Guernsey Press

There's no victory in GST

Taxing fuel, food and kiddies’ footwear might make sense if there was some unifying purpose behind it. But, says Richard Digard, Policy & Resources’ forthcoming money-raising initiative isn’t there to help you – just them

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LOOK, this is a bit tricky. I have some news that by the time you get to read it will be out of date, thanks to production deadlines for columns. So either Policy & Resources has its preferred candidate in Bob Murray or else Gavin St Pier has been forced on them. The surprise discovery over the weekend for me was that, on paper at least, Deputy St Pier had a chance at all – thanks in part to the expected absence from the Chamber of Deputies Mark Helyar and Chris Blin. That, said experienced States watchers, meant Gav could make it by one vote. Regardless of the actual outcome, that slight possibility is/was significant because it would have indicated a shift away from Policy & Resources, and some disillusionment creeping in – a sort of half-time moment, with members asking what this Assembly has actually achieved. What’s gradually dawning, especially for those interested in surviving the next election, is that the imposition of GST, which will be proposed in the tax review later this month, is based on smoke and mirrors, and voters will not be nice to those deputies supporting it. As former Rothschild Bank International boss and current Butterfield Bank (Guernsey) chairman Peter Rose damningly put it, P&R’s lament of an £85m. financial deficit is ‘fake news’, based on dodgy financial forecasts and story-telling (2021’s position being £84m. better than we were told and not needing to borrow £200m. for capital projects after all). I quote Mr Rose because, unlike many States members, he’s good with figures and happy to tell it like it is: ‘These conflicting messages rightly cause the electorate to view confusing and blatant exaggerations with considerable scepticism.’ Oddly enough, P&R appears largely to agree with him in saying that the 2023 Budget should result in a surplus – note, not deficit and certainly not £85m. – of plus £33m. The committee’s much-blandished ‘structural deficit’ might make an appearance, but only by spending lavishly on things like extending Alderney’s runway. Which is one of the other reasons why deputies were said to be keen on putting Gavin back on Policy & Resources – where is all the promised action-this-day investment in infrastructure? Alderney, with no supporting business case, isn’t seen as cutting the mustard. In turn, that brings us on to the tax review. Insiders tell me it’s purely there to sell GST. If so, that’s a huge opportunity missed. As Mr Rose also said, if a consumer tax is to be introduced, it has to be part of a fundamental reshaping of fiscal policy. To put that more simply, it won’t have escaped you that Guernsey’s alleged plight is pretty similar to that experienced by governments elsewhere – balancing the books. The difference, however, is that everywhere else is looking at the holy trinity of tax increases, growth and spending cuts to restore equilibrium. Yet saving a penny here is totally off limits. For instance, P&R has gifted Health & Social Care an extra £24m. – 12.7% more – on a ‘no questions asked’ basis, even though I’m reliably informed its use of eye-wateringly expensive agency nurses is through the roof. ‘We could double nursing salaries and it would be cheaper than using agency staff,’ I’m told. No attempt at strategic thinking, and that’s pretty much across the piece. Oh, and if you need cancer care at a time when it doesn’t suit hospital bureaucrats, then you have to pay despite that £24m. bung. Economic growth then? That’s the province of Neil Inder and Co, who are busily working on something called the Human Capital Development Plan (answers on a postcard please), watching Sure put fibre in the ground and taking credit for funds under management and bank deposits increasing in the financial services sector. Meanwhile, the island’s tourist industry is still awaiting details of next year’s promotional campaign from Economic Development or even word on whether the high-level economic enabler report from Frontier Economics will be acted on. You’ll remember, it’s the one that says: ‘…the runway extension is justified based on the benefits that arise from the economic impacts of visitor spending and business expansion. Indeed, the former effect on its own is sufficient to justify the costs incurred in investing in runway extension.’ Funnily enough, just about the only immediate action taken to help the economy has come from Home Affairs. As committee president Rob Prow put it: ‘We firmly believe that our flagship proposal to amend population and immigration policy, to open up off-island recruitment worldwide for roles that are currently restricted to a more limited cohort of nationals, will be a game-changer for local businesses competing in a global market for staff to meet our economic needs.’ The problem there, of course, is this ‘game-changer’ is limited to stopping the island’s workforce from shrinking, hence the 300-a-year cap. In other words, it’s a policy of standing still, not growth or expansion. Which brings us back rather neatly to the forthcoming tax review. If it’s simply there to justify GST then not only is it an opportunity missed to look at some of these wider issues, it will also be inherently dishonest. Again, as Mr Rose says, ‘All we DO know for certain is that, as of right now, we have no existing financial problems and considerable reserves, we cannot trust Treasury forecasts, and our Bailiwick workforce (inevitably including that of the States of Guernsey) is going to fall.’ Not many economists recommend tax increases ahead of a recession, such as faces us and Britain, where living standards are expected to fall by 7%. Add GST to that here and food, fuel, heat and kiddies’ shoes go up by an extra 8%, the top rate sought by P&R, compounding the misery when the need for it has yet to be justified. When things were particularly bleak for the UK, Winston Churchill famously offered years of blood, toil, tears and sweat. But he also promised victory. P&R, by refusing to entertain controlling the size of the States and pursuing growth is, by contrast, offering nothing but toil and tears. There is no community victory with GST, no end-game to aim for, other than making life easy for free-spending committees. So as I said at the start, I have no idea who the new P&R member will be. But if it is Deputy St Pier then perhaps it means the States are starting to question the leadership and ability of this Policy & Resources. If not…