The Policy & Resources Committee will be publishing its tax proposals on 8 June, in less than a week’s time.
Guernsey unfortunately has previous on spending more than it collects in taxes – an open invitation to parrot Charles Dickens’ Mr Micawber – but we are alarmingly faced with the deficit-producing habit of expenditure exceeding income resulting in misery of more than sixpence.
So for once, just once, please can we begin with establishing how much money we actually need, and then, and only then, plan how to raise it?
I have, in these pages, been known in the past to disagree with a certain Horace Camp; an activity which is reciprocated with enthusiasm. Mind you, we did meet up for a convivial lunch to discuss our differences, a far better way incidentally than going down the hate-filled polemicism and violence of social media. But I found myself totally agreeing with Horace’s article in these pages of a couple of weeks ago: ‘Yet government appears to operate on the assumption that every spending increase eventually has to be matched by another tax rise.’
Spot on Horace.
I see Richard Wharton of St Andrew’s wrote in with a letter just last Wednesday that echoed the theme to cut costs and overheads before you take the easier route of raising taxes.
A significant component of P&R’s intended package is to try to reduce spending. It is to be applauded in committing to be open about its work to examine efficiencies and service reduction options. Massive overruns in IT expenditure and hospital projects make it very easy to see that doing things more cheaply and, frankly, better is there to be delivered.
We have had years of denials by States committees that there are savings to be made, so we can only wish P&R’s process much success. I say ‘we’ because the Guernsey Policy & Economics Group, which I chair, has this approach as a major plank in its advocacy work; my fellow board members Ann Davies and Jon Moulton do an incredible amount of hard work on research and policy formulation, and also on verifying so much that comes out of the States as fact, a task which is sadly so necessary.
The island is currently fortunate to have at the helm our democratic leader and our head of the civil service both committed to reform and to delivery, no matter how challenging and exasperating that task may be. Only a fool would not wish Lindsay de Sausmarez and Boley Smillie the very best as they navigate a rocky road ahead.
I really don’t want to hear deputies saying they’re delivering on this by cutting the rate of increase of public spending. That is definitely not what this is all about. We have to reduce the amount we spend, period. ‘How?’ certain deputies will wail.
Well, how about:
l Reforming the civil service pension scheme. It is a defined benefit scheme where the employer (that’s, er, you and me) has to find the dosh for ever-increasing pension benefits of a scale that similarly paid, tax-paying employees in the private sector could only dream about. Leave present benefits in place (and possibly bought out by an insurance company so things are all certain going forward) but change for next year the entire scheme to a defined contribution scheme – and immediately for new members. Thus at last a beginning would be made in capping the horrendous contingent liability that has been built up to be paid for as a first call on future tax payers on our island. On Gpeg’s website is a paper published this week on (inter alia) this precise subject.
l Leaving this enormous benefit in place for teachers and hospital staff, where recruitment is a serious issue. Although most UK private healthcare providers and private schools on the mainland have defined contribution schemes already, so recruiting from that reservoir of talent by majoring on the quality of life on Guernsey and other benefits would not face a DC pension scheme as an obstacle.
l Introducing means-testing on many benefits. While I disagree with the central premise of Deputy David Goy’s tub-thumping, headline-grabbing, globally-naive attack on the high-net-worth individuals living on our island, he is sadly onto something when he stokes the fires of resentment of wealth and feeds the voracious maw of envy. Isn’t it time that all benefits are subject to income/assets assessment so that those who can’t afford them receive them for free but those who clearly can, don’t?
l Insisting on headcount reductions in all departments and expecting cleverer, smarter delivery mechanisms (both technological and systems-based) to cope with the inevitable complaint that service-delivery will suffer. The automatic default, in the face of having too much to do, of ‘we need to recruit more people’ has to end. Don’t work harder, work more cleverly.
l Keeping the scope of government smaller would simplify things and reduce cost. Have you noticed how nothing ever gets removed from legislation? A proper cost/benefit analysis should accompany all new legislation & regulation.
Then, and only then, when the deputies have a budget for expenditure for the fiscal year in relation to which they are seeking to raise tax revenue, which is less than last year’s, should they address how they’re going to pay for it.
I fear for Guernsey’s future when I hear some naive deputies, faced with the obvious risk of some wealthy taxpayers or investors leaving or not coming in the first place because of an unreliable, anti-business fiscal atmosphere, saying ‘let ‘em go’. Wealthy people don’t just have assets, they have global mobility in where they place those assets, where they pay tax, where they employ people – we must welcome them with open arms.
I fear for the future of our island when I consider how many of the current crop of our democratically-elected representatives can’t read a balance sheet or understand cash-flow, don’t understand the difference between current account and a structural deficit, and very worryingly do not appreciate the global race that Guernsey is in, for talent and for investment.
We simply cannot fight to attract and keep financial services companies and then behave fiscally and atmospherically as if they’re taken for granted and, God forbid, not welcome.
We must now, right now, change the order in which this work is implemented. The choice of taxes – be they GST, GST-plus, income or business taxes – needs to add up to the right number to meet the agreed reduced expenditure, not just follow the ideological pursuit of ‘putting up taxes to pay for it’, whatever ‘it’ may be. And it will probably be increases in unreformed expenditure.
Gpeg is not against increases in taxes per se, but such increases should only follow, not lead a budget. The States needs to show it recognises that any increase in taxes carries risk, and behave, not just speak, accordingly. ‘Watch what they actually do, not just what they say.’
If there is an issue upon which Horace and Digby agree – and this is one – we might well just be onto something.
