or the wealthy deserves to be insulted. What we don't need in Guernsey is some sort of class war between different groups in our society.

Gavin St Pier is a highly qualified individual who could be earning much more money getting richer in the private sector or probably retire and given these personal attacks I wouldn't blame him if he does.

He's working really hard and trying to make changes to the way the States operates bu it isn't easy to turn around a huge bureaucracy overnight. He has had the decency to respond on twitter and this forum.

I am affected by this reduction in relief but can see that the intention is to withdraw it gradually. It will make life harder but I will try to remain stoical, tighten my belt and identify savings. The personal allowance is also set to rise.

I still feel very lucky to live in Guernsey, have a well paid job and own my own home. There is a real danger that a small rise in interest rates could push people over the edge.

Keeping calm

AM

Ermmm GSP is still working in the private sector as well as holding his States position.

Billythefish

I wouldn't blame him if he were to retire, in fact, I'd actively encourage it... that said, I wonder to what degree it's being driven by the real power holders.....

And I'm sorry, but I don't hold to your comment about his decency to reply to comments. He posted (not replied) early on to restate his position and that's been it - sorry,but that's not engaging or responding - that's sticking your fingers in your ears - "LALALALA can't hear you!!!"

And a class war would be best avoided, but some are doing their best to start one thanks to measures like this!!!!!!!!!!!!

bcb

Well said Billy

The Mrs

Not impressed one little bit.

Ok I will hold my hands up we are in the middle income earning bracket. However we moved up on the property ladder got a larger home for our growing family so in terms of disposable income we are probably not that different to others with smaller mortgages.

Our choice to move up yes I am well aware of that we did not need to move. However we are also just one family helping to keep the property market moving by selling smaller properties for first/second time buyers.

The cost of living is going up insurance is absolute madness, electric, gas, oil, food don't get me started there. My salary increase this year has not covered the increase in bills so I am already worse off. Now this, and family allowances.

Do they want anyone to remain living in Guernsey?

Jamie

It's hard to disagree with the reasoning for removing this allowance (and yes I do currently benefit from it).

The problem is this potentially hits a certain demographic quite hard.

It would be interesting if Gavin St.P could also indicate what extra tax revenue would be raised by removing the Tax Cap for individuals. From a revenue raising perspective this would only hit those that clearly would have no issue making ends meet.

Billythefish

No it isn't - it's phenomenally easy, as many people have already done so. For those renting, it will likely force the rent up and make it even harder for them to get on the ladder thanks to increased rent and increase in income required to service this new tax debt they will have when they take on their first mortgage.

Like others have said, equity is a total red herring. I bet virtually everyone would want to own their own property, this assist them in doing that when they can, and all those who no longer have a mortgage will have benefited when they did. What about those with no kids? With no need for social housing? Who don't smoke? the list goes on!!!!

Madness, pure madness. There's been some big ones dropped already this term, but this is the biggest one dropped for years and years!!!

Neil Forman

Billythefish

Totally agree!

jamie

So BTF,

you'd prefer to keep the status quo where currently rental payers are subsidising those that already have a mortgage instead ?

Rachel

How is this anything but an attack on the middle class? I am struggling to pay my mortgage as it stands. Put a tax on unoccupied dwellings and holiday homes instead!

If bought in at all it should only be applied to new mortgages and/or those properties worth over say £800,000 (of which in Guernsey there are plenty) the further a house is above the threshold the less likely the purchaser needs any subsidy at all.

kevin

talk about another nail in the coffin for people trying to get on the housing ladder.

this Deputy is trying to make it more difficult for local folk to buy a house yet the o.k. has been given for hugely expensive apartments to be built at Havelet and Cobo.

the tax subsidy is a red herring because according to Deputy St. Pier's logic someone with no kids, for instance , should not be subsidising people with children at school. what nonsense!

Another case of an out of touch Toff duping the voters. Let's hope the states as awhole says no to this daft proposal....... I'm not holding my breath.

p.s what's Deputy Jones's take on this after all he is the Housing minister.

Voter (no more)

Shame on you GSP

Why not include the issue in the full tax review?

The Budget report published today says that there

"During 2013, the Treasury and Resources Department, ... intends to begin a review of all taxes, duties and contributions which government imposes on islanders with a view to providing a greater degree of equity within the system."

It then says:

"This review will also consider the most appropriate manner to redistribute the additional income raised by phasing out of mortgage interest relief."

which is a reference to the following which appears on the next page:

"However, an instantaneous complete removal would be detrimental to the local property market but the Treasury and Resources Department believes, in the interest of fairness, that this subsidy should be phased out and proposes that, from 1 January 2014, interest relief will only be provided for mortgages not exceeding £350,000."

So there is to be be a comprehensive review over the next 12 months on all taxes but not on the mortgage relief which is the change that could have the largest impact on those whom it affects.

Why not add this tax relief into the mix and subject the proposal to the rigour of the review that is to follow?

These matters are all interlinked as for example many people have a mortgage to buy a family house to fit their kids in. Upgrading their house in this way also frees up smaller houses and generates fees for professionals involved and Document Duty for the States. These same people also receive family allowance relating to their children.

So if the same family is doing the right thing for themselves and others trying to get on the property ladder by upsizing for family reasons then the interest tax relief must surely be considered in the review that considers the tax treatment of say familly allowance. These things are all linked and it is inexplicable to conduct a full review but effectively prejudge the outcome on one element - interest tax relief - something that impacts so heavily on many whether directly or indirectly.

And to cap it all, the review is going to work out what to do with the money raised from this abolition of tax relief!

This is almost surreal. Decide to raise some people's marginal tax rate by 50% over several years, then afterwards carry out a full tax review and then try and work out what to spend this tax revenue (the payment of which will significantly diminish many people's disposable income).

Perhaps a full review will determine that the relief should be abolished, but possibly in way that is less damaging to our economy and many families. Such as announce a date in the future when it will close to new entrants but leave anyone in the system now to run down their mortgages over their standard period with the relief in place.

This will have completely got rid of the relief in about 25 years.

That sounds a long time, but is merely the duration of the debts to which it relates which families cannot really get out of once they have begun.

Quite bizarre. Hopefully the interest tax relief can be brought into the tax review terms of reference and everything be looked at in the round so that a suite of changes can be announced that are well researched, modelled, evidence based and importantly consulted upon with full transparency on where the money will be redistributed to.

Then the Deputies can decide how to vote on this important issue on Budget 2014 with all the information that they need and the electorate will be aware in advance of the issues and impacts and can speak to their Deputies before any decision is taken.

If you do not know what to spend the money on, then there is surely no rush - just stick the issue in the full tax revenue!

Ed Gregson

I agree.

Why is this not part of the wider review in which Mr St Pier can explain this measure as part of the bigger picture?

Sigmund

I would imagine that the money saved will be re-distributed to raise personal income tax allowances for some or all. I don't think there's any great doubt about where the money will eventually be diverted to.

Jezza

I don't remember seeing the idea of scrapping tax relief on mortgages in any of the deputies manifestos that I read. This decision should be deferred until the next round of local elections to let the people have the opportunity to vote with their feet.

Dick Turpin

At least he had the decency to wear a mask.

You can only push even the most timid of people so far, soon enough the peasants will revolt..

Dave

Let's face it something has to done. More income is needed for Guernsey be it mortgage relief or GST like Jersey you cannot continue to spend more than you get in. The property market will find its level it might remove some of the excess that has built up. Anyone who is struggling with interest rates at historic lows should allow for rates bouncing back in the future.

Billythefish

Ooo good idea Dave. Let's plunge a lot of people into negative equity in one foul swoop, drive more properties on the market, force the prices down even further and increase the negative equity position.

You should run for Treasury Minister!!

Devil's Advocate

What's going to happen with buying houses by share transfer Gavin? That must dodge significant amounts of stamp duty for the well off?

Scarlett

http://www.gavinstpier.gg/downloads/leaflet.pdf

I knew we should have voted for the other one...!

Walt Disney

Reality check... local homes get repossessed leaving locals homeless and the younger generation/future of Guernsey with no option but to leave for another continent due to unattainable monthly payments on a mortgage that they can't really afford!

One pro from all of this... Guernsey roads become clearer due to the young families and hard working professionals leaving the Island.... sorry… I meant driven out!!!

Zab

As always in Guernsey the cart before the horse. were there sufficient houses available their price woulld be reasonable with no need for tax relief. However does our Treasury minister or any of our exhalted States members see this, of course not and yet they wonder why the public holds them in such low esteem.

it use to be good here!!

The simple solution to raising money, is bring back corporation tax, or a similar named product. Guernsey has been in a black hole ever since it was scrapped, The Finance sector is responsible for the climate the world is in so let it pays its way.

For anyone who wants to argue this solution, I have worked in the Guernsey Finance sector for 20 years and these companies are not here because they like the look of the Island or want to be supportive of employment they are here for their benefit. The corporation tax paid was £600 p.a. per company, a £1000 p.a. would be nothing to them and would sort the problem out. For those companies that don’t like it, let them go elsewhere, if they are receiving a good service they will stay here.

Stop mugging the local of every penny they have and look in the obvious place to raise funds.

it use to be good here!!

apologies I meant tax exempt fee not corporation tax!!!

kevin

Absolutely right, either bring back corporation tax or raise the personal income tax rate for high earners - they would be paying a minimum of 40% if they lived in the UK!

GM

Kevin

But they don't live in the UK, and Guernsey doesn't need a tax system to support an infrastructure like that of the UK, which also has to pay billions to the EU.

You are quick to compare high earners with what they would pay in the UK, but don't seem so keen on the comparison of how lower earners are taxed.

kevin

GM,

Look around you - the island and many of its residents are in a financial mess, how on earth can you turn around and say that Guernsey doesn't need to raise money?

Those on a low income are hardly the people to look at to solve the problem are they?

Let those that are creaming off the money on the back of the success of Guernseys finance industry give something back to the economy.

GM

Kevin

I said nothing of the sort! I said we didn't need a tax system like that of the UK. I didn't say that we didn't need to raise more taxes. Of course we do, although like many others I would prefer the States to cut wastage and slim down the bloated public sector first.

There are many ways of raising more taxes, but sheer ignorance leads many to suggest that taxing all the corporates is the answer. As previously stated, doing so would decimate the fiduciary industry and as a consequence result in essential extra tax rises for everybody else as thousands of jobs would be lost.

You will also recall that I suggested a 10% IHT on Guernsey property and a 25% top rate of income tax for high earners. I'm not against increased taxes but I'm against stupid suggestions.

kevin

GM,

You are probably right, taxing the corporates is not the best way forward as unfortunately Guernsey is now almost totally reliant on finance.

I also agree with you that the higher earners should pay a reasonable increase in personal income tax, as stated previously they are in a much better financial situation in terms of tax benefits than their counterparts in the UK.

The island is doing its bit through zero-ten ( which indirectly everyone is paying for) so I don't think it is unreasonable to ask those that see the most benefit from the finance industry to pay a little extra.

GM

Kevin

I almost agree with you.

Once again you make reference to what higher earners pay in the UK, which is simply not relevant. It woukd be equally appropriate for me to say that all UK taxpayers are also required to pay VAT, regardless of how much they earn. Again - simply not relevant but introducing GST here would go down like the proverbial sausage roll at a bar mitzvah,

You seem to have a big chip on your shoulder about the finance industry. Zero-10 had to be introduced in order to save the industry. Every islander benefited from that, not just finance industry employees. Where woukd the customers come from for non-finance businesses if we had lost the industry? How much would house prices have fallen for all islanders? How many would have gone bankrupt due to negative equity? What rate of tax would those few lucky enough to have employment now be having to pay to try to maintain the island's infrastructure? Every single one of us would be a lot worse off financially without it.

kevin

GM,

UK tax rates are not particularly relevant to Guernsey but you can't deny that high finance earners in Guernsey are considerably better off than their UK counterparts, add this to the fact that their industry is being heavily subsidised by everyone in Guernsey and you might begin to see why I feel that those people should be asked to contribute a little extra to our economy.

You have correctly deduced that I am not the biggest fan of the finance industry, as you say those employed by it do put some money back into the island however I remain unconvinced that the pros outweigh the cons - house prices have gone through the roof,we are overpopulated, the infrastructure is stretched and there is a definate move towards a two-tier society.

I'm not suggesting that this is all the fault of finance but it certainly does not help the situation.

If you fancy trying it, I think a couple of years on a £25-£30k salary would probably change your outlook, theres an awful lot of people on the island that are having to survive on this (and in some cases a lot less).

GM

Kevin

Of course high earners are better off here. That's obvious. That's why I have been suggesting a 25% tax rate for earned income over £100k. I'm not disagreeing with you there.

I have a fair idea what Guernsey would look like without its finance industry- it would be bleak for the vast majority including those who don't realise how correlated their own seemingly unrelated jobs are to the finance industry.

I don't doubt for one moment how difficult it is to live on a low income here but it's exactly the same in any economically successful and desirable place to live the world over. There will always be lower earners in any society and it will never be easy for them. Life isn't fair - it never has been and it never will be, and politicians in the western world will never find a solution to that.

kevin

GM,

If only our government could come around to a similar way of thinking instead of scratching around trying to save a few quid here and there - the solution is staring them in the face but they seem unwilling or unable to take action for fear of upsetting some of the wealthier people.

Hitting those on a much lower income is by far the easier option.

I don't want to see the finance industry go down the pan, after 25-odd years Guernsey and its people are now too reliant on it and we would all suffer - but at the same time somehow,somewhere the States have to raise some money before the whole rock sinks beneath the waves!

One more question for you, why do you use £100k and above as the figure to increase the tax take?

Surely anyone earning in excess of maybe £70k could be classed as a higher earner - after all they could pay a £2000 p/m mortgage and still be left with at least the same again to live off?

GM

Kevin

Those earning well in Guernsey are mainly, not exclusively, doing so from the finance industry. It is perfectly reasonable that we should pay more. But please don't forget that we are also paying a lot more in SI contributions, which is in reality another form of income tax. If overall combined rates go up much further then it will convince some to move, taking lots of jobs with them. And yes, I would probably be one of them. We must not lose sight of the fact that the wealthier residents are best able to up roots and move elsewhere - and they would.

Whether a suitable threshold is £100k or £70k is less important than the principal, but in light of the above point re SI contributions, I would still opt for £70k.

Wealthy open market residents needn't be affected - a higher rate can be limited to earned income rather than investment income.

I am pretty certain that GST is becoming totally inevitable for Guernsey, albeit alongside some higher taxes on the wealthy.

Cynic

This money saving venture will only impact on hard-pressed middle Guernsey people who are already feeling the pinch of increasing costs of utilities against an income that has seen few if any rises in the last few years, are now facing a substantial financial problem.

The wealthy, of whom there are many, won't really notice the loss of mortgage interest relief and of course the withdrawal will not affect the lower income homes where renting is a more likely option. I have always been against the idea of GST but surely, when considered against this latest budget idea to emanate from the senior staff at Frossard House ( I doubt the good Deputy came up with the idea himself) GST would be a more equitable means of saving/raising money in that it would target everybody in the Island, but only on what they spend. The wealthy, who don't have to worry where the next penny comes from, will probably not even notice that their lobster lunch with a bottle of a decent bottle of wine went up by a few quid. If food shopping was excluded from GST the poorer people would probably not be affected, the middle strata would see a modest increase in their spending and the wealthy simply would never notice.

I have a healthy respect for Deputy St. Pier but in this case I think he has been misled by staff who are desperately trying to balance the books following the substantial failure of the Financial Transformation Programme. (No? Wait and see next year when FTP is debated) His political naivety and lack of experience of dealing with the civil service have allowed him to be led into this dogs dinner of a budget proposal. I have faith that the rank and file States Members will see the folly in this proposal and kick it firmly into touch.

jack

Cynic - i gather that boards and especially treasury are actually ignoring advice from civil servants on most issues

Ed Gregson

I'd like to add my voice to this collective cry of anxiety and dismay.

Mr St Pier, your representation of this measure as a benign redistribution of wealth is not shared by me

I am a father of two with 22 years left on my mortgage.

Things are very tight as things are: a big mortgage to repay, painful energy tariffs, petrol price hikes (but no reduction when wholesale prices come down), expensive food, insurance, phone bills, pricy broadband...

We also just extended our mortgage to do some home improvements. If I had known of your scheme I would not have taken out this extra money and would not be putting it back into the local economy.

You cannot delude yourself that this is not going to be extremely painful for people like me and will have a real impact on our standard of living as well as the wider economy

Please rethink this measure.

Cautious or Catastrophic?

You are not alone.

This measure is doubtless well intended, and maybe even right in terms of its objective.

However, we are where we are and the impact on real lives and real families of getting "from A to B" needs to be recognised.

This is a pathway to poverty for many.

If this aspect of the tax system is "wrong" and needs to go then they need to wind it down in a careful manner that minimises collateral damage.

So how about:

** winding it down over the same period but for new borrowers only - e.g. in 2014 you can have relief for your mortgage up to £X where X is less than £400,000. X reduces each year eventually to 0. That relief should last for many years, maybe the length of the mortgage.

** leaving existing borrowers / loans well alone

** in this way the scheme would have disappeared completely in about the life of 1 typical mortgage, say 25 years.

Not a long time if you compare it to the duration of the mortgage.

A more considered wind down should be far less damaging to our economy.

Sadly if this policy goes ahead, it will likely cause enormous fiancial harm directly to many hardworking families, but perversely indirectly too to a broad cross section of the wider community at all levels, but especially the less affluent.

Please can T&R rethink how they deliver this policy objective or can Deputies vote to make them do so?

YouhavingalaughGSP

I thought with your background specialising in providing trust and tax solutions to the wealthy, a chartered accountant then ideal for states but I am feeling tad embarrassed I suggested to friends to vote for you

GSP, I guess you are a very wealthy man given someone who has bought, sold trust companies is not Mr Average and the fact according to your SoI from gov.gg you have put your property in trust this will not impact you or your family. Did this make this an easier decision for you?

Should I be looking to put my property and the mortgage on it in trust? What other things will you be changing that I will be kicking myself and think, I wish I had followed GSP example?

Final question, can you GSP, confirm to the electors how this change will impact companies specialising in fiduciary services such as yours?

David

What annoys me most is that once again the States has taken the simple inflationary route. Funny how the same comments appear every time about wastage in the States, and no apparent appetite to curb it.

So SoG stop employing consultants to tell you the obvious. Sack heads of departments when they go over budget. Politicians be open and transparent on your plans before we vote you in.

Finally SoG come up with real ideas that will boost the economy to give you the funds you so desperately need to waste, without further burdening the average person on the street.

ripoff

Overspends in States department that's fine.

Loss of 2.6m that's fine.

Keep on shafting hard working people that's fine.

Very few pay rises (except States) that's fine.

If you were a private company you would have into liquidation years ago.

Run by clowns and laughing at all of us.

What a joke!!!

GM

A better balance would have been to phase the reduction of mortgage interest relief down to say £250k, but to retain it at that level rather than abolishing it altogether, and to have a top income tax rate of 25% on all earned income over £100,000 (the UK used to have such an "earned income surcharge"). And yes, I am somebody who would be hit by that. Its about time that we high earners bore an extra share of the pain.

Definitely also look at phasing out some personal allowances, or at the very least reducing them, for high earners.

Its well past time though to find a way of taxing the likes of Boots on their Guernsey profits. Its absurd that they pay nothing other than TRP.

Otherwise its probably got to be GST.

Spartacus

GM

Well said. Absolutely spot on.

I can hardly believe my eyes! We agree!

Dave

Eminently sensible GM.

It's an an ill thought out policy which as usual will have an impact on middle and lower income earners whilst those at the top, like GSP, won't notice much difference.

Guern abroad

I agree with all of that except for GST in that I would hope that GST never gets considered.

Whilst I can see why phasing out mortgage interest relief is being tabled I like the idea of keeping it for just up to £250,000 but I would only do that where the total mortgage was not more than £250,000.

The Guernsey housing market is too expenesive so anything to help stabilise it would be good, but I feel the biggest way to do that is to not allow license holders to buy on the local market if they have a 5 year term of less at the very least.

West

Introduce income tax at 20% for all income and remove the cap at £1.1m. There are many in this island earning more than £1.1m a year and are not paying tax on it.

st.sampsonite

Keep on squeezing and something gotta give.

This is another nail in the coffin of the middle classes, driving us back down to total dependence on the state, while the gap to those at the top widens.

You may not be directly affected by this, but just wait you will be a target soon until there is no middle just poor and super rich.

Les Pets

Don't scrap mort relief for honest working people , scrap benefits and massive legal aid bills. Simple.

Fed up!

I totally agree! there are too many people on "sickness" or other benefits claiming private rent allowance on infalted rents to landlords who probably don't even live on the isand, and to cap it all some are working on the side!!

lets put some money into investigating if they are genuine or not! That would probably save a lot of benefit payments.

Think again!

This measure will only be neutral on first time buyers if house prices fall by about 20%.

Is that the plan?

God help us all if it is.

Just imagine you have your £400,000 house with a £300,000 mortgage with 25 years to run.

If this measure works as may be intended you will see your house fall to £320,000 value and you will see your annual tax bill ultimately go up by about £2500

If you earn £50,000 you currently pay just over £6000 in tax each year. Look out: your your income tax bill will go up by over 40%!

That is two catastrophes from one policy.

Your disposable income will collapse - so you will not spend anything like what you did before in other people's business - god help them too(especially if they also have a mortgage on their home).

Negative equity and repossessions will increase.

Rental sector will overheat more (not less).

More State handouts will be needed all over the place to address the doubtless widespread unintended but likely consequences.

Why do it like this? There must be another way.

Maybe leave existing borrowers alone and gradually phase it out for new borrowers from some future date. Granted it will take longer to wean the market off this subsidy, but some things take a long time to do if you do not want to cause enormous collateral damage on the way.

Ehhhhh

If I were a states worker I'd be laughing. Everyone who does not work for the states knows how ridiculous that this mess of a pension scheme isn't the first port of call to save money....it's an incredible joke!,,,,

Serious GSP do you think there are so many states workers

Seriously why has it not been sorted out!!!!!!!! Now that pension is more unfair than my tax relief.....sort the pension and you can have my tax relief. Priorities!

Only a complete numpty would not visit this cost first...please explain!

I say fair play to the states workers....guaranteed pay rises, fat pension, no accountability.........hmmm why do I actually bother working in the private sector to try and support the islands growth!

Rooster

I wouldn't mind this going if other more costly and unfair problems existed!

Stop the disincentives to work, rpi pay rises, fat pensions, people claiming poverty who are fit to work and can afford to smoke or drink.

I think people would accept this if there weren't other injustices going on.

Please review your approach to delivering this objective

Minister

Listened to your audiboos. Thanks for these.

I think many people may agree with your objective, but it is the manner of delivery, timing and conesquent impact on real lives, people and families that is causing the problem.

Looking at some of your arguments.....

All taxes are a form of subsidy from tax payers to whomever benefits from government spend, so I not sure that argument is persuasive.

You remark that the personal allowances for all could go up by 9% from the abolition of a relief that only currently benefits the homeowners. So just imagine what the massive impact will be on those homeowners in order for them alone to fund this significant change.

I think your proposed time scale is simply unfair on those ordinary families who have pulled themselves out of the rental market, tied themselves into 20 to 30 debts on the basis that this is affordable owing (in signficant part) to the relief.

If you take it away in 9 years - only say 1/2 to 1/3 of the life of the debt - leaves those individuals in some cases with an increase in their annual tax bill for the remaing 10 to 20 years of their loan of up to 50% in some cases. You should do a few worked examples - it is shocking!

How many Treasure Ministers / Governments in the civilised world would announce a change in policy that increases the annual tax bill of a significant section of the hardworking middle by in the region of 50%? It is unthinkable in my view. But that is the effect for lots of people. Even 10% to 20% is large.

So whilst your objective may be right, surely it is unfair to ask people who have done nothing wrong to shoulder that kind of additional burden in order for you to make the system fairer. That is being very unfair if not punitive to a group of hardworking folk in pursuance of some generic principle of fairness.

Why not deliver your objective without plunging many families into domestic fincancial doom (albeit deferred slightly)?

Wind this "unfair" tax relief out over a period and in a manner that will not unfairly or disproportionately hurt anyone and in a manner that minimises the risks of many unintended consequences (higlighted in many posts)?

It might take you longer to achieve, but there seems to be no particularl rush as you have stated that this tax change is not to tackle the structural deficit but for equity and fairness.

Sadly, as currently proposed it is possibly going to be a bit better for many but catastophic for quite a few and those few have done nothing wrong - indeed they are helping many less well off than themselves already by exiting the rental market or moving from small to larger house or by borrowing to fund building works etc etc - all good things for the wider economy.

The manner you intend to deliver this policy is at best risky at worst plain catastrophic for many (and far from cautious.

You also explain how important it is to carry out a full review of our tax system - many may agree that is right. So why are you prejudging and rushing to a decision on this one massive area? For those it affects it could be the single largest tax increase that will come out of the whole review! Except you have taken it out of the review! Why?

Why not just signal that there is a presumption that this relief must be phased out over the long term but in a manner which is fair etc and that it must be looked at in the round with all the other changes in personal taxation that might come through over the next few years.

I urge you to reconsider the way you would like to implement this change.

The best way to do that would seem to be to stick this issue in the melting pot of your full tax review and come up with an integrated, resilient well modelled complete package, that is fair and equitable to all overall and does not discriminate against hardworking groups in our community by pushing them off the top of a financial cliff half way through their mortage.

Please rethink your approach on this for the benefit of all in our community, not just the borrowers, as we all risk suffering the serious consequences of this proposal if it is implemented as currently formulated.

Thanks.

AM

Excellent, well reasoned post that pretty much sums up my and, I am sure, a lot of other peoples' thoughts - thankyou.

Ray

Post 102 should be printed out and circulated to every States Deputy

Neil Forman

Brilliant

AGA

As someone who will be affected by this from the start this is not the greatest news I have had recently. However, in an effort to offer some balance to the debate, (1) I think this was always going to happen at some stage and (2) I'm encouraged to see an elected politician make a brave and unpopular decision when it comes to the islands finances as that is unfortunately what the island needs in this economic climate.

When will the same approach be taken to public sector pension reform? If anything I'm only surprised that a decision to scrap MIR (not discussed during the election) has preceded any action on final salary pensions (which was widely discussed).

lord nose

hi guys and gals

all ignoring the elephant in he room?

population in guernsey has increased far faster than the supply of properties, we all know why. its time to stop talking about it, and actually take steps to reverse it.

Guern abroad

And that is by capping population and not by building more on more.

You build more they will still sell at very high prices.

I feel there is a need to stop short term license holders buying on the local market. As that kind of buyer is looking to maximise return so will look to hike the price on selling or hike the price on renting it out as the motive is all about money and not the property being a home.

Forest

Classic example of this in our parish Guern Abroad.

Family A come over on a 5 year licence with kids and buys a local market property. Family A's licence holder loses his job so has to sell property but decides to market it at way above market price to make a quick killing. Locals won't touch it.

Family B come along (also from the UK on a 5 year licence) buy the property at at least 150k more than it's worth and there you have it.

2 UK family's on licence both contracted by the states have managed to inflate local market property by at least 30%

The same can be said for the rental market which is over inflated by licence holders earning more than your average local.

Dave

I'll give you an example. My sister sold her house to a couple with a three year license. It went on the market last month for 100 thousand more a return of over 20%. Who benefits from ramping up house prices.

guern abroad

Exactly backing up my thoughts that to stabilise the housing market is to stop short term license holders buying on the local market. They can buy on the open market if they have to own while working in Guernsey.

devils advocate

Dave / Guern abroad - based upon your comments are you seriously suggesting that when a "local" sells their house they will deliberately under price their house?

I would agree that licence holders unfamiliar with the market are likely to overpay and I would agree that the licence system may result in increased levels of activity. But to suggest that a "local" would knowingly sell their house for less is ridiculous.

Stopping licence holders from buying would significantly impact the housing market.

Dave

Devils Advocate what a stupid comment. Anyone who sells a property tries to get the highest price possible. But license holders on very short 3-5 year licenses are forcing up prices. If you went to the UK would you expect to get this return in a recession. Being able to buy and live locally takes years of residency a license holder bypasses this.

paulo

The long term result with all this crap is a bigger hole, the States revenue will fall, and the only solution when it all goes wrong is for every States members to dive in and fill the massive hole they keep talking about. My advice to you Mr St Pier is Stop spending money you don't have, how many new schools do we need and how many old schools are empty costing us money.

High

Exactly unaccountable states workers building ego massaging projects. Joke!

Guern abroad

Reuse and repair. Keeping things well maintained is cheaper and the States are crap at this, only have to look at Perelle for a very current example of maintenance failure.

Also agree with earlier posts deal with final pensions schemes now, that is a thorn that has to be grappled with.

Rufus

From the photograph, I can see the Board standing four-square behind their minister.

Board in hiding?

The Minister is counting from zero to 10% under his breath and then he is going to find the rest of his board.

My guess is they are under the table with the fiduciary and insurance sector maybe?

Your thoughts?

Minister

Mortgage interest relief (MIR) is an "unfair tax relief favouring homeowners with mortgages".

Document Duty is an "unfair tax targeting homeowners".

But people exiting the rental market by buying houses or upsizing are presumably good things for those trying to move into up the homeownership ladder. And MIR encourages those good things. But Document Duty does not.

Any comments?

Thanks

Freedomfighter

I know that it won't happen but if there was a VAT over here it would mean that people who can afford the non essential items would be taxed and quite right too. If you can afford the latest clothes and gadgets then you should be taxed on them. It's your choice if you want to buy them. I simply cannot but my mortgage I have to pay otherwise I cannot live here. I don't know where I'd be without the charity shops these days.

None the less, I can only see this going one way. The middle class will be reduced to a working class whilst the rich elite prosper. As time goes one we are all going to be squeezed because quite frankly the world's economy is in sh*t street. And if you all haven't woken up to that one yet...

Manifesto commitment

Minister

In your manifesto you committed to no new taxes before the States operations were fully efficient.

I suspect nobody would suggest that your condition has been satisfied yet.

Therefore given that removal of Mortgage Interest Tax Relief will, as day follows night, substantially increase affected homeowners annual tax bill (albeit 1 year from now), then there does appear to be a clear breach of this commitment.

If Mr & Ms Other will pay say £2000 more tax for say 15 years (=£30,000) because of this proposal that is one large tax increase, is it not? Could mess up the family's financial forward planning completely as mortgages are clearly not just for Christmas. They last around 25 years.

Punitive tax rises are usually levied rarely but when used it is to drive behaviour - e.g. high taxes on tobacco, alcohol and petrol are to discourage their consumption (in part for the health, social and environmental costs they cause).

Are you suggesting that government policy is now to discourage homeownership?

Unless you implement this policy in a different way over a longer time period, that will be one the effects, sadly whether you want it or not.

We all know you do not want to implement this "overnight" but in reality you need to do this over 1 generation - and as this is not a fund raising measure that should not have any impact at all on government coffers.

Conclusion

10/10 for the objective

1/10 for delivery plan

Please change the implementation plan.

Thanks

Pillsbury

The fact is that the politicians concerned are mostly wealthy and have no comprehension of seeking a mortgage. (The minister should have offered his resignation over the lost money, but it looks, although it is not, a cover-up). Rich boys making life difficult for the plebs, no idea and no comprehension.

Warren

Sign the petition and please share.

http://www.ipetitions.com/petition/say-no-to-guernsey-mir-reductions/

sickofit

And Guernsey yet again becomes a further more unaffordable and unattractive place to live. FFS I'm 35 and still living with my parents! What hope in hell's chance has a single person who doesn't work in finance got to afford a place of their own?

Devil's Advocate

35 and still living at home? How much have you saved up? How much have you wasted on nights out, flash cars, foreign holidays, expensive fashionable clothes, gap years etc. I suspect you've spent your money and made your choice!

Seriously!?!

I cannot express how depressed I feel at this news, i'm trying to get onto the property ladder for the first time and have (as most people would!) factored in tax relief. The idea of this going through makes me want to pack my bags and leave, and i'm a local! It's just increadibly unfair to anyone who is earning a 'normal' wage. Perhaps GSP doesn't understand how it works, the banks look at our wages, tell us what we can afford we struggle to find something worth buying (because so much is going to 'investors') and struggle to come up with the deposit so YES around £250 extra a month DOES matter, to be honest its food or heating! I have everything crossed that this does not get approved. There must be another way!

davy_b

Why not implement a Guernsey Poll Tax?

Local girl

We've had a non-emotional post. This is an emotional response to show the real impact of a young person trying to get on the ladder...

My partner and I are in our late 20s. For the last 2 years we have been living off one salary, whilst renting a tiny bedsit, in order to save the money needed for a 10% deposit and all the legal, tax, survey and estate agent fees. This will get us a mortgage of 330k, and if you look at the property pages we will not find a place considered a 'family home' and so hoped to climb the ladder. In this time we have been hungry and cold and have not bought new clothes and have developed asthma due to the damp and mould of our property but by early next year we would have reached our target.

If we do buy next year GSP states that house prices will drop. This will mean OUR house price will drop and so we will never be able to 'climb the ladder'. So each year we will get financially worse whilst our house price drops. How does this help first time buyers? I was on the waiting list for a couple of years waiting for a States home loan but the States scrapped this.

We are both trying to be honest citizens who don't ask for help. We are incredibly hard working (70-90 hours each a week and my partner has 2 jobs) who come from working class backgrounds but, through determination, have 'done good' by becoming enthusiastic teachers who adore their jobs. We wished to have our own property to have something to show for our hard work and also have security (our lease has a 2 months notice clause). Now we need help. Our families are not in a financial position to help us. Weddings and children should not be considered 'luxuries' and yet those things keep on being pushed further and further away for us.

My family have been in Guernsey since at least the 1600s, helped Guernsey grow through the horticultural industry and lived here throughout the Occupation. I am a proud Guern. I want to live here and raise my children here. We have never been one penny in debt. By living how we have over the past 2 years we have played the game and now you, GSP, want to make it harder. Without realising it you are making us decide between a house or children. To be honest we have enough of a deposit to get a good house in the UK, have a wedding AND have children and as we have both been classed as 'excellent' in our jobs by UK moderators I'm sure we will find jobs. I have never been so tempted.

So now you know the plight and lifestyle of a first time buyer in Guernsey who has skills which you should be trying to keep. GSP please rethink. Please help us first time buyers.

Devil's Advocate

Why have you been living off one salary for 2 yearS?

PLP

DA - The lady says her and her partner are living off one salary, then goes on to say later on they work 70-90 hours each a week.

Putting 2 and 2 together (and hopefully making 4) I think what she's trying to say is that they only use one salary to live off whilst the other is saved towards buying a property.

A.J.

Well said (Local Girl.) Many years ago, when we decided to buy our first home, it was a simple two up two down with a 'thunder box' down the garden.We paid £900 yes £900 for it which at the time was twice my annual earnings as a Greenhouse Hand.It terrifies me how my Grand children (or anyone else's in the same situation) will manage.The driving force in this Island's economy has been driven by greed and eletism. both diseases arriving by Air and sea and spoored by one Mr Geoffrey Church who only spent a couple of years here as an adviser, before vanishing with his pockets bulging with his fee!

Consultation required

Nobody expects a great deal of research or consulation ahead of sticking a few pennies each year on this and that tax or duty, like tobacco, petrol or whatever.

When massive changes are in question, that could have significant (positive and negative) impacts on the economy, people, businesses etc, it is good government practice to conduct some research, a review and often targeted or general consultation in particular of those mainly affected and relevant experts both within government and across the community etc.

That does appear to be more or less what the Minister is proposing for the full tax review in 2013, and that has to be applauded.

There is one massive omission - the MITR phased removal which appears to be a concrete proposal in the current budget has NOT been subject to this process and as a matter of good government should be.

Why the exception?

Perhaps the Minister could shed some light on this?

guernseyal

Well, until now GSP has been quite vocal on this site on various topics - deafening silence here now.

I wondered if they were hoping for that famous boiling the frog effect where you raise the temperature little by little and the frog doesn't notice until it is too late.

Doesn't seem to work on Donkeys!

Struggling Gsyman

We need to get this Gavin out. I have not had a pay rise in 4.5 years (And I DONT work in Finance) I do have an over £300k mortgage with little chance of reducing it or my wage increasing enough to cover the mortgage relief. This is simply down to the cost of property in the Island, me and my wife both struggle and both work full time, we have a family to look after and this will hit us HARD!!

I spent days agonising over my house purchase, and worked out what I could afford based on the relief. This will kill us.....! I bet this Gavin St Pierre isn't even blood local!!

GET HIM OUT!

Medium G

I guess the scrapping will be on all mortgages: not just ones taken out after the implementation date? Ah well, another nail in my financial coffin. Thanks.

Best advice I have read is start concentrating on paying off your mortgages. Good luck, everyone! It will, of course, reduce spending in the shops, and further deflate Guernsey's economy, but I am sure GSP knows best.....

Our own homemade recession?

Good point.

If have a mortgage, then over the next few years, the larger your mortgage is the bigger your tax bill will get (depending on the ratio of salary / mortgage and other metrics it could be up to a 50% increase in annual tax bill for some people!!).

So, many of us affected, like me, may act as best we can to mitigate the damage from this government made tax train coming down the track by paying off as much of our mortgages as we can over the next few years.

And as you say, what is paid in debt repayment to banks will not be working its magic round the economy.

Maybe our own homemade recession will result?

To ward off recessions, governments where they can, usually seek to stimulate the economy. This proposal will do the opposite.

And the Minister cannot respond on the basis that he will redistribute and that will cancel the recessarionary effect.

He will have no money to redistribute for about 3-4 years (tax returns are in arrears).

So that leaves the economy exposed to 4 years of borrowers applying the brakes and he will have no lever to pull to stop the recessionary effects.

In these times of fiscal austerity he will be powerless as she watches - maybe like watching a train crash in slow motion.

And if in 4 years when (his successor?) has a pot to redistribute, it will

(a) maybe far too late to save the economy from irreparable damage and

(b) may not be put in the hands of people that spend the money as beneficially for the economy as the current recipients of MITR.

Awfully risky idea this when you look beneath the bonnet, even if it might seem OK at first glance.

T&R and Deputies, we hope you will have a good long think about this before you proceed as per the budget proposal.

Time for thinking

A lot of points have been raised in this thread and the other 2 currently running on this topic, most are critical of the whole or part of this proposal and of course a few comments are in support.

To be fair, there is a lot of material for the Minister to go through (with his board and advisors) and even though I do not agree with the approach being taken by T&R in this case to daye, I think that the Minister / T&R need to be given time to reflect and respond on the many fundamental issues raised in the last few days.

Maybe, though, in the meantime, the Minister could acknowledge that he will study all these threads and take the big issues away and have a good think on these with his people?

And then maybe make a statement that addresses all these issues.

Or just agree quickly that it is a good idea to drop this proposal and all its complexities into the full tax review for 2013?

Thanks

Popstar

Anyone hear Treasury board member Mark Dorey on the phone-in this morning?

Unbelievable, he was really misleading trying to make out that the department wasn't planning to phase out mortgage relief, it was merely reviewing it as part of the wider review on all taxes.

You can all find the budget on gov.gg

In that document, published by his department with his approval, it clearly says the department's 'intention' is to scrap mortgage relief.

'However, an instantaneous complete removal would be detrimental to the local property market but the Treasury and Resources Department believes, in the interest of fairness, that this subsidy should be phased out and proposes that, from 1 January 2014, interest relief will only be provided for mortgages not exceeding £350,000.

'It is estimated that the current annual cost of mortgage interest relief is £8million per annum and a reduction in the maximum limit to £350,000 will raise approximately £100,000 in 2014.

'It is the Treasury and Resources Departments current intention, subject to consideration as part of the Review of Taxes, Duties

and Contributions to recommend seven further reductions of £Ì50,000 each in the maximum limit in future annual Budget Reports until this relief has been removed.'

If it was really dependant on the review of taxes, as Deputy Dorey would have use believe, why mention the explicit 'intentions' to reduce it by a further £50,000 each year until phased out?

The facts are Treasury wouldn't have put it in the Budget unless its board have agreed that it was going to scrap it.

I don't see any other 'intentions' relating to the review of taxes - becasue the board clearly hasn't agreed its position yet, where as it already made its decision on mortgage relief.

A clear case of Deputy Dorey trying to back track by claiming everyone else got the wrong end of the stick. Disengenious much??????

Fed up!

well it clearly wont affect him, he's a landlord with countless properties!!

This has to be a joke right?

Of all the ways to save money, this is the worst way I can think of. I am completely shocked that this proposal has seen the light of day and Gavin St Pier should resign for even suggesting it. Deputies, please see sense and reject this seriously offensive proposal which could see many young professionals seriously struggling. How on earth do you expect your teachers and nurses to be able to afford to live here???? Utterly ridiculous!!!

Swinesheadvillage

Mr St Pier. Looking at your published CV, can you tell me how you made partner at KPMG in 9 years after leaving university. As ex KPMG at your time I recollect:- three years training, two as AM, two as manager then as many as necessary as manager to make senior manager, then the dirge through the bloody war and pestilent season to make partner. 6 Years after qualification may make you the genius necessary to make this change, but I would like the details. Also, many others may wish to comment on your CV. I attach yours as published just for record.

http://www.gavinstpier.gg/curriculum-vitae/

kevin

Deputy Dorey and Deputy St.Pier are VERY wealthy people.

What do they know about people like Local Girl,Struggling Gnsyman or Seriously and how they live?

Answer absolutely nothing. There have got to be better ways of balancing the books than this.

April Fool!

The Budget was published on 16 November 2012

If you remove mortgage tax relief (MTR)from that date on a deferred phased basis and multiply it by the date of the last election and subtract the amount of economic growth that will be lost by this proposal, it is quite incredible, but that date changes to 1 April 2013.

From this calculation, I conclude that the proposal is an elaborate early April fool and that, like all the other taxes imposed on islanders, MTR will be subject of proper review during the heralded 2013 FULL COMPREHENSIVE tax review (and will not, contrary to the initial impression, be the subject of a dangerous pre-determination).

Phewwww.

swinesheadvillage

Of course you could be reminded of this:- 'I passionately believe that Government serves us...'

http://www.bbc.co.uk/news/world-europe-guernsey-17590536

swinesheadvillage

Gavin. Remember this?

http://www.bbc.co.uk/news/world-europe-guernsey-17590536

forest

ahh. a minute on the lips, a lifetime on the web.

Gavin St Pier

Mortgage Interest Relief provides taxpayer support to rising property prices. This seems an odd policy objective and outcome in a market with sky high prices to start with; and that is not in the long-term interests of anyone, least of all first time buyers trying to get on the property ladder.

However, as the Budget Report makes clear, the only decision before the States in December is a proposal to reduce the current mortgage cap on which interest relief can be claimed from £400k to £350k with effect from 1 January 2014. This will affect around 200 mortgage holders with mortgages at or above £400k. Whilst we decided it was more open, honest and fair to share our view that the relief should be phased out, the States is not being asked to decide on any further reductions in this cap at this stage. We have also announced a widespread review of taxes, contributions and benefits. It is the Treasury & Resources Board's view that any tax raised by withdrawing mortgage interest relief should be recycled by means of the tax system, for example by way of increased personal allowances to taxpayers. Any further reductions in the cap and any other changes to the tax system will be subject to the outcome of the review and further deliberation and decision by the States in the future.

Concerned Voter

Minister

Thank you for your response.

You are focussing on one narrow aspect to the exclusion of others to seek to justify your proposal.

And even if, overall, AFTER taking everything into account, it were still held to be desirable to reduce or remove this tax relief, there are many ways to do that and many would suggest that the method you have suggested is T&R's preferred route is actually a most dangerous path due to the economic and social side effects.

T&R cannot overlook the inconvenient truth that MITR is firmly integrated into the lives of many and the econmomy and removing it must, if ever done, be a very careful process.

Many would also think you have completely overlooked the benefits - direct and INDIRECT that do flow from this relief and all the PROBLEMS that will flow from removing it in the manner you proposed.

I am sure you will know that it is all very well to be doing "the right thing" (if removal of MITR were ever classed as such), but doing it the wrong way could be worse than just leaving the "wrong thing in place".

This is a complex area and great care, research, modelling, analysis, consultation etc is necessary before a comprehensive package of integrated decisions is taken - the fact that you have declared a full tax review for 2013 suggests that that work lies ahead and as such it would seem reckless to be fiddling with something as fundamental as MITR without having done all the necessary upfront work.

The tax system and our economy is too important to be subjected to fundamental changes on the basis of shallow, superficial or only partially thought through initiatives, however well intended.

Remember, the fact of your signal to borrowers will ALREADY be causing some cautious people to be putting the brakes on their spending NOW and pay down their mortgage faster to get ready for your future plan to massively include their tax bills.

Have you already thought through in detail the economic effect of that? It is recessionary. And you will have no new money to redistribute to try and counteract that for say 3-4 years. A lot can change in an economy over 4 years, especially if the wrong kind of behaviour is encouraged by government.

So already you have unleashed a significant risk of economic harm by T&R saying what it has in the budget on this point and you have no levers to pull to fix this - save perhaps for emphatically reversing your preferred position. Silence will leave us with this problem.

I am sure that you did not mean to have this effect on the economy, but that does not mean it will not happen: when the government sends signals, indiviuals affected make decisions regardless of whether they are good or bad for the economy.

Government should be careful what signals it sends.

forest

Gavin.

Even if this did get through - which I doubt very much it will because you'll see protests like you've never seen before in Guernsey, all money raised will either go straight into paying for overspends and consultants from out of control states departments or be swallowed up by a civil service that you and your fellow deputies seem unable to put a leash on.

You made a promise to us all that there would be no more tax increases until the SOG had demonstrated that they have made every possible saving through the FTP. You've now put this process off for ANOTHER year because the civil servants say so and imediatley decided to hit us with this.

I don't think so.

markB

" for example by way of increased personal allowances to taxpayers."

Yeah Right! …… I think you’re trying to take the sting out of the tail there with that little sweetener?

Scarlett

Gavin

Theoretically, as someone else pointed out, I guess if a homeowner depends on mortgage relief to keep their head above water, then it's a tenuous position and they probably shouldn't even have a mortgage in the first place....however (BIG however), I don't agree.....

many of these people haven't had so much as a cost of living pay rise in the past 5 years or so, so the mortgage that was affordable back then quite possibly is a struggle for many people, through no fault of their own, and mortgage relief has therefore become a lifeline for them.

Your proposal potentially means people going into default on their mortgage and essentially losing their homes, and whilst this happens, you will continue to allow States departments to make outrageous overspends, employ expensive consultants to tell them what they should already know (it being their job, ffs) and of course, allow the civil service pension pot to continue, unabated, until someone, somewhere, has to admit that we simply cannot continue to subsidise it, an' it all goes t*ts up....

let's not forget the fact your own department managed to lose 2.6mill, either, for no apparent 'reason' we've been given, and all those responsible still cosily tucked up in their well paid jobs (bar one).

Yes, you have a difficult job, and yes it's not all of your making, Gavin, but you CHOSE to run for office whilst maintaining your nice well paid job in the private sector as well, and continue to prove that you have no damned clue what the average person (many of whom voted for you in to 'represent' them) are going through on a daily basis, or the incredible stress that your demands for yet more from us whilst continuing to allow States spending to run riot.

Quite frankly, it's insulting that you would assume any of us believe a word you say or have any faith in your ability to sort out the total balls up that is our island's fiscal situation.

JJ Lehto

"Your proposal potentially means people going into default on their mortgage and essentially losing their homes.."

Even at an unrealistic interest rate of 5%, the first tranche of this reduction in a years time will cost £500 per year.

Is that really going to result in someone defaulting on a mortgage??? I think all the sensible heads out there know the answer, rather than the drama queens with their made up figures and bizarre conculsions (such as mortgage amounts far in excess of 5 times salary).

Scarlett

JJ.

I, you, and quite obviously Mr GSP, have no idea how close people are flying to the wind regarding their household budgets, that is why I used the word, 'potentially'.

There are many people over here who are apparently living the high life, i.e., well paid jobs, nice house, 4 x 4s, holidays a plenty, kids at private school, who are, in fact, utterly skint and literally living on credit to maintain their 'status'.

There are also many people over here who, despite best efforts, are on their bones of their asses, due to several factors, including the fact they haven't had a wage increase in years, and are literally living on credit just to get by....

and that's whilst we have relatively low unemployment, which I hope will continue, somehow.

This proposal, which Gav and his mates were apparently only speculating on (and now back peddling as fast as their expensively shod feet will carry them), when fully implemented, would effect everyone, some more than others, and for what? So he can chuck that 8 mill into some bottomless pit such as the CS pension pot or yet more consultants?

But, enough of me, what's your position on this debacle?

Tulip

Gavin,

I appreciate that it is an odd policy objective, however it is a direct tax on the young and middle classes and will leave many people struggling.

It will be nothing more than a further re-distribution of wealth in favour of those who have already benefitted from massive house price gains. Good idea, let's make sure their taxes don't go towards assisting others who weren't so fortunate as to have been born at least 10 years earlier.

Whilst you suggest that it will lead to a decline in house prices, which will in turn assist first time buyers (which MITR already does), without legislative and/or other tax changes, rich buy-to-letters will simply step in to fill the void.

I urge you to revisit this idea.

bcb

Gavin

Read the very well thought out post in response to yours (also post 102) and you will see why you are not the right person to be fiddling with taxes. Please either hand over the position to someone who is able to look at all the possible out comes or at least get some advice before plunging many people into the desperate situations some have explained to you on this forum.

I think you are just out of your depth.

Matt F on the radio this morning had it spot on.

Scarlett

http://www.gov.gg/CHttpHandler.ashx?id=75859&p=0

I have just taken a look at your Declaration of Interests, Gavin, and noticed that your home is held in Trust.

Could you please explain what the benefit of this is? I may sound naive, but this seems a tad unusual to me.

Is it something we can all do?

Also, just for the record, how will your property investments be affected by this move?

- just to keep everything fair and above board, you understand.

Slash

I don't think anyone's mentioned the other ticking time-bomb of the interest-only mortgage. I know of quite a few people who are just about keeping their heads above water paying the interest on a huge mortgage, trying not to think of that day when the lender will come and ask for hundreds of thousands to repay the capital sum.

Many of these mortgages were taken out back in the heady days of 'self-certification', also known as Liar Loans, in the expectation property values would move ever upwards.

People in this situation, now facing the prospect of losing mortgage interest relief must be wondering how they will ever cope.

tum tum

Firstly whether you agree or diasgree I think we should thank GSP for taking the time to reply. I'm not keen on the action but if only £50k is removed it shouldn't be too bad. Maybe review each reduction at a time rather than plan to phase out by x date.

If we are talking about a fair society how is punishing homeowners for the sake of first time buyers fair?

If GSP and fellow states members take one thing from this forum i don't think it is that people are hugely against this action and i believe if all other problems were sorted people could accept this. The problem is when there is such huge wastage in our system it is incredibly insulting to ask us to give up more. When the states pension etc is sorted and we stop spending milions on ego building projects maybe the public would accept such actions. The pension for states workers is the most stupid and grossly unfair thing i have ever come across

Dave Haslam

Steering well clear of this Hornets Nest for now, there far too much 'true colour' on display and the publics 'all change' dream has clearly fallen under the wheels of orwellian ideology.

I will however be protesting outside on the day this goes to the vote. I would imagine the incinerator protests will look pitiful compared to this. I would also wager that GSP has already blown his chances at the next election.

markB

“Blown his chances” ......He can afford not to worry about it.

Sensible

GSP's proposal is badly thought out and can only have a detrimental effect on people's chances of ever becoming a home owner.

The argument that it makes for a fairer tax system is a poor excuse for simply introducing greater taxation to help the State's defecit. If fairness is the true driver for our future tax system then presumably two-tier rates of personal income tax and social security contributions will be introduced to refelct thos who do or do not have children. At present, non-parents heavily subsidise those with children, paying towards their education, healthcare and the many other States-funded aspects of life. I can't see that change being implemented so the concept of hard decisions for a fairer system is nonsense.

The fact is that the cost of rtunning our island and its services is constantly rising and the money has to come from somewhere. To this there are two simple rules to follow: Those who earn more should pay more tax, and: Those who spend more should pay more tax. The former is achieved by removing tax caps, with higher rate tax bands applied progrssively on higher earners. The latter is achieved by the application of VAT to all goods purchased in the island or bought elsewhere and then imported into the island.

By increasing taxation of the higher earners and introducing taxation on the higher spenders we would have a truly fair means of balancing the island's books.

hmmph

With all due respect I'm not for this proposal but I disagree with you on a few points.

1) You see kids as a cost, actually given pension holes etc they are the ones in the future that will be working to pay all your bills! If everyone produced kids we wouldn't have the ticking time bomb of aging populations.

2) Whilst in principle your VAT proposal makes sense you have been a bit simplistic as many people are accusing GSP of. Firstly there is the wastage to society of administering such a system (probably cost what it raises) and secondly the damping effect this would have on our economy from higher costs to business and also consumers.

Devil's Advocate

so you suggest we all have kids to pay our pensions? where do you expect them to live?!

Gogol

No they aren't saying that.... The point is that the kids will be paying in to the system to pay your and mine pensions etc as there isn't enough cash. If everyone stopped having kids who would pay future taxes to pay healthcare bills etc. people don't always see the big picture.

markB

We are all subsiding the Finance Industry to be here, so maybe its time Mr St Pier should start to look there for some sort of taxation.

A voter

The finance industry is the engine room of our economy. It allows us all wherever we are in the system to enjoy the standard of living and public service we have. Even if some have a lower standard of living than they think is fair, it would likely go down more if finance sector were not with us.

We should not wish to see the finance industry discouraged.

So to use your language, if there is a subsidy, it is from the finance sector not to it.

We take lots of tax from all those employed in the finance sector here. If they go, that tax goes and maybe if the jobs are not replaced, the burden on the public purse will jump. That would be a bad double whammy, in nobody's interests. Except perhaps another country where the finance sector might head off to if we discouraged them here.

And all those finance sector employees spend much of their income in our economy.

Now that is not the same as saying it is not possible to intelligently tax elements of it and other multi-national non-finance sector businesses some more in some way(s)that will not discourage them from operating here.

But no, we do not subsidise them!

Guernsey's economy has thrived with the finance sector here and we should encourage the key pillar of our economy to stay.

Malcolm

A Voter

I agree with you that the finance "industry" is the engine room of our economy, the problem is that it gives out so much polution that it's choking everyone that doesn't live inside it's walls.

I have always suspected that the engine in our engine room may have been bit dodgey from the start, all it seems to do is provide heat to those that don't mind getting their hands dirty maintaining it.

Mortgage tax relief was here before the finance "industry", but we can now no longer afford it?

Something is badly wrong with this Key pillar of our economy.

Gogol

Sorry but this is ah totally illogical poorly thought out argument. Careful what you wish for!

All those employed people paying taxes should not be wished away. Get a grip

kevin

No, you're right, all those employed people people paying taxes should not be wished away - in fact quite the opposite, the high earners should be made to pay more tax as they would have to do in the UK.

Bewildered

Another case of an unqualified deputy trying to make his mark before he gets voted out at the next election !

How on earth can he say that this will help islanders get on the property ladder ?

The man is deranged !!!!

hmmph

How about we look in the following places as alternatives to raise cash

1) tax man goes after all the tradesmen etc that take cash and don't declare. Its not hard to see people who declare

2) clamp down on property developers claiming they live in their houses before selling

3) stop wastage and huge cost of public projects

4) freeze states pay. The states has no money and as an employee of the states they should share the ''pain'' as is the private sector. If they go on strike sack them

5) stop being over generous with benefits. If you can afford fags and drink your getting too much

6) close the outrageous states workers pension scheme

7) operate the states on an efficiency basis and make people accountable

One final point aren't the taxes on property purchases unfair then?

A.J.

HMMPH

I'm with you all the way.. Your post seems to me, obvious and common sense. GSP and Dorey are totally out of touch with (a) the people,and (b) reality.They should both return to Mars!

A Voter

Minister

Can you put yourself momentarily in the shoes of a borrower who has say a £350k mortgage the repayment for which is their largest outgoing?

They have heard what T&R plan and they know that if you follow through with the idea, they will have to find say £3000 more per annum within about 8 years.

OK, so their mortgage has 25 years to run, so that leaves them with 17 years without that MITR.

They know now that it would be risky to do nothing and assume that they will get big pay rises or that the cost of living will not go up faster than their pay (who thinks that will happen?!).

So they logically think that you have kindly given them 8 years notice so they start to divert all possible domestic income to accelerate the repayment of their mortgage.

The concern of many of us is that when you multiply the effect of that across the number of borrowers affected and then you model on the impact of that loss of spending which will then not cycle through the economy, plain and simple it is a majorily recessionary measure.

That, many of us think, will be bad news.

So, in a way, the merits of your argument could almost be ignored. It is not a matter of whether the outcome you seek is right or wrong or fair or unfair, but in taking us to this place you wish to go you may cause so much economic damage you and all of us may wish you had not done it.

So the work that is needed is not to exchange shallow political spin on selective points - anyone can do that - but to properly work through the likely impacts of your proposal, bearing in mind that what you have already done by making the announcement has already caused a great deal of uncertainty and nervousness. People, businesses and markets alike all react to uncertainty.

So if your board do take on the concerns voiced and accept the risks involved, many of us hope that they will not just kick this into the long grass but emphatically announce a clear policy to remove the uncertainty. Because if they do not we may get all the downside of this policy even if you do not implement it.

The economy and tax system is a bit like a complex ecosystem in an unstable equilibrium - give it a big kick, like you plan, and the consequences may be many, adverse and appear all over the place and cost far more to fix than you raise.

If it ain't broke don't fix it - there is plenty of other stuff to fix though.

devils advocate

Given the relief is calculated via the Income Tax return then surely it should be relatively straight forward to make it means tested. So for example anybody with taxable income under £50k still qualifies and everybody who earns more does not qualify. Perhaps have a sliding scale so that there is a smooth transition. Should be quite straight forward to work out (even for Guernsey tax dept).

Tax Mug

Dear Minister

Before trying to come up with hair brained schemes to fill Lyndon,s 'Black Hole' please consider the following:

Beau Sejour = Overspent

Airport Terminal = Overspent

Rondin = Overspent

Incinerator = Wasted millions on something that was never built (Twice!)

Can you see the pattern - you don't need to be Doris Stokes to see it,

Deputies Pay = Let's give ourselves a nice big rise whilst everybody else is struggling!

Industry = Lets pander to finance and bugger everything else!

In short - get your own bloody house in order before you even think of mugging the men & women of Guernsey of more money.

Sleep tight.

Guern

Pleased to see that you have noted that it is Lydon's mess that Gavin is trying to sort out, and if you see what he is recommending in the Budget and do not get carried on the band wagon it will only be on morgages over 350,000 instead of 400,000, and then rest will be reviewed in the total review of tax allowances.

See Fallaize is trying to whip up a storm again, if he can't stay on a committee because his views are not agreed with why should we support him, he should just stand down from the States totally.

Eddy

I think they should scrap the subsidy immediately all in one go and then me and my rich "Guernsey Come Lately" foreign friends can buy up all the houses that are repossessed from the locals very cheaply and then charge the local peasants high rents to live in the properties they once used to own. This has two benefits, firstly it will give us something to invest our obscenely large bonus's in and will give us a nice rate of return and secondly it will help keep the locals in a position where they can only ever afford to rent, thus keeping us supplied with tenents for our newly owned properties.

nice one mate :)

truth

Let's face everyone on here is just out for themselves. My present mortgage is £280k therefore i think it would be sensible to lower the cap to about £275k!

It will be an interesting test of the states will power to see if the proceed with this. I live in St Andrews(previously next to St Sampson Primary) and think its ridulous that as soon as a petition is signed our cowardly deputies step back on their decisions to do things such as shut schools!

Fallaize just loves making headlines and no doubt has a vested interest which he should declare in terms of his mortgage.

Phil

It appears from their Declaration of Interests that Deputies Dorey and St Pier are heavily involved in property investments, where they are able to claim full tax relief on any loans on properties that are let to tenants. This practice is far more damaging to property prices than MITR is, yet they claim to be some sort of moral crusaders wanting lower property prices. Unbelievable and hypocritical, simple as.

Scarlett

a very interesting observation, Phil. I also noted that his home is held in Trust for some reason.

I have asked the question, so await the gentleman's reply with interest, especially in light of the fact one of the main reasons for cutting mortgage relief is that it's not 'fair' (to no home owners)...

hoping this 'fairness' extends to his personal finances, too.

bcb

well spotted Phil.

Dani

After reading a lot of the posts I have become confused on what the result of the MIR withdrawal will be. This is in regards in what it will do to house prices or what it will do to rental prices. I think this needs to be looked at closely before such a decision is taken.

I do not think that the withdrawal is equitable but more importantly I think you have to look at the overall effect on the people of Guernsey and the economy. This adjustment may contribute to a larger trend. I hope Gavin has considered this.

I also think you have to consider what is important to people locally. It is owning your own home. This may not be the case in other cultures but it is ours and you cannot pretend it is not so. I also agree with the posts above that it should be a realistic expectation if you are willing to work hard and sacrifice. I think it it is fair to suggest that as time has gone on it takes longer and more sacrifice is necessary. I think it is unfair to suggest that the only reason younger people and those on lower incomes cannot get a mortgage is because they are not trying hard enough or are squandering their money.

It is getting harder and harder to get on the property ladder - I think this needs to be addressed. MIR withdrawal may just be another factor making it harder.

I think an island of home ownership is better for us than everyone renting. Irrespective of what I think I ask you what kind of behaviour should we be encouraging though? Is it renting or own home ownership? This is important. We should be certain on this.

Why I think this way currently is because:

I can see benefits to owning your own home. First people will be happier as their money goes towards their own home; not someone else's bank account. Things can seem futile if you give away £900 a month and you get no long term benefit for it.

It makes having a family a lot easier. A lot of rented places now do not want kids and animals. Owning your flat/house means you have a home that you can do what you want in. You can make adjustments to so it feels like your space. It improves the quality of how we can live for some people which I place value on. It can make you feel more stable and secure.

Once someone has paid off their homes they have a lot more disposable income (from not continuing to pay a mortgage) which can be spent locally and or saved for retirement. The later is especially good for us all as they will potentially rely on the States less. They even have an asset to sell to help fund nursing homes costs when they are older. They will have potentially more cash to enjoy their retirement with. People still renting may not be in the same position.

What does happen to people renting when they retire? Rents are very high - can pensions cover them and the rest of today's living costs? Do they get more help from the States? Will the money gained from having the landlords property income taxed be more or less than the future cost of potential extra support to renters? Is the cost of helping people obtain mortgages offset by a reduction in costs from them potentially needing less support in the long run? How are the landlords spending their profits? Does it matter if the landlord is not local on how much benefit islanders see from it? I don't know the answers to these but I think these things should be considered.

I also want to know if this does make getting a home harder how this will effect young people. How many are coming back from university now? How many are moving away? Is it because of the cost of living and home ownership? Is this effecting our demographics? How does this effect the ratio of young supporting the old in retirement?

I guess what I'm saying is you have to know what you want to achieve with subsidies or taxes and assess if in aggregate they fulfill the bigger objectives you want to achieve or work against them. On this basis I want someone who does know to make it clear of the overall impact. I think we need to discuss what we value as community more as well.

concerned

Dani

You raise so many good points and questions in particular.

I think the point for many of is that T&R have not even scratched the surface of many of these issues.

Until the debates are had and analysis is done it maybe that many of these key issues (and plenty of others) will not be known, which begs the question:

"How can it be right for T&R to be proposing any substantive change on this matter at this time?"

Surely it does not matter whether each of us is pro or anti this relief, but that the decision taken in due course is the best one possible in the circumstances for the greatest number of people, the community and economy as a whole.

Of course there are always losers and winners when there is any change, but the best way to get wide buy-in I think is for all those affected (especially adversely) to see that a proper process was followed.

Here there seems to be little or no process other than some simplistic, selective, incomplete, shallow arguments put up in an unconvincing defence of what many of us think to be indefensible in its current form.

If T&R take this forward properly and then come back with comprehensive evidence based proposals and clear policy objectives then many of us who are voicing concerns now will probably accept the outcome of a fair and rigorous process (even if overall we are financial worse off as a result).

Dani

Concerned

"Surely it does not matter whether each of us is pro or anti this relief, but that the decision taken in due course is the best one possible in the circumstances for the greatest number of people, the community and economy as a whole."

Wow. So well put. I'm loving your last paragraph too - I think your right there.

I don't see why at first they were not going to wait for the results of the review they are going to carry out before making a decision on how to raise more money or assess what would be more equitable. The best decisions are usually always made with all relevant information in mind.

I'm also hoping what is found in this process is not ignored as it sounds like the rest of the information will be overlooked and only used to judge whether there is any "compelling evidence against" MIR withdrawal and this would be such a waste to focus only on one issue. I think T&R must use all the information suitably and not purely to support their own view points for their proposals to be accepted by anyone with concerns.

concerned

It is usually wise to keep an open mind, as you say.

It would not be a particularly worthwhile review to say - this is what we think we should do, please look for compelling reasons not to do it.

As we have seen these past few days it is always possible to deploy arguments that support any view and then vigorously defend that and dismiss everything else.

But that would be a great waste of an opportunity to not have an open mind in how to implement policy objectives - incidentally do we know what these are? They are the prerequisite to any meaningful review I would have thought.

Armed with those the review can get underway and then it will become apparent what all the options are and what the best overall package might be. And there will be winners and losers as there always are with any change. But lets look for the best mix.

I would hazard a guess that there might be some counter-intuitive outcomes if an open mind is kept throughout.

Fingers crossed that the review is genuine and not window-dressing.

MP

Gavin

after hearing you on the radio I have felt the need to write again.

To be bracketed along with the top earners in Guernsey seems ludicrous. You state that this will "only affect the top earners in the island" - how do you know this? Do you know what I earn? Have you reasearched this?

What about all the top earners in the Island who dont buy a house as they are on a license or those who simply are rich enough to not need a mortgage, they are not affected by this at all so how is this fair?

To put many hard working local people in the same bracket as this shows your ignorance and naiviety in so many ways. This is not equitable and fair but lets face it the equitable and fair way isnt something that the States will ever get to grips with.

Radical

@ MP

Agree completely - seems to be confusion about people who have the biggest mortgages having the largest incomes. A couple I know moved back from the UK where all they had was a £10k deposit due to house prices falling there. They had to take out a mortgage of £425k to find a house with enough room for their children (albeit it is riddled with damp etc).

According to GSP this family are high earners and shouldn't benefit from MIR. Why? Who is more deserving? The only people I can think is those that rent, who normally do so out of necessity before getting a deposit / mortgage and getting onto the housing ladder, and will then themselves benefit from MIR.

All this debate about something that works. Lets concentrate on the more important issue of increasing income tax for high earners or radical an idea as it is, increasing the income tax rate on high earners on licence / open market only. I know, the concept of looking after locals first is a bit left field!

If MSG partners are earning £350k + then I think an income tax rate of 25% for them would be reasonable.

Dave

Where did they get a mortgage from with a 2% deposit unless there is a place where you can get 100% mortgages? If you have a 425 thousand mortgage you still have a high income.

Pillsbury

More rich boys' lack of understanding of ordinary people. T&R are not exactly strapped for dosh as individuals are they?

confused

I agree MP. Gavin said the reduction from interets on £400,000 to interest of £350,000 will affect 200 "top earners". I would beg to differ as I do not class anyone with a mortgage ot that level a "top earner".

Quoted elsewhere, again by Gavin I believe, is no MIR in the UK and lower in Jersey. What have they got which we haven't? VAT and GST!

Come on Gavin we live on an expensive island. Look at what £350,000 buys in the UK and what it buys over here. If you need to tinker with MIR means test it through the Income Tax but do not withdraw it unilaterally or would that be too simple

MP

So Gavin what is your response ? I am not a "top earner" certainly don't earn near what you probably have in your career but you think it fit to pick on me. What about the real top earners? The ones who really can afford topay more aren't being targeted are they? I cannot believe that there are only 200 people that are "top earners" in the island. Do you think this is really the case? Being ex big 4 you should know better even if you averaged across the main firms banks, accountancy etc this simply doesn't stack up does it?

Stop picking on the low hanging fruit

Stop picking on the normal and average person who has to spend this much to but an average house.

Start making proper decisions and deal with things on an equitable basis. If that means income tax then that's what it should take. That at least impacts people fairly.

You had a great chance to make a difference but as with your predecessors you have ducked from proposing a proper decision and stuck with something to avoid putting off people moving into the island.

Gavin when you were voted in it was for a change, a new direction and something other from what we were used to. Unfortunately you seem to have fallen into the trap of trying to keep everyone happy at the the expense of the majority.

Be big enough to accept this proposal is wrong. Concentrate on real changes and what can really add value to the island. Do this and you might be lucky to get my vote next time around but then again maybe you don't care.......

kevin

I would like to have a good look at Deputies declared interests e.g directorships held,businesses e.t.c

can anyone tell me where I can get this info.

Dave Jones

Kivin

The information you are after is on the States of Guernsey web site

just type in Declaration of States Members interests and it should pop up, I dont have the link to hand but it is not difficult to find.

Ray

Amongst the 150+ posts on this particular thread I read that the proposed change will only affect a couple of hundred homeowners

Does this number include all the people who have purchased a 1M + property but only needed to borrow 400K on it ( for instance having sold their 'old' house for 600K +?)

Chris

Surely as house prices and therefore mortgages are on the rise, the mortgage relief will be phased out anyway over time as more people reach the £400,000 limit?

Zab

The Elephant in the room is the Minimum Income standards Survey, the solution is easy, take it as base line and work toward a fair society.

What is wrong is most of our government do not believe in an equitable society due to their political ideaology, however as they do not want to be seen as such they attempt to disguise their policies whilst appearing ABSOLUTELY unaware of the existance of this document and the 60% of people whom wanted this as the base line.

Comments please Policy Council.

Jimbo

Has anyone seen this?

http://www.iflr.com/Article/3121992/EXCLUSIVE-UK-to-impose-son-of-FATCA-on-Crown-Dependencies-despite-governments-denials.html

It will affect far more than our levels of mortgage tax relief!

Dani

Jimbo

Yes I have seen it.

I am currently attempting to deal with his comments on other stories where he is saying we do not have democratic government and saying we will go belly up and start asking the UK for money.

It is besides your point but it must be known what he is saying.

Spartacus

Jimbo

Thanks for this link. I believe this is a serious threat.

I believe Dani is confusing this author with someone else but she will correct me if I am mistaken.

Jamie

I suspect we'll see something about 'son of FATCA' in the press soon, however it is still yet to be confirmed by the UK which I think is expected in Early December (4th - 5th).

I don't actually think it would have much of an impact except more regulatory burden on Local business (although I only speak knowing the situation of one local institution). What will be interesting is if the CDs insist on 'exchange' of information as the UK did with the US. This would put a lot of regulatory burden on UK business to reciprocate the information sharing, something which a lot of US institutions aren't too happy about with regard the UK deal under FATCA. It could actually be the straw that breaks the camels back of the UK's rich who arrange their affairs offshore .... they may see a few more people leave the UK.

Jimbo

Interestingly, I tried to post the same link on the This is Jersey website and their editor has obviously decide to block it - that's Jersey for you! They refused to move to automatic exchange of information when Guernsey and the Isle of Man did, and it is Jersey whose big banks (subsidiaries of UK clearers) who employ several hundred staff (RBSI/NatWest, Lloyds, HSBC) are looking after huge numbers of UK connected accounts. It is Jersey who had the controversial Jimmy Carr scheme (and several other similar ones), and the HSBC stolen data disk with thousands of UK account details (although its certainly not an offence to have an offshore account).

I think you will find that it's been Jersey's arrogance, refusal to sign up to automatic exchange of information (what the hell are they hiding there which led them to make that decision? ) and heavy involvement in more aggressive tax planning which has brought this latest move from the UK. And Bailhache wants Guernsey to become much closer to Jersey constitutionally? No thank you, His next move will be to propose that both islands should stick two fingers up to the UK and go our one way together, which would be the biggest single mistake Guernsey could ever make.

Our biggest challenge would be the practical costs of complying with the "Son of FATCA", rather than the implications of reporting the information. I think Jersey will be far more concerned with the information being disclosed, based on their refusal to move to automatic exchange of information.