2p extra on income tax – but just for two years

A TWO pence increase in income tax is being put forward as a temporary measure for the next two years, in a bid to fix public finances.

The 2025 Budget drawn up by the Policy & Resources Committee also includes an increase in personal allowances to offset the tax increase, to the point that ‘an estimated 80% of the lowest income households will see no change in their financial position or will be marginally better off’.

P&R president Lyndon Trott said that going into an election year it would have been easy for the committee to produce a ‘steady as she goes’ Budget, but doing so would have been irresponsible.

‘We cannot in good conscience knowingly leave public finances in such a challenging state for our successors to pick up,’ he said.

‘We must collectively take action and we believe our package of measures will be easily understood by the community, are forthright in their intentions, and will raise the money we need in the short term while protecting the lowest income households.’

He described the proposals as ‘a Budget for tomorrow – a budget for infrastructure’ and one that would permit, and encourage, investment in the island.

‘Our proposals will support growth, enable critical investment in our ageing infrastructure and stabilise the financial position of the States over the next two years,’ Deputy Trott said.

By having these measures adopted now, if the States agrees next month, P&R said that valuable income would be received from January 2025, compared to adopting something like the controversial goods and services tax which would have taken years to implement.

‘Implementing a time-limited solution provides the breathing space for the next Assembly to consider a further Tax Review in 2026 without the financial position having materially worsened in the meantime.’

Other budget proposals include no rise at all in alcohol duty, while tax on real property and fuel will increase 3.2% in line with inflation. Tobacco duty is up by inflation plus 10%, equal to £1 on a packet of cigarettes.

The Budget debate will take place from Tuesday 5 November.