Cuts to services in Guernsey considered under tax review

A government efficiency drive and a reduction in the services it offers is an option being considered.

The Policy and Resources Committee is pressing ahead with its plan for a tax reform debate in July.

This is despite Deputy Gavin St Pier saying he will resign as Treasury lead and seek re-election, with P&R saying it will not back him as its preferred candidate.

Ahead of a series of meetings with islanders and business in the coming weeks, P&R is setting out the progress it has made on tax reform.

It will publish its policy letter in early June.

What will be presented is likely to be a mix of the four options: GST, Corporate taxes, efficiencies and fuel duty.

The political head of P&R, Deputy Lindsay de Sausmarez, says despite last year's accounts looking positive, this is a one off snapshot, and government must raise more revenue and make efficiencies:

"The accounts are not a good proxy for the overall financial position the States is in.

"We've got a gap between the amount of money that we raise and the amount of money that we need to spend to support the community.

"That gap can be met either by more revenue or by reducing expenditure and there's a balance between the two, so it's really important that we understand where people think that balance lies."

"When it comes to expense reduction, that is the kind of territory that can affect public services so we are very cautious around that, because we know historically that whenever public service cuts have been suggested by the States, the public has tended to be very understandably upset by that."

GST at 5% including food, with a tax and benefits cushion for the less well off, is the biggest revenue earner, at £50M, far more than any corporate tax options, which would raise around £3M.

P&R has been working on the background to GST's implementation, if that is what deputies vote for in July this year.

A territorial tax, favoured by P&R's Deputy Charles Parkinson, has been ruled out at this stage, but P&R want Guernsey to be able to adapt as corporate taxes evolve in future.

Fuel duty is a fourth option being looked at and Deputy de Sausmarez says it is something that is close to her heart and has never been progressed by the States.

She says as vehicles become more efficient, or people turn to electric, the less well off are paying more in tax:

"There is unfairness in the current system where we’ve got so much dependency on fuel duty that fuel duty has been going up above the rate of inflation for years, and it’s actually unfair on the people who can’t afford to upgrade to a more efficient vehicle."