Guernsey Press

Senior politicians make the case for tax reform

On Monday evening at Les Beaucamps High School, Chief Minister Peter Ferbrache and fellow Policy & Resources members Dave Mahoney and Jonathan Le Tocq were joined by Employment & Social Security president Peter Roffey to present proposals for tax and social security reform. Deputy Mark Helyar was unavailable. The subsequent question and answer session kept them busy for another 87 minutes. Simon De La Rue reports an abridged summary of that session.

Left to right: Policy & Resources president Peter Ferbrache, P&R members David Mahoney and Jonathan Le Tocq, and Employment & Social Security president Peter Roffey. (Picture by Peter Frankland, 31518934)

Q: To quote your P&R treasury lead: ‘Calls for higher taxation can only drive us towards long-term decline. Our young people, wealthy residents and businesses in all sectors will not stay in an island where there is no opportunity. History tells us that in almost every jurisdiction, once a new tax is introduced, it never goes away. Once we put our taxes up, we will have let that genie out of the bottle.’ What’s your comment on that?

Peter Ferbrache: As Winston Churchill once said: “If you can’t have your mind changed by the facts, you’ve got no mind to change.” So in relation to that, Deputy Helyar has decided, with reluctance, that we do have to put these proposals forward. And if we don’t, there won’t be the money to keep our schools open, to keep our libraries open, to keep our health system. It isn’t a matter of fancy things that we might want to do, it’s a matter of life, death and having decent services.

Peter Roffey: I have to say that at the last election I was quite frustrated because I was being very candid and telling everybody that I thought taxes would have to go up in the next term. It frustrated me that some people were – whether it was for votes or whether it was for genuine belief at the time – in denial of that fact.

Q: How can you expect the public to pay more when you can’t get your own costs under control? And I specifically refer to the civil service and the amounts that you are paying some people.

Jonathan Le Tocq: We actually do have to do that. So it’s not “either, or”, it’s “both, and”. But that alone will not resolve these problems because we’re facing the same demographic problems – costs of health care, particularly – as all of our neighbours.

David Mahoney: It’s a very easy target to pick the civil service and we see a lot of it going on. But of the increases that we’ve seen, a huge proportion of those are actually health-care staff. So if the suggestion is that we stop bringing in nurses, then that clearly is not workable.

Q: What reassurances can you give that the GST rate won’t rise above the initial 5% or that the 15% income tax band won’t be removed in future? It’s obvious what you’re doing – this is a stealth tax (applause).

Ferbrache: It’s certainly not a stealth tax because it’s open and obvious. To say that we’re in some way trying to mislead the public is completely and absolutely wrong and I take strong objection to it. If it was possible to decrease tax, we would all gladly do that. When we say, in a few years’ time, that we don’t have enough money to keep our schools open, to pay our carers or to fund the NICE drugs, what are we going to do then? You can get a round of applause now but you won’t get a round of applause then. I’d like all the people who applauded just then to tell me where they think the money to fund those services will come from.

Q: Can the Revenue Service cope with the extra work or will they need more civil servants?

Ferbrache: We will need a few more but in Jersey, the annual cost two years ago was £800k for a GST that brought in £94m. That cost has been factored in.

Q: We have a lot of wealthy people who have come to the island. Did you consider graduated tax bands that would see them pay more?

Le Tocq: Our proposals go a good way towards that. We currently have people spending money – buying new cars every three years and going out for expensive meals – who currently do not pay on their huge consumption.

Roffey: There are quite a lot of people in Guernsey with significant wealth but very little in the way of income, who draw down capital on a regular basis. They, because our taxes are focused on income, are paying very little. That’s something we need to address.

Q: Have you considered asset-based taxes?

Roffey: The biggest asset people have in Guernsey is their home and you’ll have noticed that Tax on Real Property has gone up fairly significantly over recent years. I think there’s a limit to how far you can take that because there are people living in family homes that are actually on quite low incomes. You could say they should be forced to sell it but I think there is emotional investment in a family home and I would not want to get to a point where we would lever people out.

Ferbrache: There are people who have got multiple assets, millions of pounds in the bank, shares and own several properties and we could have, effectively, a wealth tax. We would gain money for a year or two and we would lose money in the long term. If I thought it was achievable, I would be in favour of it. It isn’t achievable.

Q: Could you exempt healthy foods from GST?

Roffey: I can hear all the legal debate over what is or isn’t healthy food. I don’t think eating meat is healthy but my colleagues here would totally disagree with me. If you keep it simple, like the New Zealand model, the administration costs are incredibly low [1%]. As soon as you complicate it, the costs ratchet up very quickly.

Q: When asked about GST on the question and answer section of the website in 2020, Deputy Ferbrache said “in principle, against it”, Deputy Helyar said “against it, as it harms the poorest in society”, Deputy Le Tocq said “I wish to avoid introducing a GST unless absolutely unavoidable”, Deputy Mahoney said “I am against GST and will not support”, Deputy Bob Murray said “no, not at all” and Deputy Roffey said “I’m against it, it would be regressive”. How can the public have any confidence in our electoral system and electoral pledges, if the States now supports a GST? (applause).

Le Tocq: I do think we’re in a situation where it is now unavoidable. Also, we’re not just suggesting GST. If that were the case, we would not be here tonight trying to persuade you to agree with us. What we have been persuaded is that a raft of packages which includes a GST but deals with the regressive nature of what a GST by itself would be, is appropriate.

Roffey: The overall package is progressive rather than regressive.

Ferbrache: In principle, I don’t like it but you’ve got to have regard to the reality of where we are. If people say at the next election “I’m not going to vote for you because you voted for GST” then that’s democracy.

Mahoney: I’ve already apologised in a previous States debate about the change of my position. GST on its own is regressive and was anyone going to say at the last election “yeah, to hell with it, let’s have a regressive GST”? No, of course not.

Q: Will you look at your spending on consultants?

Mahoney: The officers, at my request, have finally given me a list of all consultants that we employ, the basis of those contracts, how much they’re being paid, what notice periods they’re on etc. That’s consultants and contract staff. That’s being looked at right now on the basis of: is this the right person or can I actually employ another person on full-time and pay half the money?

Q: Large companies have not been required to pay tax on their profits since zero-ten was introduced. Can we look to tax them more?

Mahoney: There’s been a lot of analysis into what we can add into the 10% and 20% corporate tax bands. It’s all in appendix three, section five of the Ernst & Young report [published with the policy letter].

Roffey: We can’t go back to the old system because it was deemed to be not compliant with international tax competition rules and it would still be not compliant. But the business sector will be paying £20m more under these proposals plus their increased social security payments.

Q: Will you allow a referendum on this divisive issue?

Mahoney: You can ask “do you want a GST?” – that’s a fairly easy tick box – but the next question must be “do you want to lose a hospital or a school?” and then the next one’s got to be “100 staff or 200 staff?”

  • The States will debate the proposals at their first meeting of 2023, which begins on Wednesday 25 January.