THANKS to this newspaper’s look back through the archive on Tuesday, we now know that at least 30 current States members said while standing in the first island-wide general election that they were opposed to introducing a goods and services tax. So if you can trust what deputies say, two of Policy & Resources’ options in its taxation review looking to raise up to £75m. a year in new revenues are dead even before arrival.
This is puzzling. Why, as Education argues over the two-school model, propose something that simply isn’t deliverable? Perhaps, in this still strange Assembly, party loyalty trumps electoral promises. If so, it is worrying – ‘dear elector, this is what I think I believe but my party will let you know in due course…’.
Meanwhile, lobbying for the introduction of a GST is picking up pace and will start to have a particular allure for those who see spending your money as the path to political righteousness.
What concerns me is that the degree to which it gains traction is the exact degree to which States members are losing touch with the very islanders they are supposed to represent.
I don’t mean this in a personal way, but look across the States Chamber. None of them are exactly on their uppers, are they? Coin a collective noun for our political leaders and it would be a wealth of deputies: a group of decent, well-meaning folk who generally do not have to fret about there being too much month for their money.
This immediately sets them apart from many islanders who do struggle and for whom the already high cost of living here is a real burden – and that’s before post-Covid inflation kicks in.
There is a seductive appeal to P&R’s blandishments that the island needs to broaden its tax base away from earned income to consumption. Look at that more closely, however, and it’s actually a deeply cynical approach. You may be out of work but you always have to eat so we’ll have a slice of that instead…
And it’s also designed to make your deputy’s life easier. Instead of remaining focused on the strength of the economy, ensuring that Guernsey remains an open and welcoming place for business to locate and that you and your offspring have decent, well-paid jobs to keep you here, their attention can turn instead to the nice-to-haves.
Yes, P&R says it will take steps to mitigate the worst, regressive, impacts of GST on the less well-off. But this makes little sense either. Let’s introduce a new system of taxation, employ more civil servants to operate it and set the rate higher than it should be so we can give back some of what we’ve just raised…
The other concern is how damaging this will be to the island’s cost base. Electricity is already expensive (19.78p a unit vs 14.53p in London) but will go up by 8% under the proposals. Food prices, already up to 30% higher than in the UK according to a University of Loughborough Centre for Research in Social Policy report, will become even more out of reach at a time when food bank use is already increasing.
Building costs, estimated by consultants KPMG to be 30-40% higher than in the UK, will rise to approaching half as much again – with all the consequent impact on ‘affordable’ housing. That’s property now costing an average of £510,000 per home but before GST on estate agents’ fees, removal costs and conveyancing, furnishing and any building or maintenance on it.
The biggest impact, however, will be on the cost of the public sector. An 8% GST has been estimated by P&R to add 5% to the island’s RPI, which States employees will demand to recoup via higher wages – in round terms an extra £12.5m. a year. By way of comparison, the amount GST is expected to raise from visitors is just £10m. a year.
What’s more puzzling in this tax review is why the options have been set out with little of the back story or detail – to quote John West, what did P&R reject to make this package the best?
If we are to be reefed by a profligate government I’d rather the burden went on the 4x4 brigade, for instance, than gran’s winter coat or your nippers’ rusks. What happened to the distance-charging mechanism for road use that the States approved in June 2019?
There’s also the unspoken transition, just eight years away, when sales of new petrol and diesel vehicles will be banned here, prompting a collapse in fuel duty and the loss of well-paid jobs for mechanics as electric vehicles replace internal combustion ones.
So what’s been released so far by P&R falls far short of the tax review actually required. If, on the other hand, it’s simply to persuade us that income tax needs to go up to 23p in the £ under the fig leaf of a ‘health tax’, fair enough. That’s the only sensible and practical approach – and the fairest for all islanders.
Just don’t expect it to stop there.