OPINION: Right solution, wrong problem?
As part of a series in which our columnists respond to the tax proposals announced by Policy & Resources this week, Horace Camp offers praise for the plan but questions the problem it is trying to solve
FROM a professional point of view, as a former marketeer and salesman, I have to start off by applauding the States of Guernsey for its launch of the taxation policy.
I could hardly have spun it much better myself. Softening the edges by rolling up a major reform of social security which effectively makes contributions more obviously taxation and with the added benefit of getting the whole policy endorsed by Saint Peter Roffey was a near genius move.
And to be honest, the content as well is, like Mary Poppins, practically perfect in every way. By all counts an almost immaculate solution. If we are indeed to introduce GST this is without doubt the way to go. Packaged in small ‘c’ conservative fiscal responsibility while at the same time introducing an element of wealth redistribution, it is surely designed to appeal to all elements of society?
So far so good. It is a fine solution but is it the solution to our problem? Again P&R’s P and R people have earned their money by ensuring we understand the problem. When pitching a product, it is absolutely essential to explain to the ‘mark’ that they have a problem which our product can solve.
It’s a very similar approach taken at national levels. Take Mr Putin, for example. He has spent several years explaining the ‘problem’ of Russians in Ukraine being persecuted by Ukrainian fascists. He took every opportunity to highlight the ‘problem’ until the only solution was ‘a special military operation’ and a solution the Russian population tended to agree with. Even though the solution was for a problem that didn’t actually exist in fact.
Let’s look at our ‘problem’ to be solved. The accounts of the States of Guernsey, which I believe adhere to no modern recognised accounting standards, appear to show our government’s revenue exceeding its expenditure. Last year we had an operating surplus of £38m. And that was after spending an extra £22m. on Covid support and before adding £37m. made by investing our vast reserves.
Can you see the ‘problem’? No, me neither, which is why it was so important to keep predicting future deficits and ingrain that into our psyche before spinning GST and higher social security contributions. I can’t remember if the States predicted the huge surplus we achieved last year but no doubt they are better at predicting bad times than good.
We are starting from a pretty good position when it comes to States finances. Higher revenues than expected, cash in the bank and reasonable reserves. The same can’t be said for the majority of the good people of Guernsey. Wages not keeping up with inflation, rents and mortgages spiralling up out of control and a general belt-tightening across all the 10 parishes.
Which is why I wonder why the States, which isn’t doing as badly as it makes out, wants to take more money out of the community. It is clear that the States knows it will hit some people very hard, so is planning cushions to make the punishment less painful for them. But we must be cynical and ask will those cushions always be available?
No States can bind another States and history tells us that politicians like spending and to feed their addiction they will add a penny of tax here and threepence there. Once the seed of GST is planted who knows how tall it will grow in future?
If we, the common housefolk of Guernsey, push back we will be met with the threat of losing loved and important services provided by the States. We will not be threatened with the loss of an Active Travel Unit but we will be threatened with school closures.
But it doesn’t have to be this way.
In the first GST presentation at Les Beaucamps, to a packed audience of 45, Deputy Le Tocq said something very wise. Recalling his childhood he reminisced about his mother explaining that in our small community we cannot expect to have everything they have on the mainland. I’m sure many of us of a certain generation agree with this sentiment.
The problem is that we now have a large proportion of our population that does expect to have everything the world’s sixth largest economy can supply to its people. Without the economies of scale, we just can’t afford it. Take Alderney as an example. In Alderney, a couple of thousand people live on a very small rock. But they take it as their right to enjoy all the benefits enjoyed in the vast, rich countries which surround us. Tip-top medical care, a state-of-the-art runway and so on and so on. Many here in Guernsey will look at Alderney and say, ‘You can’t afford it’. Well, I say look at yourselves and tell yourself the same – that Guernsey is too small to match the UK pound for pound for services.
Healthcare is our bete noire. Peg the cost of healthcare to present costs and we wouldn’t need GST. It’s a hard one to contemplate but just trying to match the drugs used by the NHS added £5m. to our annual health costs. No doubt this £5m. will become £10m. in the blink of an eye. And I wouldn’t want to make the decision that would stop a £1m. drug being given to someone to hopefully give a few more months of life.
Which is how we got to where we are today. If we accept that the States has no fat to trim, that all services delivered are absolutely essential and that anything the UK can afford should be free here, then the P&R plan is probably as good as it’s going to get. Taking the UK as an example of excellence could mean we will watch it go bankrupt trying to maintain a National Health Service that is unsustainable in its current form. And then we will go bankrupt as well.
Or we could stop and reconsider where we actually want to be and how can we get there together.