Deputy Lee Van Katwyk told the latest Guernsey Press Politics Podcast that he would propose a temporary increase in income tax as an alternative to GST-plus or swingeing cuts in public services if, as expected, the Policy & Resources Committee omits the idea from a policy letter on fiscal reform which it hopes to publish early in June.
But he also revealed that some deputies were already discussing a push to postpone the debate, currently scheduled for mid-July, in the wake of the weekend resignation of treasury lead Gavin St Pier, following his re-arrest on suspicion of misconduct in public office which he denies, and P&R’s opposition to his bid for re-election to the senior committee later this month.
Listen to the full interview with Deputy Lee Van Katwyk on the latest Guernsey Press Politics Podcast
Deputy Van Katwyk said there was now ‘a real possibility’ of the States debate being pushed back for an unknown period and that he and colleagues had been ‘having those conversations’ in recent days.
‘There are so many question marks around this debate now,’ he said.
‘If Deputy St Pier doesn’t get back on to P&R, are we even going to have this debate this year?
‘There are questions around that.’
P&R remains determined to stick to its timetable for leading the tax and spending debate, despite the imminent loss of its treasury lead, and having not yet finalised its proposals.
It looks increasingly likely to propose a menu of options – based on various combinations of GST-plus, increases in company tax and possibly other existing taxes, and spending cuts – and Deputy Van Katwyk wants them to include a temporary income tax increase from 20p in the pound, an idea originally put forward by the previous P&R led by Lyndon Trott but rejected by the States.
‘During a cost-of-living crisis, nobody wants to put additional taxes on the population, and the other option is to cut services and cut committee expenditure even further than we have agreed to at the moment,’ said Deputy Van Katwyk.
‘With all of those questions around at the moment, I think it would only be right to put back on the table, in front of the Assembly, having a temporary income tax rise.
‘For me, the benefit of that compared to GST is that we would not have to install this huge new tax collection system, which once installed is always going to be there. It’s a lot easier to put income tax down again than it would be to reduce GST to zero.’
Deputy Van Katwyk believed that opinion among States members was divided ‘about 50/50’ on GST-plus, which was approved in-principle late in the previous political term, but would need the backing of a majority of the new Assembly to be introduced before the next general election in 2029.
Successive senior committees have been warning since before the Covid pandemic that the States was heading towards a shortfall of tens of millions of pounds a year without tax rises or spending cuts. Deputy Van Katwyk acknowledged the risk of delaying decisions further beyond this summer, but felt that an income tax rise was a good option either way.
‘We have got this deficit that is only growing, we’ve got infrastructure which is degrading faster and faster, and we need a way to bring some extra cash into the coffers now,’ he said.
‘For me, that way, particularly if the States debate is put back, is going to have to be an income tax rise, otherwise we are just digging ourselves into a deeper and deeper black hole.
‘There are too many unanswered questions at the moment, but there is a heck of a lot of risk in not doing anything for the next year.’
P&R is expected to publish a paper later this week or early next week which will set out the latest work on potential spending cuts if the States throws out major tax rises as well as recommendations to raise more revenue from companies following a review led by Charles Parkinson and his corporate tax sub-committee.
Deputy Parkinson will be the front-runner to take over as treasury lead, if Deputy St Pier fails to win re-election to P&R, although in the present uncertain circumstances the senior committee may decide that its president, Deputy Lindsay de Sausmarez, is best-placed to lead the tax debate this summer.