Andy Sloan: It’s all of the above

Circumstances dictate. There’s a budget or two in the offing. Which means I’m going to have to go and make some serious points this month. How many? Who knows? Spoiler alert one: it’s 10. Spoiler alert two: where I stand on GST is a matter of public record. I’m getting t-shirts printed. Order them via X.

I file this column before the UK Budget, but by the time you read this, Rachel Reeves will have delivered her first Budget. I know tax rises are coming; Labour has been relentless in preparing the ground on that one, but I’ve lost track of the specifics. The UK public is resigned to it – even the hysteria being whipped up by the Tory press has a half-hearted feel to it.

It’s been interesting to follow the lead-up to the Budget, watching ministers flying various kites and testing soundbites. Coming down the home straight, all the talk is around promising that ‘working people’ won’t be taxed more.

When I read that Rachel had been challenged to define ‘working persons’, I thought at first the BBC had gone a bit existential on me. But apparently not. This challenging promise rather exposes the depth of Labour’s terror of being accused of increasing the tax burden on workers.

P&R is clearly made of much sterner stuff. No such sensitivity over here in Guernsey. The proposal on the table is to increase income tax by 10% (yes, we can do the maths). A clear two fingers to Richard Digard’s ‘hard-working third’.

To be fair to P&R (not a popular pastime, I accept), their explanation of why they felt the need to do something is not misplaced. They finally acknowledge a point that many thought I was blunt for making in last year’s Fiscal Policy Panel report (though I’ve been making it for many years in these pages) – namely, that the States budget has remained in structural imbalance ever since the introduction of zero-10. Point one.

Setting aside the debate on the corporate tax regime, GST is the answer to this problem. A 10% increase in income tax is not. Point two.

Point three, this was always so. GST was always supposed to be part of the zero-10 package. The zero-10 measures included enabling legislation. We’ve suffered because politicians at the time ran with the pretence that there was another method of structurally balancing the books. There wasn’t, and we spent the 2010s employing jiggery-pokery in the presentation of States finances, trying to pretend otherwise, and the state of the public finances is a lot worse than it should be because of it.

But trying to present another can-kicking as a noble and considered move is baloney. It’s certainly no political magic wand. And coming from the same deputy who started off all this can-kicking some 16 years ago, I, for one, won’t be asking the president of P&R to take a bow in appreciation.

The problem with this baloney is that it’s dangerous baloney. I’m not going to go all William Pitt on everyone – everyone understands the nonsense of ‘temporary’ tax rises, but the risk is this perversely becoming a permanent policy response to zero-10’s structural deficit. Back in 2008, a politician would have probably been stoned (I mean in the Biblical sense) to suggest increasing income tax by 10% as the yang to the yin of removing corporate tax. But that, interspersed by 16 years, is what we risk doing. Point five.

Point six is a technical point: increasing the concentration of revenues on income tax narrows the tax base and increases its volatility; it’s not a move that improves the resilience of our public finances as claimed in the Budget.

Indeed, the curious manner of presentation of certain ‘facts’ in this budget makes me concerned for good government. We seem to have landed in a place where government publications are peppered with Orwellian spin. Let me take a moment to consider a handful of obvious instances.

‘This Budget is not simply looking at balancing the books in 2025; it is a budget for tomorrow – to support renewal and growth.’ It’s a bit of a vacuous cliche – budgets are typically about tomorrow. Financials that relate to yesterday are accounts, after all. But the real transgression is the claim of supporting growth. As a good friend pointed out to me, if it’s claimed to be a budget for growth, it’s supposed to have some measures supporting growth in it. Just saying it is so doesn’t make it so. Point seven.

‘In the short term, the proposed increase in income tax will be economically challenging, but longer-term, this should be balanced by the positive impact of reinvesting this money in our economy through public services.’ I’m not sure which is the bigger crime – the grotesque use of modern newspeak where public spending is somehow not spending but investment, or the attempt to portray spending on health and pensions as having an economic impact that offsets increased taxation.

I agree that the need for health and care services grows ‘ever upwards’ with an increasing demographic, but we have to do something about it other than constantly keep increasing taxes, point eight. It’s not a sustainable solution. The sustainable solution is, I admit, an unpopular one, but a topic for another day.

And this idea that we’re a low-spending jurisdiction really needs to be knocked on the head, point nine. It’s no good comparing ourselves to the UK as a whole, which spends over £100bn on in-work benefits and has huge regions of economic deprivation. A decent comparator is the south-east, where, as I’ve said before, our spending levels per capita are broadly par (and that’s without trying to account for our greater levels of private – and by construction, lower public – spending on health and education). It’s a dangerous fallacy that’s trotted out to justify increasing expenditure, as it is elsewhere in the budget, as it happens. ‘Our public services are delivered from a substantially lower cost base than similar jurisdictions, and it is therefore not surprising that many significant cost pressures face our public services.’

But one of the most jaw-dropping lines in this year’s budget is the most plain-spoken. ‘For the first time in recent years, this Budget does not include a central savings target.’ Or, put another way, the States hasn’t been very good at delivering savings, so we’re not going to even bother with the pretence of effort this year. Apparently, it could have been worse. The Budget states, with no hint of irony, in a manner suggesting it believes it has demonstrated Herculean expenditure restraint, that ‘the [budget] proposals do not allow for all the requested expenditure to be met, and there have been some very difficult decisions resulting in our proposals, which would see just under 50% of committees’ requested budget increases being agreed.’ A round of applause is clearly in order. But seriously, this spendthrift approach undermines public support for the action it knows is inevitable.

The answer, sadly, to our problems is all the above. Point 10. Increasing tax revenues to overcome the structural deficit of zero-10 (through GST). Finding another route to fund the demands of demographics. Reforming the corporate tax regime. And addressing this cultural predisposition to spending more of our money. There just isn’t widespread public support for more public spending to justify ever-higher taxes.

But we need to get on with it. More than a decade’s inaction has proven costly to the public finances and just diverts attention from the pressing economic issue of our day – the growth problem. Like I said, we needed a budget for growth; this is not it. Just saying it is so doesn’t make it so.