How much should we pay for the necessities of life?

The details remain secret until budget day, of course, but we can be confident about one thing – the budget won’t contain any large tax increases. The Treasury Minister has already given a hint, but in any case, Jersey doesn’t do big tax increases.

Thank goodness for that, I hear you cry. Who wants to hand over more hard-earned money to the government? Certainly not me. As I’m neither rich nor poor, I get clobbered for enough tax already, thank you.

But hang on. Isn’t this a little strange? We have an Island of just under 100,000 people and growing. They all need education, medical services, the police and numerous other services. We’ve got an economy that’s floundering, and not just because of the recession, so that it could do with a boost from government funds.

We have inflation pretty well under control, although even if standards of public services are just maintained at last year’s level, the government is going to need more money to pay for them.

On the other hand, revenue is struggling to keep up. Some sources of revenue have been blocked because of outside pressure, and tax paid by corporations is a fraction of what it used to be.

And still we can keep total tax down so that our tax burden is one of the lowest in the world.

It’s either a remarkable achievement or a fool’s paradise.

As I’m not a politician and therefore don’t need to be liked, I can say what I think. So I’m inclined to believe that taxes in Jersey need to be higher, or we should at least start preparing for when it’s absolutely necessary to increase them.

Having said that, I would prefer they didn’t actually put my taxes up, and I suspect there are many like me who struggle to find what’s due. But there are alternative ways of raising income, particularly using environmental taxes which have been talked about for years but to no avail. However, if I had to pay more, then I would do so perhaps grudgingly. At least that’s better than the alternative of ending up with a third world health system, or education that fails to compete with the rest of the world.

Yes, we’ve tried the savings route and despite all of the protestations to the contrary, I think that has largely failed. The figures may look impressive with another £20m saved by States departments last year. But at what cost?

Dig a little deeper and you will find the true cost of making most of these savings has been either lower standards or shifting the figures around. That’s because we were lead to believe the cuts would be relatively painless. We were told that there were tens of millions of pounds of waste in the States which could be hacked away so that we could all work differently and get more bang for our buck. There wasn’t and we didn’t.

Add to this the additional cost of employing more people to help us save money, and you begin to wonder how the figures manage to stack up.

However this isn’t about finance or even accounting. It’s all about politics, and the kind of government we want the Island to have.

Low tax has become a bit of an obsession for Jersey, where public service is sometimes looked upon by some as a necessary evil. It’s perhaps not really surprising given that our economic success has been based on low taxation. David Cameron might say that we’re not a tax haven, but our attractions are based mainly around helping people outside benefit from our tax structure.

There are also still those who insist that low taxes are good for economic growth, and of course they can be, although the Scandinavian countries are a shining example of why this is not always the case.

The worry really is that although you might expect someone to put forward the case for higher taxation, no one is doing so. The argument is therefore lost by default and anyone who bucks the establishment line is obviously just a troublemaker or misguided.

The same can be said about the UK. Despite their massive debts and other economic woes, not many people are pushing for higher taxes there either. In fact quite the reverse.

However Paul Johnson, the director of the respected Institute of Fiscal Studies points out in the latest edition of Prospect magazine that the UK will need more than spending cuts to close the budget deficit.

‘The choice between tax rises and spending cuts is politically and economically serious,’ he writes.

‘If there are no tax increases then we need to have the consequences for public service provision spelt out. These choices are becoming harder over time.

Demographic change will require more money to be spent on health and pensions just to keep the levels of provision steady. Not raising taxes implies either worse health and pension provision, or continued squeezes on everything else.’

Of course, Jersey’s economic problems are nowhere near as severe as those in the UK, although we seem to be applying the same remedies. However the lack of any real debate about tax choices is very striking in both jurisdictions. Only Guernsey appears to be gingerly grasping the nettle and has sought the public’s views on future taxation.

As Mr Johnson points out in his Prospect article, if there are to be tax increases, the options should be examined and debated and although he was writing about the UK, the same applies in Jersey.

‘There are real choices to be made about the shape of the state, how much it takes from us and how it takes it,’ he writes.

‘These are genuinely fundamental to determining how we live. They should be at the absolute forefront of political debate.’

Perhaps now we’ve got over the trauma of what to do with the constables (or have we?), we can now start such a debate in Jersey.

By Peter Body