‘Do we really have a deficit?’
CHAMBER of Commerce members have questioned the scale of the public sector deficit.
A survey of the organisation’s more than 700 members saw about a third respond to questions over the Tax Review.
Of these 45% were not convinced Guernsey was in deficit, arguing there was a lack of accurate accounts, confusing capital spending decisions, and conflicting surplus/deficit statements.
Of those convinced there was a deficit, many were not convinced it was as big as the States has claimed.
The deficit forms the backbone for Policy & Resources' review.
With islanders living longer, having fewer children and a shrinking working-age population, P&R has said that Guernsey’s funding shortfall could rise to £100m. a year.
Chamber president Diane de Garis said the results showed clearly that respondents either did not find the government’s argument that Guernsey has a deficit credible, or find the quantum of the deficit credible.
‘Equally if there is a deficit – which the executive accepts there is – respondents agree with Chamber executive that a mixture of fiscal reform from government to achieve savings, a policy platform to get more people working, increasing productivity alongside some form of tax package that isn’t GST, would be the preferred option.
‘This isn’t surprising given the public sentiment against GST and the results broadly align with the Chamber executive’s views.’
Of those surveyed, fewer than 9% thought GST was the best option for dealing with a deficit.
About half agreed with the Chamber executive that there needs to be a plan that included a mixture of civil service and pension reform to achieve savings, tax rises and an increase in productivity in the workforce.
About a fifth favoured a straight rise in income tax, while another fifth wanted to see large cuts to government core services.
The survey also found that nearly 90% said that action to address the workforce productivity and size could or should be the priority.
Chamber executive’s views on the amendments
The Parkinson/McKenna amendment is calling for new corporate income tax laws to bring in more revenue.
‘While it is accepted that such a tax (Territorial 10) could in theory work, the uncertainty on investigation of such a designer tax would be dangerous and very likely cause significant damage to the finance sector, which contributes 37% of all GDP and indirectly, as some estimates suggest, as much as 60+% of all GDP.
‘There are several ways corporate tax could be increased to raise as much as any Territorial 10 tax, without the damaging uncertainty for the islands primary source of income the design and implementation of such a tax would bring. Add to this that such a tax will not raise enough to be a credible alternative to GST by itself, the Chamber executive strongly urges deputies to vote against the amendment.’
The Soulsby/St Pier amendment focuses on reducing spending.
‘The Chamber executive note this option most closely aligns with members’ views in that it does not include GST as an option, but does include other tax rises and spending cuts and importantly addresses the public sector pension which needs reforming.
‘What it does lack is any consideration of policy to increase the work force size and productivity which urgently need addressing.
‘Overall, this is a credible alternative to the P&R proposal, but work would be needed on workforce productivity.’