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The States’ failure to agree on immediate tax and spend measures last week means it must reconsider income tax and social security reform, according to the Confederation of Guernsey Industry.
The business group has received updated feedback from its members and has reiterated calls for a modest increase of income tax, social security reform, a review of corporation tax, and a full evaluation of the capital projects portfolio.
Projects which should be scrutinised for value include a new dairy, the new school buildings, and the agreed redevelopment of Alderney’s airport, according to CGi Chair Dave Newman.
It has also proposed an increase in the annual charge for finance businesses, and the introduction of a “health supplement”, which the CGi and some Institute of Directors members say could raise significant sums.
It says this is necessary to sure up funding for essential public services.
Pictured: Dave Newman.
But the States did agree several workstreams representing a long list of additional reviews, with any recommendations or debates unlikely to come forward until 2024.
Among the work was a review of the capital projects list, a sub-group to investigate other changes to the tax and benefits system, and whether more cash could be raised from transport and visitors.
However, the States did not formally direct itself to investigate raising around £20m extra per year from corporates in tandem with the other Crown Dependencies, despite being a feature of all five tax options tabled.
Mr Newman questioned why the States did not take increases to income tax more seriously to help fill the looming black hole of £85m.
“We accept that P&R is in a difficult position, and no-one wants to see any rise in their personal costs, but income tax and social insurance reform – especially for higher earners – are by far and away the most efficient and equitable way for collecting additional revenues,” he said.
“The mechanism for collecting income and health taxes exists, so changes could easily and quickly be introduced without the huge costs of administration for government and all businesses, our members included, that a GST would have required.”
P&R and its tax policy letter argued that income tax would be rendered insufficient by the creeping demographic changes, and that a broader tax base is required to ensure sustainable revenue collection.
Pictured: Spending on large capital projects must once again be approved by the Assembly after P&R briefly enjoyed authority over a £0.5bn portfolio.
CGi also said that some capital projects should be reviewed for value for money and appropriateness, bemoaning a lack of action on public spending over the past decade despite public and political concerns.
Mr Newman said: “We would support capital expenditure that provides a return as there is an economic justification for borrowing the necessary funds.
“Building a new dairy in the proposed Brickfields location, for example, would create land adjacent to the PEH and allow for key worker accommodation and therefore has merit.
“We would be happy to work with the States, alongside other organisations to look at all of these measures and also explore new options as outlined.”
Policy & Resources are meeting in committee next Tuesday where the fallout from the tax debate will be discussed. President Peter Ferbrache said he does not expect members to resign, but External Relations minister Jonathon Le Tocq has indicated that he will be reflecting and considering his position.
Deputy Charles Parkinson is understood to be considering laying a vote of no confidence against P&R having previously said its members should resign if unable to steer its flagship fiscal policy through the States.
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