Policy and Resources (P&R) has rerun its GST numbers and found its tax reforms will raise roughly the same amount of money, despite using updated household spending figures from after Covid.
Back in June Guernsey’s top political committee told us that its proposed tax reforms, including GST at 3%, would raise £39m.
However, that was based on seven-year-old data from a 2018-19 household spending survey.
Now those numbers have been rerun using more up-to-date spending data, which crucially is from after the Covid pandemic increased the cost of living and radically changed spending patterns.
The new answer? About the same.
In fact, despite the new data being from 2023 and 2024, the tax will only raise £3m less a year than before – £36.2m.
P&R President Lindsay de Sausmarez insists the drop doesn’t derail the plan.
“The reduction does not alter the fundamental purpose or balance of the package,” she said, pointing out it still gives “substantial tax relief” to lower and middle earners while funding core services.
So what’s changed?
Fresh data from the latest Household Expenditure Survey shows average household spending dropped 6% in real terms between 2018 and 2024.
At the same time, non-taxable essentials swallowed up a far bigger chunk of islanders’ paychecks. Surging rents and mortgage repayments mean households have less cash leftover for the goods and services that would attract a 3% GST.
It isn’t just locals tightening their belts, either – tourists are spending differently too.
Updated figures show visitors spend around £35m a year on air and sea travel, which is zero-rated under the tax plans. That slashed predicted visitor GST revenue from £4.7m down to £3.5m.
There was a minor silver lining in the recalculated numbers: updated forecasts chopped the cost of proposed income tax cuts from £28m to £26m, offsetting some of the losses.
The revised estimates for the whole package are:
- Income tax changes: a reduced cost of £26.2m, compared with £27.9m previously, to
reduce the amount of income tax people pay. - Social security contribution changes: revenue of £1.2m, compared with £1.6m in original
model - GST from households: £38.3m revenue, compared with £41m
- GST from visitors: £3.5m revenue, compared with £4.7m
- International Service Entities scheme: unchanged at £11m revenue
- Motor taxes: unchanged at £7.4m revenue
- Corporate taxes: unchanged at £5.5m revenue
- Corporate TRP relief: unchanged at a cost of £1m
- Total gross additional revenue: £39.7m
- Total net additional revenue: £36.2m (after £2.5m administration costs and £1m cost of
increasing benefits).
‘The world doesn’t stop still’
Despite the moving target, P&R says the reality on the ground hasn’t changed.
Warning of an imminent “cliff edge” when Guernsey’s reserves run dry, Deputy de Sausmarez urged politicians not to stall any longer.
“Forecasts inevitably change as newer information becomes available, but one thing that hasn’t changed is the absolute need for the States to diversify its tax base,” she warned.
“As a responsible government, we must act to safeguard public finances, and we must act without further delay.”
“The world does not stand still while we deliberate.”
