BUDGET 2025: A step-by-step guide to the amendments as deputies seek major tax and spending changes

Tuesday 29 October 2024

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More tax from companies, changes to help the housing market and clamping down on the numbers working in the public sector now sit alongside a GST package in the changes deputies want to see to this year’s Budget.

There are now 19 amendments on the table, with more that could follow when debate gets going on Tuesday.

You can find details of the major GST bid by Deputies Peter Roffey and Peter Ferbrache here; a big cut to public spending being proposed by Deputies Mark Helyer and David Mahoney here; and opening up temporary housing villages to local residents here.

Another raft of amendments were published by yesterday’s deadline.

Corporate tax changes 

Tens of millions of pounds extra would be brought in by introducing a territorial corporate income tax, its supporters claim.

Deputy Charles Parkinson will lead an amendment that would maintain the individual standard income tax rate at 20%, but tell P&R to develop the new territorial scheme to be introduced from 2026.

It is estimated it would cost up to £2m. to implement the scheme, but the pay back would come from tens of millions of pounds of extra revenue it then brings in.

Critics of the scheme say it could leave the island uncompetitive when compared to the other Crown dependencies.

Deputy Liam McKenna is seconding the amendment.

Exempting food from GST

Should the Roffey/Ferbrache GST package find success, there will be an attempt to exempt food.

This would mean a loss of £11m. in the revenue it would bring in, so to compensate for that the rate of GST would be set at 6% instead of 5%. There would also be higher admin costs.

The amendment is being proposed by Deputy Rob Prow and seconded by Deputy Neil Inder.

More money for social housing maintenance 

Employment & Social Security wanted an additional £1.04m. in its budget for social housing maintenance, but was P&R only backed an extra £370,000.

The committee points out that the total maintenance budget for 2024 is £6.409m., £242,000 less than is present in 2016.

Significant cuts have been achieved by working differently and using alternative materials, it says, including painting the outside of houses less often.

An uptick in rental income expected next year would more than cover the extra it is asking for, it says.

“The committee feels strongly that it is not appropriate that an increasing proportion of the rent paid by tenants is being used to fund other government expenses while allowing the properties that they occupy to deteriorate through inadequate ongoing investment. Prolonged under-investment will inevitably result in deterioration in the fabric of the properties which, ultimately, will cost the States of Guernsey more to rectify or redevelop in the long term.”

The amendment is being proposed by Deputy Peter Roffey and seconded by Deputy Lyndsay De Sausmarez.

Bringing forward next term’s tax debate

Under P&R’s plans, the States would debate plans to address the deficit in September 2026.

Deputies Yvonne Burford and De Saumarez want to bring this forward to March 2026.

Fast-tracking work to replace fuel duty

The dangers of an overreliance on fuel duty has been recognised by the States since at least 2017.

Cars are becoming more fuel efficient, electric and hybrid vehicles more popular, fewer new vehicles are being registered each year, which all means the revenues from this area are falling unless the tax is increased in excess of inflation each year.

Fuel duty is also seen as inequitable, for example, those driving electric vehicles make no contribution.

“It is true that EVs do not produce exhaust emissions and that emissions from hybrids are also typically much lower than from ICEVs, but they do still cause localised pollution and have other negative effects, so even on a polluter-pays basis it is reasonable to expect a proportionate contribution to the Treasury, whilst still being mindful of the need to support the energy transition and transition to a cleaner and more sustainable transport system,” an amendment being backed by Deputies De Sausmarez and Simon Fairclough states.

People who can not afford a new car also pay disproportionately more because they do not benefit from the efficiency gains.

A draft policy letter on a new regime already exists, but Environment & Infrastructure says it needs guidance from P&R and others on issues like whether it should bring in more money than the current regime or be neutral.

E&I wants to press ahead and not wait for the general tax review.

Mortgage interest relief

An amendment by Deputies Aidan Matthews and Andy Taylor would pause the withdrawal of mortgage interest relief on a principal private residence for the two-year period when it is recommended that the individual standard rate of income tax is increased from 20% to 22%.

It follows a pause in 2023 and 2024.

It would cost the States - or save those 6,000 people that would have been hit - some £1m.

Tweaking the “rent a room” scheme

P&R has proposed a scheme to encourage householders to rent a room in their house, increasing housing supply by offering a tax break on this rental income but only if it does not exceed £10,000.

An amendment seeks to avoid this “cliff edge”.

£10,000 a year equates to £833.33 a month.

If backed, the change proposed by Deputies Sam Haskins and David Mahoney would allow rental income to exceed this amount, but with the portion above £10,000 subject to tax.

Getting more money from corporates in fees and charges

The Guernsey Registry would be instructed to increase  how much money it makes by up to 20% from 2026 if an amendment by Deputies Sasha Kazantseva-Miller and John Dyke is successful.

This would be around £2.1m. a year.

There is an existing resolution to increase revenue from corporates by £5m. a year.

Work has already taken place on the structure of fees and charges at the Guernsey Registry.

“The level of Registry fees was originally set to ensure some revenue was recouped from the corporate sector after the introduction of zero-10 and the fees have remained unchanged since then.”

Pausing the States taking adding new jobs

Deputies John Dyke and Chris Blin are targeting the size of the public sector.

They point out that in the last five years, the number of full time equivalent positions have increased by 374 - 341 of those were in health and social care.

This Budget makes provision for another 80.

“This trend is unsustainable with States FTE headcount now in the process of exceeding numbers in the finance sector. Both cost and housing are major issues. A pause is called for, at least until adequate nursing and other key worker accommodation is made available to meet excess demand.”

The amendment would cap the headcount from January, except for 20 technical specialist roles.

P&R would also have to approve all consultancy agreements committees want.

A separate bid to cut spending

The major spending amendment is being led by Deputy Mark Helyer to cap things at this year’s levels.

Should that fail, Deputies John Dyke and Simon Vermeulen will try instead to reduce expenditure by £27.8m.

Taking in an extra £151,000 in alcohol duty

P&R has proposed freezing alcohol duty in its Budget proposals.

But two deputies will attempt to get a modest percentage increase instead, one that in some cases not even change the actual rate itself.

The amendment proposed by Deputies Sam Haskins and Andrea Dudey-Owen would increase duty rates in this area by 0.9%, in most cases adding a penny to the rate.

Helping the buy-to-let sector 

In the 2023 Budget, document duty was increased by 2% for properties that aren’t someone’s main home.

A bid will be made to scrap that uplift to help the buy-to-let sector.

“It is believed that buy-to-let sales have been negatively impacted over the last two years by the introduction of an additional 2% document duty in the budget agreed in November 2022, just as interest rates were increasing very significantly,” the amendment proposed by Deputies Lyndsay De Sausmarez and Victoria Oliver states.

There was no direct evidence of the impact of the uplift, but landlords, estate agents and developers have spoken about the negative effect.

One local developer reports a 300% reduction in sales of properties to let relative to private unit sales over the last two years compared with the two years immediately prior.

Extra money for St James

Education, Sport & Culture want to dip into the Budget reserve to find £151,000 to increase the grant to St James.

It is continuing to work on a service level agreement with the operation to make a sustainable long term plan.

They say the extra money will “secure the immediate future of St James”.

A pause on the “down-sizing” scheme

Since the introduction of a “down-sizing” scheme in November 2022 up to June, 5% of conveyances benefitted, which equates to approximately £600,000 in document duty relief.

The Budget says it does not know how many transactions happened because of the tax break because they may have taken place anyway.

Supporters of a pause say it could be giving homeowners an advantage compared to first time buyers when looking at smaller properties.

It might also be making it harder for lower income families to move up the housing ladder.

Deputies Sam Haskins and Sasha Kazantseva-Miller want the scheme paused while E&I finishes its investigation into downsizing.

Tax break for independent small distilleries 

Deputies Rob Prow and Neil Inder want the same help given to small distillers as is offered to independent brewers and cider makers.

“Independent small distillers experience the same challenge concerning the greater economies of scale achievable by much larger international brands which distil at high volume. The aim of this amendment is not to dramatically reduce the retail price of spirits on the island but instead to enable independent small distillers to compete more effectively within the market.”

Only independent distillers producing less than 20,000 litres of pure alcohol per year would be eligible for the alcohol duty discount rate being proposed.