States approve P&R’s tax reform package

Voting has concluded. The States is about to rise until its next meeting on 21 October. That will include a lot of adjourned business which has backed up while deputies have been immersed in this topic.

‘We have now finished the tax debate,’ declares Bailiff Jessica Roland.

We’ve had two propositions not carried. There was a tied vote - 17-17 with 6 abstentions - on the proposition to start the process of scrapping the Lieutenant-Governor’s exemption from paying income tax. So that one has fallen away. P&R will not be required to progress that move.

The second was to impose a spending freeze in real terms on most States expenditure. It was lost 15-22 with 3 abstentions.

From Matt Fallaize in the public gallery:

After briefly coming back to life, the electronic voting system has fallen over again. Back to manual voting. Suddenly anyone listening will be able to follow the votes again.

There are four votes remaining but they’re on relatively routine details now which do not affect the main proposals.

The States has just voted that GST will rise to 4% in 2031 and 5% in 2033, together with changes to compensating measures, principally further reductions in income tax and social security contributions.

By 20 votes to 19 with 1 abstention.

Here’s how they voted on the main proposals...

For (22): Burford, De Sausmarez, Dorrity, Falla, Gabriel, Gollop, Hansmann Rouxel, Helyar, Humphreys, Kazantseva-Miller, Laine, Le Brun, Malik, Montague, Niles, Oswald, Parkinson, Rochester, Rylatt, St Pier, Strachan, Williams.

Against (17): Blin, Bury, Cameron, Camp, Collins, Curgenven, Goy, Hill, Kay-Mouat, Leadbeater, Matthews, McKenna, Ozanne, Sloan, Snowdon, Van Katwyk, Vermeulen.

Abstained (1): Inder.

From Matt Fallaize, who is sitting in the public gallery:

It’s all become quite chaotic while voting owing to uncertainty about which amendments have been inserted in which order. This is not a good look. This happens more nowadays, with electronic voting, than ever it did without it. Just saying, as my youngest would say.

P&R’s tax package - including 3% GST and reductions to income tax and social security contributions - has been approved by 22 votes to 17 with 1 abstention.

Here we go...

From our senior reporter Matt Fallaize:

As Deputy Lindsay de Sausmarez stands to close one of this Assembly’s most important debates - in a ludicrously limited 7.5 minutes - the sense in the chamber is that P&R has the votes to get its tax package across the line.

P&R may have 20 votes, it may get to 21, which is a small margin to play with, but it looks pretty certain to have more votes than opponents who will vote against the package.

In replying to debate, Deputy de Sausmarez is trying to underline the three major advantages her committee sees in its package: raising more revenue for public services, protecting lower- and most middle-income households, and broadening the island’s narrow and vulnerable tax base.

Counter arguments are available, but they look unlikely to prevail today.

No more speakers so it’s time for Deputy Lindsay de Sausmarez to respond to general debate on behalf of Policy & Resources.

She’ll get seven-and-a-half minutes...

Deputy Ross Le Brun: ‘If we want to invest in businesses and initiatives to boost the economy and the island’s resilience to invest in infrastructure, to improve quality of life and our children’s future, we need sustainable funding. Nobody really wants to cut public services and nobody really wants to pay tax. But we can’t have it both ways. We can’t afford to gamble our island’s infrastructure, services and our children’s future on let’s wait and see.’

Deputy Gavin St Pier: ‘I worked with Deputy Parkinson on the tax review sub-committee to find just a little bit more corporate revenue down the back of the sofa. We have, indeed, been lifting every stone. I do not want to upset and feel the wrath of a great chunk of the public. I don’t want to tax anyone, including myself more. I don’t want to create a new system that costs more for business and government, and I don’t want to increase the tax burden on the economy. But I do want tax reform. That was clear from the manifesto on which I and my party colleagues stood.’

I make it 25 speakers so far in general debate...

Deputy Garry Collins: ‘I’m really, really worried about the number of members that have said this package will start filling reserves. I just really want to say it won't, because pushing through this package, GST will be on the table, and we will start feeding that beast. The beast of uncontrollable expenditure, and we've already heard that the budget coming next time is going to increase expenditure, and committees are going to continue to push expenditure.’

Deputy Munazza Malik: ‘We should be clear about what is at stake. This is about the services on which the islanders depend, health and care for an ageing population, support for children and families, safe roads, and resilient utilities, housing, education, and the capacity to make our island a place where young people can build a future. Investment in infrastructure is not a luxury. It is how we create the conditions for economic growth, better housing, effective public services, and opportunity. But investment requires financial capacity. We cannot continue asking for first-class outcomes while declining to put the public finances on a secure footing.’

Deputies have resumed debate, with Deputy Haley Camp on her feet. She’s the 20th member to speak in general debate.

Don’t forget, the States voted to limit speeches this week to 5 minutes so things are moving fairly swiftly.

Deputies will be back to continue general debate in 10 minutes.

The final amended propositions are being circulated to members in the meantime.

Deputy Mark Helyar: ‘The thing which puts me slightly more towards it was Deputy St Pier’s amendment, which puts us in a more honest discussion about this with the public, because I’ve been saying 8% was in the 2020 January policy letter before I became a deputy. I still think that’s likely where we may end up at some point in the distant future. I’m not saying in the near future, I’m saying in the distant future. But we must remember, we’re talking about getting over a hill, and there’s something that nobody’s mentioned in this debate. After the period when our demographics spike, they will start to drop away again, and there will not be as much requirement for tax. There is an end to this. It’s just something we need to get through, but it’s going to be difficult.’

Deputy Marc Leadbeater: ‘We’re making our decisions in the wrong sequence, as I’ve said before. And I’m not prepared to make a decision on the evidence before us today that we need to introduce GST. Because maybe come next October, when P&R would have been reported back, things are materially different. They may not be. They may be worse.. They may be better. The important thing is we have a clear picture. We’ll have the evidence in front of us.’

Deputy Rhona Humphreys: ‘I’m going to start by saying to those on the steps, those on social media channels - that I’m sorry. I’m sorry they felt unheard. I’m sorry that they think we’ve changed our promises. And I’m sorry you feel some deputies have left you down. I’m equally sorry to those members of public and businesses who felt they couldn’t shout and screaming on the steps or on social media. The ones that were somewhat embarrassed that they support the tax package, the ones that whispered in my ear, literally whispered in my ear, “Don’t forget us, we support you.”’

Deputy Andrew Niles: ‘We have spent years, decades even, living off our savings to avoid a difficult decision. This package begins the work of stopping that drawdown and rebuilding what we will one day have to pass on. This is not an austerity package, it’s a package that enables us to invest, build and repair. It enables us to consider our future and not just what is immediately before us, but is also what’s over the horizon.’

Deputy Jayne Ozanne: ‘The island doesn’t believe us in our assumptions. They don’t trust us in our ability to deliver, and they don’t think this package is fair. And it’s that trust gap that I believe is our biggest risk right now, and what I’ve passionately believe we have to address.’

Deputy Sally Rochester: ‘I don’t think there’s a viable alternative to GST in broadening the tax base and creating future financial resilience we need. So I ask my colleagues to lift their heads, look at the horizon, and bravely face the reality of our community’s future, and join me in making that incredibly difficult decision to approve this tax reform package. It’s a difficult choice, but it’s this choice that secures our financial sustainability and will give us the best chance to support our community even as those head winds I’ve talked about blow harder.’

Well, the motion to allow debate on Deputy Sloan’s new amendment, number 59, did not carry. The vote was tied 17-17.

So it’s on to general debate on P&R’s tax package...

States members are back from lunch and deciding whether to debate a new amendment from Deputy Andy Sloan.

It proposes that there should be a change to the States’ rules of Procedure which would require all future proposals submitted to the Assembly to include an assessment of their likely impact on Guernsey’s economic competitiveness.

Deputy Sloan says it is something that has emerged from this debate. Deputy Gavin St Pier says there has been plenty of time before this meeting to submit amendments...

States members have broken for lunch and will resume debate at 2.15pm.

And there is just one more amendment to get through... unless any more are submitted over the lunch adjournment!

This was a quick one.

Deputy Gavin St Pier’s amendment would scrap the law which exempts the Lieutenant-Governor from paying income tax in Guernsey.

It was carried 18-12, with six abstentions and four members not in the chamber.

The best way to stop Deputy Matthews’ ‘recurring nightmare’ (12:26pm), said Deputy de Sausmarez, was to vote in favour of this move, and that’s exactly what States members have done.

Amendment 43, which would direct P&R to return to the States by June 2028 with proposals for a wholesale overhaul of property and land taxes, is carried 29-7, with two abstentions and two members absent.

‘This just doesn’t work on any level. People cannot pay tax if they don’t have the money. You cannot create liquidity out of an asset. It just doesn’t work. fundamentally does not work on any level. It never did, it still doesn’t now, and I wish we could move on,’ says Deputy Mark Helyar.

‘I don’t see there’s any harm in us considering is there a different way to do this? I think TRP, to me, feels like it’s had its day. I do think it is an unfair way of taxing property ownership in Guernsey. And so I will support this amendment,’ says Deputy Haley Camp.

On to a move from Deputy Aidan Matthews, which would direct P&R to return to the States by June 2028 with proposals for a wholesale overhaul of property and land taxes with the aim of raising more revenue from high-value properties and owners of substantial parcels of land.

‘This amendment works for supporters of GST, as property tax reform will help avoid the need for some future increases in the rate, and equally for those members who would prefer alternative sources of revenue,’ says Deputy Matthews as he sets it out.

He says the GST debate has become a bit of a ‘recurring nightmare’ as he laid a similar amendment back in 2023...

Another debate for a Deputy Goy amendment, but another defeat.

Deputies reject his move to investigate additional taxes on vacant properties, voting 10-26, with four abstentions.

From our senior reporter Matt Fallaize:

The States must be in generous mood today. It is affording David Goy the rare luxury of seeing some of his amendments actually debated. Although each one in turn is still being heavily defeated: 8-28, 7-31, 5-32, 3-29, etc. It’s baby steps forward for Deputy Goy: this morning is at least an improvement on the previous practice of throwing out his amendments with no debate. 

If he wants to take more steps forward in future, he’s going to need to make his amendments less prescriptive, and probably spend longer pursuing his ideas with committees. 

I’m pleased his latest batch of amendments have been debated. The members who were behind getting earlier amendments thrown out prematurely have wisely rethought their impatience now they know the tax debate will definitely conclude today.

That’s why they were hastily disposing of amendments on Wednesday and Thursday, by the way: they feared running out of time again, as they did in July. While their blocking motions and guillotines were unfortunate, they were not crushing democracy, as a few over-excited deputies and journalists have claimed. This tax package was published 4 months ago and the States has now been debating it for six days, including 59 amendments at the last count. That’s a marathon of democracy.

Deputy Goy’s TRP tax idea is rejected 5-32, with three abstentions.

His next amendment is to investigate the introduction of additional property taxes on residential properties left vacant for at least 12 months or used as holiday homes for less than half the year and on commercial properties left vacant or unleased for more than 12 months.

After a short comfort break, States members are back to debating Deputy Goy’s amendment around requiring a minimum tax contribution from households living in properties within the top 10% of TRP values.

‘One of P&R’s justifications for introducing GST is the wealthy households who currently contribute little or nothing through income tax would pay consumption tax instead,’ says Deputy Goy. ‘But why do we need to slap the entire island with GST just to capture the contribution we’ve failed to capture in the first place? Why not address the under-contribution directly? And this is what this amendment is proposing.’

Deputy Rhona Humphreys, responding in debate, says ‘some in this Assembly have spoken already about the danger of even talking about wealth taxes.’

‘Before this debate, I gave up an afternoon to meet with Deputy Goy and Locate Guernsey to go through their work and the model and the value these people bring to the island. Sadly, it didn’t change or affect any of the amendments that Deputy Goy has brought.’

Deputy Goy’s next amendment is to investigate requiring a minimum tax contribution from households living in properties within the top 10% of TRP values.

There was attempt not to debate it, with the Bailiff deeming it to go beyond the original proposition, but the vote was tied 18-18 and so it will be discussed...

That took a while in the end, but Deputy Goy’s amendment around looking at new charges for expensive and powerful cars has been rejected 7-31, with two abstentions.

Deputy Goy said new charges based on the power output of vehicles would be easy to administer. Environment minister Adrian Gabriel disagreed, while P&R president Lindsay de Sausmarez said the right moves were already being made on motor taxes as part of the wider tax package.

Another one from Deputy Goy up next...

It’s another amendment from Deputy Goy - this time about cars.

It calls on the States to investigate the introduction of higher one-off and annual charges on the most expensive and most powerful vehicles purchased for use on Guernsey’s roads.

Defeat for Deputy Goy’s amendment 37, which called for the States to look at a higher rate of document duty on high-value property.

He said he was simply asking P&R to investigate it, but members voted it down 8-28, with three abstentions.

‘I think we should work on these things in a steady fashion, evolving it,’ said Deputy Steve Williams. ‘Anything overdramatic, I think will have a phenomenally dramatic effect on the marketplace. And that would be my personal view, so I won’t back these percentages.’

This amendment, seconded by Deputy Aidan Matthews, calls on P&R to investigate the introduction of a higher rate of document duty on purchases of property exceeding £2.5m.

Deputy Inder calls it a budget amendment, but once again, we’ve got a bit of debate on this one.

The first vote of the day goes against Deputy Goy, but he did generate some debate with this open market amendment.

Members voted it down 3-29, with six abstentions. On to his next one...

From our senior reporter Matt Fallaize:

By the end of today - the sixth day they’ve been at this - the States will have voted on P&R’s proposed tax package. Deputies have decided to sit today for as long as it takes to conclude, but with speech limits in place the final vote may well be no later than mid-afternoon.  

The package has picked up a few relatively minor amendments along the way this week, but the core remains as P&R recommended: 3% GST, new motoring taxes, reductions in income tax and social security contributions, and public spending reductions of £20m a year - all by 2029, when this States term will end.

All of the alternative routes proposed in amendments have fallen short of a majority, mostly by very clear margins. They included raising income taxes, deferring for a year or more any decision on the biggest tax changes, and putting the whole thing to a referendum. 

All the voting indications so far have been that P&R’s proposed package is heading for approval, perhaps with a smaller majority than the senior committee would have liked. I wrote yesterday that they were 2-0 up with half an hour to play.

But is GST, etc. now almost certain or could P&R still snatch defeat from the jaws of victory?

There are 40 members, each with one vote of equal weight. If every member votes pour or contre, the key number is 21, because these proposals require a simple majority to be approved. But the key number changes if one or more deputies abstain, voting neither pour nor contre, and an abstention or two is a real possibility.

If I was a betting man, I’d put money on the following 19 deputies voting in support of P&R’s package:

Yvonne Burford
Lindsay de Sausmarez
David Dorrity
Steve Falla
Sarah Hansmann Rouxel
Rhona Humphreys
Sasha Kazantseva-Miller
Marc Laine
Ross Le Brun
Munazza Malik
Paul Montague
Andrew Niles
George Oswald
Charles Parkinson
Sally Rochester
Tom Rylatt
Gavin St Pier
Jennifer Strachan
Steve Williams 

I understand that one deputy, Neil Inder, is most likely to abstain, or if he doesn’t abstain to vote against P&R’s package. If he abstains, which would reduce the number of total votes to 39, P&R will need 20 votes for its package to be approved. If he votes against, keeping the total number of votes at 40, P&R will need 21 votes for its package to be approved.

If I am correct about my list of 19 above - of virtually certain supporters of P&R’s package - the senior committee is looking for one or two more votes to get to 20 or 21.

Tina Bury’s voting so far indicates that she will be a (reluctant) vote for P&R’s package, but that is far from certain.

John Gollop has a long history of speaking in favour of tax rises, but as Tina Bury herself said yesterday - somewhat ironically - you can never be sure about John Gollop’s vote until he presses the button.

Moving down P&R’s list of potential votes, next are probably Adrian Gabriel and Marc Leadbeater, both of whom are politically and temperamentally inclined to want to support this P&R. But Adrian Gabriel has indicated continuing reservations about GST (he unsuccessfully proposed an amendment to raise income tax instead) and Marc Leadbeater has said he believes P&R is trying to move too far, too soon on big tax reforms (he unsuccessfully proposed an amendment to make smaller changes now and defer the rest for reconsideration a year from now).

I can’t see any other member voting for P&R’s package.

In summary, as the final day of debate starts, this is how things look. 

If Neil Inder abstains, P&R needs one more vote to get its package across the line, and if he votes against P&R needs two more votes to get its package across the line, and if those one or two votes are there at all they belong to Tina Bury, John Gollop, Adrian Gabriel or Marc Leadbeater. 

That’s how I see it anyway.

Will we get a decision today?

States members are back debating at the Royal Court, starting at the slightly earlier time of 9am as they aim to reach a conclusion on P&R’s tax reform proposals.

We’ve picked up where we left off last night with debate on Deputy David Goy’s amendment 36.

He wants the States to investigate requiring a minimum tax contribution from future purchasers of open market properties who are shown to have considerable wealth.