Scrapping GST on food would cost £14m a year

REMOVING GST from food would cost the public purse an estimated £14 million a year, according to the new Treasury Minister – who warned the biggest financial benefit would go to the Island’s highest-income households.

Senator Alan Maclean released the figures in response to a written question from Deputy Lee Carpenter.

The Reform Jersey politician asked for the estimated cost of removing GST from food and essential grocery items, and what assessment had been made of the impact on different income groups.

In his reply, the Treasury Minister said the annual cost of removing GST from food had been calculated using Statistics Jersey’s 2021/22 Household Spending report, adjusted for inflation.

But Senator Maclean said it was not possible to estimate the cost of removing GST from “essential grocery items” because the term was not defined.

The analysis found that wealthier households would receive the greatest share of the savings because they spend more on food overall.

The lowest-income fifth of households would save an estimated £1.8 million collectively, representing 12% of the total benefit, while the highest-income fifth would receive £4 million, or 28% of the savings.

Middle-income households would receive an estimated £2.9 million, equivalent to 20% of the total.

The minister said evidence from other countries suggested retailers “often do not reduce their prices accordingly, especially when the GST reduction increases administration costs for businesses”.

Senator Maclean added that when GST was introduced, the States agreed long-term measures to offset higher food prices – including increased personal tax allowances, higher Income Support payments and targeted schemes such as the Food Cost Bonus and, later, the Community Costs Bonus.

He concluded: “Ministers maintain that a broad-based GST, accompanied with these support measures, is the most effective way to support people with the cost of GST on food.”