Taxes – including GST – ‘will have to rise’ to plug States black hole
TAXES – including GST – will have to go up as the States face a £30 to £40 million financial black hole next year, the Treasury Minister has warned.
And schemes such as university funding – introduced last year – are likely to be reworked, as providing tuition fees at current levels is ‘not sustainable’.
Speaking at a Chamber of Commerce lunch event at the Pomme d’Or, Treasury Minister Susie Pinel told Islanders and businesses that they would have to pay more tax following ‘write-off costs of the hospital’, ‘a downturn in investment performance’ and ‘legacy’ issues surrounding the failure to implement proposed waste and health charges.
The recently released States Annual Accounts showed that government expenditure was £75 million more than its income last year.
Having previously issued warnings of looming black holes in States accounts, Deputy Pinel gave her biggest indication yet that an overhaul of the tax system would be needed.
This would include GST – currently levied at 5% – with the minister saying it would have to go up. However, she also hinted that the way GST is charged could change, with exemptions on certain ‘core commodities’ potentially being introduced.
During the event’s question and answer session, Deputy Pinel said: ‘Every time there is a debate about GST it always incorporates whether there should be exemptions.
‘It [GST] will have to go up but it will inevitably encompass what the exemptions are going to be. By how much, that has to be worked out as well. That is for a consultation of the Assembly to debate.’
She added that discussions about new charges or increased taxes would come after States chief executive Charlie Parker had delivered his ‘OneGov’ programme designed to drive efficiencies within the public sector.
Deputy Pinel said: ‘If the government has delivered substantial efficiencies, and it still can’t afford to pay for the services the Island requires, then the government will need an honest conversation with the Island about how and where it will raise more money, or it will have to cut some services.
‘As I said in my Budget speech, something has to give – not a message with which many will be delighted, but we may have no alternative.
‘So do we need to raise taxes, and if so, which taxes? The short answer is, potentially, yes.’
The minister added that Jersey has some of the lowest rates of GST, property tax and income tax in Europe – yet, she said, the perception was that taxes were ‘sacred cows’ that could not be touched.
‘I’m convinced that if Islanders want to continue to enjoy high-quality services, the government will, as part of a balanced strategy, also need to consider appropriate revenue-raising and cost recovery measures for the future.
‘But, not until we have demonstrated that efficiencies are delivered and enduring.’
Discussing potential business taxes, Deputy Pinel said that many Island companies benefitted from the zero-ten regime but ‘baulked’ at the thought of paying for commercial waste charges – ‘something they would pay for without question in almost all other countries’.
She also suggested that a scheme to provide university tuition fees may have to be reworked. Under the scheme, students from households earning under £110,000 per year will have the full cost of university tuition fees covered, up to £9,250 a year. Those earning up to £200,000 will have some of the costs covered on a sliding scale. However, this is only an interim measure until long-term funding for the scheme can be found and agreed by the new States Assembly – something which has not yet happened.
Deputy Pinel said: ‘It was brought in and has been well-received. Whether it is sustainable in the long-term is debatable and that is something that will form part of the Government Plan.’
Speaking to the JEP, Assistant Education Minister Jeremy Maçon said any changes to the scheme would be ‘grandfathered’ for those already enrolled at university.
‘As part of the 16+ review consultation, we are looking at the scheme and whether that should be restructured in another way,’ he said. ‘There are some issues around the sustainability so we will be reviewing whether it could be better distributed.
‘People shouldn’t think it is going to be pulled away but we need to put in place the proper funding for the long-term sustainability.’