States Meeting Transcript - 08/12/2010

STATES OF JERSEY OFFICIAL REPORT

WEDNESDAY, 8th DECEMBER 2010

PUBLIC BUSINESS – RESUMPTION..........................................................3

1. Expenditure Proposals for 2012 and 2013 and Draft Budget Statement 2011 (P.157/2010): amendment (P.157/2010 Amd.) – amendment (157/2010 Amd.Amd.)....3

1.1 Connétable K.P. Vibert of St. Ouen:.....................................................3

1. Deputy K.C. Lewis of St. Saviour:.......................................................3
2. Senator P.F. Routier: ....................................................................3
3. Deputy T.M. Pitman of St. Helier:.......................................................4
4. Deputy F.J. Hill of St. Martin : ...........................................................6
5. Connétable J. Gallichan of St. Mary : ....................................................6
6. Deputy M.R. Higgins of St. Helier:......................................................7
7. Deputy R.C. Duhamel of St. Saviour:....................................................9
8. Senator P.F.C. Ozouf (Minister for Treasury and Resources):..........................11 Senator J.L. Perchard:........................................................................17
9. Connétable D.J. Murphy of Grouville :..................................................17
10. Deputy G.P. Southern of St. Helier:..................................................17
11. Deputy M. Tadier :...................................................................19
12. Senator S.C. Ferguson:..............................................................20
13. Deputy R.G. Le Hérissier:...........................................................21
14. Senator T.A. Le Sueur (The Chief Minister):........................................22 Senator J.L. Perchard:........................................................................22
15. Deputy J.A.N. Le Fondré of St. Lawrence:..........................................24
16. Senator A.J.H. Maclean:.............................................................24
17. Deputy I.J. Gorst of St. Clement:....................................................26
18. Connétable A.S. Crowcroft of St. Helier : ............................................26

1.2. Expenditure Proposals for 2012 and 2013 and Draft Budget Statement 2011 (P.157/2010): amendment (P.157/2010 Amd.) - second amendment (P.157.2010 Amd.Amd(2)) ............................................................................31

1. Senator S.C. Ferguson:.................................................................31
2. Deputy J.A.N. Le Fondré:..............................................................31
3. Deputy G.P. Southern :..................................................................31
4. Deputy A.E. Jeune :.....................................................................32
5. Senator J.L. Perchard:..................................................................32
6. Senator P.F.C. Ozouf :..................................................................32
7. Deputy M. Tadier :......................................................................32

8. Senator S.C. Ferguson:.................................................................33

1.3 Expenditure Proposals for 2012 and 2013 and Draft Budget Statement 2011 (P.157/2010): amendment (P.157/2010 Amd.) as amended.............................34

1. Senator B.E. Shenton:..................................................................34

2. Senator J.L. Perchard:..................................................................35
3. Deputy P.V.F. Le Claire: ...............................................................36
4. Deputy T.A. Vallois of St. Saviour:....................................................38
5. Deputy M. Tadier :......................................................................39
6. Deputy A.E. Jeune :.....................................................................41
7. The Connétable of St. Helier:...........................................................42
8. Senator P.F.C. Ozouf :..................................................................42

LUNCHEON ADJOURNMENT PROPOSED..................................................44 LUNCHEON ADJOURNMENT................................................................45

PUBLIC BUSINESS - resumption..............................................................45 Senator P.F.C. Ozouf :........................................................................45

9. Senator B.I. Le Marquand:..............................................................45
10. The Connétable of St. Mary : ........................................................46
11. The Connétable of St. Peter:.........................................................48
12. Deputy J.A. Martin: .................................................................49
13. Deputy J.A.N. Le Fondré: ...........................................................50
14. The Deputy of St. Mary:.............................................................58
15. Deputy J.G. Reed of St. Ouen : ......................................................59
16. Deputy J.M. Maçon of St. Saviour : ..................................................60
17. Connétable D.W. Mezbourian of St. Lawrence:......................................61
18. Deputy E.J. Noel of St. Lawrence : ..................................................61
19. Senator F.E. Cohen: .................................................................62

20. Senator A.J.H. Maclean:.............................................................62
21. Deputy R.G. Le Hérissier:...........................................................65
22. Senator S.C. Ferguson:..............................................................66
23. Senator T.J. Le Main:................................................................66
24. Deputy K.C. Lewis : .................................................................67
25. Deputy I.J. Gorst :....................................................................67
26. Deputy P.J. Rondel of St. John:......................................................69
27. Deputy A.E. Pryke of Trinity : .......................................................70
28. Senator T.A. Le Sueur:..............................................................70
29. Connétable P.F.M. Hanning of St. Saviour:..........................................72
30. Senator F. du H. Le Gresley:........................................................72
31. Senator A. Breckon:.................................................................73
32. Connétable J.L.S. Gallichan of Trinity : ..............................................76
33. Deputy G.P. Southern : ..............................................................76

ADJOURNMENT................................................................................83

The Roll was called and the Dean led the Assembly in Prayer.

[9:30]

PUBLIC BUSINESS – RESUMPTION

1. Expenditure Proposals for 2012 and 2013 and Draft Budget Statement 2011 (P.157/2010): amendment (P.157/2010 Amd.) – amendment (157/2010 Amd.Amd.)

The Deputy Bailiff :

The States now resumes its debate on the amendment of the Connétable of St. Helier .

1.1 Connétable K.P. Vibert of St. Ouen :

I would like to remind Members of the words, some of the words, not all of them, of the Deputy of St. Mary yesterday. [Laughter] He highlighted what I think he termed as the mañana syndrome. That is a very widely used system in this Chamber when people try to put off mañana until tomorrow decisions which are painful, expensive or which they just do not feel like tackling, and I think that the amendments of Deputy Southern and the Connétable of St. Helier are the mañana syndrome. They are trying to put off decisions which are painful and which are difficult until a later date. The Minister in his proposition of the Budget Statement highlighted that we need to make decisions now which are timely, albeit painful, but which will be far more painful and far more difficult mañana.

1. Deputy K.C. Lewis of St. Saviour :

I thought long and hard about this one, and I will be supporting the Constable of St. Helier's amendment. This extra 6 months is the breather that the people of Jersey need and it is not about working Jersey or middle Jersey, this is about all of Jersey. We need this extra 6 months. Many small shopkeepers have absorbed the 3 per cent much to their cost. They will not absorb 4, 5 or 6 per cent, so that will be passed on.   After I asked a question of the Minister for Economic Development several weeks ago regarding asking landlords to reduce commercial rents, I had several phone calls from people, one of which was going en désastre because they simply cannot make it any more. I think this 6 months is essential to give people of Jersey the breather they need, so I will be supporting this amendment.

2. Senator P.F. Routier:

Perhaps I should declare that Members will recognise that I am a retailer of clothes but I do not believe that what I am going to say reflects on that. So, my opening comment will of course focus on this amendment but will refer to the main amendment, as they are both very similar in principle, but with varying times and quite obviously cost. This amendment by the Constable of St. Helier and the initial amendment by Deputy Southern both propose to maintain the current G.S.T. (Goods and Services Tax) rate at 3 per cent with no exemptions and for different periods of time. I am not sure if I am reading this wrong but in both of these amendments the proposers seem to have now settled in their own minds that the current flat rate of G.S.T. is the best, the simplest and the most appropriate form of G.S.T. I say that because they appear to want to keep it. If I am wrong in my assumption I do apologise, but then if I am wrong I am really confused because mixed messages are coming from the Member. I cannot recall the Constable's previous stance on G.S.T. but it does appear that Deputy Southern certainly has had a conversion and now supports G.S.T. at that flat rate. [Laughter] No doubt if we get past this debate we will find out later how deep the proposers of these amendments belief is in a flat rate G.S.T. Certainly, this amendment by the Constable is, on the face of it, the least costly of the 2 options in lost revenue to the overall Budget package and could be seen as the easier option to approve, and could be tempting to some because it does not appear to be as costly as Deputy Southern 's. Just for clarity, the Budget as proposed by the Minister for Treasury and Resources would lose at least £15 million next year if this amendment was successful. I will explain later that it would be likely to possibly cost even more than that. I do

not believe that we should entertain any such loss because we need the income to provide the services that we all want to provide. I would like to comment on 2 matters which the Constable raised in his opening remarks. Firstly, he put forward the view that maintaining a 3 per cent rate will help to fight off or hold back the increasing threats to town retailers from internet sales. There seemed to be a view which has been put to him by retailers that internet sales are increasing because of G.S.T. and if there was an even higher rate it would be even worse. There may be some merit in that, but I have to say that the main reason for increasing the internet sales in Jersey is the same as it is all over the world where we are seeing a growth in internet sales currently at about 10 per cent of all sales, and growing to what is predicted to be 20 per cent of all sales within the next 10 years. This is not a function of any tax or tax rates but it is people's buying habits and competitiveness around the various markets. The growth in internet sales is happening the length and breadth of the U.K. (United Kingdom) and within the U.K. without any tax differentials at all. So, it is just happening. It is just a fact of life. The internet is taking a slice of the business. The answer to the traditional retailers is to compete against the internet by offering quality, reasonable prices and obviously a good service. The second matter relates to a very practical issue of the suggested date that the 3 per cent G.S.T. rate is to be extended to. The Constable is proposing that the rate be kept until 31st December 2011. This would require retailers to change their prices on 1st January, which is totally impractical. Those Members who have taken part in previous G.S.T. debates will, I am sure, recall the outcry from retailers who needed time to change prices, preferably in a mid-week, avoiding weekends and holidays. This amendment is really not an appropriate date for very real, practical and cost reasons. Although Deputy Southern 's amendment is a mid-week changeover, the date does not make his amendment more acceptable because it is even more expensive in lost revenue.

The Deputy Bailiff :

Senator, I am sorry to interrupt you but we are firmly going to keep this debate contained to the amendment to Deputy Southern 's amendment and we are only discussing the date.

Senator P.F. Routier:

Yes, Sir, certainly. This amendment proposes that the existing rate should be kept until the end of next year after the elections. I presume that the proposer is signalling that a new rate should be effective from 1st January 2011. If this is the case, we will need to decide what that new rate will be in advance, at least 6 months in advance so that there is sufficient notice for retailers to prepare their buying strategies for the forward period which, in many cases, have a long lead-in time. If of course the Council is just wanting to leave the decision until after the next elections for the new House to debate, then allowing for at least 6 months' notice period to be given to the public after any such debate, the cost would be considerably more and probably even more than Deputy Southern 's version. So, if there is a desire by some to support this amendment on the basis that the new House, after the elections, can deal with a new rate I do not think that it will be practical because it would be impossible to debate it before December 2011 and give everyone sufficient notice and warning to have it in place. For those sort of practical reasons, and for the cost reasons, this amendment is inappropriate in these times when we need to balance our books as soon as we possibly can. Mañana, mañana, mañana I will not be supporting this amendment or the main amendment.

3. Deputy T.M. Pitman of St. Helier :

I thought the Senator was going to sing then when he started into that little mantra. I think on yesterday's evidence this debate may become irrelevant because the Minister's proposed June implementation date for G.S.T. increase will probably have come and gone before we have finished anyway. So, let us see what we can do today.

[9:45]

Having said that, I was pleased to reach the adjournment last night because when I heard Deputy Noel start to tell us about jewellers having their best retail year ever, I honestly thought I had had something stronger than my orange juice at lunch time. Now, maybe he buys his piercings at a different retailer to Deputy Martin and I, but I can tell you that the jeweller I was speaking to, a 2- man business, one of them has moved to the U.K. to keep the business going. That is how bad it has been for them and that is as a result of G.S.T. now. I know we all hear about how bad .. sorry, I am being put off by someone .. I cannot remember who. I was stopped by a member of the public this morning and asked how I thought it would go and he wanted to remind me about election promises and that is really apt, is it not, because I certainly know of one Deputy who the people have told me would be very lucky to get in because they have stood on an exemption, a G.S.T. exemption ticket, as soon as they got in did the exact opposite and as this member of the public said to me: "That might seem a long time ago now, 2 years, but there is an election less than a year away. People are not going to forget this time." So, what I would say to people, you have got to make up your own mind on this but just make sure you are happy with the way you vote because it will be remembered. Now, my voting is consistent on G.S.T. It is undeniably regressive as Deputy Southern and the Constable have said, absolutely undeniably regressive.

The Deputy Bailiff :

The date, Deputy , please; that is what the debate is about. Deputy T.M. Pitman:

What the Constable is proposing and Deputy Southern as well, of course, is indeed like Deputy Lewis has said, some breathing space. It is the chance to maybe avoid making a wrong decision, not the mañana, mañana, mañana syndrome because, yes, the House is very good at this. Six months, will it be the end of the world? Will it be, really? Only yesterday we saw in the J.E.P. (Jersey Evening Post) and as we all know it must be true if it is in the J.E.P., we had the finance industry again blubbing about how the rest of us can take G.S.T., those at the bottom the middle earners, but oh no, if they have to pay their way it will be Armageddon. How many times have we heard that trotted out? Now, this is interesting, I do support the finance industry. There are elements of it I do not support, but why is it that industries that can make £809 million in a bad year if we follow the amendments here today it will be Armageddon but for the rest of us, for those middle Jersey, for those at the really sharp end below, it is okay. This is indeed, as Deputy Lewis said, breathing space and surely it comes down to the fact that it is wrong for a government that will be in its dying days to introduce a tax, and that is what will happen, and it is fine for Senator Ozouf .. and I understand Senator Ozouf , he is pretty consistent in this, some would say he is not with the promise that he broke, but we know his politics, we know his ideology, but what about the others, those of us who say one thing. Well, I stick to what I say. I will be supporting the Constable just as I would support Deputy Southern , because surely it is wrong for a government in its dying days to bring in a tax that then the next House will have to live with. Surely it is even worse that we propose an increase in tax when we have not yet sorted out Zero/Ten.

The Deputy Bailiff :

The debate, Deputy , please. Deputy T.M. Pitman:

Well, I think that is linked, Sir, if you give me a little bit of leeway. If I was the Deputy of St. John , I would say you were cutting me off at the knees, but I will not steal his catch phrase. I am nearly finished. I have only taken 73 minutes today, Sir, and you are being monitored now.

The Deputy Bailiff :

As far as I am aware, Deputy , I have been monitored since I started. [Laughter] [Approbation] Deputy T.M. Pitman:

So what I would say to Members in closing  is let us see, whichever way  you vote on this, consistency. Just make sure that Members are happy with the way that they vote because that is going to be remembered for all of us who are going to face an election in 10 months' time or whatever. The Minister is not one of those, but many of us are. I know I will be able to stand up and say I was consistent. Let us make sure each and every one of us can say that, and no, you should not vote for this amendment purely because you think it might influence the electoral result, but you should vote because you are doing what you have said, and you are sticking to what you have said. I do not know what that interruption was but I think it was a tea party member. Hospitality can have an exemption, have had a delay, where is the consistency here? There is no consistency. If that is not mañana, mañana then I do not know what is. This amendment from the Constable does deserve support. It is breathing space. I have used Deputy Lewis ' catch phrase enough times and I will absolutely be supporting it because it is a chance to make a right, informed decision rather than a possibly very damaging one.

4. Deputy F.J. Hill of St. Martin :

We are going to spend quite a considerable amount of time today and tomorrow the way things go, even Friday, if we start discussing about the 3 per cent, 4 per cent, 5 per cent, 6 per cent, none on food, where are we going to go to? We have heard about mañana time. What I do know is what goes up never comes down, and if indeed we put this up to 5 per cent it will not come down. That will be the benchmark and the next one, it will be 6 per cent, it will be 7 per cent and just go on. I think what we have today is something which I am certainly going to support and I would ask other Members to, bearing in mind what goes up does not come down, and I would also like to remind those people on the executive side that very soon unless we accept this one we will be debating an amendment to an amendment brought by none other than the Minister for Treasury and Resources. So, if you are going to propose something he does not agree with, why propose it in the first place? Why spend time debating that as well? I think we have an opportunity today just to accept what we have, it is a breathing space, it is £15 million we are told. That is what it is going to cost. If we cannot find that out of somewhere or other then I think we are failing those people who have put us in the Chamber. So, I would ask Members not to spend too much time on this. We have what I think is the most sensible, most pragmatic approach today. Leave things as they are, give us that breathing space and let us get on to the vote.

5. Connétable J. Gallichan of St. Mary :

I speak a couple of languages, I speak 4, but Spanish is not one of them although of course I understand this mañana concept. The difficulty I have got is with the English because I have heard from different sides of the Chamber, different areas, what I consider to be conflicting ideas. I thought that if I was to support this amendment of the Constable of St. Helier, I would simply be deferring the increase of Goods and Services Tax to 5 per cent which is set out in the Budget Statement until 31st May 2012. I was not under the impression that I would not be making that decision. The way I read it is that I would be giving exactly what the Constable of St. Helier says, a breathing space and an extra chance. From what Senator Routier said, he seems to think we are not making the actual decision and also I got that from Deputy Pitman as well, leaving it to an election issue. So, I am really confused because I had understood that we would be making the decision but simply deferring the implementation date, which is rather a different thing. I would be grateful if someone who speaks could then please give me a clarification on that because it is not only a question of making the decision, it is a question of getting the timing right and in some cases mañana is a good thing. You know where you are going but sometimes you just have to give people the right chance to prepare how they are going to get there.

Deputy D.J. De Sousa of St. Helier :

Can I raise the défaut on Deputy Shona Pitman? The Deputy Bailiff :

She is here already, I think. She may be unusually quiet but she is here already. Does any other Member wish to speak? Deputy Higgins?

6. Deputy M.R. Higgins of St. Helier :

I have been looking at a lot of economic data of late. In fact, looking at the Fiscal Policy Panel's report there are a number of quotes all the way through it. For example, the outlook for the global economy looks profoundly uncertain. Expectations about the experiences of global recovery have swung since the beginning of 2010 reflecting fears of fiscal sustainability and contagion in the euro area, and so on and so on. The world at the present time is not settled. For example, if we look at the recent Irish crisis we found that the British Government had to bail out as part of the European package the Irish banks to the tune of some £7 billion. Why? Because the British banks are in hock. When I say "in hock", they have lent to the Irish banks something in the order of £80 billion and therefore any problem in Ireland affects the U.K. banks. We know that Portugal and Spain are also in trouble. The German banks have got money tied up very much in Portugal and in Spain, as well as the British banks. So, what I am trying to say is the financial crisis that we witnessed over the last few years has not gone away and in fact the pressures are still there. Now, in terms of the future of banking, I have been looking at figures suggesting that financial services may take quite some time to recover. If we look at Jersey even closer to that, I asked a question in the States in the last sitting about the level of deposits that we upstream to the London money markets and how much we have upstreamed over the last 10 years, and what those figures showed was that over the last 18 months to 2 years some £15 billion less has been upstreamed into the money markets. So, what we are seeing is not only that the volume of deposits we are placing in those markets ..

Connétable J.M. Refault of St. Peter :

Excuse me, could the Speaker give way? I would just like to inquire through the Chair what this has got to do with the dates of the G.S.T?

Deputy M.R. Higgins:

It is highly relevant to what I am going to say about the date, so if you just bear with me, please. What I am saying here is that in terms of Jersey's economy, and this is what I am concerned about and the timing of the measures that we are doing. So, in terms of the money that we have upstreamed into London, something like £15 billion less, so the volumes of deposits we are placing in London are considerably less than have been in the past. We also know that interest rates are historically low. Therefore, the profitability of the banking sector in particular is likely to be under strain for the next few years. Now, we are being told by the Minister that the economy is going to recover. He sees green shoots next year, the year after and so on. I do not think any economist can be certain that we are going to see that growth. Just to give an example, one of my favourite quotes is by an economist called John Kenneth Galbraith who was a Harvard economics professor and he said: "Economic forecasting makes astrology look respectable." That is how much reliance you can place on the economic forecasts. So, what I am saying is just looking at our economy alone, and we look at finance and we know that banking is an important part of the financial sector we can see their returns are likely to be low. If we look at the F.P.P. (Fiscal Policy Panel) .. also, we are being told we are now diversifying, we are going to India and China. How many of you have noticed recently how the Chinese are starting to rein in their own economy? They are increasing some of their provisions with regard to the amount of capital the banks have got to have, liquidity, they are trying to tighten up on China's growth. So, even that market is being restrained. If we look at the United States it has been bumbling along the bottom. It is one of our main markets and President Obama, his Treasury Secretary is going for more quantity of easing, trying to stimulate the economy a bit more. The Japanese economy is depressed. The European economy across the board there are problems. So, what I am trying to say is the financial outlook, or the economic outlook, is not all that rosy. We cannot be certain that we are going to see the economic growth we are going to see. We cannot see that our banking industry is going to rebound quickly and if we

look at the other figures and the other information contained in the F.P.P. report they go through, and anyone who has read this report will see all the way through there are serious questions about the performance of the economy. They mention, for example, interest rates, that even by 2013 interest rates are not expected to have reached the level comparable to the long run averages. It says that: "Near zero interest rates may have a significant adverse effect on the profitability of some banks in the Island, particularly those that rely heavily on net interest income." If we go further, the rest of the economy, he mentions that if we look at employment we are saying that: "Firms reported they were still reducing employment and were pessimistic about general business situation" and this is just in retail. If you go through this report all the way through you will see not a great deal of joy going forward and I do not believe that we should be raising the taxes and cutting as much as we are at this present time, and I think this recession, as I have said before, financially induced recessions take longer and I think we are in danger of exacerbating the situation. I would rather delay any possible move on G.S.T., whether it be 6 months or a year, until we get a much clearer position of where the economy is going. I would also mention too that if we look at some of the other things, clouds on the horizon, we know that Zero/Ten is being discussed ..

[10:00]

The Deputy Bailiff :

Deputy , this is only about the date. Deputy M.R. Higgins:

I am coming to that. All these factors, these are all things that are making the outlook uncertain. I am saying whether we delay the imposition of G.S.T. for 6 months or a year, I think it is preferable to wait, to draw down from the Strategic Reserve to see which way it is going. So it is not a question of mañana; I think it is being sensible. What we are doing is not trying to sort of depress the economy any further than it is and create further unemployment and reduce economic growth within the Island. Now I would echo some of the things that others have said. The Deputy of St. Martin is totally correct. When I came into the States I was quite convinced .. in fact I am surprised that the Minister for Treasury and Resources is only going for 5 per cent. I was quite convinced he was going to go for 10. I can tell you, before we are finished we will have 10 per cent and I will forecast that when the E.U. (European Union) Code Group comes back and if they do condemn the Zero/Ten and we have to change things, the person who is going to be paying for this error is going to be the ordinary taxpayer; the ordinary man in the street. Why? Because indirect taxes such as sales taxes are quite easy to implement and they are an easy target. I can tell you I have visions before .. in fact, I am almost prepared to go and see Honest Nev and take out a bet as to what the level of G.S.T. will be in a further 3 years from now, in 6 years from now and 9 years from now. I can tell you, we are heading the same way as the U.K. and the rest of Europe. I just want to make a few other comments too. I do believe in integrity in politics and I happen to believe that the whole thing about G.S.T. .. promises were made by various politicians about not raising G.S.T. I very much remember Senator Routier, for example, and others such as Senator Maclean and quite a number of members of the Council of Ministers saying they did not agree with raising G.S.T.; they would come and support the thing on food. Ever since that election they have broken every single promise in that area. I think it is totally unacceptable. I think politicians, if you stand on a platform you should go for it. Now I accept if you get a major sort of calamity, yes, you can argue your case. But in this case, I do not even believe they believe what they said at the

time. So, I am one politician who .. Senator A.J.H. Maclean:

I think that should be withdrawn, frankly. The Deputy was making assertions which are inaccurate and I think it is unreasonable that he should do that ..

Deputy M.R. Higgins:

Well, would the Senator tell us, did you say you would not support .. The Deputy Bailiff :

Deputy , through the Chair, please. I think the allegations that you say to us that Ministers did not believe what they were saying at the time, that amounts to an allegation of bad faith on their part and I think that I should ask you..

Deputy M.R. Higgins:

Is that not a question of my belief? I believe that .. The Deputy Bailiff :

You are making an allegation of bad faith against them. That is something which ought not to be made. [Interruption]

Deputy M.R. Higgins:

I think I will withdraw it but I am sure the electorate will remember and, fortunately, they do not have to stand for election for another 4 years. Anyway, the bottom line is anyone who looks at the economics of the world situation and our economy will see that what we are doing by taking out £65 million in the period of time we are and raising taxes is going to have an effect on the economy and I think a detrimental effect, and I do not believe that we should be jumping into some of these things. Going back to Zero/Ten before I finish, if that Code Group comes out against us, ECOFIN come against us, we are going to be coming back and looking for alternative taxes to make up the shortfall. All I can say is it is going to be G.S.T. because we know, for example, the consultation on business tax, we know all businesses are against having any taxes on them, and we know that the Council of Ministers is against any sort of business taxes and therefore it is going to be the ordinary consumer again. I will support the Connétable of St. Helier 's amendment and if not I will be supporting Deputy Southern 's amendment.

7. Deputy R.C. Duhamel of St. Saviour :

Austerity measures. I think I am old enough to remember: "Dry bread today; jam tomorrow" and I think in some respects that is why we should be supporting the proposal by the Constable of St. Helier. I am not happy that the Treasury or the Minister for Treasury and Resources has done enough at this stage to offset the structural deficit that we have in our economy. Now to be fair to him and to his officers, there are a lot of things that he can do and many more things that he cannot do. But I think this is why we have these debates in the House: to assist him in his thinking and to encourage him to do the right thing. None of us have crystal balls, as has been referred to by Deputy Higgins, to determine what might happen next year, or indeed any further. Sometimes no further than the end of our nose. Some of us have longer noses. [Laughter] The longer the nose, the better. But seriously it worries me. A lot of these problems are not of our making but we are going to have to respond to them in some shape or form. Our economy is part of the world economy and if indeed questions are being raised as to the efficacy or the ability of the capitalist system to deliver based as it is on continued growth, then I think we are up against the wall at some stage. Those are the messages that are beginning to be expressed in some shape or form. Now that does not mean to say that we should all suddenly emigrate and go to the moon or go to some other country which has better conditions, and will continue to allow us to have lifestyles which are based on exploitation and growth, because those places are becoming few and far between. We have heard Deputy Higgins suggest that perhaps even though the world's biggest growing economy, China, is suddenly starting to realise that a lot of its growth potential is based on selling goods to Europe, America and other countries, the whole thing is connected. So we cannot step outside of it but we have to do whatever we can do. I was one of those who voted consistently against the imposition of G.S.T. and indeed when G.S.T. was agreed by this House, I continued that stance and voted on the basis that I would not support exemptions which would make the rate of G.S.T. any higher than the 3 per cent that was being proffered at the time. Here we are, not very many years after that decision, when promises were made by the Council of Ministers and others that they would endeavour through their economic policies and through the efforts of the Minister for Treasury and Resources to keep down the rate for as long as possible. Indeed, if we go back over the Hansard scripts there were some Ministers who said that perhaps if we were pretty savvy in how we dealt with our affairs then we could keep 3 per cent indefinitely. Here we are suggesting that we cannot do it. We have to find the monies to continue our profligate lifestyles and to continue to spend on things that do not generate wealth and do not necessarily provide the benefits that we all would want. As I say, I think the system is coming up against the buffers. I think we are due to face some even more difficult decisions, in particular if we are told by the E.U. Code of Conduct Group and Europe or the U.K. to get our house in order and to come forward with a different tax system to raise the monies that we want to spend on our necessary services. For me the bulk of the work has not been done as yet, although it has been promised. I hope the efforts accelerate in order to deliver the comprehensive spending reviews that have been hinted at, to fundamentally reassess what this Island wants to do, what this Island needs in terms of services and what this Island can afford in services. Because unless we do that and do that pretty quickly we are running out of monies. We are spending monies on things that we do not particularly need in order to prop up the system on the hope that the economy is going to turn the corner and suddenly start to fill up our coffers so that we can continue to go on as we have done in the past. In 6 months' time we are told by the Minister for Treasury and Resources maybe. Maybe sooner; maybe later. The system is almost broken. I think we have to be a little bit more clever on how we decide we are going to fix it. I think it is pretty clear for the thinking Members among the Chamber - and I hope I am one of them - and would hope others would support that this suggestion of a breathing space is an admirable one. I do not consider that just a 6-month delay will be sufficient. This taxation

debate is all about finding monies for one year and not necessarily trying to bind the hands of future Houses which may or may not include the Members who are contributing to this debate today. I think to take monies out of the rainy day fund, another £15 million, in order to offset the rise in G.S.T. which, if everybody looks at it, will throttle or choke off the very recovery that we are asking to happen. If the whole of the economy is based on the assumption that we are all wanting to go out and to spend more and more in order to generate this economic wealth, then people are only going to do it if they can afford to do it. By putting the rate up to 3 per cent, 4 per cent, 5 per cent, 6 per cent or whatever per cent, any increase over what we have, we are hearing the squeaks from various businesses now to say that the recovery is not there. So to put up the rate is foolish. Let us give ourselves I think the period of the year, there is money in the rainy day fund. I would not necessarily be wanting to spend those rainy day monies because I think we are spending them on things that do not have any lasting effect. I will be one of those Members who would support raiding the rainy day monies on the basis that we were going to put those monies into some kind of long-term capital project which would be wealth generating. But I think, because times are hard, an exception can be made. In terms of the volatility of the markets, we are already told by the Treasury officers that their figures in terms of the estimates as far as they are able to be made are plus or minus £35 million, so what is £15 million? It is not a lot. I think we can go along with the Constable of St. Helier in this one. Deputy Southern has admitted to this House that perhaps he has been reigning back his ambitions and perhaps that is why he only suggested that he had put things off until May next year. I think the Constable was quite right to try and aim a little bit higher. I think this is a sensible proposition and I certainly will be supporting it.

The Deputy Bailiff :

Just picking up the point made by the Connétable of St. Mary. It may be of some help to Members if I say from the Chair what I understand the effect is of these amendments. In effect, Deputy Southern 's amendment proposes that there should be no increase in G.S.T. until 31st May 2012. The effect of this amendment would be to reduce that period from 31st May 2012 to 31st December

2011. That is the only thing that is being debated today at the moment. If we convert this debate into a full-scale debate about G.S.T. and Zero/Ten and everything else that goes with the Budget, we will be here for a very long time indeed and what is more, we will be at risk of debating the same thing more than once. Can I ask Members to contain their comments at this stage to what we are presently debating?

Deputy P.V.F. Le Claire of St. Helier :

Sorry, I am struggling a little bit. Are you saying that the amendment by the Constable means that we will be delaying putting it up until the date he is talking about but at that time it shall be 5 per cent and are you saying [Interruption] .. That is not decided. Thank you.

The Deputy Bailiff :

That is not decided. The actual change to the rate of G.S.T. is brought about in P.158 Article 3 which provides for an increase in the rate.

[10:15]

It will be a matter for the Minister, depending on how this debate goes on the Budget Statement to decide how he wishes to proceed at that time.

8. Senator P.F.C. Ozouf (Minister for Treasury and Resources):

I did want to hold back in this debate in order to respond to some of the comments that have been made but I think that your helpful explanation of exactly what this debate is is really quite important. I want to be absolutely clear with Members as to my understanding of the consequences and of the process that will follow in the event that this debate is passed. This is something that I have asked all of the amenders to explain and to confirm and to agree what the consequential amendments to subsequent legislation, as you rightly point out, is. I have to say that having done that I am obviously arguing against some of the amendments, but I have to understand the consequences of subsequent amendments to legislation to be put forward. I have to say, I have heard 2 things which I think are confusing this debate. I am quite clear that this proposition, if it were to be passed in the terms that we are debating, that I will lodge an amendment to that income tax law which you referred to to confirm the rate of G.S.T. in law as to an increase on 1st January 2012. Now there have been some people that have been talking about this debate as if they do not want G.S.T. at all. The consequence of this debate is that I will lodge an amendment and ask the Assembly to confirm that the increase is on 1st January 2012. That is what this debate is about; that is what the consequence is about and that is the only .. and I see the Constable nodding. I am pleased he is going to confirm that because I did not understand what he said in his opening remarks. I was very grateful for the complimentary remarks he made about my Budget speech but I was absolutely confused about what he was talking about in terms of a mandate. Because there will be an election next year but we will have to decide on the rate of G.S.T. now. Just to be clear to Members, of course there will be another Budget next year but that will be by this Assembly. This Assembly votes on the Budget, this Assembly votes on the Business Plan and then the new House is adopted, and indeed that is the right thing to do. I think the Constable and I are on the same side on one issue: he said the importance of giving notice to retailers. We could not have a situation where we would be giving retailers a notice period in next year's Budget to increase G.S.T. on 1st January. We need to make that decision now; we need to have certainty. So I am grateful for all of the confirmation because some Members are using this debate I think for different reasons and saying and arguing and forwarding different arguments for different things. We will come on to whether or not we come on to the amendment that is going to be accepted or not. I think Deputy Southern 's position if this is amended is that he does not want G.S.T. at all, although there is an issue of public finances. I am confused, because the underlying amendment only makes provision again for 6-months' withdrawal from the Strategic Reserve and I have assumed also that that amendment is we would confirm the rate of G.S.T. as of 1st June in terms of the deferment. But again I am confused because there are some arguments that have been forwarded in terms of not having G.S.T. at all versus confirming the debate itself. I am clear Members are voting in favour of this in order to confirm the increase of G.S.T. on 1st January and that the legislation of that will follow. I think we need to set aside the issues of mandate and all the rest of it, if I may respectfully say. I am going to stick to the debate ..

The Deputy Bailiff :

Minister, can I just ask you to clarify that? It seems to me to be possible that Members might vote in favour of this amendment and then against Deputy Southern 's amendment.

Senator P.F.C. Ozouf :

That is of course entirely up to Members. They can do whatever they want. Of course they can, yes.

The Deputy Bailiff :

If that were to be so, there may be theoretically a group of Members who are against Deputy Southern 's amendment but think it would be made better by this amendment.

Senator P.F.C. Ozouf :

I suppose so, yes. I cannot really comment on that. Members will vote in the way that they want. This was always going to be a confusing debate as far as I am concerned.

The Deputy Bailiff :

I only say that because you may wish to think that what you decide to do in relation to the Finance Law will depend upon the vote on Deputy Southern 's amendment and not on the vote on this amendment.

Senator P.F.C. Ozouf :

Yes, ultimately that is the case. But there are 3 options. Effectively, if this amendment is successful and then Deputy Southern puts the proposition as amended, to which case there will be the confirmation of 1st January. If this amendment is unsuccessful, then we will have a debate to confirm the debate of G.S.T. on 1st June; obviously that subsequent legislation follows. Or Members may throw the whole thing out and then we will revert to the other debate.

The Deputy Bailiff :

If this amendment is successful and Deputy Southern 's amendment as amended is unsuccessful, you are left with your current position.

Senator P.F.C. Ozouf :

I am left with the current position. But obviously we would then get on to other amendments in relation to the 4 per cent and the food exemptions. I know this is confusing and I am attempting to do my very best. I am happy to give way to the Deputy of St. Mary if he will be brief.

Deputy D.J.A. Wimberley of St. Mary :

I am also asking for clarification. If Deputy Southern 's amendment, amended or not by the Constable of St. Helier 's amendment, goes through, do we then proceed to talk about 4 per cent, 5 per cent and 6 per cent? That is what I want to know and I am unclear still.

The Deputy Bailiff :

No, Deputy , all that is left then is Deputy Green's amendment and maybe others on exemptions but if Deputy Southern 's amendment, whether amended or not, goes through, then the rate remains at 3 per cent and there is no further discussion about 4 per cent or 5 per cent because the States will have taken a decision on 3 per cent.

The Deputy of St. Mary :

Until the date specified?

Senator P.F.C. Ozouf :

Sorry, let me be clear. The consequence of Deputy Southern 's amendment as amended by the Constable of St. Helier is that I will put forward legislation to confirm that the increase will occur on 1st June or on 1st January. So this debate is about a deferment. We are talking about the debate, and the Constable has nodded, and I would be grateful if he can confirm. He has been clear. He wants the date of G.S.T. to be on 1st January but he wants the rate at 5 per cent on 1st January 2012. I asked him, I have emails and that is what we are doing. I cannot really go on any further, so I think I will just go on with my remarks. I just want to refer very quickly, if I may, to the issues that Deputy Le Claire raised in this amendment in relation to the rainy day. He asked specifically if "this is as wet as it gets?" I would just respond by saying that Deputy Martin spoke about real recessions and difficulties. We have not been affected as some places but we have taken, in total aggregate, 20 per cent out of our savings. I know that Members sometimes want to link the Stabilisation Fund and the Strategic Reserve. We have taken by the end of next year 20 per cent out of our savings. I think that responds to the issue of the fact that it has been raining. It has not been raining incredibly heavily like some places but we must accept, in my view, that the world has changed. It was brought home to me last night when, with the Minister for Economic Development, I attended the 6-monthly meeting between the Jersey Financial Services Commission and J.F.L. (Jersey Finance Limited) of which we attend as observers. Deputy Pitman spoke in this debate about the finance industry "blubbing" or at least some people in the finance industry blubbing. I have reviews from the trust sector, the funds sector in banks and I have to say that it is tough. But I think that we have people out there who are working for us, who are working for the benefit of Jersey, trying to bring in revenue and trying to secure our taxes. That is going to help in terms of the overall rebound of the economy. Deputy Martin, I am just going to say very briefly, she spoke of Oxera and she said that they had been sacked. I will say 2 things on that. When I joined the States 12 years ago, I asked why I was on the Finance and Economics Committee because there was not any economics. At the time we had no economic adviser. We brought in Oxera, Oxera came in, advised us and we have now built in-house competence on economics matters that advise us. I think it is important that while there is a debate, we have heard various different Members speak about economists. Deputy Duhamel has views about economists, Deputy Higgins has got .. I have to take advice from professionals. I do not take anecdote; I take facts in

terms of what the overall economic analysis is. The economic analysis is that the world economy is growing and we expect and we predict - and this was backed up by what I heard last night - that as tough as it is we expect the economy to be growing. The Constable of St. Helier in his support of deferring the G.S.T. to 1st January, he spoke about the issue of retailers and he spoke about tumbleweed. The retail sales figures have been published this morning. They were in Members' hands yesterday but they have been out of embargo this morning and they are helpful to Members because they do say that retail sales are up for the first time in 2 years. The crucial point is that I am going to be arguing against the deferment of G.S.T. to 1st January. We are proposing to defer the increase of G.S.T. until 1st June and all the evidence that we have is that the economy will be continuing to improve as we have seen the early parts of it. It is going to be difficult but the economy is expected to improve. The Constable spoke about tumbleweed. Yes, there may well be an ebb and flow of retailers but to solely represent the picture of retailers to be in one area of time, I do not think is informing it. He is the Constable, he is the mayor of the Island capital and he has been at openings of Liberty Wharf and others. He knows, and his Town Centre manager knows, that there has been a remarkable resilience in terms of our retail landscape in St. Helier versus towns and cities across the U.K. He has seen empty shops being replaced. I am not going to name any brands but there are double-barrel brands that have come into Jersey over the last few months and are doing well. Of course there is going to be an ebb and flow. Yesterday I saw in a less popular area of town that there was a major food retailer that was coming in terms of a premium food product that was coming in. I am aware of 3 major retailers that are arguing in terms of coming and taking spaces at Liberty Wharf. So I know it is tough but just to simply say that there is tumbleweed and to be, if I may say, a little scaremongering in terms of that because he and his Town Centre manager have been doing a very good job in terms of keeping retailers vibrant through what is a very difficult time. My proposal, if it is accepted in order to reduce the import value, is going to help some of those bulky goods retailers to be on a level playing field with U.K. retailers. I am going to say just a few more things. The Constable in terms of his deferment debate said that this was going to be in tune with the targeted, timely and temporary. I am afraid that it is not targeted in terms of a deferment. It affects an issue in terms of benefiting a specific group of people which many members are concerned about. They talk about targeted. This is a not-targeted measure; it spreads across the board. That is important. We have been spoken to and we have been advised about economic fiscal stimulus in terms of being targeted. This is not targeted. It is across everybody. The wealthy pay in terms of their spending. That does not work. It is not timely. I do not make forecasts, as I have said. I am advised that running deficits is appropriate for a period of time and we are taking, as I have said, £160 million virtually out of our economy. In terms of the downside of income tax forecasts there are variations. Everything, as I have said in my opening remarks, points towards, in terms of income tax forecasts, going forward to the downside. I think it is very worrying for Members to think that suddenly this rabbit is going to come out of the hat. We have a prudent forecast and I am concerned in terms of the prudence and needing to balance books and needing to think very carefully about not taking risks. Temporary. Is it temporary?  Well I think that Members are voting for this proposition in various different ways. Some Members are saying that it should be not at all. Some people are putting if off. I do not think it is temporary. I do not think I have heard Deputy Higgins say anything positive about Jersey for a long time and he spoke about G.S.T. [Interruption] .. I am not giving way. He spoke about G.S.T. going to 10 per

cent. I hope not on my watch .. Deputy M.R. Higgins:

I am sorry, I was saying that I believe that you would take it to 10 and I think you will if you stay as Minister for Treasury and Resources.

The Deputy Bailiff :

The Standing Orders do require interruptions not to take place unless it is a point of order and I shall be grateful if Members would continue to honour that.

Senator P.F.C. Ozouf :

G.S.T. will only  increase in my view if we are unable to control spending, and I will leave Members to make their own minds up about that. I am not going to go into the debates about the Code of Conduct issue but I have said clearly that in terms of the Code of Conduct position, I have made my position absolutely clear. In conclusion, I realise that this Budget is difficult.

[10:30]

Governments are around the world needing to restructure their finances and we have a structural deficit which has arisen because of the downturn in our revenue. This needs to be tackled. The F.P.P., which have been appointed by this Assembly, eminent economists, have said that we need a credible medium-term plan. A credible medium-term plan requires dealing with the deficit and not putting forward policies of mañana. Not putting it off. We need to be sensible, we need to be responsible and it is not recommended to impair our revenues by a further £15 million over that that we are already. We are supporting the Island through the economy. We are putting millions of pounds in terms of the continued support and running a large deficit next year even with these measures into taken account. I urge Members to be responsible in terms of their decision-making and do the right thing in terms of a credible medium-term plan. I urge Members to reject this amendment and the subsequent amendment thereafter. Thank you.

Deputy M.R. Higgins:

Can I just get a point of clarification? There are 2. I think one is the Minister might want to correct something he said. He mentioned that when he was the Finance and Economics Committee they had no economic advice. What about Colin Powell who was a tremendous economist advising the States throughout the entire period? That is number one. The second one, the Minister has said that the F.P.P. is saying we should not be going for additional expenditure and so on. I was reading the interim report of the F.P.P. last night and they recommended that we did not vote the money that we put for contingency for court and case costs and everything else. So the Council of Ministers are going to get through ..

Senator P.F.C. Ozouf :

I do not believe it is appropriate to mention individuals but let me be absolutely clear, the individual concerned had retired his term of Chief Adviser and there was no dedicated economic advice. That is the reason why we brought in Oxera and that is why since then we have built income. It is important that we make decisions with our heads and not with our hearts sometimes in terms of economic advice. The Deputy never says anything nice about our economic advice in terms of economists. He reads obviously different publications than I do but I know that I have good advice. I cannot remember what the other point was. I think it was in relation to the F.P.P. I am clear about what the F.P.P. said. I received their report, just as other Members did, at the same time as other Members, and I met the F.P.P. after their presentation to States Members. I confirmed my understanding of what they were saying. They have not always been complimentary about our medium-term plan. They have been very uncomplimentary about spending and in terms of stabilisation but their advice this time cannot be interpreted. It is clear. They want a medium- term plan and balancing our books and they say: "Do not delay." They also told Deputy Southern in response to his question a very interesting thing about the use of the Stabilisation Fund to those Members that were there. I hope they remember that advice.

Senator F. du H. Le Gresley:

Could I have a point of clarification as well? I think I heard the Minister say that he has deferred the increase in the rate of G.S.T. to 1st June. I am sure he used the word "defer". I would like to point out that it would have been impossible to increase the rate until 1st June because the G.S.T. law said it could only be increased on the third anniversary of the introduction of the law. [Approbation]

The Deputy Bailiff :

Minister, do you wish to respond to that? Senator P.F.C. Ozouf :

The matters are obviously that this Assembly can vary it and governments around the world are making difficult decisions in relation to that. I am talking about deferring because we are running a deficit and in terms of deferring, correcting that deficit by allowing a deficit notwithstanding this increase in G.S.T. I think my position is clear. If we would have been responding to not balancing our Budget straight away we would have been making difficult decisions in terms of taxes straight away.

Deputy J.A. Hilton of St. Helier :

A point of clarification, please.

The Deputy Bailiff :

I have you down to speak, Deputy . This is a point of clarification? Deputy J.A. Hilton:

Yes, it is. I understand from what the Minister has said previously, or looking at the running order, that if the amendment of Deputy Southern is successful, my understanding is we do not go on to debate the 4 per cent proposed by Senator Le Gresley and we do not go on to debate the food exemption of Deputy Green. What I am just trying to be clear about in my own mind ..

The Deputy Bailiff :

Can I stop you on your understanding straight away? I think you are right that we will not be discussing Senator Le Gresley's amendment of 4 per cent, because that in terms is dealing with a timetable period which has already  been covered by Deputy Southern 's amendment if that is adopted, but we would still be debating Deputy Green's amendment.

Deputy A.K.F. Green of St. Helier :

What we would not debate is the Minister for Treasury and Resource's amendment to my amendment.

The Deputy Bailiff :

But we would not be debating the Minister for Treasury and Resource's amendment, yes. Deputy M. Tadier of St. Brelade :

Can I seek some procedural direction as well as ..

The Deputy Bailiff :

I am sorry, Deputy , in just a moment. Does that complete what you wanted to ask? Deputy J.A. Hilton:

So, in effect, what we are saying is that we would debate Deputy Green's amendment and if he were successful, G.S.T. would stay at 5 per cent with food exemptions?

The Deputy Bailiff :

At 3 per cent if Deputy Southern 's amendment is successful. Deputy J.A. Hilton:

That is exactly what I was trying to understand. I understand now. So it would be food exemptions with G.S.T. remaining at 3 per cent. Thank you.

Senator P.F.C. Ozouf :

This is one debate about the rate and this is the first one. If we confirm it, then we do not have other debates about the percentage rate, and I will then bring forward the proposal to do the 5 per cent at the deferred date.

The Deputy Bailiff :

If I may say so, Minister for Treasury and Resources, this is a debate about the date and not about the rate.

Deputy M. Tadier :

It was just direction to do with the point raised by Senator Le Gresley. If in fact the G.S.T. Law does need to be amended, does it need to come back to the Assembly in order for that to happen? Because that is a consideration I think when people will be voting.

Senator P.F.C. Ozouf :

If I may, I will help with that. Yes, there are a number of other consequential laws that we effectively have the overall Budget debate and then we bring into legislative force all the measures that we have done. Normally those are fairly automatic discussions because effectively we will have had the debate. I will lodge a proposition in order to confirm the deferred date if this amendment goes forward to bring the G.S.T. in on 1st January.

The Deputy Bailiff :

We can, Deputy Tadier , if necessary get advice from the Attorney General on the matter. My recollection of it, which is supported by the Greffier, is that the law contains a provision which prevents the States changing by regulation the rate, but there is nothing preventing a change by primary legislation. Senator Perchard.

Senator J.L. Perchard:

Can I give notice of my intention to propose closure on this debate on the amendment to the amendment? It is quite extraordinary that we are debating this amendment to the amendment in such detail when the amendment needs to be debated. I give notice if that is in order.

The Deputy Bailiff :

Thank you.

9. Connétable D.J. Murphy of Grouville :

I am very pleased to hear that so many Members now understand it. [Laughter] I shall have to talk to them later. I am relieved that quite a lot of explanation did come out then. It did clear the air a little bit for me. However, I would just like to slim it down to the fact that we are asking to defer the attack on a problem. We have a problem; we have identified the problem; we must now attack that problem. Prevarication will not help. We must get on and do what we have to do. I picked up on Deputy Higgins' pessimistic attitude towards the eventual outcome of the Code of Conduct problem which is coming up. Now surely if we have been digging away at the rainy day fund to see it subsidised ourselves in the meantime, when we do get to this big problem we are in a much weaker position because we have used up part of our rainy day fund. This is our pension. This is our life blood. This is money, not for repairing and decorating; this is money for putting a new roof on when it all goes wrong, if it all goes wrong. Let us hope it does not. I would just remind Members that there is a case in point quite recently, the island of Bermuda, which really relies on the same industries that we do: that is finance and tourism. No agriculture but finance and tourism. They had a rainy day fund and they took the same attitude as Deputy Higgins and the other Deputies who are backing this proposition. They have used up their rainy day fund and now they are a billion dollars in debt. Now I do not want to see Jersey end up in that position. So I would ask Members to vote against these propositions, to attack the problem, be realistic and let us be pragmatic and get on with it. Thank you.

10. Deputy G.P. Southern of St. Helier :

I thought the list was a bit longer than that but never mind. This is about timing and I am going to address the issue by using 2 words. The first one is "phased". A phased approach to what the Constable of Grouville calls a problem. The second word is "responsibility". The Minister for Treasury and Resources has talked about a credible medium-term economic policy. I say, is it a responsible attitude to say: "We think it is going to be better next year therefore we can act" or: "We know it is going to be better next year. We know it is already better"? Therefore, we can act safely and increase taxes, if that is what we wish to do, safe in the knowledge that we are into recovery and that we do not endanger our economy further by increasing taxes. That is the whole issue. Whether we defer until January 2012 or until June 2012 is the issue that lies between me and my Constable. I must admit when he first brought his amendment I reacted as I sometimes do instantly and said: "Why do you not pull that? Gosh, what a waste of time that is going to be." However, during the course of the debate yesterday and today I have come round to his perspective and it could well be that he might even get my vote at the end of this debate because I think the case has been made. The case is one of phasing and timing. Since Deputy Martin brought up the existence of Oxera and their wonderful advice, many of whose papers I still have in my cabinet at

home in my office, I will refer to February 2004 in terms of timing of tax increases to the advice given by Oxera of the day and how prescient it was. It says here: "One issue that arises is the ability to phase in tax increases in order to smooth the impact on the population. This could involve some drawdown on the existing Strategic Reserve which currently stands around £370 million. It has now grown to £550 million. Back in 2004 that was a consideration, an option, that we might have taken. It still is. In addition, phasing would allow for economic growth to mitigate the effect of tax increases on living standards. I will repeat that. In addition, phasing would allow for economic growth to mitigate the effect of tax increases on living standards. In effect, this implies a solution that taxes away any increase in real wages, relying on there being sufficient economic growth to supply the necessary increases in real wages. Even if this is achieved, it will be impossible to ensure that all residents do not experience a real decrease in their standard of living. Nonetheless, it may be possible that on average the standard of living in Jersey at least remains constant. Listen to those words and consider for a minute, do you wish to impose a tax increase of the order of £300 a year on a single pensioner as soon as you can? I do not believe Members of the House want to do that. Do you want to impose a tax increase of around £800 to £900 on the average family in Jersey starting as soon as you can? I do not believe that is what people want. Are you confident that the finger in the air, the feeling that economic recovery is on its way; the world is on its way up and us with it? Does that feel right? I do not believe it does yet. It certainly does not for me. Apparently it is sufficient for the Minister for Treasury and Resources and he says it is safe to proceed. No. The maxim that we should go by is you do not cut services and you do not raise taxes thereby threatening your economic wellbeing until you know you are in the recovery phase. Not, you suspect, the recovery is just around the corner so you know you are in recovery.

[10:45]

That is when it is safe to do so. Anything else puts the economic recovery at risk. So the question with this amendment as indeed with my original amendment is, for example, will we know by the time we get to January 2012 or June 2012 if we have been able to make the £65 million of cuts without affecting seriously frontline services? Well we are expecting to hear about that, certainly by the end of March. We will have a paper before us providing solutions in May and we will be able to debate that in September. So, yes, we will know. Will we know what economic growth is doing? Probably we will. Sometime halfway through next year we will get the definite signs. Hooray, we are into recovery. It might be rough and it might be slow but, yes, it is safe to act. Will we know what we are doing about Zero/Ten? Well we are expecting to hear from February whether Zero/Ten gets the mark of approval from the E.U. We are told by the Minister for Treasury and Resources that he will have a solution to Zero/Ten and the fact that foreign-owned non-finance companies do not pay any tax currently in the Island. We will have given him time to find a solution to that whether it is under Zero/Ten or outside of Zero/Ten and, by gosh, he had better be there with some answers because certainly people out there are saying: "When are we going to tax these businesses? When are you going to sort this out?" But we will know by then, I hope, because we have given a breathing space, not just to us, not just to the people of this Island but to the Minister for Treasury and Resources himself to come up with some hard and fast answers. Will we know what solution that we have for business tax overall? The Fiscal Strategy Review. Apparently, yes, first half of the year he is going to report back to us with potential solutions whether that is regional tax or whatever. Will we have some sort of clarity and certainty in where we are going? Yes. In the first half of next year we should be able to say what is happening and where we are going. Will we know what is happening to employment? Will we see a trend? Will it be on the mend? It may well be but then is the time to decide what action to take to respond to that. Those are the arguments that are crucial to this particular debate. I believe that we should be phasing our approach to tax increases. I believe the responsible action of this House is indeed to wait and not be beguiled by this mantra that says we have to take action now. We have to be strong. We have to be powerful. That is not the case. We have to be subtle, we have to respond to the needs of our people and the economy and we have to phase our approach to tax increases and that is what this proposition says, and I urge all Members to support it.