After 11 months of detailed work, the Policy & Resources Committee published its 2026 tax review policy letter on 8 June. If it feels like Groundhog Day, that’s not surprising. I first had to decide how to vote on GST back in 2015. At that time, the proposal was not designed to raise money. Its aim was to broaden the sources from which the States raises income to provide public services. We were, and as of today still are, heavily reliant on income tax. Having all of one’s financial eggs in one basket is never a good idea.
However, I could not support the 2015 proposals because GST on its own without other changes to offset its effects on lower and middle-income households makes those households disproportionately worse off. That is something I have pledged not to do.
In the last term, mindful of growing pressures on public finances from two main areas, namely increased demand for healthcare and the need to invest in the islands’ infrastructure, the P&R of the day brought proposals that sought to raise money and at the same time address the regressive nature of GST - its tendency to hit the poorest hardest. This was to be through a package of mitigating measures. To my mind, there were still issues with that package, particularly the lack of a mechanism to continue protecting people on lower and middle incomes if the rate of GST were to rise in the future. In our package, we have legally linked any potential future rises in the GST rate to protective measures, to help ensure that if the headline rate does increase beyond 2030, people on lower and middle incomes will be insulated from the increase by further mitigations.
Last term, my Scrutiny Committee launched a review into the States’ IT contract with Agilisys. It was a complex process, but we uncovered significant concerns and made recommendations accordingly. The previous P&R decided to terminate the Agilisys contract, and this P&R is implementing all the Scrutiny Review recommendations. The new head of the public service, building on previous work, uncovered the full extent of money that was wasted - there is no other word for it - and this committee has been fully upfront and transparent about it.
It is totally understandable therefore when members of our community express concerns about trusting an organisation with more of their tax on the heels of such failure. However, significant changes are already well underway to prevent such things from happening again and to improve efficiency overall. We are firmly committed to fixing the structural issues within the organisation, particularly on large capital projects, but it won’t happen overnight.
In the meantime, the deficit is not just a one-off issue. Relying solely on efficiency changes will not resolve it. A total of 3% - or £20m. - in efficiencies is part of the way forward, but if we do not raise more income in addition to that, serious service cuts will be inevitable, as will the inability to invest in our islands to help grow the economy.
And what of the tax package itself? GST has been a prime example of political strategist Lynton Crosby’s ‘dead cat strategy’ - namely, that if you throw a dead cat on the dining room table, it diverts attention away from absolutely everything else. Those three letters, GST, are diverting attention away from everything including two fundamentally important things where this package is concerned.
Firstly, the rate of income tax is being slashed from 20% to 15% for earnings up to £28,000. This tax cut applies to everyone who earns over the personal allowance figure - some commentary on social media wrongly suggests it only applies to people earning under £28,000. For someone earning the median wage of £42,600 their income tax bill will fall by £730 a year from this measure and from the increased personal allowance.
The other fundamental change is the introduction of a new social security personal allowance. At present, someone on median earnings will be paying social security contributions on every pound of their wages. If our proposals are passed by the Assembly, people will not have to pay anything at all on the first £11,122 of their wages, a further saving of approximately £520 even accounting for the increased employee rate. Therefore, the average person on the median wage could expect to be substantially better off from tax changes. But what about the effect of the 3% GST? Rent and mortgages will not attract GST. Assuming our average person spends £18,000 a year on things that do attract GST, that will come to £540, leaving them £709 a year better off than now. But this has been drowned out of the conversation.
In addition, and also lost in the noise, are the other measures to help pensioners, people on low incomes who don’t qualify for income support and small businesses. Of course, the examples I have given in this brief article can’t cover all scenarios – very few people will be the ‘average person on median earnings’ and therefore we have updated our online calculator so that people can see how the package of changes would affect them personally. It will be available shortly.
On social media, people urge the States to take more tax from corporates and from higher earners. That is exactly what the package proposes. A significant portion of the money raised will come from corporates. Additionally, we will be getting income from visitors.
Is the package we are proposing perfect? No, of course not — and no package will ever be. But the fact remains that if we are to continue to maintain the islands and provide the services - particularly in health and care - then there is no getting away from the fact that we need to raise more money.
Do I agree with everything in the package? I’d probably do one or two things slightly differently, but nothing fundamental. Naturally, I would far rather not be proposing any tax increases – believe me, no politician ever wants to have to do that despite claims online to the contrary – it’s hardly a vote winner after all. But all the while we defer, delay, amend, and review, our reserves are dwindling and if we do nothing they are forecast to run out in five years. The sooner we do something, the less severe the measures we need to take will be. This is a problem that is not going to go away on its own. It’s not a problem that can be fixed by sacking a couple of dozen civil servants.
In my manifesto last June, on this subject I said that making efficiencies and savings in our public sector should be a continual process, including listening to frontline staff - and we are doing that. But I cautioned that even with savings, we would still need to raise money for healthcare, infrastructure investment, and rebuilding our rainyday fund, which are the three things driving the deficit. The current proposals do not allow for rebuilding the reserves, but what they will do is ensure that those reserves do not run out.
I promised that I would only back fair tax changes that protect or improve things for low and middle earners, who are already under pressure from the cost of living, and I said that any system must have safeguards regarding potential future increases. I also emphasised that corporates need to contribute too. I believe that the package Policy & Resources is recommending to the States meets these aims and I would urge people to look at it in the round and not just at those three letters – GST.
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