Speech – Budget 2017

SPEECHES

Budget 2017

Sir,

The progressive intention of this Budget is welcome, although its progressive credentials hang entirely on two measures: Document Duty, which is being reorganised in a way that should reduce the cost of buying housing at the lower and mid-range of the market; and the withdrawal of personal allowance, which will touch only 3 in 100 islanders, with six-figure incomes. It is a good start, but there is more to be done. Perhaps the time for debate on that will be in a fortnight, when we come to debate the Fiscal Framework within the Policy and Resources Plan.

It is disappointing that Deputy Oliver thinks the way to solve this is to kick down, to people whose daily experience is of a hardship born of conflict, poverty or disease, which is unimaginable in this island. I understand and respect the need to question everything the States spends. I would extend a warm invitation to Deputy Oliver – and indeed to any States Member – to join my Overseas Aid Commissioners and me for one of our grant evaluation sessions in the Spring, where we consider the hundreds of projects which the States are being asked to support. We could give much more than we do, and we would still barely scratch the surface. Members should not feel alienated from that, and my challenge throughout this term is to make the work that we do through Overseas Aid & Development, and the positive impact that Guernsey has around the world, more visible to everyone here. Nevertheless – to pre-empt what the President will say in summing up – the only reason why Overseas Aid has not been touched this year is because there was a five-year funding formula agreed by the States in 2011, and P&R have honoured that. In 2017, the funding will be up for review, and we will no doubt come back to this question thoroughly then.

In general terms, the need to do more, however, is undeniable. In that respect, as others have done, I commend Deputy Ferbrache for drafting the amendment he did. Although I would not have supported it, and I believe I understand why it was not laid, it would clearly have opened up the question of what needs to be done, and how we might dare to think differently.

And the first way in which we might think differently is in terms of our language. We have already talked about the need to “broaden” our tax base. We talk about it a lot, in fact: it has the status of an almost theological truth. And it leads us, I would argue, into some counter-productive positions.

Let’s be honest. There are 63,000 people living here. They are all subject to income tax, provided, of course, that their income is high enough. The people who buy houses and pay document duty – the people who own houses and pay TRP – are the same, income-tax-paying people. The people who smoke and pay tobacco duty – the people who drink and pay alcohol duties – the people who drive their car and pay fuel duty – are the same, income-tax-paying people. They also include, of course, some of the people who are on incomes which are modest enough, low enough, not even to be subject to income tax.

As for excise duties, it is okay to tax harmful behaviours. It works. We’ve already discussed that. I am not saying – at least, I don’t think I am, not right now – that we should have no behavioural taxes. I am simply saying that when we talk about taxing behaviours, or taxing consumption, we are talking about taxing the same people in a different way. We have to be honest about that. The only way of “broadening” the income tax base is to look at doing corporate tax differently, and we know that’s off the table for now, and we understand why.

So let’s not talk about “broadening”. It’s nonsense, and it won’t help us find a way out of this deficit. Let’s talk about “strengthening” instead. Let’s make sure we place the burden of tax on the shoulders which can bear it. Perhaps we need to start 20-means-20 at a more reasonable threshold, as Deputy Roffey has said. Perhaps we need to look towards higher rates of income tax for those with higher incomes, and – despite Deputy Trott’s retort to Deputy Fallaize earlier – I believe we will have popular support in doing so – including, I believe, from many of those who would stand to pay such rates.

As a variation on the same theme, some of the minor propositions in this Budget lead me to ask if we have our priorities right. Proposition Four is a sop to High Net Worth Individuals. I understand why it is there – I’m given to understand it’s a bit of tidying up, removing a bureaucratic annoyance rather than a source of revenue – and I’ll probably vote for it. But fixation on High Net Worth Individuals stops us asking: what can we do with our tax and social insurance system to make life in our Bailiwick more attractive to people in the middle income brackets – people with household incomes of 30 to 50,000 a year – including many of the nurses and other frontline professionals who we struggle to recruit and retain, because living in Guernsey comes at such a cost.

It stops us thinking about the power of capital investment as a form of economic stimulus. Despite the fact that construction is the third biggest employer in Guernsey, and most workers in the sector earn between 20 and 40,000 a year – squarely in the lower- to middle-income bracket – we skimp on capital investment and lose sight of the opportunity to create, through work, a boost for our construction and industrial sectors. I will be voting with Deputy Fallaize against Proposition 22.

It stops us thinking, too, about the one in five households who live in homes with combined incomes of less than 17-and-a-half thousand a year. Seventeen-and-a-half thousand. I’m not sure we can even understand that. Each of our salaries alone are double that, before we even take into account the wealth we enjoy from our partners’ incomes, or from pensions, or from our investments. Whatever our backgrounds, we must not forget how insulated we are, here, from the hardest side of island life. There is no progress on implementing a fairer welfare system this year. There is a threat that funding for such changes will not be available at least until 2019. We have an ambition to do better for islanders, but we are not yet putting our money where our mouth is.

Deputy Roffey, in summing up on his amendment, laid out a provocative challenge. “If you are happy for your Committees to be squeezed, then by all means let the States’ revenue fall.” He is not wrong. But. Whenever we take income from a household, in the form of tax or contributions, we remove some part of their ability to use their own resources to solve their own problems. We do that because, as a society, we have a duty to look after each other, and we do that most effectively by pooling our resources. But we have to be as aware of the impact of taxation and social insurance on the lives of households, as we are aware of the benefits our services provide to those same households. If we are interested in protecting islanders, we must do so in what and how we take, as well as in what and how we give. So considering the fairness of the kind of tax we raise – when we talk about strengthening the tax base – is fundamental.

I make a couple of minor points in closing:

Unless I can be persuaded otherwise, I won’t support Proposition 29, which directs 50% of “evidenced tangible fiscal receipts” from new economic developments to be reinvested in the Economic Development Fund, or the Future Guernsey Economic Fund, as it will become. We will just waste time trying to prove an evidential link between certain projects and certain revenues. Let’s just make sure that the Economic Fund has the resources it needs, on an annual basis, to deliver the results we want – within the constraints common to all the States’ spending.

I would echo the concerns raised by fellow States Members about the proposals to invest the bond in companies outside the public sector. The bond was approved with very strict criteria about how it would be used. As soon as we start to allow slippage, we are in a very dangerous place.

And finally, let’s be honest about our limitations. The fact we’ve got a better Budget than planned is a happy accident of economic and operational good fortune, not an inspirational achievement. Not inspirational, but good. And my criticisms are relatively small. It’s a decent start, and I’ll support the vast bulk of the propositions. But, to reinforce the points well-made by Deputy Fallaize and others, we are going to have to take a much more resolute and realistic approach to removing the government deficit; we’ll have to think differently and, as Deputy Green has said, we’ll have to act on the courage of our convictions.

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