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Former Vice President reveals opposition to P&R tax plan

Former Vice President reveals opposition to P&R tax plan

Tuesday 29 November 2022

Former Vice President reveals opposition to P&R tax plan

Tuesday 29 November 2022

The Policy & Resources Committee's final plan to raise taxes by tens of millions of pounds a year - including through a new 5% goods and services tax - was "the final straw" which led to Deputy Heidi Soulsby resigning from the Committee.

Deputy Soulsby said the Committee's plan overstates how much additional tax the States need to raise, ignores opportunities to make efficiency savings and shows no empathy with households facing the largest squeeze on living standards in decades.

Speaking to Express this morning in her first interview since resigning last month, Deputy Soulsby revealed the frustrations which caused her to leave the States' senior committee two years after it was elected. She said they included the Committee's "lack of strategic thinking and lack of challenge" on tax and spending policies. 

"The tax plan was the final straw. It's such a missed opportunity. Don't get me wrong, there absolutely is a structural deficit, but I believe it's being over-egged. The States are in control of a lot of that deficit," said Deputy Soulsby, pictured top.

"I can see that GST might be needed at some point, but I don't think the case is made that it's needed now. Frankly, the timing is terrible.

"For me, it shows no empathy to propose GST at a time of the highest inflation we've had in decades when there is a cost of living crisis. We know people above the benefits system are really struggling. It shows no understanding of people's experiences in the island at the moment."


Pictured: Deputy Heidi Soulsby said there is "no empathy" in proposing GST when so many families are struggling with a cost of living crisis.

The Committee wants a new goods and services tax [GST] at a rate of 5% on almost all purchases and an increase in social security contributions to 8.5% for employees, 8% for employers and 14.5% for the self-employed.

But it also wants to cut income tax to 15p in the pound on income up to £30,000, increase the personal tax allowance by £600 and introduce a personal allowance on social security contributions at the same level as the income tax allowance - currently around £13,000.

The Committee estimates that its proposed changes would boost States' income by £55m a year towards a funding gap in States' finances which it now projects could be as large as £140m a year in the long term. The Committee also says the overall effect of the changes would leave most families better off with only the most affluent 40% of households paying more.

But Deputy Soulsby believes her former colleagues on the Committee have largely adopted the wrong approach to reviewing States' finances and reached the wrong conclusions about the tax policies needed now.

"It's full of missed opportunities and the timing is terrible. The missed opportunities are in not having a thorough examination of what the States are doing and what they should be doing, and not designing a much more progressive tax system." said Deputy Soulsby.

"That examination needs to be done across the States, from the ground up. That exercise has not been done. There hasn't been that kind of strategic outlook in this States' term so far. It's all felt much more tactical - winning battles on policy letters. That's been a frustration for me."


Pictured: Deputy Soulsby has previously spoken about tribalism in the current States' Assembly and she believes this has contributed to "lack of strategic thinking" in the Policy & Resources Committee's final tax plan published yesterday.

The Committee first suggested substantial tax increases in the summer 2021. Since then, it has projected a funding gap in States' finances of between £55m and £90m. But unveiling the Committee's latest tax plans to the media on Saturday, Committee President Deputy Peter Ferbrache said it was now projecting an even larger deficit beyond 2025 of up to £110m a year plus £20-30m a year in rising long-term care costs. 

Deputy Soulsby said she became concerned about growth in the projected deficit during her final few months as the Committee's Vice President.

"The assumptions are questionable about how the size of the structural deficit is calculated. Over the past few months, we were told the size of the deficit had got worse and worse and worse. Everything has been poured into it to make it as large as possible," she said.

"Also the underlying assumptions include capital spending of 2% of GDP every year - that's £76m a year of the deficit. But we can't do all that. The States haven't got the capacity to do all those projects every year and have never reached that level of capital spending. We haven't got the staff; we can't get more staff; the staff we've got are overworked anyway; and doing capital projects properly sucks up a lot of time.

"We're told we haven't got any money, but they've been happy to support inflation-busting increases in some committees' budgets. I challenged inside Policy & Resources, but there wasn't the same challenge from other members.

"I remember how it used to be: a committee would present its budget and Policy & Resources would really scrutinise and challenge the requests. But in this P&R there isn't that same challenge. There are opportunities to make savings by doing some things differently and those opportunities are now being missed."


Pictured: Deputy Soulsby resigned from the Policy & Resources Committee last month suggesting strained relations with some other members of the Committee, but she said this morning that she always enjoyed a constructive working relationship with the Committee's President, Deputy Peter Ferbrache.

Deputy Soulsby predicted that the Committee's tax plan would face alternative proposals when it is debated by the States' Assembly, which the Committee hopes will be at the end of January.

Follow Express for more from our wide-ranging interview with Deputy Soulsby about her experiences as a member of the Committee, the reasons for her departure and her intentions and hopes for the remaining two-and-a-half years of the States' term.


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