By Richard Digard
SPARE a thought for your skint cousins just 25 miles away – this month is expected to determine whether Guernsey’s most fiscally incontinent States in modern times is going to clobber taxpayers already reeling from a cost-of-living crisis with a goods and services tax. Just so the States can continue to spend freely.
Previously, the smart money was on Policy and Resources, the island’s senior committee, losing the argument over what’s known as Tax Review Phase II (phase one having been rejected) and thus potentially facing calls to resign.
Now, however, the mood music suggests that Guernsey’s Chief Minister Peter Ferbrache – remember, he’s the chap who said Jersey’s government was seen as a ‘bunch of bumbling idiots’ over its pandemic handling – has cobbled together a majority for his package, which seeks to plug a government funding gap of up to £100 million by 2040.
Unsurprisingly, he’s come in for a lot of criticism. That’s not just because people don’t want to see already sky-high food and fuel costs rising by another 5% – few GST exemptions are envisaged – but because the last election was notable for many high-profile candidates pledging to oppose any new tax on consumption.
In particular, the man who leads on treasury matters for P&R, Mark Helyar, was a founder and chair of the Guernsey Party, which was implacably opposed to GST. Following his Damascene conversion, however, Deputy Helyar is now evangelising on behalf of proposals that, as far as I can tell, mean that 75% of Guernsey households overall will be worse off, to varying degrees, but the poorest 25% will be better off.
This act of prestidigitation is necessary because Guernsey States is spending more than existing revenues are bringing in and growth and expenditure restraint either aren’t in the frame or else are viewed as incapable of realistically bridging the financial gap.
Public opposition really hasn’t cut in over the proposals. Guernsey being Guernsey, that will happen only after GST has been approved. Which means the establishment is furiously working on an April 2025 implementation date – conveniently just ahead of the next general election that June.
Well, good luck with that. Even if the new tax is endorsed, there are many opportunities for opponents to delay that start date. Doing so would ensure it becomes the dominant election issue when Guernsey goes to the polls for its second election under island-wide rules and a golden opportunity for anyone desirous of £45,000 a year to spin a populist narrative of reversing GST if only they are elected.
Before we get there, however, an alternative package is sure to be published. A number of States Members and others are working on proposals that raise the same sums and have broadly similar outcomes but without taxing consumption.
This is significant on a couple of fronts. The first is the Chief Minister earlier saying don’t just criticise what we’re putting forward, come up with proper alternatives. Tax Review III will be the result. The second is how feasible doing so actually is.
P&R has access to all the officers and all the information to make and justify its case. How completely will that level of support and guidance from civil servants be available for a rival (and possibly more palatable) package?
The other aspect that has yet to come into play is Mr and Mrs Le Page from Torteval, the mythical couple who apparently embody middle Guernsey. When will they make their voices heard?
Your Deputy Sam Mézec already has. In a letter to the Guernsey Press and Star last month he said Jersey’s experience of GST had been a failure, hadn’t filled the Island’s financial black hole or spared the most vulnerable from £10m-worth of cuts to the support they received.
‘Today, it remains a contentious subject. When we introduced it, we were told it was too complex to provide for VAT-style exemptions on essentials such as food. Yet somehow it wasn’t too complicated to exempt yacht fuel and private school fees. Go figure,’ he wrote.
The Guernsey proposals will tax those two areas because zero-rating and exemptions will be very limited. But excluding food, we’re told, would require a headline rate of 6% because it would restrict tax collections by up to £8 million and benefit the richest the most. And anyway, not all food is essential. ‘Any definition which exempts value packs of minced beef and prawns would almost certainly catch 30 day-aged steak and oysters,’ harrumphs Policy and Resources.
So transport like Condor and Aurigny will be spared, but essentials such as food, fuel, electricity and water won’t, and charities ‘deemed to be carrying out a commercial operation’ will have that clobbered too. In all, £68 million is to be raised, around £1,000 per head of population.
The other area of controversy – GST on direct imports via Amazon and the like – is similarly opaque. The intention is that the de minimus matches the £60 Jersey is aiming for ‘if this level is not achievable at the outset’. It’s not clear what the starting level will be if not. Probably your existing £135. The other obvious area of challenge for the GST proposals is whether they’re really needed at all. While that should be clear cut – either Guernsey’s running out of money or it isn’t – the reality is far more opaque. The States of Guernsey accounts follow no known accounting standard and are deficient in significant ways, including how it accounts for assets and property while it doesn’t recognise depreciation, so expenditure on capital items simply disappears. All of which means you can read the accounts, as various commentators and think tanks have done, to say they show a) no problem at all, b) a shortfall of £100m., or c) a black hole of £220m. Take your pick.
Will we get GST? Yes, at some stage because it is inevitable. Is this particular offering the right package? No, it’s poorly produced, underwhelming in its evidence and seeks to bribe taxpayers into acceptance using their own money.
Will it nevertheless be approved? Too close to call. If it is, that will be because of good fortune – not because the tax review has been subjected to proper and thorough scrutiny. That element of essential parliamentary rigour disappeared when island-wide voting came in. As Jersey folk might ask, who are the bumbling bunch of idiots now? I couldn’t possibly comment but happy new year anyway.
