‘Not the time to bury head in sand’

Gavin St Pier has outlined the stark choice for islanders – do nothing, or start to think about it.

In other words, pay more taxes or see public services struggle as costs rise while government revenue fails to keep pace.

The Policy & Resources Committee wants to kick-start a review of the tax base to consider four options to raise more revenue.

These are a company profits tax, a sales tax, a health tax, and an extension of the existing income tax and social security system.

A company tax would need to keep a structure which is competitive, internationally acceptable and maintains tax neutrality, which is seen as important to the island’s finance sector.

January will see the first staging post in the process, when a policy letter will go before the States.

A number of financial challenges are on the tracks ahead, including long-term care for the elderly, the introduction of new drugs, an overhaul of primary health care, and the review of pay and conditions for public sector workers such as nurses.

Most of the changes are driven by the ageing population, and in total they could cost taxpayers an extra £132m. each year.

Deputy St Pier said they cannot duck the challenges.

‘We can do what other countries do and we can buy our heads in a bucket of sand and ignore it and leave it to the next lot of politicians,’ he said.

‘That is the easy solution, we can pretend there will be no crisis in the next six months or few years, that would be the politically normal thing to do, to keep the head down and let someone else worry about it.

‘We have an option, we can either be planning for what’s ahead, or we can just react to it, and the Policy & Resources Committee’s view is that it is our responsibility to plan for it.’

The sobering message is that tinkering around the edges with tools like TRP and sin taxes are no longer going to create the sums of money needed, and that an overhaul will affect everyone, including lower income earners.

Targeting the wealthy is often a crowd-pleaser, but the reality outlined is that Guernsey’s top 10% of earners are already contributing nearly 50% of the entire income tax take.

Deputy St Pier acknowledged that raising taxes is never popular, but his personal hunch is that people would be prepared to pay a little more.

‘People very much want to have the services, particularly when it comes to health and social care services, when they or a member of their family or friends have a particular issue, for example a hip replacement costs £12,000.’

‘If the community says absolutely we don’t want to pay any more in taxation, well then there are consequences for that in terms of what changes would be needed to services, and my instinct is that the community would not find that acceptable.’