I doubt that fate will befall P&R’s package of fiscal reforms, not least because there aren’t too many other games in town. But it is certainly rather bland and cautious.
Some might regard that as a good thing. After all, horses are best not scared. But I am not so sure.
On the surface a GST levied at 3% must be better than one at 5%. On the other hand, it must surely mean less income for exactly the same administrative costs?
It also means that some of the key measures to help islanders of modest means have had to be scaled back.
So we will have a narrower 15% tax band than under GST+, and the new (very welcome) social security contribution allowance will be considerably lower.
This also creates another potentially worrying side-effect. Cynics have often claimed the planned mitigations for GST could later be left to wither on the vine. When the social security allowance was tied to the personal Income Tax allowance that was unlikely.
Now they have been divorced it will be much easier to do.
As for the motor tax? Fair enough, but did it really need to be one which, taken together with the reduction in fuel duties, benefits those who drive a lot, while hitting those who use their cars lightly? A curious bit of social engineering to my mind.
Elsewhere in the package it seems that those millionaires who retire at 55 but ‘do a little job on the side’ will continue to pay next to nothing in social security contributions, while pensioners will continue to pay them on their entire income. A rather odd take on fairness.
Then there is the £20m. in savings included as part of the package. Not unalloyed good news because, while that might take the pressure off the taxpayer, we know it may lead to user charges in areas such as healthcare.
So how do I rate the P&R package? Well, despite my criticisms, it is broadly progressive and does boost public finances by £59m. So a grudging 6.5 out of 10. But I still think they are proposing something worse, and less progressive, than retaining GST+.
