OPINION: Why I stand with P&R on tax rises

EVER felt like a cat’s paw?

Call me paranoid but I am beginning to feel a little bit that way over the tax review. It is one of the biggest and most unpopular policy packages to come before the States in a generation. And it’s very much the property of the States’ senior committee, Policy & Resources.

But despite it belonging firmly to P&R, it feels at times as if, barring their treasury lead, my voice is being heard far louder in the debate than any member of that committee. Call me paranoid but it rather smacks of: ‘All together now – let’s take a step backwards and Roffey will be left standing out front.’

Actually I don’t mind that too much, even though I do wish all P&R members would step up to the plate a little bit more. Why am I so sanguine? Am I a masochist? Not really but there are two good reasons for making my voice heard over this controversy.

The first is that the package of reforms will hopefully contain a radical transformation of Guernsey’s system of social security contributions. So it is natural for the ESS president to be heavily involved. This aspect of the package has slipped far too much under the radar thus far, but it is absolutely crucial.

This is NOT just a debate about whether we need higher taxes, and if so whether we prefer higher income taxes or a GST. Social security should be absolutely front and centre.

More on that in a moment but I have a second reason for being happy to help front up this deeply unpopular message. That is that any politician worth their salt will always ‘run towards the sound of gunfire’ when there are difficult but necessary decisions to take on behalf of the community.

Perhaps that’s easier for me to say simply because I am very firmly into the second half of my time in politics, but to be honest it has always been my approach. You are in public life to serve your community, and to use your judgement, not to wave to the crowd or gain easy plaudits.

So moving on to the meat of the issues. Why am I burning political capital like its November the 5th by standing alongside P&R over increasing taxation?

The answer is very simple. Because I care deeply about core public services and I’m convinced that without higher taxation Guernsey’s public services will be devastated. It is all as a result of changing demographics and we are not unique in that respect. It’s a problem facing most of the developed world. It’s why the Tory Chancellor in the UK is pushing through increases in National Insurance contributions in the teeth of opposition from his own backbenchers.

Put simply, if we don’t accept higher taxation then we will face devastating cuts to healthcare, pensions, social care, education, policing and so on. A massive downgrading of public services which will prove even more unpopular than the current tax proposals and leave the weakest in our community the most exposed.

So to me it is not a matter of whether to raise taxes but of how to do it.

Let me say loud and clear. If the choice was simply between a stand-alone GST, or stand-alone increases in taxation on income, I would choose the latter. Why? Because a general consumption tax is regressive and income taxation is not. But that is NOT the choice.

My starting point is protecting those on lower incomes, as far as possible, from the inevitable higher taxation. Just putting 3p on income taxes would disadvantage anybody above the current tax threshold. So really low income islanders on £20,000 or £25,000 would be significantly worse off.

By contrast the package which contains not just a GST, but other measures too, would mean most lower income households would actually be better off, while those who can most afford it do the heavy lifting.

How can this be true when I have already accepted that GST in itself would be regressive? Because of the other measures in that package. These include higher pensions and income tax allowances but by far the most significant measure is the restructuring of social security contributions.

At the moment that system is supremely unfair on lower earners. Yes, they are exempt from any contributions if they earn below the threshold, but that threshold is below £10,000. Once they cross that threshold they not only pay contributions on the amount they earn above it but on every single penny they earn.

It’s a stinker, it’s a disincentive to work more hours, and it’s incredibly unfair on those on low incomes in our expensive island. I have long wanted to see it changed so that everybody has a contribution allowance – a bit like an income tax allowance – and only pay on what they earn above that level.

So why not just go ahead and make those reforms without all of this consumption tax malarkey? Because it would be totally unaffordable. It is only as part of an integrated package that we can make social security much, much fairer on those on lower incomes. And it’s only the inclusion of this measure which makes P&R’s total tax package progressive, despite the inclusion of GST. If they ever go wobbly on social security reform they will see me heading for the side door.

So what will the outcome of this whole taxation brouhaha be? I’m not sure. If its savage cuts to public services that would be tragic. If another credible way to raise taxation is proposed, which also protects the least affluent, then fine. But what I really fear is prevarication and living beyond our means.

Not only would that be very unfair on the next generation of deputies/islanders who would be forced to clean up the mess we leave behind, but it would have other consequences too.

Others outside our shores are noticing that the States look like they might lack the backbone to tackle this seminal issue. It’s one of the main reasons why the rating agency Standard and Poor has downgraded Guernsey’s outlook to ‘negative’. There may be trouble ahead.