States should make large cuts in expenditure

Now, as we begin to see light at the end of the Covid tunnel, we all realise the associated costs have been considerable, not only for the States, but for businesses, large and small.

Businesses, having had to raid their reserves or borrow to supplement their lack of income, are faced with two key challenges; cut costs and potential price reductions. Cutting costs can be unpleasant and painful, but decisions have to be made to survive. Attempting to regain those customers who found online purchasing easy and more competitive may well force price reductions to remain competitive. Cuts and price reductions – a double whammy – whilst businesses attempt to pull through.

If businesses have to do this, why not the States? Not just by trimming here and there to save small amounts, but why not large cuts such as cancelling the sacred cows of planned and agreed expenditure? Of course, this might well be really uncomfortable, especially for States members whose dreams and raisons d’etre might be extinguished.

The difference is that the States has the great benefit that its customers, the taxpayers, are a captive audience with no online shopping for competitive tax rates. Increasing their prices (taxes) increases their income. If this is their chosen route, the key question is how? The simplest, and by far the most palatable, is to increase income tax and/or decrease personal allowances, both being very simple to implement with zero or very little additional overhead.

Yet, what about that angry old elephant in the room which wants to use this time to make the threat of GST a reality? If so, consider just two of the key drawbacks to GST:

n GST is a complex and expensive tax for businesses and the States to administer. It demands additional staff, thereby increasing overheads, demanding even more taxation just to cover the increased costs.

The only winners are the accountants.

n One of the great attractions Locate Guernsey has in drawing new and wealthy residents to Guernsey is that the island is GST-free. This highly prized benefit will be lost. Bear in mind that additional wealthy residents would have contributed to the treasury by paying income tax.

Surely, the sensible route is for the States to do as businesses will have to do. Make cuts, not just trims, and if taxes still have to increase, fiddle with income tax and/or personal allowances without feeding the enormous and questionable appetite of the GST elephant.

PIERS DU PRE

Address withheld.