Deputy Andy Sloan, the president of the Scrutiny Management Committee, has described it as a ‘damp squib’. Deputy Charles Parkinson, the treasury lead for the Policy & Resources Committee has said it’s a ‘compromise’. Former deputy Peter Roffey, whose amendment gave birth to the package with the horribly misleading name, GST-plus, has called it ‘rather bland and curious’. Deputy Steve Falla has written on these pages that it is ‘an iterative, softer, blended approach – a Guernsey compromise.’
‘It’, of course, is P&R’s policy letter entitled: Tax Reform. If States’ rules of procedure allowed a sub-title, it might have read, ‘A fifth attempt in a decade to adopt GST.’
That fact alone does much to explain the lukewarm descriptions so far applied to the policy letter. But you must remember the political adage that ‘politics is the art of the possible’. The origin of this phrase is attributed to the 19th-century German statesman, Otto von Bismarck. The full quote is said to be ‘the art of the possible, the attainable – the art of the next best’. He might have added, ‘the art of compromise’. It sounds as if Bismarck might have fitted in quite well into Guernsey’s ‘consensus’ system of government.
P&R is very conscious of the political history around this topic. This inevitably drives considerations as to what is politically attainable. They know this issue resulted in the removal of one of their predecessor committees in the last States term, then under the leadership of former Deputy Peter Ferbrache. Indeed, that motion of no confidence was led by
Deputy Parkinson – a motion supported by all the other current members of P&R (other than Deputy Niles who was not in the States at the time).
Neither can they ignore the short political history of this States term. Oscar Wilde said, ‘To lose one husband may be regarded as a misfortune; to lose two looks like carelessness.’ This P&R, through no fault of its own, has unprecedently managed to lose two of its members in less than 12 months. That has weakened the committee but, in the context of this debate, strengthened the political hand of Deputy Parkinson who has most consistently opposed the introduction of GST. Whilst it was conceivable that a tax reform package could have been submitted to the States with one of P&R’s members refusing to support key elements, it is utterly inconceivable that could be the case if that individual is the treasury lead. To all intents and purposes, Deputy Parkinson acquired a veto on the design of the package – and if 3% GST was all he could stomach, then 3% was always going to be GST’s ceiling.
Deputy Falla has written that, ‘This package is a far more balanced and a more progressive approach.’ He was careful not to clarify what he was comparing the current package to, because if he were comparing it to the erstwhile GST-plus proposal, he would be wrong. As a matter of fact, that was more progressive. But if he were comparing it to the status quo, he’d be right.
The danger with Bismarck’s ‘next best’, a compromise – whether it’s a Guernsey one or any other – is that you risk pleasing no-one and upsetting everyone. There is a solid constituency both in and outside the States of Deliberation for whom any GST, however low, is a bridge too far. But there is another solid constituency for whom any failure to fully acknowledge the reality of a structural deficit – recently re-titled a ‘funding gap’ – is an act of irresponsibility, of weakness or both. All that is before you toss into the mix the toxicity of attempting to change the basis of motor taxation. Given that in Guernsey politics an absolute, unfettered right to an unlimited number of untaxed vehicles of any size is to Guernsey what gun rights are to America, you swim in that shark tank at your peril. (Just ask P&R’s Deputy Yvonne Burford, who spent four years in the political wilderness after an earlier attempt to meddle with Guernsey’s right-to-bear-cars).
The pretty tame, relatively modest suggestion of cutting motor fuel duty by 25% and replacing it with a fixed road tax, whilst kicking the issue of paid parking into the next political term, will still be enough to induce red mist for many.
Given politics is often more about emotion than logic or common sense, the problem with the tax reform package is whatever was proposed, those opposed were always going to be more emotional, more engaged and more vocal than those in favour. The fact that there is much in the package that logically ought to appeal to the majority of lower- and middle-income households cannot out-compete the emotional engagement of those opposed. Opponents can rightly point out that 100% of the cost and pain for government, business and consumers of introducing a GST is going to be incurred, but for only 60% of the revenue previously envisaged when GST was going to be 5% rather than 3%. And whilst there might have been a justifiable case – based on managing the inflationary impact – of introducing GST at 3% on a clear, phased path to 5%, few will believe a case built on an assumption that 3% will be GST’s ceiling. Indeed, the compromise plays right into one of the principal arguments against introducing it at all: once it’s in, critics say, it’s just too easy to ratchet it.
To believe that 3% is the limit, you need to buy either into the argument that the structural deficit is not as big a problem as is being made out, or you need to rely on the many promises of jam tomorrow on which the package rests. £20m. of future spending cuts (delivered because of a previous Forward Guernsey amendment, not as part of the package.) A bonanza of Pillar 2 revenues. Substantial economic growth delivered because of Economic Development’s financial sector strategy. But we’ve seen this movie before. Back in 2006. The original zero-10 corporate tax package rested on promises of economic growth and spending cuts to be delivered by the Financial Transformation Programme.
P&R’s self-styled blended, softer compromise may be enough to get a careful, thoughtful but unloved package over the line. If so, it will demonstrate this P&R is simply better at politics than its defenestrated predecessor. They will have proven Bismarck’s maxim that politics is the art of the attainable. By delivering the next best, they will almost certainly be leaving their successors with a challenging legacy. But that’s tomorrow’s problem.
