All aboard for a new tax and benefits destination

GUERNSEY has now begun its journey into a new tax, pensions and benefits system.

Not that you will notice, because this is, after all, about a long journey, planning for the future... Well, you've heard the message from Treasury and Social Security many times over.

That direction of travel, though, is not the one that the two boards set out in and the destination will inevitably be different.

Importantly, there is no GST – a victory for a strong lobby from the business sector perhaps.

Deputy Allister Langlois was quick to warn after the debate that GST would return, an age-old political response from the beaten – and no doubt it will, but this States' decision at least means Treasury will not be sent down a dead-end, wasting time and money along the way.

The departments ended up with a pretty low barrier to judge the success of their report – happy that a discussion about the future challenges had been had, putting a big emphasis on the income lock that had been agreed, pegging this to 28% of GDP.

That has all the rings of the hollow promises being made by the big parties in the UK general election, though.

Drill down into it and it's all pretty meaningless – is it a challenging target for Guernsey? Who really knows, based as it is on historic income levels which may well have been based on inflated spending anyway.

Indeed it is a recipe for profligacy in times of economic growth, something the island is suffering for now.

Where does the accountability lie if it is ever broken?

The States has targets – the States misses targets.

The deficit has not been eliminated, the number of houses it promised have not been built, inflation is running too low, population is too high, we are not recycling to the level the States accepted and the FTP – well, they gave themselves a few more years.

Challenged about this, there will be various answers – or excuses, if you want to be harsh: 'We are victims of the global economy, we can't force people to build, it was only aspirational'...

This is part of what erodes public confidence in the political administration – shout loud and proud about a new target which plays well to the public gallery and sweep it quickly under the carpet when it is missed. Never, ever, though, hold anyone to account. It's the Guernsey way.

The GDP target, while capturing taxes and charges, does not capture other ways government-owned entities increase the cost to the public – electricity, air fares, water charges – or those costs that its actions lead to indirectly, say through privatisation, however unlikely that is to happen.

Elsewhere in the debate, there was a resounding loss for T&R and Social Security's move to individual taxation.

That is another expensive hole in the tax package as it was initially presented.

The loss of GST and the sudden eureka lurch towards environmental taxes is an equation that does not balance as it stands, which means the fundamental plank on which this was all sold falls down. Income tax allowances will not be able to grow to the levels suggested to offset impacts from other changes, such as scrapping mortgage interest relief.

It is just as well the brakes were put on making any decisions on universal benefits too.

The one fundamental decision that was made, the move to increase the pension age, could have been done and dusted in a standalone report – the seeds having long been sown on that and the impact not felt by anyone making the decision, which made it all that much easier to vote through.

For those it does impact, it is hard to get angry because you pretty much know it will change again in a decade's time anyway.

The headline aim of the review was to reduce the reliance on direct personal taxation.

Members have signed up to that principle, but only partially-backed those words with the investigation into environmental taxes and increases in property tax which Treasury say can only go so far.

What these decisions have done, with the words that this States cannot bind the next ringing loud, is left the door much more open to a fresh look at the corporate tax regime.

Yes, this Assembly has made it patently clear this is not an area it wants to explore to any great degree, or it certainly has not been given the opportunity to.

But there are proponents of moving on corporate tax that are waiting in the wings come election time – it may be time to dust off that work on a territorial system.

The tax, pensions and benefits review failed to really spark the public imagination, although it did lead to some key interventions by the likes of the Guernsey Community Foundation.

That public interest will come, though, as the journey moves on and what are ideas and investigations at this stage become a reality that bites someone in the pocket.

It would be a mistake now for this strategy to become fragmented as the different initiatives get under way and return one by one. Each element has a knock-on effect on the next, but more fundamentally on society.

It would also be a mistake for politicians to think the work is done with selling it to the public simply because this debate has been had.