Tax cut U-turn looms for most households

Thursday 30 April 2015

Ministers are considering a swift u-turn on a pre-election tax cut that could see 84% of Islanders getting a bigger tax bill.

The rate of tax that the vast majority of Islanders pay was reduced from 27% to 26% in 2014 – a tax cut worth around £200 each to 40,000 households.

But with the deficit in public finances now expected to hit £130 million by 2019, the new Treasury Minister says that he doesn’t think that the reduced rate is affordable.

Senator Alan Maclean says he is reviewing the tax reduction that his predecessor Senator Philip Ozouf brought in for last year, ahead of the October elections.

The tax cut is worth an estimated £8 million.

Senator Maclean said: “It is something that I feel we need to look at. It’s regrettable and difficult on the basis that taxpayers who are the beneficiaries have just begun to receive the benefit effectively this year.

“It’s not ideal giving something and taking it away.

“I have to look at the facts as I see them now. I took up the role in November, and I have to deal with what I’m facing at the moment. Would I be considering reducing the rate if we were at 27% now? No, I would not. We cannot afford it.”

Last week ministers announced plans for £60 million worth of staff savings and job cuts, along with £35 million worth of benefit and service cuts and a new £35 million 'health charge' to plug a £130 million black hole in States finances.

They said that for the first time in years, the government might start laying people off. A voluntary redundancy scheme is set to start to reduce the public sector pay bill – currently running at £1 million per day – and ministers say that it will be used, “...to minimise the number of compulsory redundancies."

The problem for the States is compounded by the fact that ministers have to find another £50 million for the Health department and another £9 million for the Education department every year, just to cover much-needed investment in looking after the growing elderly population, raising pay for nurses and improving standards in schools.