Fireworks expected from Budget debate

Policy & Resources circulated an 11th hour amendment proposing income tax of 22p in the pound for the next two years and the introduction of GST-plus permanently from 2027.

The rival tax packages were amalgamated in a deal struck yesterday by P&R president Lyndon Trott and Peter Roffey, the leader of GST-plus, after they unexpectedly agreed to support each other’s plans as new figures were released indicating that States finances had worsened by £100m. in the past 12 months.

‘Our amendment gives the Assembly the opportunity to prove once and for all that we can come together and make the difficult but necessary decision to stabilise public finances and ensure we invest in our community,’ said Deputy Trott.

• Podcast: Simon De La Rue, James Falla and Matt Fallaize look ahead to this week’s budget debate on our Shorthand States preview

He said it was ‘essential’ for the States to increase its revenue immediately and that putting up the personal income tax rate from January was the only action available to do that.

Although he has previously opposed GST, Deputy Trott acknowledged that it was now ‘desirable’ also to agree a long-term tax plan to deal with a shortfall in public finances projected to reach up to £100m. over the next 15 years.

Deputies have already flunked three chances in the past three years to agree a long-term plan for balancing the States’ budget. This week’s debate will be their final opportunity before next year’s general election.

Deputy Roffey has previously criticised P&R’s proposals for a temporary increase in income tax, but he agreed a compromise after what he called ‘constructive conversations’ with the senior committee.

‘It will not be easy for me to support income tax increases given my well-publicised comments, but it is sometimes crucial to make significant compromises within our consensus style of government,’ he said.

‘I appreciate how far P&R has moved by proposing to invest significant sums in preparation for GST-plus to be introduced in 2027 and, with that in mind, it seems only right to reciprocate.’

If P&R’s new amendment is approved, at the end of the debate deputies would be unable to vote for the two-year income tax rise unless they also voted for GST-plus from 2027, although the details would be subject to another debate early in the next States term.

But if the combined income tax/GST-plus package was defeated, deputies could still approve GST-plus as a standalone measure.

GST-plus has gained new supporters in the Assembly since it was last rejected and indications yesterday pointed to it being within one vote of securing a majority.

Fewer votes were anticipated in support of putting up income tax, and it was widely expected that the States would also reject amendments for a territorial system of company tax and cuts of about £40m. to committees’ budgets proposed for next year.

The Guernsey International Business Association swiftly backed P&R’s new compromise amendment.

‘While Giba maintains that prolonged income tax increases are not the answer, this amendment is a pragmatic and sensible compromise that both addresses the immediate financial challenges and seeks to address the long-term picture without delay,’ said chairman Paul Sykes.