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ANALYSIS: At least our treasury lead should avoid crashing the economy...

ANALYSIS: At least our treasury lead should avoid crashing the economy...

Monday 31 October 2022

ANALYSIS: At least our treasury lead should avoid crashing the economy...

Monday 31 October 2022

Welcome to EYE ON POLITICS from Express. We dig deeper behind the headlines to help you make sense of the goings-on in Guernsey politics. Including taking a closer look at the agenda for meetings of the States’ Assembly.

Here’s your EYE ON POLITICS digest for this week's special States’ meeting to consider the Budget and non-contributory benefits for 2023...

The last time a treasury chief in the British Isles presented a budget – or ‘fiscal event’ as it now seems to be called – he had quite some effect. Then-Chancellor Kami-Kwasi Kwarteng’s legacy included a run on the pound, large increases in the cost of borrowing, shredding the UK’s reputation for economic stability and precipitating the fall of the shortest-lived and arguably most inept government the UK has known.

When Deputy Mark Helyar rises just after 09:30 tomorrow to present this Policy & Resources Committee’s third annual budget, he will be hoping for a more benign outcome.


Pictured: The States are set for a landmark debate in January 2023 about future tax and spending plans. In the meantime, this week the Policy & Resources Committee will ask the Assembly to approve its draft 2023 Budget containing inflation-busting spending increases and popular tax cuts or tax freezes. 

To be sure, there are some discomfiting parallels.

The Guernsey Party which Deputy Helyar leads in the States frequently appears to share at least some of the neoliberal preoccupations of Mr Kwarteng and Ms Truss which did such damage.

And his draft 2023 Budget proposes its fair share of inflation-busting spending increases and tax cuts at a time when public finances are projected soon to be in such a state that deputies are about to be asked to introduce the most hated tax in the island, GST.

There is no immediate danger to Guernsey’s public finances of course – because the island is in monetary union with the UK, its borrowing is relatively modest, recent investment returns provide headroom on spending and the prudence of previous administrations left various helpful reserves.

But you have to wonder how precarious public finances could become if the present States do not quickly curb their conflicting impulses for spending more and taxing less.


Pictured: The Policy & Resources Committee will soon be leading the States into significant annual budget deficits if it continues to propose real terms increases in spending without being able to persuade the Assembly to raise taxes.

The draft 2023 Budget faces no substantial amendments – oh, perhaps one.

Treasury leads used to see the almost certain defeat of every Budget amendment as a test of virtue. Then there was a period when Budget amendments became more acceptable. In the current era, Budget amendments scarcely exist at all, and when they do they hardly touch on any of the main proposals. Such is the zeitgeist in this Assembly: a vigorous battle of ideas it is not.

Policy & Resources’ proposals for big increases in almost every other committee’s budget while cutting or freezing various taxes will sail through the Assembly, though not without several amusing contributions urging greater spending restraint from deputies sitting on committees whose budgets are about to go up in real terms, again.

If there is a substantial amendment, it is Deputy David De Lisle’s on property tax [TRP].

He dislikes Policy & Resources’ proposal to freeze TRP on three out of four local market homes and in effect pay for it with sizeable increases on the 25% of properties which are most extensive with more buildings and land.

He will lay a sort of ‘Sheriff of Nottingham’ counter proposal for all properties to face the same percentage increase in TRP, apparently because it is fairer for all, irrespective of income or wealth, to face the same percentage hike even – or perhaps especially – in these financially difficult times.

Deputy David De Lisle

Pictured: Deputy David De Lisle, with the support of Deputy Liam McKenna, wants to see all property owners paying more TRP next year rather than the increases being contained to the 25% of properties with the most extensive buildings and land.

Deputy Neil Inder, hitherto not a prolific contributor to fiscal policy debates, will lay two amendments to the Budget.

One, encouraging States’ committees to work with their equivalent ministers in Jersey, is pure motherhood and apple pie. Ironically, less than two weeks ago, Deputy Inder was railing against one of his colleagues, Deputy Sasha Kazantseva-Miller, alleging that members should not lay benign amendments simply to give themselves a platform to make worthy but meaningless speeches. He was right then and his sudden change of heart is regrettable.

His other Budget amendment is more interesting. It implies that companies legally cultivating cannabis are struggling at least partly because of the requirement to pay 20p tax for every pound of profit. He wants their profits to be free of tax for five years.

Critics will see it as an irrational last-ditch attempt to save an industry which some deputies, all too rashly, once spoke of as the island’s economic salvation. On balance, more deputies may give Deputy Inder the benefit of the doubt for trying to do at least something with an otherwise rather unimaginative set of propositions.


Pictured: Many in the cannabis industry have unsurprisingly welcomed a proposal from Deputy Neil Inder, which is backed by Deputy Mark Helyar, to scrap tax on profits made by companies legally cultivating cannabis.

The remaining Budget amendments relate to housing.

Deputy Gavin St. Pier believes that giving developers tax breaks on profits made on houses sold below the average local market price could encourage them to build more affordable first-time buyer homes.

He also thinks it might be useful to tax profits made from the sale of second homes – a sort of capital gains tax suggested by the arch nemesis of capital gains taxes in previous Assemblies.

It is understood that at least one of these ideas may previously have been suggested to the Policy & Resources Committee without success by its outgoing Vice President, Deputy Heidi Soulsby. Now that they are being suggested by Deputy St. Pier, they are also being seconded by the Committee’s treasury lead whose Budget they are trying to amend. I’m told it can be tough to be a woman with original ideas in politics.


Pictured: Deputies Sasha Kazantseva-Miller (left) and Heidi Soulsby have submitted Budget amendments with innovative ideas to help address a crisis in the supply and affordability of housing. 

Deputy Soulsby has a Budget amendment of her own.

She wants the States to look into tax breaks to encourage homeowners to rent out spare bedrooms to essential workers moving to the island. Deputy Soulsby believes that such a scheme could be introduced quickly to assist States' committees and companies struggling to recruit staff from outside the island for key posts.

The prize for the Budget amendment which has the least to do with the Budget goes to Deputy Kazantseva-Miller. But the States would be unwise to prevent it being debated, which they could, since it is probably also the most popular, original and potentially useful of the amendments.

Deputy Kazantseva-Miller wants the States to start a housing review which could lead to ownership of local market houses being restricted to those qualified to live in them. She believes the supply and affordability of local market housing could be improved if people without local market residential status were prevented or discouraged from owning such properties.


Pictured: Some of the island's larger poor families could see their financial circumstances improved from next year if the States' Assembly backs proposals from the Committee for Employment & Social Security this week.

Once the States have approved their 2023 Budget, with or without amendments, they will debate the second of their two items of business: proposed non-contributory benefit rates for 2023, submitted by the Committee for Employment & Social Security.

Non-contributory benefits are those funded not by social security contributions on earnings or income but instead by general taxation - such as income support and carer's allowance.

Deputy Peter Roffey's Committee is proposing one of the most significant and progressive recent steps in social welfare policy: the abolition of the benefit limitation. This widely misunderstood policy does not impose a cap on benefits received - rather, it caps the amount of income received from all sources, including earnings from employment and benefits.

The malignant effect of the benefit limitation is to prevent many larger families from obtaining the level of income which the States have already calculated they need to avoid an intolerable standard of living. It is highly likely the States, to their great credit, will boldly vote to scrap it this week, concluding an incremental process driven over the years by the likes of former Deputies Andrew Le Lievre, Mark Dorey and Michelle Le Clerc.

The Committee will, however, most likely split its normally reliable supporters in the Assembly over carer's allowance. It wants to increase the allowance a little above the rate of inflation. Deputy St. Pier wants a more substantial increase and he and Deputy Lester Queripel have submitted two amendments asking the States to be more generous with the Committee's budget than the Committee thought it could get away with itself. 


Inflation-busting hike in carer's allowance "financially irresponsible"

Attempt to increase weekly carer's allowance 

Cannabis taxes could be reduced to 0% for five years

Tax breaks for renting out spare rooms could attract key staff

States to debate keeping local market homes for local residents

Tax breaks could encourage more affordable first-time homes

Housing plans to alleviate crisis 

States spending set to increase by nearly £50m next year

Toughest situation for "donkeys' years"

2023 Budget proposals out today

"We're nearing the day that we will have to turn off services"

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