Tax raid won’t be a one-off

YOU might recall that I wrote a piece here last month headed Day of Reckoning. Publication of the Fiscal Policy Framework this week has shown that not only has that day arrived, it’s financially far worse than I outlined.


Demands on your back pocket are as high as £132m. over the next few years and meeting that could entail income tax rising to 27p in the £, social security rates going up by seven per cent, GST introduced at eight per cent (higher than Jersey) or anyone earning more than £50,000 being taxed at 45%.

It could be a combination of all or any of those options, of course. And also in the mix is forcing islanders who need long-term health care to pay for it by selling the family home or burning through any accumulated savings, something we were promised would never happen.

We’ve already highlighted the reasons for this – unfettered policy aspirations by States members who devise their grand plans for us without knowing or caring how they’re going to be funded, and their lukewarm commitment to making meaningful savings or seriously transforming government itself.

Since we’re facing significant tax increases – not far short of an extra £7,000 for a tax-paying couple – it’s natural to look for someone to blame. Unhappily, we can’t simply accuse today’s deputies and those who advise them, tempting though that might be.

Some of you might remember Wing Commander Ron Guy, a St Peter Port deputy from the 1970s, ex-banker, plus, bizarrely and completely at odds with his dapper, military background, MD of the ’60s fashion icon Carnaby Street.

He was a fierce and outspoken critic of the States’ enthusiastic ability to spend more than it earned and no one much listened to him then. I imagine he worried about it up to his death in 2005, aged 92, because he knew that revenues were finite. Cutting your cloth, so to speak…

And as the Policy & Resources fiscal framework now emphasises, government’s desire to do stuff has now exceeded the current capacity of the taxed economy to pay for that stuff – in particular, ‘nice to haves’ like secondary pensions, a wider selection of drugs for patients and more civil servants to police all the splendid new initiatives that have been and are yet to be introduced.

I’ve long held the view that when the history of this particular chapter of the island comes to be written, the chroniclers will pinpoint the start of Guernsey’s decline to the failure to extend the runway. That, you understand, as underscoring its desire to remain inward- rather than outward-looking.

The response to the fiscal framework is likely to be equally totemic. Either because government shrugs its shoulders, votes for business as usual and taxes us more, or because islanders accept Gavin St Pier’s invitation to join the debate and give States members some clear and emphatic guidance on what sort of future they, rather than their politicians, want.

I agree with the president of P&R that there is a limit to how far savings and transformation can take you (although we’re not there yet). At the same time, there’s been precious little discussion about how to grow the economy and flex immigration to dilute the effects of the ageing population. Which is why we’re now discussing how to cut the cake into even smaller slices instead of making a bigger one.

The concerns raised by the framework report go beyond that, however. The first is the abject failure to properly manage the terms and conditions and pay scales of public sector staff, something that affects more than half of all expenditure.

Responsibility for that goes back years – at least as far as when we had something called the States Civil Service Board – and P&R are now telling islanders that it could cost them up to £40m. to rectify. Even Aurigny would blush at that. Yet no apology, just cough up for past bungling. That will be another £1,000 each please.

What this indicates is that inability properly to administer key elements of government itself is deep-rooted and recent independent reports have highlighted the failure of HR to tackle this or help drive much-needed transformations. I’m guessing none of the deputies seeking your vote in 2016 mentioned this while canvassing or promised to resolve it.

The other area of concern raised by the fiscal framework is that this looming cash raid on islanders won’t be a one-off.

Ten years ago the first framework came into existence, permitting the States to take up to 24% of GDP in terms of revenue. As we know, the current level is 21% and the extra headroom factored in simply on a ‘just in case’ basis – but that may already be too little to meet the latest demands.

So that baked-in wiggle room has already been exhausted and just shy of 60% of all States spending goes on health or social care, areas that are highly sensitive to the ageing of the island’s population.

As the availability and expense of treatments increases and medical inflation pushes up hospital costs – before there’s any settlement in the nurses’ pay dispute – so that pressure on the bulk of what government spends can only get worse. Worse, that is, before the 2020 intake of island-wide deputies begin inflicting their own varieties of cost-increasing initiatives on us.

So unless we’ve already hit peak demographic time bomb, history suggests P&R will be mounting a fresh raid on your wallet some time during the Assembly of 2024 – not an encouraging prospect.

Deputy St Pier said this week that his hunch was islanders will be prepared to pay a little more tax under this framework. If so, fair enough.

My only plea to islanders is to engage in the upcoming debate fully so that if you really do want a tax-and-spend future you know exactly what you’re letting yourselves and the kids in for.

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