It’s shameless plagiarism, I know, but I’m going to repeat what a fellow commentator wrote in a sister publication a few weeks ago.

The article in the Guernsey Press I consider worth repeating because it makes me feel good. I almost entirely agree with what it says, and what’s more, it’s not from a hypercritical journalist or a left-leaning radical, but from a senior partner at a leading accountancy firm.

Accountants in Jersey have tended to follow the Establishment line, but this accountant obviously doesn’t agree that we are striking the right balance between taxation and government spending.

Under the heading ‘Is spending less before raising more tax, really the best way?’, the tax partner at Ernst & Young expresses his personal frustration at Guernsey’s inability to face up to their budget deficit and ‘perhaps be more willing to pay a little more for the privilege of living here’. Compared to the sister isle, Guernsey doesn’t have much of a deficit problem, but they have been forced to make savings like the rest of us.

Guernsey, of course, hasn’t yet succumbed to the inevitable and introduced a consumption tax such as GST. That’s obviously why this Guernsey accountant worries that the Island is concentrating all its efforts on reducing spending and little effort on raising taxes. Jersey on the other hand has increased taxation, although nobody can say that the level of either indirect or direct taxes puts us in the category of the highly taxed. So perhaps we too could be willing to pay a little more as well.

The accountant goes on to say that his critics claim Guernsey ‘needs less but better government’ (now where have I heard that before?) and to increase taxation before cutting spending is putting the cart before the horse.

In Jersey we claim to be trying to do both things at the same time, although no one can deny that the emphasis so far as been very heavily on cutting spending.
We are also no better than Guernsey in looking for alternative sources of tax revenue before deciding to wield the axe. As the Guernsey accountant said it’s not just a question of having to raise capital taxes or income taxes; there are other taxes such as tax on rateable property which could be looked at.

The same applies in Jersey and in spades. Property taxes in general produce a tiny proportion of States income and certainly much lower than just about any other jurisdiction. However in a modern economy property are considered to have almost as many advantages in raising taxes, as consumption taxes have. I know that we don’t like upsetting property owners, developers and speculators in the hope that their activities also benefit the Island, but maybe it’s time they contributed more.

The Island also continues to ignore the opportunities for environmental taxes, but then we don’t want to upset the car drivers either.

The Guernsey accountant then goes on to talk about States spending which has been criticised there almost as much as it has been in Jersey. He wonders ‘what will be achieved if we leap off the fiscal cliff into the abyss, in our properly ordered horse and cart, repeating the mantra that we cannot raise taxes until spending is under control?’

We couldn’t repeat that mantra as the Jersey horse and cart is generally in the right order as it hurls over the cliff. In Jersey’s case the mantra would be ‘we will not raise taxes more until spending is under control’.

The columnist in Guernsey however questions whether reducing spending is the right objective for a modern society.

‘There is an increasing demand for public services,’ he wrote. ‘We are living longer, which when it comes to spending is a hugely difficult and sensitive area. A good education is perhaps even more important than ever, and I know only too well the cost of a university education…’

The mention of age demographics and education will of course ring a bell with Jersey readers struggling with the tax and spend dilemma.

The Guernsey accountant says that of course there should be an unstinting drive to reduce waste in the States, and despite my awful reputation for defending the performance of the public service, I agree with that sentiment wholeheartedly. The problem in Jersey has been that we have started to hack away at spending in the absence of any evidence of waste, apart from the strong prejudices of a few businessmen and political commentators.

I’m sure there is waste, but I’m equally sure that it is nothing like many people seem to believe. Certainly the Council of Ministers doesn’t seem to be so sure any more. They are continuing with their target of £65m in savings, but they are also now painfully aware that the real savings will be far less because we have to invest in restructuring the public service, improving the infrastructure and hopefully invest in the economic future of the island (although that one is a bit doubtful). Yes they will make £65m in savings, but they will be ploughing a large chunk of it back into the public sector.

That’s because, as the Guernsey accountant said, ‘ultimately, you cannot grow by cutting alone’.

He also points out that not all taxes are as bad as each other, and the important thing about taxation is who and what is being taxed.

Reading the Guernsey article, Jersey’s politicians will thus be able to take some comfort from the fact that they have been brave enough to boost the income side of the equation, against quite strong public opposition. However they haven’t been particularly inventive in how they have done it.

But the real problem is that the balance they have struck between spending and tax is as wrong in Jersey as it is apparently in Guernsey.

The aim in both islands is to keep taxes down while continuing to provide essential public services. The fact that everyone has to accept that the cuts in Jersey are damaging those essential services (or would be if there hadn’t been some serious backpedalling) means that they have not achieved the right balance.

If the public wishes to maintain these services – and there is ample evidence that they do – then they have to be paid for by increased taxation. That doesn’t necessarily mean hiking GST, impots or income tax, because there are other ways of raising money. However as the Guernsey accountant points out people in both islands might ‘perhaps be willing to pay a little more for the privilege of living here’.

Peter Body is the editor of Business Brief magazine