‘£50m hole in GST plan’

P&R has estimated that a new goods and services tax would cost the States £40-42m. in its first year.

But a group of deputies led by Heidi Soulsby has obtained figures from P&R which they say show that GST would cost the States more than £90m. within 12 months of being introduced.

They claim P&R’s original estimate failed to take into account the effect of GST on the fund which pays public sector employees’ pensions.

‘Having undertaken further analysis of the effects of GST since the last tax debate, we have discovered a significant adjustment would be required to the public sector employees’ pension fund,’ said Deputy Soulsby.

‘We have found that the impact on the fund of introducing GST would be a one-off deterioration to the funding level of approximately £50m. against what might otherwise have happened without it.

‘This would bring the total forecasted range of the cost of GST to £90.7m. and £92.3m. within 12 months of its introduction.’

In February, the States rejected P&R’s tax plan, including a new 5% GST, by 25 votes to 15. Deputy Soulsby proposed a different plan, which she called the fairer alternative, most of which was defeated on a tied vote.

At that time, deputies were unaware of the additional cost of GST which Deputy Soulsby estimates at £50m. But she said it was a significant new factor which could influence the outcome of next week’s States debate when P&R will make a third attempt to get GST and other tax changes through the Assembly.

‘This is material to the discussions surrounding GST and the funding and investment plan, including the importance of the timing of measures,’ she said.

‘Making a decision to introduce GST at a time of the continuing cost of living crisis, and persistently high inflation, remains challenging.’

P&R’s original estimate that GST would cost up to £42m. in its first year included setting up new IT systems, other tax changes to assist the least affluent half of islanders and increasing old age pensions and other benefits to counter the inflationary effect of GST.

The previous self-styled fairer alternative amendment led by Deputy Soulsby was also publicly fronted by Deputies Gavin St Pier and Sasha Kazantseva-Miller. They confirmed over the weekend that they were working up a new version ahead of next week’s debate.

‘Deputies behind the fairer alternative proposals have been scrutinising the funding and investment plan in discussions with the States treasury team and will be publishing an alternative set of proposals,’ they said.

Under the States rules of procedure, amendments should be submitted by 3pm today, although the States can vote to allow later amendments to be debated.