LAST week I listened to Alistair Darling as he gave his first UK pre-budget report speech. Next month, Guernsey’s 2008 Budget will be laid before the States. Although an island of 60,000 people is clearly different to one of 60 million, as he was speaking a number of points he raised seemed relevant in part to the debate that has been going on in Guernsey.
As our Treasury and Resources minister finalises his deliberations, what can he take from last week that might help?
I suppose the first point to acknowledge is that not only are the two jurisdictions very different in terms of size, but also the issues they face. Guernsey has had to deal with EU attacks on its harmful tax practices, which has led to the whole zero-10 process and the need to raise money from other directions, while at the same time having no increase in population.
The UK, whose ‘non-dom’ regime makes it more of a haven than Guernsey to foreign high net worth individuals, has been free from such pressure. Its working population has increased significantly as a result of inward migration from eastern Europe and therefore faces a very different set of problems.
Turning to the speech itself, one point that struck me was the benefit of knowing the numbers. I could not fail to be impressed as Mr Darling trotted out anticipated deficits some four years ahead and there was plenty of detail in support of those figures.
Of course there will always be those who question the accuracy of the predicted numbers which in any case, with the best will in the world, can be changed by any number of factors.
However, being able to forecast ahead accurately makes the job of managing the economy that much easier. As Guernsey embarks on the first year of zero-10 and all the uncertainty that brings, knowing the likely deficit is an important first step in managing it.
One important subject in his speech was the level of borrowing by the UK Government and how that as an element of the overall government finances compared to a number of other G7 countries. Guernsey has no debt, something of which it should perhaps be fiercely proud. Clearly our government must decide whether that should remain the position and instead use our savings to balance the books over the next few years.
During the speech, Mr Darling made specific reference to the UK Government’s intention of selling assets no longer required in public hands, which again made me think of Guernsey.
An emotive issue, one man’s selling of wasted assets to raise much needed revenue being another’s selling the family silver.
We are told that a strategic review is ongoing, which frankly has been the case for some time. Given the challenges we face in the next few years, decisions in this area, one way or another, do need to be taken.
Before announcing his detailed tax measures - and much has already been said on those - Mr Darling set out his intention that the system should be competitive, simple and fair. What about Guernsey?
I suspect our government would, and should, say the same and more so. The whole driver behind zero-10 is for the island to remain internationally competitive and few would suggest that it is not. We do just need to ensure than it is not more competitive than it needs to be.
Simple? I suppose here I have to declare an interest, clearly given my day job simple might not seem ideal.
That having been said, history shows that often attempts to simplify just make things more complicated.
However, as we look at ways of filling the black hole, it is in our interests to make things as simple as possible.
For example, as we examine the merits of a GST, the clear lesson from elsewhere is the simpler the better.
And fair. As a principle that must be right, although recent well publicised changes to the powers given to the Income Tax Office, in the view of many, might have tipped the balance the wrong way. If it has become unfair, that makes it potentially uncompetitive.
So as Deputy Lyndon Trott and his team prepare next year’s Budget, while the problems facing us are very different from those in the UK and an election is much closer, there are lessons to learn or at least points to note from the UK pre-budget report, which clearly include not being afraid to use other people’s ideas.
We should also make sure that our tax system remains competitive, simple and fair to all.
Article posted on 19th October, 2007 - 12.00am
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