From A to E ...five areas where it all went wrong for Policy & Resources
Editor James Falla reflects on the Tax Review process, debate, and last week’s result, and picks out five areas where the senior States committee picked the wrong option
Fail to prepare...
The Tax Review may not be traditional flagship policy territory. As a government, your big achievement for a term in office should ideally be constructing something, perhaps even something that might one day bear your name above the door. Not taxing the hell out of the population to fuel out-of-control expenditure (my interpretation, other views are available).
However, once Policy & Resources decided that decisive action was where it was at, the Tax Review’s position at the front of the queue and front of mind was always going to be questionable. And when the Tax Review report in the summer of 2021 was presented with this awful menu selection of more income tax (but we don’t like it); more income tax dressed up as a ‘health tax’ (but that’s not being honest on you islanders so we don’t want to go that way) or GST at 5 or 8% (‘you pays your money, you takes your choice’), the whole process was largely doomed at the very beginning.
Part of this failure to prepare has been the missed opportunity to offer a show of support for islanders in meeting them halfway over spending cuts. There were ‘promised’ spending cuts in P&R’s eventual option A, though whether these would prove to be genuine or not, we shall never know. Largely, and eventually, islanders have come around to the realisation that we do have a future finances problem. But to convince them that they are serious about tackling it, the States should have already instigated savings and cuts, rather than just making vague promises about future budgets.
P&R told us that they ‘turned every stone’ but so many points of consideration get chalked off before they’re talked about because they’re too difficult, or risk destabilising a market.
Guy Hands’ daring proposal to tax the open market more was probably a non-starter, but it was an indication, an invitation even, that the island’s wealthier residents might be open to paying a bit more to support the community. But with talk of effective tax rates, P&R had put that to bed long before Mr Hands came up with his idea.
Means-testing the old age pension was one idea that came forward from within the committee – and true, some people clearly don’t need it. However, politically it was a suicidal proposal – perceived as a threat to take away the hard-earned income of those who already felt (absolutely incorrectly, to be fair to the States) that they were being ‘blamed’ for taxes going up.
If some of that argument sounds like political naivety, that’s probably because it very much looks like it. There was a time that securing a spot on the senior States committee would take 10 years plus, and they would be known as Advisory and Finance because there was genuine ‘advice’ from the grey hairs at the top table who had been there and done it, politically. They didn’t always get it right. But they knew the game and knew how to get things done.
That has changed over the years, sacrificed in favour of sating the ambition of high-pollers who believe that mandate has given them the opportunity to start pushing the changes that the Guernsey public want. About a decade ago the mood changed and political colleagues started supporting this enthusiasm, and that way you end up with an era where 60% of Policy & Resources are first-time candidates. And whatever their merits as individuals and fledgling politicians, there has to be a deficit of political knowledge as a result.
Of course there’s civil service advice. But anyone who has worked within the system at high level will know, that’s not often respected by a politician with a ‘good idea’ and a mandate.
Which leads me on to tribalism. You know, the latest game in the States, whereby those who are obsessed with it are always telling everyone else that it doesn’t exist. You only need to take a look at the voting records from A to E from Friday to see some of that tribalism writ large.
The traditional lines fractured a bit because some of the ‘Blob’ immediately signed up to the ultra-cheap ‘Say No To GST’ campaign, and the voting record for option E, in particular, is just plain weird, but Gavin St Pier and Heidi Soulsby have recognised that if somebody else’s name had been on the amendment, it’s just possible that option D might have got through.
This modern-day trait also probably damaged option A’s prospects as well. As P&R led an unpopular proposal, its day-to-day opponents may have seen this as an opportunity to gang up on a vulnerable committee and if not bring them down, at least dish out a bloody nose, no matter how great the mitigations.
A theme which came through loud and clear on Friday, as debate got serious, was the strength of the mitigations package within option A, and how it had been underrated. Was it under-sold? Almost certainly.
A few members made the excellent point that under any other option, there were no mitigations to tax rises.
None at all.
The mitigations were pretty clever, though it’s an odd way to design a tax system – to collect more than you need in order to give 20/30% of it back to islanders.
However, it had two major failings. It offered the prospect of a better fiscal life without any idea of how much of your income you would actually spend and thereby return tax through GST, and that nobody trusted it to last more than five minutes before those mitigations evaporated at the sight of the next fiscal deficit – after the sucker punch to swallow GST had been delivered.