2p rise on income tax is dropped unless States also backs GST-plus
Income tax at 22p has been taken off the table – unless the States also agrees to back GST-plus from 2027.
Deputies agreed yesterday that there would be no vote on increasing income tax as a standalone proposal at the end of this week’s Budget debate.
Instead deputies will vote on two major revenue-raising options – either putting up income tax to 22p in the pound for 2025 and 2026 and introducing GST-plus from 2027, or alternatively keeping income tax at 20p in the pound but still introducing GST-plus from 2027.
Or they can reject both.
The revised approach, recommended by Policy & Resources, which is behind the income tax proposal, and Deputy Peter Roffey, the leader of the GST-plus plan, won by 20 votes to 15, with five members absent.
Listen to our Shorthand States round-up from day two of the Budget debate
P&R president Lyndon Trott presented the revised approach as a compromise to help the Assembly find a way of dealing with the States’ financial problems.
‘Pragmatism is essential in political leadership and politics is the art of the possible,’ he said.
‘No single one of us can dictate how we solve the problems of our immediate financial shortfalls or our long-term sustainability.
‘We need to work together to find the answers, even if they are imperfect.
‘I believe that is the role of all States members in our system, but the senior committee and its president must lead by example. I know we have done that.
‘We have shown a willingness to work with a GST, which for me and some other members of my committee is far from an ideal solution.’
It is understood that Deputy Roffey gave P&R an assurance that he would reluctantly vote for its short-term income tax proposal if the senior committee’s members backed his long-term GST-plus plan, in a bid to find a tax package which could secure a majority in the Assembly.
Deputy Trott made it clear that P&R’s priority remained increasing tax revenue immediately.
He said that 2p on income tax would immediately secure an extra £55m. over two years, money which would be invested in infrastructure developments.
‘If we don’t have that additional revenue, we cannot continue to invest as planned, and we would need to come back early next year with a revised capital portfolio.’
P&R has warned that rejecting its proposed income tax hike would force the States to cancel or defer major projects, possibly including the next phase of developing the Princess Elizabeth Hospital.
Deputy Trott accepted that some States members were more concerned about agreeing a long-term tax strategy to eliminate an ongoing black hole in public finances.
‘Leadership is finding a way forward. If we can’t move forward, we aren’t leading anyone anywhere. Leadership is about showing a grown-up approach and that we can work together as 40 individuals with 40 different views.’
Deputy Trott said it would be unthinkable for the States to end its term in June without taking steps to improve the island’s precarious financial position, and that it had run out of time to do anything other than increase income tax.
‘It has always been clear to me that our community has felt that the fairer and more acceptable revenue-raising measure is a higher income tax rate.
‘That is partly why this Budget has been constructed in the way it has been. And why we have not seen red ribbons or placards or heard Sweet Caroline on this occasion.
‘In fact, there has been no organised protest against income tax rising.’
