The Policy & Resources Committee is launching a public campaign today to persuade the Bailiwick to support the introduction of a new goods and services tax (GST).
The Committee is projecting that in a few years’ time there will be a shortfall in States’ finances of up to £85million a year. It says GST is a better way of dealing with the shortfall than raising income tax and social security contributions.
In 2021, the States’ senior committee asked deputies to back GST in principle but withdrew the proposal when it became clear during debate that it would be heavily defeated if pushed to a vote. Instead, the States approved an alternative proposal from the Committee to investigate other options, consult more and return to the States for another debate in July this year.
Ahead of that second debate, the Committee is now launching ‘Our Island, Our Future’ – a campaign of engagement with the community to explain the need for tax rises and why it considers GST not only the most effective but also the fairest way of bringing in tens of millions of pounds of additional tax revenue each year.
Pictured: In October, the Policy & Resources Committee withdrew proposals for GST after finding little support in the States' Assembly. This time around, the Committee is hoping to persuade the public first through a series of engagement events and activities before taking GST back to the Assembly in the summer.
The Committee’s treasury lead, Deputy Mark Helyar, who is leading the proposals, is looking forward to “a busy period of engaging with the community”.
“We want to do everything we can to inform and explain to islanders why we believe we need to act [and] the advantages and disadvantages of our different options,” said Deputy Helyar.
“We want to talk it through with them, face-to-face, be open to their challenge and answer their questions.”
All households will receive a leaflet this week in which the Committee argues that “a package of reforms including GST is the best way to safeguard public services now and for generations to come" – but only "if it is combined with other measures to create a tax system that is more progressive and takes less tax from those on lower incomes compared to now”.
At 17:00 this coming Thursday, 10 February, the Committee will host a presentation and question and answer session with the media which will also be live streamed to the Bailiwick.
There will be four drop-in events for the public at different venues in February and March – starting with one at the Community Hall in St. Pierre du Bois between 13:00 and 15:00 next Saturday, 12 February.
And a new website has been launched – ourfuture.gg – which is packed with information about the challenges facing the island’s public finances and the Committee’s preferred approach to meeting them.
Pictured: The States' new website about the future of public finances and public services will have more information added to it over the next few days and weeks, including on the Government Work Plan and reform programmes relating to education, health and social care and public servants.
“This new system, which includes GST, would be better at generating income from visitors and businesses, meaning it puts less burden directly on the working islanders than income tax,” said the Committee.
“It would be better at keeping Guernsey able to compete with other jurisdictions with low income tax rates, which is important for keeping businesses and jobs in our Bailiwick.
“But if you’re not convinced yet, we’d love for you to come and talk to us about it.”
Deputy Helyar said: “This summer, the States will be asked once again to make a decision on how to tackle the increasingly urgent problem of funding public services in the future.
“We’ve talked about the seismic shift that is our changing population make-up. This is not the fault of any generation of islanders, but it is a reality and must be addressed.
“The problem and the solution are not simple and so ahead of that debate and in line with the direction given to us by the Assembly we are now beginning a busy period of engaging with the community.”
Soon after its election in October 2020, the Policy & Resources Committee set up a sub-committee to look into public finances and the future of tax and spending. The sub-committee has carried out much of the preparatory work which has led to the Policy & Resources Committee settling on its preferred option of GST.
Deputy Peter Roffey, President of the Committee for Employment & Social Security, is a member of the tax review sub-committee. He said he is prepared to back GST if it is combined with changes to income tax and social security contributions to protect the least affluent.
Pictured: Deputy Peter Roffey sits on a sub-committee which includes some members of the Policy & Resources Committee and some members of the Committee for Employment & Social Security and which advises the Policy & Resources Committee on tax policy.
“This is about ensuring that future generations can access the same kinds of public services we take for granted: health, care, pensions, education, law enforcement, infrastructure. These are not nice-to-haves, these are essential services,” said Deputy Roffey.
“We’ve already waited too long to do something about our ageing population, despite knowing full well that it’s coming. The longer we leave it, the more drastic the action we’ll need to take. We must do the responsible thing, and the right thing, and ensure these services can continue to be funded.
“The reality is that means raising more revenue and that can’t be sugar-coated. But it can be done in a way to make the tax and social security systems more progressive and to remove some of the inequities that have developed in those systems over the years.
“In fact, the modelling shows it can be done in a way which actually makes those on the lowest incomes in Guernsey better off compared to now. I don’t think that up to now we have conveyed that message with sufficient clarity. It is only because of this protection for the least well off in our society that I support these proposals.”
The Policy & Resources Committee says the States are also already working on maximising the proportion of the population which is economically active, promoting economic growth and reforming public services to make them as efficient as possible.
Pictured: The Policy & Resources Committee says: "The shape and make-up of our population is changing. We’re living longer and having fewer children. Together, these two facts mean we’re seeing fewer people working and paying taxes which fund our public services and more people using public services, especially pensions, health and care services in our later years. That pushes the cost of our public services up significantly. We must address this problem now."
“The current forecasts take these measures into account,” said the Committee.
“And, while they are all crucial actions, even in the best-case scenario they cannot on their own fully address the scale of the problem created by our changing population.
“Raising more revenue through tax will need to be part of the solution.
“As islanders live longer and have fewer children, a significant shift is underway. The percentage of our population which is…economically active is shrinking and that is forecast to continue. The number of over-65s will increase by several thousand over the next two decades.
“As a result, the forecast shows the shortfall in funding public services will rise to £85m per year. This is an extremely large sum.
“For example, it is more than the entire annual budget for Education, Sport & Culture, which of course funds the running of all States’ primary and secondary schools, post-16 education, adult learning, museums and cultural sites and much more.
“This change in population is taking place in many countries which are all having to take significant action to address it.”
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