Select a region
During the Budget debate, former States economist Andy Sloan wrote to States members with an argument he first set out for Bailiwick Express about what the income tax rise proposed in the Budget meant for the average worker.
Here is Policy & Resources President Lyndon Trott's response to that as well as the correspondence to States members from Mr Sloan.
Dear Andy,
You appear to be confused regarding the facts of the budget. It has been said it might be more than confusion and an attempt to mislead members. For the record I believe it to simply be a matter of confusion, but I do fear that others may once consider it damaging to your credibility as a commentator.
The Policy & Resources Committee are not increasing personal income tax revenue by £100m - we are increasing it by a net of £27m per annum with an increase in the tax allowance to £15,000 (compared to £12,570 in the UK) which will mean that the lowest earning individuals in Guernsey should pay slightly less.
Yes, the increase in income tax will mean that someone on £42k will pay more in income tax and social security in 2025 that they might in the UK if they earned the same income (assuming they only get a personal allowance). But that's not comparing like with like. Why just look at these taxes? That is clearly foolish.
In Guernsey, people will pay very substantially less in property taxes on all but the very largest properties. The average sized Guernsey property is charged £330 in TRP each year, a Band D property in the UK could be charged anywhere between about £900 and £2,350.
They also won't be paying VAT at 20%, or at all. And if the States do decide to move to introduce a GST, this increase in the rate of income tax will be reversed.
To maintain an accurate context - the actual expected impact of the measures in this Budget relative to what they might expect to pay in 2024 for a couple with a joint income of around £70,000 (putting them at about "middle" income on an equivalised basis) is just under £10 a week. A couple with a joint income of £40k may be a few pounds a week better off.
Committee expenditure in 2019 according to the accounts totalled £479m (see extract from accounts below). Adjusted for inflation (as any good economist should) that is about £627m in 2025 prices assuming inflation for 2025 at the level allowed in the Budget. In addition, since 2019 we have also transferred approximately £30m of expenditure in to the cash limit of the Committee for Health & Social Care which was previously funded through the social security system.
It is therefore clear that the claim of reckless increases in spending is very significantly overstated - £627m + £30m = £657m v £650m (2025 Budget)
Should you wish to offer an apology, I would once more be prepared to accept it.
Best wishes,
Lyndon
Dear Deputies
I implore you, please do not raise income tax by 10% in this year's budget.
Please do not increase the tax burden on Guernsey's working classes like this.
As you vote for ever higher spending, just remember they are still suffering from the cost-of-living crisis, higher interest rates, higher energy prices, higher 'you name it' prices.
Many working families are just struggling to cope with the very high cost of day to day living in Guernsey. As Island Global Research reported this summer, over the last year half of Guernsey households have struggled just to fund their basic living costs.
So do not punish these people for your failings.
Do not make them pay for your largesse.
Do not insist they make up the corporate tax shortfall (of others).
It's a move that's seemingly designed to break the back on average Guernsey worker.
This States has lost touch with the public.
Do not persecute the average working Guernsey man and Guernsey woman in this way. They have carried the burden of zero ten for too long.
Raising the personal income tax by 2p in the pound, will mean a Guernsey worker on an average wage will pay 10% more tax and social insurance contributions than a worker on the same pay in the UK. When I came to the island in 2008, a Guernsey worker on the average wage paid 20% less.
That will be your legacy.
Increasing income tax like this is a lazy, crude and cruel tool.
These proposals display no sympathy or empathy with the plight of average workers.
Increasing the concentration of the tax burden on these groups is not a fiscally competitive move; and it for sure is not a fiscally fair move.
Despite what may have been said during your debate this week, nor is it a fiscally responsible move. Reducing workers incomes by such a large magnitude makes for bad economics. Trying to increase income tax revenues in one year by just short of £100m fiscally foolhardy.
Neither does it do anything to address the structural deficit, as has been exposed during the debate, it is to fund higher spending. Total Committee spending of £650m proposed for 2025. Total Committee spending that totalled just £409m in 2019, the year before you were elected. Yes, less than five years ago.
Painfully higher spending and painfully higher taxes on average workers will be this States legacy.
And finally, because it is easy and 'understandable' does not make it right. It does not make it fair. It certainly isn't equitable.
It is a crude, cruel blunt approach, falling on average workers hardest. It shamefully does not share the burden of increased public spending in anything approaching a fair manner. In fact it makes no attempt or pretence of doing so.
Please, please for all these reasons, do not do this mad thing in this year's budget. It is no way to run an economy. It is no way to create a fair society.
Dr Andy Sloan
Former States Economist, Former Member of Fiscal Policy Panel
