Bonfire day budget debate is lit

Tuesday 05 November 2024

Remember, remember the 5th of November... with taxes, amendments, and Trott.

The 2025 budget debate has started today with political wrangling to continue all week, as deputies try and agree Guernsey's financial path for the next 12 months.

What lies ahead for Guernsey's deputies may pale in comparison to the drama that unfolded in 1605 but there is plenty afoot. 

With some of Guernsey's residents facing a cost of living crisis, the choice between an additional 2% income tax take or GST won't offer much comfort.

The likelihood of both coming to fruition increased on the eve of the budget debate with a last minute amendment lodged by Deputies Lyndon Trott and Heidi Soulsby looking to secure the proposed temporary increase in the personal rate of income tax for the next two years, while work is carried out to enable wider tax reforms to be introduced in 2027 – should the next States agree.

Deputy Trott said this was lodged following successful discussions with others, including Deputy Peter Roffey who had already attempted to amend the budget proposals to bring the previous GST+ package back in to the mix.

Pictured: P&R President, Deputy Lyndon Trott.

"During the lead up to the Budget debate, our Committee has sought to focus on the urgent need to generate cash in the short term," he explained. "That is our priority and must be the priority of this current Assembly. It would simply be irresponsible to hand over to the next States such a precarious financial position, where the new Assembly inherits deficits of the magnitude we know will be sustained unless we take action. And the only action available to this Assembly, which will deal with the immediacy of the problem we face, is the temporary increase in the rate of personal income tax.

"However, we also recognise that there are colleagues in the Assembly who want to deal now with the long-term sustainability of public finances," continued the Chief Minister. "I have been clear that one is essential – to address the parlous financial position in the immediate – and one is desirable. Our amendment gives the Assembly the opportunity to prove once and for all that we can come together and make the difficult but necessary decision to stabilise public finances and ensure we invest in our community.

"This States have sought to play catch up when agreeing a significant portfolio of infrastructure projects, after many years of underinvestment. During the Funding and Investment Plan debate last year, the Assembly agreed to fund infrastructure projects totalling an estimated £427m yet we now have £100m less to fund it than envisaged at that time because of the worsening financial position. These are projects that will both improve the services the community receives and stimulate the economy. We haven’t sought to scaremonger but the facts are some of these projects will need to be reconsidered if we don’t have the money to progress them during the next two years and a temporary increase in the personal rate of income tax generates £55m over the next two years that can be invested.

"A growing economy needs more than just public investment of course, it takes an ambitious and entrepreneurial community, it takes a good understanding of the international economic conditions. So public investment alone does not guarantee economic growth – but without public investment you guarantee economic stagnation."

Deputy Peter Roffey said he will be backing this amendment - listed as number 22 to the debate.

"I welcome both the constructive conversations I’ve had with P&R and their willingness to seek to combine both the short and long-term packages up for debate," he said.

Pictured: Deputy Peter Roffey.

"I have made no secret of my extreme reluctance to support any increase in the personal rate of income tax, but at least this package ensures it would be for two years only before the wider tax package kicks in.

"It will not be easy for me to support income tax increases given my well-publicised comments but it is sometimes crucial to make significant compromises within our consensus style of government. And I appreciate how far the Policy & Resources Committee has moved by proposing to invest significant sums in preparation for GST+ to be introduced in 2027, with that in mind it seems only right to reciprocate.

"If the P&R amendment is passed then the proposition contained in the Roffey/Ferbrache amendment will have been inserted as 1B, so there will be no need to lay ours."

Whether Deputy Roffey's support is enough to get the temporary 22% income tax rate followed by GST+ through the States this week, remains to be seen.

Any notion of a goods and services tax has been rejected by States members three times in recent years and the island's 20% income tax rate has always been seen as sacrosanct.

To follow the debate, stay with Express and our Budget Live Blog: