P&R proposes temporary income tax hike

Deputy Lyndon Trott said the budget would not be "steady as she goes" due to challenging public finances

Guernsey's most senior politicians have proposed a 2p in the pound hike in income tax for two years as the 2025 States budget is released.

Policy and Resources (P&R) said the policy would generate £34m a year and help stabilise States finances.

It also suggested a £1,100 rise to personal income tax limits, which it said meant 80% of the lowest income households would see no change in their financial income.

The committee warned the affordability of its major projects portfolio would need to be reassessed if its budget was not approved by deputies.

P&R has suggested the creation of temporary villages for the construction industry

Plans to increase tax rates as part of tax reform plans were rejected by deputies last year by 30 votes to 10.

Under the new proposals, personal income tax allowances - the amount of money that can be earned before tax is paid - would rise to £15,000.

There are also plans for temporary key worker housing, a new village for construction industry staff and tax breaks for people renting rooms as a solution to housing shortages.

Other revenue raising measures include plans to increase corporate tax, which the States estimated could raise more than £30m a year.

Following pressure from Guernsey's hospitality industry, P&R ruled out hiking the tax on alcohol.

However, with new duty measures coming in on the day the budget is published, tax on tobacco will rise at a rate above inflation.

The cost of petrol at the pump will also rise in line with a 3.2% hike in fuel duty, matching the rate of inflation.

• Hear about the proposals in 2025's budget and from Deputy Lyndon Trott

'Collectively take action'

Releasing the 2025 budget, P&R President Lyndon Trott said it would have been easy but irresponsible to bring a "steady as she goes budget".

Last month P&R predicted a £24m deficit in States finances by the end of 2024.

Trott said: "We cannot in good conscience knowingly leave public finances in such a challenging state for our successors to pick up.

"We must collectively take action and we believe our package of measures will be easily understood by the community, are forthright in their intentions, and will raise the money we need in the short term while protecting the lowest income households."

Plans not pursued

A number of States members have already said they will not support any tax increases, while some former members have said they were reluctant to support an increase to income tax.

P&R suggested adopting some ideas from its savings sub-committee, including digitising billing, reshaping the States and transforming healthcare services, but it admitted the issues with States finances could not be solved by slimming down the size of the public sector.

P&R has not included any plans for transport taxes in its budget proposals despite being tasked by the States to do so - the committee said the introduction of new transport taxes along with the rise in the personal income tax rate "could have significant impact on motorists".

It also has made no plans to create new taxes for unoccupied properties as part of the 2025 budget as there was "very little information" on which properties were vacant.

Similarly no new taxes have been recommended on the owners of derelict glasshouse sites.