'Preserving the status quo would require politicians to defend the indefensible to the electorate'

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By Gavin St Pier

BACK in the (feudal) day, when the monarch needed a bit more silver or gold to strengthen an army to fight a battle or two, they would issue a demand of the nobility, who would pay their dues and pass the demand on down the line to all those who, in turn, owed them loyalty.

And so began the convention that revenues are raised in the name of the Crown and, therefore, the Crown cannot pay tax to itself. Even as Parliament flexed its muscles, first in beheading Charles I and then in the Glorious Revolution a few decades later, the Crown managed to keep this tax exemption.

Window tax came and went. Income tax was introduced temporarily, never to be repealed, and new taxes on capital gains and inheritance appeared without any suggestion that these should be applied to the monarch.

All this changed during 1992, the late Queen’s annus horribilis. This was the year in which three of her four children’s marriages broke down very publicly and salaciously, and the 12 months were capped with a major fire at Windsor Castle.

The public mood, no doubt in part informed by the tabloid press, was not kind to the monarchy. Suddenly, the idea that the public should pick up the tab for all this mess, when the monarch didn’t even pay taxes, hit the public consciousness.

Ever flexible and, no doubt well advised, the Queen deftly “volunteered” to pay income and capital gains taxes on her personal income from 1993. The constitutional convention was not disturbed in that no statute was changed to make this happen, it was simply dealt with in a “memorandum of understanding” with the government of the day. The move was widely praised, and the media train (and public mood) moved on.

The tax position of the Crown has been reflected for half a century or more in insular legislation which exempts the Crown’s representatives in each Bailiwick (and the Isle of Man), the Lieutenant-Governor, from local income tax on their emoluments for doing that job.

It does not perfectly mirror the Crown’s tax exemption as the Lieutenant-Governors’ other incomes remains subject to local tax while they are resident in their respective island. The basis of this statutory exemption is not well documented, other than, I suspect, it was ever thus and, at some point, it was felt appropriate to put this local tax treatment on a sound legal footing.

I have moved an amendment to Guernsey’s 2024 Budget to remove this tax exemption for the next Lieutenant-Governor and their successors. The logic (and principle) is simple and irrefutable: the Crown has been paying income tax in the UK since 1993 and therefore there can be no sound basis for an ongoing income-tax exemption continuing 30 years later for the individual representing the self-same Crown.

If it’s good enough for the Boss, it must be good enough for the Boss’ rep. It is not republican or anti-monarchist. Neither is it anti-establishment but it is anti-status quo. It also reflects the fact that the personal tax burden of island residents has increased in recent decades. This is as a result of the necessary introduction of the zero-ten corporate tax regimes in 2008 and 2009 and also a smaller proportion of the population being economically active, needing to pay for the public services enjoyed by all. In that environment, it ought not be a particularly radical suggestion that every resident, including a (well remunerated) Lieutenant-Governor, should be treated equally by the law, requiring a contribution from their income towards the public services enjoyed by all.

In opposing the amendment, Guernsey’s senior political committee have, in essence, said there is no point as it won’t raise any more tax, because in order to keep the remuneration competitive, it will be necessary to “gross-up” the sum to reflect that it will in the future be subject to tax.

This argument is specious and rather ignores several important facts. Firstly, the logical extension of the argument is we wouldn’t tax any public servant as we also need to offer every public servant (gross) packages that are competitive.

Secondly, the amount of tax that might be raised by taxing the official remuneration will depend on the personal circumstances of each individual depending on their other income and entitlement to tax allowances.

Thirdly, the package needs to be what it needs to be, in order to remain competitive for the role. In Guernsey, the remuneration is neither published nor benchmarked, but is simply 50% of the Bailiff’s pay. (Although currently subject to review, the Guernsey Bailiff’s pay has,for the past half century, simply mirrored the Jersey Bailiff’s pay, but that’s another other story.)

Suffice to note that, as the Isle of Man does these things openly and transparently, we know, because it is published, that their L-G is paid £108,000 a year. And this less competitive sum than the Channel Island equivalents doesn’t seem to have put off the requisite talent from the role, so in the final analysis it might not actually be necessary to make any adjustment.

The Palace and the Ministry of Justice would really rather prefer that on issues such as this, Guernsey, Jersey and the Isle of Man move as one in lockstep. For officials, it would be much easier if all three islands reached a common position that their respective tax exemptions should be removed. For that reason, my amendment provides for consultation with the other two islands.

Self-evidently, this is not the most important issue which any of the islands face but the legislative change is a very simple one so “prioritisation” cannot be used as a valid blocker.

Preserving the status quo will require politicians to defend the indefensible to the public. This is, no doubt, how many of the nobility felt when they had to reach into their serfs’ pockets to give the monarch of the day what he had demanded. Plus ça change?

  • Gavin St Pier is a Guernsey politician. He previously served as the president of the island’s Policy and Resources Committee.

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