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The Policy & Resources Committee say they are yet to see credible alternatives for raising tens of millions of pounds each year in additional revenue after a group of deputies banded together to oppose its tax and social security package.
Senior politicians behind the tax review also suggest that failure to decide at the end of this month will restrict the States ability to plan for the future, while external observers will also be watching the Bailiwick’s moves closely.
When the major reforms to taxation and the social security system were announced, President Deputy Peter Ferbrache made a plea to colleagues asking them to “phone up” or come to him if they were thinking of proposing alternatives.
Yesterday he said that “at no point” have Deputies Charles Parkinson or Liam McKenna, who will challenge P&R in the States, communicated their intentions to the Committee, and alleged that the former has only attended one of the Committees’ presentations over the past 24-months.
The island’s senior committee say it only had first sight of that amendment to its tax plans on Wednesday evening this week.
“That disappoints me,” said Deputy Febrache.
P&R members say they will attend the public presentation unveiling Deputy Parkinson’s amendment to its tax plans in the coming weeks as it will be the only way to see what the alternative is in detail.
Pictured: P&R and Deputy Roffey are keen to stress that the package is about much more than just GST.
Deputy Peter Roffey, who has supported P&R’s plans despite not being on the Committee, fears that rating agencies may despair at a lack of action and direction from the States.
“They want to see that we have got a clear path towards financial sustainability, if we just refuse to make any decision at the end of this month then some of them will say ‘is the very positive rating that Guernsey gets, credit rating, still justifiable because they don’t appear to have the will to resolve these problems?’ I hope that doesn’t arise,” he said.
Deputy Mark Helyar, P&R’s treasury lead, agreed: “If Guernsey were to fall into a sort of junk bond status rating, what it does is prevent investment into the island.
“So, if you’re a financial services business like a bank you can’t carry a higher rating than the jurisdiction in which you’re based, so that completely undermines a significant part of our finance sector.”
I fully respect any deputy's right to vote against the proposed social security and tax reforms, but it is odd to see a group of them acting like a public campaign group. They don't need to lobby the decision makers because they ARE the decision makers.
— Peter John "Rufus" Roffey (@PeterRoffey5) January 6, 2023
Pictured: Deputy Roffey questioned a pressure group comprising elected deputies rather than members of the public.
It is widely expected that a significant challenge to P&R’s approach to corporate tax will come from members of the Anti-GST campaign group.
Deputy Helyar insisted there is “zero support” in industry for the territorial corporate tax regime being proposed by Deputies Parkinson and McKenna and bringing that in without proper consultation could “potentially cause a huge amount of danger to the finance industry”.
Deputy Roffey said the totals that could be raised from a territorial system match those already proposed within the Committee’s tax review plans at “circa £20m” per year.
But “it comes nowhere near funding the deficit in the public accounts,” he added.
Deputy Ferbrache reiterated that the policy letter contains a proposition to work with the other Crown Dependencies “between now and November” to see if a joined-up approach to raise further corporate revenue through an ‘alternative vehicle’ could be found.
Introducing unsupported corporate measures before any GST was seen by Deputy Bob Murray as a high-risk approach that P&R “wouldn’t even countenance”.
Pictured: Alternatives to the corporate measures suggested by P&R are viewed as being insufficient without other revenue raising measures.
Deputy Ferbrache previously accepted that not fully implementing the changes by April 2025 would pose an existential threat given an imminent general election.
There is less than three weeks for opponents to come up with formal alternative solutions to the structural deficit.
“The fact they talk about 2029 is a staggering amount can kicking”, said Deputy David Mahoney. “In rugby parlance that’s the perfect hospital pass isn’t it; have that and sorry for the pain you’re going to suffer.”
“Any sursis would mean it can’t come in this Assembly which means it then gets dumped on the lap of the incoming Assembly,” Deputy Roffey warned.
Deputy Murray agreed that pushing back the implementation of tax and social security reforms onto subsequent States would be “completely unacceptable” and compared leaving the problems to the next States to the note left by the Labour Party in 2010 to the incoming Conservatives that there is no money left.
Pictured: The States will decide to adopt, delay or reject the proposals at the end of January.
There is also strong agreement about the consequences of failing to deliver the package as set out.
“If at the start you had said it would be possible to reduce the tax burden on 60% of households and raise £55m I’d have laughed, but that’s what these proposals do. The poorest will be better off, and the burden of taxation will fall on those who can afford it,” Deputy Helyar said.
“If we don’t pass these proposals the poorest in society will continue to be worse off as inflation rises. This will reduce the taxation burden on the poorest in society and 60% of households, and that isn’t something that seems to be coming across in the discussion.”
“I’m absolutely convinced we need to raise government revenues, if someone could come up with a reliable, sensible alternative I’m open minded. But I’ve spent two years with P&R on the working party and I haven’t been able to find a better alternative to this sort of package,” said Deputy Roffey.
“It’s not all about GST - if it was, we’d all be against it,” he added.
“I think you’d have more coloured ribbons and badges if we tried to [cut public services] than what we will see over the next few weeks”.
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