Below is a media release regarding the GST free amendment that Deputy St Pier and myself are going to lay against the Tax Review Policy Letter. The amendment and report are available to download from here:
GST-free amendment to tax review
Two experienced deputies have put together a detailed alternative approach to the tax review. Deputy Heidi Soulsby is proposing an amendment, seconded by Deputy Gavin St Pier, that reduces the structural deficit by more than £62m. without introducing GST.
The package of measures combines corporate and other contributions with States’ spending control, including:
- Real terms reductions in spending of 1% in 2024 and 2025 totalling approx. £9m over two years
- A special purpose committee to review the role and size of government, services and spending
- Reform of social security contributions
- Accelerating the withdrawal of allowances from high earners
- Charges on business parking and cruise ship emissions
- A special purpose committee to review corporate tax
The amendment seeks to delete and replace the Policy & Resources Committee’s policy letter with its own propositions backed by a 40 page report, ‘A Fairer Alternative.’
Deputy Soulsby said: “We have been working with colleagues across the Assembly to construct a credible and fairer alternative package of measures that will address the island’s longer-term public finance needs.
“The first thing that needs to be done is a comprehensive review that establishes the role and size of government. Until we’ve decided what public services must be provided by government, and what can be done by others outside government, we really haven’t got a sound basis on which to build a long-term view of public finances.”
On proposed containment of public spending, Deputy St Pier said:
“It has really frustrated many of us during this political term that spending has been allowed to run away with no attempt to stop it.
If you don’t even try expenditure restraint, then you are guaranteed to fail to deliver it.
“This States is the most spendthrift of the three I’ve served in when it comes to spending. Without fail, it chooses the most expensive model for everything.”
Two Special Investigation & Advisory Committees would be created and would work simultaneously. One will look at spending and reviewing the role and size of government and a second will review corporate tax.
GST is not part of the proposed package at this stage and both deputies say there are better alternatives that can be implemented now, with GST remaining an option of last resort for the future.
Deputy St. Pier said:
“As Treasury Minister, together with former Deputy Chief Minister Allister Langlois, I led the debate in 2015 arguing that GST should be kept on the table. That proposal was heavily defeated at that time and I took the view that the States must live with that decision. While in my personal election manifesto in 2020, I did not oppose GST, having lost a year to this tax review it’s now far too late in this term to introduce it. It will just turn the next election effectively into a single-issue referendum on GST, which no general election should ever be.”
Deputy Soulsby added:
“There is never a good time to introduce GST but doing so when inflation is
at a 40-year high and wage rises have not kept pace with price increases is really, really bad timing. More importantly, the case for GST has not yet been made and the alternative proposals demonstrate that a different approach is possible, focusing on spending restraint and completion of
a corporate tax review.
“The Policy & Resources Committee policy letter includes some assumptions about the structural deficit. This includes a States requirement for an average annual capital expenditure of 2% of GDP. But we’ve never spent at that level on a consistent basis because the island’s capacity for capital
projects is constrained by our size and available internal and external resources. The last P&R recommended, after careful analysis, that we plan to spend 1.5% of GDP but it was amended on the
floor of the Assembly.
“Returning to that recommendation, as we propose, will reduce the deficit by £19m. a year. Taken with the revenue raising measures we have included, we have bridged the gap that we were told
could only be achieved through bringing in GST.”
These proposals will give those members of the Assembly and the public who are opposed to a GST, a credible, fairer alternative.
In addition to supporting the reform of the social security contribution system, the amendment includes proposals for revenue raising measures to be introduced over the next few years:
- £10m contribution from the corporate sector
- £500k in TRP from non-domestic, non-public parking
- £500k from an emissions levy on visiting cruise ships
- £2m contribution from visitors
- £2.1m. from an acceleration of the withdrawal of tax and social security allowances from higher earners
There will also be investigations into how the island’s reserves can best be invested and whether there should be minimum tax contributions from high-net-worth individuals in addition to the maximum tax caps that already exist. It is proposed that the public servants pension scheme should,
in principle, close to new entrants from 1 st January 2025 with lower risk alternatives put in place for new employees after that.
Comparison as to how changes are borne between the Policy Letter and the Fairer Alternative.