Matt Fallaize: Policy & Resources has said it would take at least 18 months from approval of the tax package to implementation. Can you say it hasn’t crossed your mind that, if the debate is delayed long enough, P&R will run out of time to implement GST before the next election?
Deputy Camp: The bigger thing for me is the 2030 review, which seems to be P&R signalling some kind of timing issue with the whole package. If, in 2030, there’s an intention to pause and review – because we’ll have more certainty on Pillar Two [company tax changes], offshore wind and whether the financial services growth plan is producing any growth – then why is 2028 the key deadline?
There are parts of this tax package which, if revenue is needed before 2030, could raise a useful amount of money before then without the complexity of GST and its associated benefits and mitigations package, which is complex to apply and requires complex law. Having sat on the GST steering group, I am fully aware of what the timeline looks like, but that’s not my motivation for saying this is the wrong tax package.
Do you think there is now a realistic chance of the States approving P&R’s tax package in October, or whenever, but it not being implemented before the next general election in 2029?
That probably comes down to the will to put it in place. My understanding is that if it’s not ready for 1 January 2028, it’s a year’s delay, so January 2029 implementation.
That is six months before a general election. That would be much less attractive for anyone behind the package, wouldn’t it?
Yes. I’m not naive about political terms, and I’ve followed politics long enough to see attitudes shift the closer you get to an election, especially for a politician looking for re-election. But we know, from the amount of money already spent preparing for GST, that there must be a fair amount of preparatory work aimed at the 1 January 2028 deadline. If this gets approved now and the will is there, I don’t see why it shouldn’t happen. In any other walk of life, you’d work to the deadline you’ve set and pull out all the stops to make it happen.
If the States doesn’t finish the tax debate at the next meeting, there is only one other meeting before the 2027 budget must be debated. You could end up with a conflation of the long-term tax debate and the 2027 budget. If there is a sense of chaos, it won’t just reflect on P&R, but on the whole States. Are you concerned about an image of chaos?
No. Tax reform looks at 2028 onwards; the budget looks at 2027. They’re distinct time periods. You should be running your 2027 budget on your 2026 actuals, not on what you think might happen in future. I don’t see this picture of chaos. If the debate rolls on until November, December or into next year, it should roll on for as long as it needs to because this is important. Over this political term, we’ve seen big decisions taken quickly. This is the first time that a big decision has taken longer, and I think that’s right. When you’re making a change as monumental as this, it should be done properly and within the appropriate time - it shouldn’t feel rushed. Nobody is trusting, or paying, a whole load of politicians to rush through decisions that change their lives.
Part of your amendment at the July tax debate would have shelved GST and the income tax and social security changes for now while going ahead with transport taxes, a corporate levy and a visitor levy. You would have raised a total of just under £20m. a year when the structural deficit is closer to £80m. a year. Did your amendment fail to provide an alternative plan, barely touching the sides of the structural deficit the island is facing?
Neither does P&R’s tax package, if you strip out the £20m. of what I’d call wish list savings because we don’t know if they’re achievable. Take them out and P&R’s own package only hits about £40m. of the deficit – and that’s a gross figure before accounting for the inflationary impacts of GST and the social security and benefits changes on the economy, which don’t arise if you don’t introduce GST. I haven’t had a team of civil servants supporting me on this or £1.6m. of public funds to come up with an alternative. Once you look at the net position of my alternative amendment against P&R’s tax reform, the numbers aren’t hugely different after all.
Neither plan fills the deficit, but your package would raise less, wouldn’t it?
It’s true it would raise less, but it would also cost less on the other side. You wouldn’t have the associated uplift in public sector pension payouts or the risk of collective bargaining by unions asking for additional inflationary rises. And what my approach doesn’t do is send bad messages into our economy – it doesn’t put business owners at risk of feeling their businesses will need to close, which wouldn’t help employment, and it doesn’t make householders feel they’ll have to make very difficult choices about their lives, including whether to stay in Guernsey at all. Tax is not the only way to fill a deficit – you can improve public finances through realistically looking at economic growth. That’s the elephant in the room. But with no plan, we’re never going to get there.
You sat on the Committee for Economic Development until you vacated your seat quite recently. Growth has been anaemic and our economy may even have shrunk. This States isn’t doing anything that’s going to generate more growth, is it?
Looking at it from the outside, before I came into this role, it was frustrating to see government refusing to pull certain levers which would have helped the finance industry stay competitive. Being able to house your staff would be huge – that’s a real turn-off when you’re trying to recruit from outside the island. The cost and the hunt for housing puts people off, and why would they choose us over a jurisdiction where they don’t have that problem? The other side, which I’ve spoken about a lot, is that our regulatory appetite in financial services has decreased almost to nothing. We became a zero-risk, zero-failure jurisdiction, on the political watch of the last two or three States terms, which quite happily presided over that. Meanwhile, Jersey hasn’t had the same problems. We may have moral reservations, but Jersey has leaned more into things like the cannabis side of financial services and taken more of a foothold in the digital asset space, because their attitude was different.
Jersey also has GST, at 5%, and its record on economic growth in recent years is much better than ours, isn’t it?
Tying economic growth to GST is one of those lazy arguments. Jersey’s experience suggests that introducing GST doesn’t negatively affect growth in the long term, but Jersey introduced GST a long time ago, in a very different world. Back then, for both jurisdictions – heavily reliant on financial services, which is my area of expertise –business was essentially writing itself. The volume of enquiries and the win rate were both high. We’re now, and so is Jersey, in a far more competitive, more regulatory difficult world, with more jurisdictions coming after us. The EU has grown as a financial hub, and Brexit has changed our relationship with both Europe and the UK. It’s a distraction to say Jersey has GST and so we could, too. We have a very different economy now – one that’s stagnating rather than growing, unlike 15–20 years ago. We have much higher inflation here, partly from government decisions –or non-decisions – on housing and energy strategy, which have pushed up energy costs for everyone. That hasn’t hit Jersey in the same way. When zero-10 came in [in 2008], there was a sense GST should follow, and perhaps that was the perfect time. There may be another good time in the future. But it’s wrong to compare us to Jersey and say 2026 is the best year to introduce GST in Guernsey.
Everyone can agree that increasing economic growth would increase tax revenue and help towards the deficit and that would be welcome. But wouldn’t it be better to agree a package which deals with the deficit now and then, if growth is somehow stimulated, reduce taxes later? Without tax rises, the only way to close the deficit is going to be by cutting public services, isn’t it?
You must look at it differently. I’m already tired, a year into politics, of the argument that savings mean slashing and burning. The point is that a tax reform package which doesn’t speak to growth, with no government plan for growth, isn’t good enough. Growth is currently left to five members on Economic Development who have no real levers to pull because – just as an example – the regulatory issues I’ve mentioned sit with P&R, not Economic Development. You can have lovely conversations there, but you’re mostly dealing with things like funding the Red Arrows. We need a whole-government growth plan, and I haven’t seen one. So far, the only real mentions of growth exist because I put an amendment into the Government Work Plan asking everyone to think about growth when doing anything. We should be thinking more commercially, more smartly. We need to stop talking about public service cuts and savings as if they are the only lever – that’s nonsense. What we need is a programme to ensure we optimise how we spend public money. We can’t just keep spending the way we always have. There is new technology all around us and we’re not taking advantage of it.
Part of P&R’s tax package includes redistribution – giving back a reasonable proportion of GST receipts, from the better off to the less well off, through reduced income tax and social security contributions. Is that commendable or would you rather see redistribution like that scrapped?
There is an element of redistribution I struggle with. I think it gives people a potentially false premise – on paper, people might look better off, but that doesn’t necessarily flow into being better off in real life. That feels like a problematic part of the package. The other side is that redistribution means more of the GST raised gets repackaged back out, so a lot of the net tax take is coming from sources which aren’t GST. Redistribution can be seen as commendable, but ultimately the island needs money. Another side is that that we’re not talking about the potential windfall a few years down the line – the 2030 date, and what it might bring. Pillar Two feels more settled because it’s on the books globally and we know it’s happening, but on the wind farm there has been a lot of discussion but not much evidence yet that it’s a viable project or of the type of income it might realistically generate.
Do you not think that politicians in other jurisdictions would like to be able to present a package which introduces a consumption tax, which exists almost everywhere else in the world, and raise enough to deal with most of the projected deficit while leaving the less well-off half of the population better off than otherwise?
It’s a lovely fairy tale, isn’t it? We hear a lot about kicking the can down the road, usually aimed at so-called anti-GST deputies, but I think P&R’s package is a major example of kicking the can down the road. I’ll use this analogy: if my son’s bedroom is a mess and I say ‘here is a fiver, go and tidy your room’, there’s no chance it gets tidied, but there’s much more chance if the fiver comes after the job has been done. This tax package is like giving a teenager a fiver and expecting them to sort out everything else too. That’s why I call it a fairy tale – it implies that all the other behaviours of reasonable fiscal stewardship in government are already perfect and that every penny raised will be spent well. We know that’s not the case because public spending has exceeded economic growth and other problems don’t appear to be being addressed. My fundamental issue is asking the population to put more money into a bucket which has some holes we know about and probably some we don’t. That is not the kind of politician I want to be.
Nearly every other jurisdiction has some form of consumption tax, and nearly everywhere it raises substantial revenue. It seems hard to believe that Guernsey would introduce GST and raise virtually nothing, doesn’t it?
Those other jurisdictions in the western world have very similar problems to ours around economic stagnation, global competition and labour market pressures. GST hasn’t solved those for them – it’s not some grand solution. These taxes are more efficient in the sense that it’s harder to avoid a tax we all pay simply by consuming – that’s a fair argument for governments needing to raise money. But they’re not the answer to everything.
Do you think Guernsey will probably need GST one day, even if not now?
I’m not sure. There might be a point at which the economic mix makes it a tax which would fit within our broader fiscal infrastructure. Our income tax stream isn’t certain. If AI takes over swathes of work, we’ll be talking about productivity taxes and things like that, and consumption tax will be the least of our worries. I haven’t got a crystal ball. All I’m saying is that my belief is that the worst time to introduce a consumption tax into an economy is when its people and businesses are struggling to see a sustainable future here.