Think tank’s tax views ‘lean on populism’

In its analysis of the States’ funding and investment plan, the group expressed concerns about the rate of GST potentially rising to 20% within the first few years of its introduction if the States attempts to fund all of the proposals set out in the plan.

But P&R president Peter Ferbrache said Gpeg chairman Lord Digby Jones’s comments leaned heavily on populism and scaremongering rather than fact.

Lord Digby said Policy & Resources was coming at the plan in the wrong way and he

encouraged the committee to look at how more money could be saved.

‘In my view public sector pensions need urgent reform – currently you’ve got a two-tier pension system with civil servants on very large pensions.’

He also said that capital spending should be tightly controlled.

‘To me, the redevelopment of the hospital and construction of the post-16 campus at Les Ozouets are “got to haves” as health and education are vital elements of any society,’ he said.

‘Projects like the redevelopment of the harbour or extension of the runway, while they would be nice to have, are not essential.’

He expressed worry over the lack of provision for the cost of the proposed electricity

strategy.

‘It will be several hundreds of millions and could rise to a billion, and potentially makes a real mess of the island finances and taxes.’

He added that the introduction of GST had the potential to cause short-, medium- and long-term damage to the island.

‘We’d lose our competitive advantage over Jersey and other jurisdictions, it would put an anchor on economic growth, and in the long-term, increases to GST would be the easy way out for the States to find more money.’

Deputy Ferbrache said that Lord Digby’s proposals were meant with the best of intentions, but his long-held ideological views seemed flawed and inconsistent.

‘Those cannot be put ahead of the financial realities,’ he said.

‘His proposals would take us down an economic downward spiral which would be disastrous, irresponsible and possibly irreversible and Guernsey should do everything it can to avoid such an outcome.’

He said while the States needed to save money where it could, there were also significant demands and cost pressures as a result of an ageing population, which meant more needed to be spent.

‘Communities that do not invest in infrastructure only store up greater costs for future years as the cost of repairing or replacing grows – we have already seen this in Guernsey because of years of inaction.’

‘Anyone who speaks to health staff, teachers, or who finds there is a lack of affordable housing, uses Alderney airport or observes the state of our harbour infrastructure can see the very obvious need to address years of under-investment.’