NOW that we have made what I hope is the final decision regarding transforming our education system, the focus is shifting to a potentially even more divisive debate – the tax review.
Significant tax increases were inevitable following the introduction of the Zero-10 tax regime in 2008. Unfortunately, successive States Assemblies have failed to fully address the structural budget deficit it created, despite repeated austerity programmes and innumerable minor tax increases.
These failures to adequately address the systemic issues, combined with the negative financial impact of Covid, make it impossible to delay difficult decisions any longer.
However, as Albert Einstein said, ‘In the midst of every crisis, lies great opportunity’. The potential introduction of significantly higher taxes creates the opportunity to have a meaningful conversation about what we want our government to be.
What we need to decide is the style of government we desire. Do we want a nanny state, a government that endeavours to control or influence wide-ranging aspects of our lives through regulation, oversight, and targeted spending, funded by high taxes? Or, a nightwatchman state, a libertarian government that preserves the rule of law but minimises its size and interventions, requiring much lower taxes? With many variations possible between these two extremes.
The stark choices we face will make this discussion difficult. We have two options – introduce considerably higher taxes to pay for our existing services and benefits, plus those due to be introduced, or start limiting or eliminating some of the services and benefits currently valued by some people and revisit previous decisions to introduce costly new initiatives.
I believe this financial crisis presents an opportunity to have a big debate regarding the style and size of government we desire, plus to understand the associated costs and levels of taxes required to finance it.
It allows us to re-evaluate everything our government does, and not simply ask ‘Can we do it cheaper?’, but also ‘Can we do it differently?’ and even ‘Should we stop doing it?’
I will be voting against all the proposed tax increases in the tax review so we can have this big debate. I hope other deputies will join me in not supporting the tax review's recommendations, but that cannot be the end of the matter. We cannot simply put our heads in the sand and leave this problem for the next Assembly. We must immediately start discussing the difficult choices we need to make to reduce the size and cost of government. We must be realistic about what that will mean – smaller government is easy to sell as a theory, but we’ll need to be determined to see it through, even when it involves unpopular decisions. And, if after the big debate, as a community, we do want a big government and higher taxes, let’s give people the chance to say so.
I propose the big debate culminates in a referendum where the electorate chooses the style and size of government, the services and benefits it should provide and the level of taxation they are willing to accept to pay for it, providing a clear binding directive for this and future Assemblies to follow.
I am not a person who recommends actions that create issues without suggesting steps to resolve them. My thoughts are:
29 September 2021: Tax review
– assuming the Assembly rejects immediate tax increases, we initiate the big debate.
5 November 2021: Budget for 2022
– Assembly approves a ‘business as usual’ budget run at a deficit and sanctions raising additional long-term debt to finance that deficit and already approved strategic projects such as the transformation of education.
June 2022: Policy and Resources proposals
– P&R presents a range of options of styles and sizes for our future government with associated tax funding regimes to be approved by the Assembly and put to the electorate through a referendum.
September 2022: Public referendum
– the public chooses the style and size of government they desire by majority alongside the appropriate tax regime required to fund it.
November 2022: Budget for 2023
– Assembly presented with a budget to transition the States of Guernsey to the style and size chosen by the electorate.
2023/24: Revised tax structure
– Revisions to the tax structure (increases or reductions) phased in alongside the States’ transition to the electorates’ chosen style and size.
– The structural deficit will be addressed, and future Assemblies will have a clear directive from the electorate to maintain a specific style and size of government going forward.
I believe this will result in a much leaner and more efficient government that focuses on the critical services and benefits our society requires with the douzaines, charities and private sector organisations commissioned to deliver more localised, specialist or focused needs, rather than the costly full-service nanny state we are currently developing.
I look forward to helping turn this financial crisis into great opportunities.