Having sacrificed an evening of table-tennis, I was pleased to attend the presentation of a new tax plan by Lindsay de Sausmarez at Island Hall, Alderney on 6 July and to have had the opportunity to raise questions. Of course, this topic is for Guernsey to debate and decide, but the people of Alderney do have a proportionate interest in the outcome.
Meanwhile, we have a strong indication of the direction of thought from a core within the Alderney Government – that is, ‘a very, very soft touch and deserving of a fair hearing’. Well, I have given the matter that fair hearing and here are my further thoughts. And, I write as someone who does not hesitate to acknowledge the value to Alderney of the support currently from Guernsey, and the need to maximise our own contribution.
Deputy de Sausmarez gave a polished performance to explain and justify the proposed changes in taxation and a forecast that the broadest shoulders would bear the greatest cost. Our friends in Guernsey are, indeed, most fortunate to have such an experienced and personable politician at the helm. But, what might well apply to the Guernsey economy, does not apply equally to that of Alderney – and her presentation is confined to just the big picture, regrettably.
If the blandishments can be trusted, it appears to me that the net contribution from Alderney flowing from all the proposed changes will not be material and certainly not material to addressing the Guernsey deficit. Also, a central plank of P&R’s extensive modelling is that Guernsey high earners will be spending vast amounts of their income paying GST on goods and services and which I doubt will be the case, generally – but I am certain that this modelling will not apply to Alderney. Indeed, I imagine that all big spending here will have been undertaken before GST is in place and that demand for all the building trades will fall off a cliff on its introduction – to be replaced by a growth in the black economy – a backward step in all senses.
It is claimed that business with annual turnover under £300k would have the choice of joining or declining to register for GST; but, if declining, those businesses would still be bearing irrecoverable GST and which they would suffer or pass on to their customers, adding to the cost of living on both islands. This is not an argument for GST.
I described to Deputy de Sausmarez the purely random example of an organic loaf of bread that cost 17% more here than on Guernsey. Of course, that is but a single example – however, the fact is that all food and fuel is materially more expensive here on Alderney and which difference falls disproportionately on the poorest shoulders. Her proposal will not change that dynamic, even with the offset of other tax changes.
Deputy de Sausmarez dismisses the cost to Alderney and Guernsey business in capex and training of gearing up for GST and declines to reference the initial and on-going cost of gearing up at Guernsey Tax, an organisation that has had its own share of criticism. Also, I am not convinced by the soft plan for bearing down on waste and inefficiency within States expenditure, modelled to be 3% each year on a £750m. – and rising – annual budget. Indeed, I have no faith whatever in much of the modelling on which the entire plan is based.
Finally, Deputy de Sausmarez does not include looking at GDP as a source for solving the annual deficit and seems to be satisfied with a nominal growth of 5% pa but which translates to a reduction of 2% in real terms. At least Alderney States has grasped this particular nettle – although our general reserves may feel the sting.
All these concerns cannot be simply waved away on the tide of a most pleasant presentation. And, all the blame cannot be simply focused on an ageing population. Yes, people are living longer; but not just longer, they are enjoying better health and they are spending their pensions and savings for longer. These are positive outcomes and which do not seem to feature in her modelling.
So – here is my conclusion.
Think again, Guernsey. Consider exempting Alderney from your GST experiment and treat goods and services from Guernsey to Alderney as GST exempt exports – but, by all means go ahead with your GST plan for Guernsey, if you can convince a majority of your colleagues and the people. Certainly, Guernsey does have a financial time-bomb to resolve. The fact that Alderney could be out of step with Guernsey and most other mature economies is not relevant – indeed, vive la difference.
When we travel to Guernsey, we will be content to contribute by paying GST. Meanwhile, we will still be paying materially more here for fuel and food than Guernsey, plus GST. The tax and social security benefits of the plan can and should still apply to the people of Alderney; under a more benign personal tax regime and in view of the multiplier effect, I suggest that the tax take from Alderney might actually rise as would Alderney’s appeal as a destination for tourists and emigrants. Has this even been considered and/or modelled?
I call on both governments to set a new model for our relationship and without waiting for the Bailiwick Commission. Let us all commit to working better together. Let us acknowledge that an improving situation in Alderney will enhance its contribution to Guernsey finances in the short and longer term. This might not solve the Guernsey deficit dilemma – but it could be a step in the right direction.
Have I been convinced by the presentation? Not at all.
Peter J Raphael FCA
Alderney
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