States Meeting Transcript - 06/04/2011

STATES OF JERSEY OFFICIAL REPORT WEDNESDAY, 6th APRIL 2011

PUBLIC BUSINESS – resumption ...............................................................4

1. Income Tax: introduction of higher rate (P.23/2011) - resumption .....................4

1.1 Deputy T.M. Pitman of St. Helier:.......................................................4

1. Deputy A.T. Dupré of St. Clement:......................................................6
2. Senator F. du H. Le Gresley:.............................................................6
3. Senator A.J.H. Maclean:.................................................................7
4. Senator B.I. Le Marquand:...............................................................9
5. Deputy F.J. Hill of St. Martin : ...........................................................9
6. Deputy M.R. Higgins of St. Helier:.....................................................10
7. Deputy A.E. Jeune of St. Brelade:......................................................11
8. Connétable J.M. Refault of St. Peter:...................................................12
9. Deputy E.J. Noel of St. Lawrence:......................................................12
10. Senator P.F. Routier:................................................................15
11. Deputy G.P. Southern : ..............................................................16

2. Draft Licensing (No. 17) (Jersey) Regulations 201- (P.28/2011)........................21

1. Senator A.J.H. Maclean (The Minister for Economic Development):...................21

1. Connétable A.S. Crowcroft of St. Helier:...............................................22
2. Senator B.E. Shenton:..................................................................23
3. Senator B.I. Le Marquand:..............................................................23
4. Connétable M.K. Jackson of St. Brelade:...............................................26
5. The Deputy of St. Martin:..............................................................27
6. Deputy P.J. Rondel of St. John : ........................................................28
7. Deputy J.A. Martin:....................................................................29
8. Connétable P.F. Hanning of St. Saviour:................................................30
9. Deputy A.K.F. Green of St. Helier:.....................................................30
10. Deputy J.A. Hilton of St. Helier : ....................................................31
11. Deputy M. Tadier of St. Brelade:....................................................31
12. Deputy R.G. Le Hérissier of St. Saviour:............................................33
13. Senator P.F. Routier:................................................................34
14. Connétable L. Norman of St. Clement:..............................................34
15. Deputy J.B. Fox of St. Helier : .......................................................34
16. Deputy K.C. Lewis of St. Saviour:..................................................35
17. Deputy P.V.F. Le Claire of St. Helier:...............................................36
18. Deputy T.M.Pitman:................................................................36
19. Senator P.F.C. Ozouf : ...............................................................37
20. Deputy S. Power of St. Brelade:.....................................................38
21. Deputy A.E. Jeune : ..................................................................38
22. Deputy G.P. Southern : ..............................................................39
23. Senator J.L. Perchard: ...............................................................39

LUNCHEON ADJOURNMENT PROPOSED..................................................40

24. Deputy I.J. Gorst :....................................................................40
25. Senator F.E. Cohen: .................................................................40

LUNCHEON ADJOURNMENT................................................................41

26. Senator A.J.H. Maclean:.............................................................41

2. Senator A.J.H. Maclean:................................................................43

1. The Connétable of St. Helier:...........................................................44
2. The Deputy of St. John:................................................................44
3. Senator A.J.H. Maclean:................................................................44

3. Draft Income Support (Amendment No. 6) (Jersey) Regulations 201- (P.29/2011)....45

1. Deputy I.J. Gorst (The Minister for Social Security):...................................45

1. The Deputy of St. Mary:................................................................46
2. Senator B.E. Shenton:..................................................................46
3. Deputy I.J. Gorst : ......................................................................46

2. Deputy I.J. Gorst : ......................................................................47

1. Senator P.F. Routier: ...................................................................47
2. Deputy M. Tadier :......................................................................47
3. Deputy G.P. Southern :..................................................................47
4. Deputy I.J. Gorst : ......................................................................47

4. Committee of Inquiry: States-owned or controlled utilities (P.31/2011)...............50

4.1 Senator A. Breckon: ....................................................................50

1. The Deputy of St. Martin:..............................................................56
2. Connétable D.J. Murphy of Grouville :..................................................57
3. Senator P.F.C. Ozouf :..................................................................57
4. Deputy R.G. Le Hérissier: ..............................................................62

5. The Deputy of St. John:................................................................63
6. Deputy T.A. Vallois of St. Saviour:....................................................64
7. Deputy G.P. Southern :..................................................................64
8. The Connétable of St. Brelade:.........................................................65
9. Senator F.E. Cohen:....................................................................65
10. Senator A.J.H. Maclean:.............................................................65
11. Deputy A.E. Jeune : ..................................................................66
12. Deputy M. Tadier :...................................................................66
13. Senator T.A. Le Sueur:..............................................................67
14. Senator S.C. Ferguson:..............................................................67
15. The Deputy of St. Mary:.............................................................68
16. Deputy P.V.F. Le Claire:............................................................68
17. Deputy A.K.F. Green:...............................................................69
18. Senator J.L. Perchard: ...............................................................69
19. Deputy E.J. Noel:....................................................................69
20. Senator A. Breckon:.................................................................70

5. States Members' Training (P.34/2011)..................................................72

5.1 Deputy M. Tadier :......................................................................72 The Deputy of St. Martin:....................................................................74 Senator T.A. Le Sueur:.......................................................................74

6. Public Elections: extension of pre-poll voting arrangements (P.42/2011)..............74

6.1 Deputy J.M. Maçon of St. Saviour:.....................................................75

1. Connétable J. Gallichan of St. Mary : ...................................................75
2. Deputy M. Tadier :......................................................................76
3. Deputy J.A. Hilton:.....................................................................76
4. The Connétable of St. Saviour:.........................................................76
5. Deputy J.M. Maçon:....................................................................77

7. Draft Separate Limited Partnerships (Jersey) Law 2011 (Appointed Day) Act 201- (P.45/2011)...............................................................................78

7.1 Senator A.J.H. Maclean (The Minister for Economic Development):...................78

1. The Deputy of St. Martin:..............................................................78
2. Senator A.J.H. Maclean:................................................................79

ROYAL WEDDING - MESSAGE OF CONGRATULATIONS...............................79

8 The Bailiff :.............................................................................79

ARRANGEMENT OF PUBLIC BUSINESS FOR FUTURE MEETINGS ....................79

9. The Connétable of St. Mary (Chairman, Privileges and Procedures Committee):.......79

1. Deputy P.V.F. Le Claire: ...............................................................79

1. Senator F.E. Cohen:....................................................................80
2. Senator J.L. Perchard:..................................................................80
3. Senator P.F.C. Ozouf :..................................................................81
4. Senator S.C. Ferguson:.................................................................81
5. Senator P.F. Routier: ...................................................................81
6. Senator T.A. Le Sueur:.................................................................81
7. The Deputy of St. John:................................................................81
8. Deputy G.P. Southern :..................................................................82
9. Deputy I.J. Gorst : ......................................................................82
10. The Deputy of St. Mary:.............................................................82
11. Deputy A.E. Jeune : ..................................................................82
12. The Connétable of St. Mary : ........................................................82
13. Deputy P.V.F. Le Claire:............................................................82

2. Deputy I.J. Gorst : ......................................................................84
3. The Connétable of St. Mary:............................................................84
4. Senator A. Breckon: ....................................................................84
5. Senator F.E. Cohen:....................................................................84
6. Senator J.L. Perchard:..................................................................84
7. The Connétable of St. Mary:............................................................85

ADJOURNMENT................................................................................85

[9:30]

The Roll was called and the Vice-Dean led the Assembly in Prayer. PUBLIC BUSINESS – resumption

1. Income Tax: introduction of higher rate (P.23/2011) - resumption

The Bailiff :

So we return then to the debate on Projet 23, lodged by Deputy Southern , and the Chair has seen next Deputy Trevor Pitman.

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

I am heartened today to learn that Senator Cohen apparently rushed in early so he would not miss my speech, he assured me, so I hope he will stay for the duration. It is interesting to start with Senator Cohen because he may have been joking when he said that this reminded him of the 1960s debates on socialism and capitalism. Well, I am far too young to remember but I was always told if you can remember the 1960s you were not there, so I am not sure how accurate his recollection will be of the 1960s. [Interruption] [Laughter] But this, I am afraid, is the negative thing about whenever something like this is brought up - and Deputy Southern is absolutely right to bring it up - it has suddenly transferred into this apparently awful debate, awful socialism against capitalism that is always right. I think it is a shame if that is the mindset we enter into these things on. I support the principle of progressive taxation totally. Deputy Southern knows I am not sure if I can support all of this but the debate has to be had. I do not know how optimistic the Deputy is on his success but I would remind him that we have to remember this debate is always again and again held within this atmosphere with too many Members - we see it all the time - jumping on the bandwagon of blaming socialism, lefties, and progressiveness on all the world's ills. They go very quiet, of course, when it is pointed out that the world's current problems are the result of right-wing policies. It is the foolishness and recklessness of unregulated free markets and people who are allowed to run willy-nilly with other people's money, money that does not exist quite often, and then turn round and blame it on these awful, bloated public sectors. These over-paid public sectors. The transference of guilt, it is generally termed. I think if we were to move on, and we surely must, we have to get away from that attitude. Now I am bringing my own proposals on this, so whether Deputy Southern is right, whether I am right, I do not know. But he has a fair point when he says that for someone on £80,000 he is talking about finding an extra £500 a year. Now that is something for Members to dwell on. I would have to concede it does put it into perspective when he says that. So, I hope that we can leave out the socialist/capitalist argument because I think it is a completely redundant one. It is about equality and fairness. Jersey, I think, cannot go on as if we live in some little vacuum. This is a debate that has to be had. The system that has gone on for the last decades cannot continue. We will probably hear that if we follow what Deputy Southern is suggesting, that Armageddon will be with us once again, everything will collapse. Like Deputy Tadier , I have to say that I have my reservations about that. It was interesting to hear, yet again, the Minister for Treasury and Resources trundling out the line that giving the wealthiest - and I would

remind the Minister, with due respect, that one man's wealth generator is another one's tax evader - a bigger slice of the pie, will automatically in turn make all the below better off. Well the facts show that that is complete nonsense. Interesting, I say, because it was only last month, I think, when I was highlighting the award-winning economist Ha-Joon Chang and his observations about in the last 30 years when we really moved to these pro-rich protectionist - if I can use that term - policies all under this myth that giving the wealthy a bigger slice of the pie would benefit everyone, but it has had no such impact generally. As he points out, the global economy, according to World Bank data, used to grow at over 3 per cent per capita during the 1960s and 1970s, and since 1980 to 2009 has been growing at around 1.4 per cent per year. Now I am not an economist; I make no claims to be. But he is an award-winning economist and, as he points out, the big problem is everyone is put off because it is very hard to argue for Jersey's situation in some cases: off-shore finance. It is very hard to argue the case that someone who earns a lot more should pay a lot less in real terms. So, of course, what happens, you attack the messenger. People are rubbished. People do not listen to the message. People are either incompetent, they are jealous, they are incapable, they have got darker, ulterior motives. As he points out, that is completely the wrong way to go about things. So I think, whatever one's views on this, you have to listen to what Deputy Southern is trying to say because the principle is absolutely right. Whether his package is completely right, Members have to decide. But the reality is this is not going to go away and I think that is what troubles some Members who just want to keep their heads in the past. As I say, Jersey does not exist in a vacuum. You look out there and I think Jersey is almost bleeding in many terms. People are having a very hard time: "Tighten your belts. Tighten your belts" and then they see that for the wealthiest: "You do not have to tighten your belts." No wonder they have lost faith in government. I get a lot of people who contact me about the 1(1)(k) issue and I have to say I fully understand it. I am a middle-earner and I understand when they say: "I look at these figures, I am paying 3, 4 times more tax than a good number of extremely wealthy people." It does not matter which way you wrap that up, it is a fact. We have spun this myth for time after time that everyone pays £100,000, and they do not. It took me a long time to get those figures but it demonstrates the fact quite clearly. Can we not expect people to be angry when there are people - multi-millionaires - paying £3,000 per year and some of us paying 4, 5 times. Completely wrong. In the 21st century I would suggest that there should be no "no-go areas"; no sacred cows. Will everyone on a salary of over £100,000 leave if progressive taxation is brought in? I would say absolutely not. I was told yesterday that just (j) categories in the private sector, the average wage, £110,000 and that there are over 1,700 of those people in the Island. Will they all leave if they have to pay more? I am not convinced. It is my own feeling that a rate of 25 per cent probably put in place and monitored for 3 years for those over £100,000 would have been the way to go but it is up to Deputy Southern to make his case. He has got a slightly different connotation in mind. The 1(1)(k) situation I am not going to say much more on because I am going to bring about my own proposals. I am very concerned that in this House we have heard, from the Minister for Treasury and Resources himself, domestic chartered accountants rubbished, and yet I am afraid the person who is being entrusted with this review of 1(1)(k)s is, I believe, a domestic chartered accountant.  [Interruption] Absolutely fine; no problem with that but I am sure other domestic accountants are equally proud of their international reputations. Really, when we get to the stage we did - I cannot remember if you were in the Chair yesterday morning - but when you are told that there is a report that proves all this is absolutely gospel, if I can use that term, £50 million to £70 million benefit to other taxpayers from 1(1)(k)s but then: "You cannot see the report." Well with due respect, I would have said of the Assistant Minister, would you buy a second-hand car off of him? "You cannot look under the bonnet but, yes, trust me, it has an engine." This is the stuff that comes to us in the House all the time. It is: "Trust us." Now whether the Assistant Minister for Treasury and Resources and his Minister think that the only people who count in this Assembly are the

Executive.. we could debate that. We probably will; we like to talk about ourselves. [9:45]

But I am afraid information that allows 53 people who are elected by the public to make decisions should be available to every one of those people. I think it is quite disgraceful that we get this situation time and time again. As I say, I am probably going to leave it there but what Members must focus on, this is not about the politics of envy. You will see the strange, eccentric letters from the same few people time and time again probably in the paper, that Deputy Southern in bringing this .. it is the green-eyed monster, it is the evil socialist, but Jersey signed-up to a fairer, more equal society. Well what does that mean? Is it just words? Is it just words? Because probably at the moment it is. The world has changed we are told all the time yet when it comes to something that has been in place for what? Since 1940, was it? Well the world must not change; it must not be looked at again. Sacred cows. In this day and age with the problems we are facing, the problems, as I say, made by right-wing politics, we need to look at everything. I say I would have a lot more faith if I knew that reviews were being carried out with opinions from all sides of the House by companies who we could know who they are, because we cannot even know the legal firm who has come up with this review. Ludicrous. Where is the natural extension? Let us press the button. Nuclear war. Yes, honestly, we were threatened; weapons of mass destruction. I am just glad this Island does not have a Minister for Defence because I just wonder where we would be. We would have invaded Guernsey by now for sure and obliterated Sark. [Interruption] But let us have a good, open debate. Because whether Deputy Southern gets this through or not it is going to come back. I am one of those who are going to bring it back and the principle that Deputy Southern is reminding us of is absolutely right: equality, fairness. Fairness cannot mean those at the very top paying less in real terms. This excuse that we are all very mobile and off we are going to go, we cannot buy into it any more. I am afraid my message would be: "Well mobilise away" if that is your only commitment to Jersey. I have brought this issue up a lot in questions in the House and I have had a few contacts from 1(1)(k)s: some very interesting; one particular one just very rude that we are all, as I say, jealous, green-eyed communists; the only people who work really hard are millionaires. That type of mentality which you really cannot argue with, I am afraid. We are talking about equality and Deputy Southern is reminding us of that. If we are not prepared to go down there and debate it, then I am afraid it has reached a very sad day for this House. So the principle I totally support. I may only be able to support parts of this but Deputy Southern is quite right to bring it. Let us not hear any misrepresentation of why he is bringing it. He is right; he is committed to equality. I am committed to equality and fairness and I would hope every other 52 Members in this House are, and I will leave it at that. Thank you.

1. Deputy A.T. Dupré of St. Clement :

I am afraid that this is another of Deputy Southern 's dead ducks. He is being ostrich-like as he cannot see that we would be killing off the golden goose. He and his minor flock are trying to bring back school milk but he is robbing us all of golden eggs. He is not going to "tern" the majority of the House and it is becoming something of a lark with his booby propositions which make us quail while he parrots even more paltry chiffchaff. I hope there will be a swift end to this cuckoo proposition. Thank you.

2. Senator F. du H. Le Gresley:

I wonder how many people are sitting in their luxury homes designed by world-renowned architects [Laughter] listening to this debate on their Bose sound systems, shaking with fear at the possibility of having to pay more tax if Deputy Southern 's proposition is approved. I think we all know that the status quo will still be in place after the vote, but morally is it right that the next time the Minister for Treasury and Resources needs another £30 million that he will once again load this burden on low and middle-income earners by adding another 1 per cent to G.S.T. (Goods and Services Tax)? I must move in different circles to many of my colleagues on the Senatorial benches as the majority of people I speak to support the principle of higher tax rates for people with incomes over £100,000 per annum. I say to Members: "Who are we here to represent?" Do Members honestly believe that there will be a mass exodus of high earners if we ask them to pay an additional 10 per cent tax on incomes over £100,000? For somebody earning £150,000 this equates to an extra £5,000 a year of income tax. Hardly enough to warrant booking seats on Condor and heading for our sister Isle as our Minister for Treasury and Resources would have us believe. I have lived in Jersey all my life and I have seen the gap between the rich and poor grow significantly since the finance industry came to town. I think that high earners are complacent in the knowledge that an Island that has prospered by encouraging tax avoidance is most unlikely to bite the hand that feeds it, but that does not sit comfortably with me. I would like to congratulate the Deputy for bringing this proposition. I agree with him that to date there has been a marked reluctance on the part of successive Treasury Presidents or Ministers for Treasury and Resources to adopt policies which spread the burden of taxation more fairly. During my election campaign last year, I made it quite clear to the electorate that I was in favour of a higher rate of tax for earned or

unearned incomes over £100,000. I was cautioned by some of my supporters that advocating such a policy would lose me votes but I still managed to top the poll. Now does that mean that the 5,798 voters who put a cross against my name support progressive taxation? Of course it does not, but I think it does show that the electorate are gradually coming around to accepting that the 20 per cent rate of income tax can no longer be sacrosanct. The Minister for Treasury and Resources is aware that I submitted to him for comment a proposition for higher tax rates prior to the release of his budget proposals. I was persuaded, as my good friend and colleague, Deputy Le Hérissier, would say, by Senator Ozouf 's silken tongue to defer lodgement, as his budget included progressive tax measures in relation to increased social security contributions from higher earners. We of course now know that the tax-raising measures in his budget were eventually approved and that the extra 2 per cent in social security contributions for earnings over the ceiling will commence from January 2012. However, the indications are that unless the economy grows significantly in 2012, there will be the need for further tax-raising measures. Having recently attended a briefing by the Minister for Health and Social Services, I am aware that we need to make substantial new investment in the services that her department provides within the next 5 years. Our Minister for Social Security wants more money to pay for long-term care and once again the burden will fall on low to middle- income earners. I think the time has come to say to the people who have the greatest income and wealth: "You have to contribute more."

3. Senator A.J.H. Maclean:

Some of the speeches that I have heard in this debate have been quite depressing. Deputy Tadier yesterday described our business model as being based on "exploitation and greed". I do not believe this does either him nor this Assembly any credit at all. He asked another question. He asked whether our 20 per cent tax rate represents the optimum rate. I think that is an interesting question but, again, it does miss the main point that the foundations of our economic success have been built on our 20 per cent tax rate. But more importantly it keeps us competitive. The fact that it has remained constant for more than 60 years gives us invaluable stability as far as the outside world is concerned. Make no mistake, stability and competitiveness are the reasons that businesses locate here. They are the key reasons for our economic success. Some of the speeches so far seem to forget, or indeed perhaps ignore, the essential connection between a successful economy and the quality of life for Islanders. A successful growing economy with profitable businesses generates the tax revenue that we spend on our high-quality public services and indeed that we spend on the benefits that help support the less well-off. A successful economy maintains and creates jobs. Comments have been made suggesting that increasing personal tax rates will not mean a loss of jobs. To me, this shows a worrying lack of understanding about how Jersey and indeed how business works. It will result in a loss of jobs as it will increase the cost of doing business here. People will have to be paid more. Business owners will themselves be affected and so will consider moving their businesses to other lower-cost jurisdictions. I agree with the comments that Jersey is not all about tax. There are other things that attract businesses here but the wrong tax policy does, and will, deter business. I think the proposition is the wrong tax policy. This morning we saw published the Labour Market Report which demonstrates very clearly that point. The Jersey economy, despite being impacted by the global recession has a high level of employment. In fact, our employment levels are at the highest level for more than 15 years. We are doing so much better than many other parts of the world. Although our unemployment rate is at 3 per cent, that in itself compares favourably to the U.K. (United Kingdom) at 8 per cent and an average in the E.U. (European Union) which is currently around 10 per cent. Now I do not need to add that, despite the fact that a 3 per cent rate is still too high as far as Jersey is concerned and certainly due to the high level of young people who are finding it hard to find jobs, another interesting point in the figures published today - and especially, I am sure, interesting to some Members who were asking questions in this area yesterday - is that employment of locally-qualified staff increased by 260 while non-locally-qualified staff, including (j) categories, decreased by 350. All of these statistics support the policy decisions like fiscal stimulus taken by the Council of Ministers and this

Assembly to help offset the impact of the global recession on Islanders. That does not mean that we have it all right. Far from it. I do not know anybody who has a monopoly on being right. Only by working together we will find the solutions to the numerous challenges that we face as a community. But for the purpose of this proposition, I need to emphasise that a successful economy needs the right environment to encourage investment and growth. Other jurisdictions recognise this which is why they are increasing their efforts to keep businesses and attract inward investment. That  includes attracting the wealth creators. For us, the much-debated 1(1)(k)s fall into this category. I have no doubt that 1(1)(k)s add significant value to our community, not just in terms of tax and employment but also the investment and a considerable amount of money they spend in other areas like charitable donations and so on. Following the recent budget in the U.K. they have also introduced incentives for businesses and indeed lowered the corporation tax rate.

[10:00]

It is an increasingly competitive world where businesses and wealthy individuals are mobile and can move to maximise their opportunities literally at the drop of a hat. We can see the damage caused to the U.K. economy by the increase to their 50 per cent tax rate. Major companies and wealthy individuals departed the U.K. in their droves, causing not only a brain drain but significant lost revenues. Perception is important and constantly debating the option of increasing our tax rates is damaging to our reputation, not only locally, but nationally and internationally as well. Debates like this get reported widely and signal instability and certainly create uncertainty. In this economic climate, we cannot afford uncertainty. If it persists it will cost us business and it will certainly cost us jobs. An example of the type of damage was evidenced last year when national and international media seized on the option in the consultation paper of Jersey increasing its tax rates. This media coverage of potential tax increases stopped a number of businesses and wealthy individuals from considering Jersey as a place to relocate, and that is an absolute proven fact. It is not surprising because of course people and individuals need certainty. It does not mean that we should not have consulted on that option but now we need to recognise that it was rejected for good reason and it is time to move on. But it must end there to avoid any further damage. It is without doubt the finance industry that will be most directly affected by this proposition. By protecting the finance industry and allowing it to continue to diversify and prosper will ensure that the wider economy has a greater chance of meaningful diversification. I would draw Members' attention to the recently published review of the Global Financial Centre's Index. Jersey maintained its position as the top-ranked off-shore finance centre, although it did slip down the rankings. The report states that personal tax rates are cited as the third most important factor influencing a jurisdiction's competitiveness. Stable tax rates are also cited among the strongest signal that a jurisdiction is committed to supporting a financial services industry in the long term. I certainly encourage Members to reject this proposition. Deputy Southern has proposed that the proposition should be taken in parts. Perhaps this is an admission that some parts of his proposition are not going to get supported and will be damaging to our economy. What concerns me is the potentially seductive arguments of supporting (a)(i). Now let us be clear that the words included in (a) include supporting the principle of higher tax rates. Supporting even parts of this proposal will send the message that this Assembly supports the principle of higher rates of tax. I am sure Members are not going to be attracted by Deputy Southern 's seemingly innocuous elixir. Sending the message that this Assembly is committed to higher rates of tax would be damaging and for that reason this proposition should be rejected in its entirety. We have the opportunity today to send out the strongest possible message that this Assembly is committed to maintaining its long-held standard

20 per cent rate of tax. I urge Members in the interest of continuing prosperity of economic growth and future prosperity to reject all parts of this proposition. Deputy Southern has not in his report, or indeed in his opening remarks, mentioned or promoted any proposals to grow the economy. Jersey has been through a difficult period in the last couple of years. Less affected than many parts of the world but nevertheless the global downturn has, as Members will know, had an impact on the Island. We now need to turn our attention to growing the economy, creating jobs, providing prosperity and securing a future for our Island. Higher rates of tax will damage this. I want to grow the economy so that we can continue to run our Island on the basis of low tax but high-value services. Thank you. [Approbation]

Deputy T.M. Pitman:

May I seek clarification from the speaker? I think he said that "we" had rejected higher tax but I think that has never come to the House. Who was he meaning exactly? Was he meaning the Executive or ..? He did say "we" had rejected higher tax.

Senator A.J.H. Maclean:

The States.

4. Senator B.I. Le Marquand:

I do not have a problem in principle if, after ensuring that we have a fully-efficient and effective public sector, we find that we need to raise additional tax in order to fund an appropriate level of public services. I do not have a problem with doing that in a more progressive taxation system. However, we must be very careful as to how we seek to achieve that. The reason for that has been highlighted by a number of speakers before. The fact is that if we were to go ahead with this proposition it would cause massive reputational damage to our finance industry because the stability of the 20 per cent income tax system has been at the very core of that stability for so long because that is still the situation in our sister Islands of Guernsey and the Isle of Man. We saw that very clearly, as the previous speaker alluded to, last year in the profoundly negative reaction to even the consultation process in relation to a higher rate. So we simply cannot try to achieve a progressive taxation system in that way without doing ourselves major damage. But we do not need to because we have another option available. Our sister Island in 2008 moved forward with reducing the need for social security supplementation by raising the cap on social security contributions, and they did so with no discernible reputational damage at all. We ourselves last year started to go down that route with changes to the social security system to reduce the need for supplementation. If we have to do that in order to maintain our essential services, that, surely, is the route which we ought to take. Finally, in relation to the issue of part (b) of the proposition, which not many people have spoken on, there is a need in relation to the 1(1)(k) system to review the system. But that is because we are not currently attracting the additional numbers which we would normally have expected, bearing in mind the 50 per cent rate in the U.K. We need to review it because we need to make ourselves more competitive in this competitive market. But we cannot do it in the manner suggested because the manner suggested in paragraph (b) completely and utterly destroys the system. So for those views I will have to oppose the whole proposition.

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

I tend to have a certain sympathy for the Minister for Treasury and Resources because really I felt he had to get up and speak too soon because no one else was going to speak, and he felt if he did not speak he might not speak at all. I did feel sorry for him at that point but he has an Assistant Minister and maybe the Assistant Minister can answer the query I am going to put because I think, as much as I want to support, and would like to support, the proposition, I have difficulty with it. Because I think most of us think it is too much too soon but I do think we ought to be doing something like Senator Le Gresley said. We have to do something to narrow the gap, or not just narrow the gap, but make sure that gap does not get wider and that is what concerns me. On page 2 of the comments the Minister for Treasury and Resources says: "The Treasury Department is currently conducting a review of the income tax system with the aim of modernising it and making it more efficient to administer." Well that is alright but what I want to know really is when did that process begin? Maybe the Assistant Minister can give the answer on behalf of the Minister because I think we have been speaking about addressing the inner quality in the tax system for some time. It is pleasing to note that at least it is currently conducting a review but I would like to know when

it began. Of course, also it goes on to say: "It is possible that this review will recommend the introduction of independent taxation as part of a wider reform, and that many of the issues that currently prevent it will be resolved." Well, again, I want a commitment this morning from the Minister as to where we are with this review: "It will take time to properly consider all aspects of our personal tax regime to ensure that it is fit for purpose." Well, again, I agree with that and that is why I said maybe what we have today is too much too soon, however, I do not think we should allow the opportunity to go away. We need a review; I do not want that gap to get any wider. What I would like to ask the Minister, is the Treasury reviewing income tax in line with what Deputy Southern has in his proposition? Because I think it would be helpful. Again, it says it must "not be rushed". Well, again, I agree with that, it must not be rushed, but I would like a commitment: ".. and could not be completed before the 2012 Budget is lodged in 5 months' time." Again, I agree, I think it is too much too soon. However, what I would like to have as a commitment from the Treasury that it will produce a report maybe within 3 months outlining its proposals as to what they are considering. Because unless we get some commitment, I do not blame Deputy Southern , he will come back, and others will come back. As I say, while I have difficulty supporting this, which is too much too soon, I do believe we have to do something to address the issue. The gap is widening and if the gap widens it will make it totally unfair for those who are at the bottom end of the income scale. [Interruption] Thank you.

The Bailiff :

Does any other Member wish to speak?

The Deputy of St. Martin :

Sorry, I will stay on my feet if the Minister wants to respond while I am on my feet. [Laughter] The Bailiff :

Well have you finished, Deputy ?

The Deputy of St. Martin:

Yes.

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

Jersey is facing a very uncertain future, not least from a fiscal point of view. We have a significant structural deficit in the order of £80 million to £100 million which cannot be sustained and which must be filled. We all know that there are 4 methods of filling the deficit: one is higher taxes; cuts in public spending; economic growth or a combination of the first 3. Now I have no problem with any of these but I believe that whatever means we adopt have got to be fair and equitable and based on open, transparent and independent research. Now if we look at taxation first, is our tax system fair and equitable?   Well the answer  is: no, it is not. Is the research open, transparent and independent: no, it is not as we found out yesterday from the Assistant Minister that we have a law firm that is giving advice on 1(1)(k)s but we cannot even know what the firm is. We know it cost us £65,000 and none of us are probably going to see the whole report; just selective extracts which happen to fit the argument of the Council of Ministers. Also, if we look back to the last budget, where was the corporate tax data when the budget proposals were brought to raise G.S.T. to 5 per cent? Members of this House are given selected information; partial information. We do not have the full picture and yet we make decisions which affect everyone in this Island and it is totally wrong. Now the policy being pursued by the Minister for Treasury and Resources and the Council of Ministers is going to lead to a further shift in the tax burden from corporations to personal taxation in the form of higher indirect taxes. Make no mistake, the Minister for Treasury and Resources has already admitted that in questions in this House that the way things are going there is the shift in corporations. Why? It is happening all over the world. Deputy Southern , for example, has already produced figures in this House that show company tax revenue is at an all-time low and that personal taxation has risen through the higher G.S.T. on the indirect side. The reason why this has come to pass is because the Council of Ministers believe that we have to offer lower taxes to foreigners to attract business to the Island. But as all our competitors are doing the same thing, we enter into a competitive death spiral. It is a competitive taxation spiral; it is a race to the bottom. In the end the only people who benefit are the foreign corporations and the high-net earners. The people who lose are the ordinary citizens of the Island that are pursuing those policies.

[10:15]

We are already a long way down this road. The Zero/Ten policy has meant that we receive no tax revenue at all from foreign-owned companies, including many of those that are ripping-off Jersey consumers. We are also receiving considerably less tax revenue from the finance industry, an industry itself that is going through troubled times, as we have heard the unemployment figures, 750 that we know of, and there is probably a lot more besides. Whether you believe the business tendency survey where it says they have renewed optimism, I am aware of many firms in the finance industry that do not have renewed optimism. There are major structural changes taking place in the world but the way of dealing with it is not through competitive tax reductions. If we have a look at the public sector spending, I have again no problem with us looking at what we are spending our money on. I have made this point very clear all the way through. It is right that we review and we eliminate waste and we get value for money but, again, you can go too far in trying to cut to the bone where consumers are losing essential services, which is what I fear is going to happen in the future if we continue with the policy of trying to drive taxes down. Economic growth: the Minister for Economic Development attacked Deputy Southern and others for not coming forward with an economic growth policy. They do not have one themselves. Their own ran out in 2009. When the Economic Affairs Scrutiny Panel questioned the Minister, we believed there was a Green Paper coming. I personally do not think we will see it before the election because they are bereft of ideas. They do not have a policy and they will not want to go to the electorate with it. So, in conclusion, I agree with Senator Le Gresley. I came into politics because I felt we had a divided society and I do believe we have a society of "haves" and "have-nots". Obviously the "haves" want to keep it and are reluctant and will fight every measure to prevent having to pay a little bit more, and they will say they are going to leave the Island the same as businesses do. But sooner or later you have to draw a line in the sand and say: "No more." Everyone has to pay their fair share. Now I happen to believe that progressive taxes are just inequitable and they are a sign of a society that looks after those who cannot look after themselves and also everyone is paying, as I say, their fair share. So I shall be supporting the first part of Deputy Southern 's proposals. I am not sure about the other 2 aspects of it but certainly, I will nail my colours to the mast, I believe in progressive taxation; it is the only fair way forward. Thank

you.

7. Deputy A.E. Jeune of St. Brelade :

I listened to Deputy Southern 's opening speech yesterday and I have to say I was taken aback. If I understood what Deputy Southern was saying correctly, he appeared to me to be saying that he thought it was okay for people employed by the States to be paid excessively high wages so long as we tax them. I have to say, I would rather not be paying them any unnecessarily high money to only get back between 20 per cent and, as the Deputy is proposing, 30 per cent. I do not believe that that would be managing our resources correctly or being responsible. In terms of Jersey's current taxation, stability is what assists Jersey in being attractive to high income and high net- worth people. I do not believe we will do this Island any favours, or the people who are here, if we start messing with that. In terms of independent taxation, I have to say I am on Deputy Southern 's side. I strongly believe that just because you are married does not mean to say you have given up your independence. I would welcome married couples being treated equally and taxed accordingly. But the comments from the Council of Ministers states that they are currently conducting a review and all I would say to that is, please, get on with the job. We have to consider our local people who may not even be taxpayers when we are considering playing about like this. It is these people,

whether we like it or not, who do give employment. We may not like admitting it but that is fact. Certainly, the Minister for Housing does all he can when he is with his colleagues making decisions on 1(1)(k)s to ensure that there will be something returned to ordinary working people. As far as the Council of Ministers' comments on the financial and manpower implications, I wonder whether the cost that he is identifying here have taken account of: could it be done for less by using online assessments? I do not think that is rocket science; it is being done elsewhere. Finally, I would just like to address a comment that Senator Le Gresley made when he spoke about increasing social security to pay for long-term care. This payment is effectively an insurance so that people do not need to sell their homes and/or use up their savings should they be in need of long-term care in the future. By paying that increase it will hopefully safeguard their homes, which currently does not happen now. Having said all that, I will not be supporting the Deputy 's proposition. Thank you.

8. Connétable J.M. Refault of St. Peter :

This proposition requests a progressive rate of taxation for the people of Jersey. However, the proposer does not seem to acknowledge the fact that there are currently 65,000 households who are liable to pay tax. Of this, 29.6 per cent, or 19,000 of these households pay nothing and contribute nothing in personal taxation towards the Island's resources and services, such as our hospitals, schools, police force, infrastructure, et ceteraI, with the burden being shouldered by the personal taxpayers on higher incomes. If this is not progressive, I do not know what else to call it. Furthermore, of those that pay tax, the effective rate starts at 0 per cent and increases in line with the higher earners' income until it reaches the ceiling of 20 per cent. Again, if that is not progressive, then I do not know what to call it. But the most troubling for me is the sentence at the start of the report to the proposition, which in my mind should say: "Following extensive research by taxation professionals in consultation with industry economists, it is considered that an increase in taxation as proposed will produce £X millions to the economy and will have no detrimental effect on the overall economy of the Island." But, as Members will see, the first 2 words in the proposition says: "I believe." There is no supporting evidence or facts supporting the proposition. I applaud Deputy Le Claire yesterday for his analogy of the picture that we are all in a lifeboat surrounded by the cruel sea and I would like to take that analogy a little step further. It would be akin now to saying: "It is cold and wet. Let us burn a few of the higher planks from the hull to warm ourselves up without any thought given to the waves bearing down on us." I also note the Deputy of St. Mary's comments yesterday on his displacement theory where he opined that 1(1)(k)s displaced local people from housing opportunities, all 137 of them, by virtue of their large houses. Does he also believe that tourism should cease as they occupy large sea-front prime locations? What about the farmers who surround their houses with fields and then grow potatoes and put cows on them? Because that is really what that analogy draws to me. I think this tantamount to scraping the bottom of the barrel because there is no supportive evidence to come forward to support the proposition. I do not believe this is the right way to get ourselves out of the recession. It is more likely to add to the deficit. What we have to do is retain our progressive and stable tax base that encourages growth and inward investment that ensures our long-term future. The proposition does not give any indication of how much it might yield because, in his heart of hearts, I think the proposer knows it just will not work but it sounds good. The proposition is equivalent to throwing a non-swimmer into the deep end to see if they can swim. I would urge Members to only make their decision on facts with good supportive evidence because that is what the electorate expect us

to do. Thank you.

9. Deputy E.J. Noel of St. Lawrence :

This proposition is not the way to get ourselves back to balanced budgets and out of our current short-term deficits. If adopted, this proposition is more likely to add to the challenges facing us. We have to attract more business and more activity. Deputy Southern and his supporters are clearly missing the point on the effect of  increasing personal taxation and the impact on jobs. No, individuals will not stop work but the companies for which they work will have increased costs and

will therefore move some or all of their businesses elsewhere. This will mean, for some people, a loss of jobs and all because Deputy Southern and his supporters want to impose a political agenda which reduces our competitiveness and damages all Islanders. The graph that the Deputy of St. Mary waved about yesterday shows that we are indeed competitive but if we adopt this barmy proposition, we will cease to be so. We have an export economy and as such competitiveness must be our number one priority. Deputy Tadier missed the point when he referred yesterday to our banks moving from a 20 per cent to a 10 per cent tax regime. As Members will know and - probably with the exception of Deputy Southern and supporters - understand, that this was to ensure our offering remained competitive. They have missed the point regarding how this proposition, if adopted, will be a cost of doing business in the Island. If we raise tax levels for members of staff, they will require higher salaries to maintain their disposable incomes. Businesses will not want to pay those higher salaries and as a result they will expand their businesses elsewhere outside of Jersey. The Deputy and his followers are not living in reality. We are in a competitive world and we always will be. There are cries that we are scaremongering and that mainly we have anecdotal evidence. But the Deputy has no evidence either. The risk that Deputy Southern is asking the people of Jersey to take is simply too high. Deputy Southern implies that our current economic model is not sustainable but he has not proposed a credible alternative. The danger in this proposition being taken in parts is that all 3 parts to part (a) links this to a progressive taxation system. For example, part (a)(i) on its own I could accept in principle but married to a progressive tax system, I cannot. A tax system substantially different to our existing policy which is mildly progressive will damage our economy beyond repair.

[10:30]

It will place our economy in a continued downward spiral. I would like to comment on part (b) of the proposition. The Deputy asked in part (b) for the Minister to review the terms under which 1(1)(k) consents are granted. The Deputy knows full well that I myself, among some of my colleagues from Housing and from Economic Development, have already undertaken and started this review and when we have all the evidence we will publish that evidence and bring it back to this House. But if this proposition was adopted it concludes in suggesting that in future all 1(1)(k)s would pay a tax in excess of 20 per cent. The evidence we have to date identifies that stability of the tax regime is extremely important. Changes to that regime for whatever reason would give the message that we are not stable and as such that damage to our reputation will be impossible to repair. At present the direct tax contribution from our 1(1)(k)s amounts to some £13.5 million per year and as I, among others, have mentioned numerous times in this Assembly, that equates to almost 1 per cent on G.S.T. Their contribution through on-Island spend on property, on services, on employment, on investment in business, on charities, runs into tens of millions and this is from a little over in excess of 100 people, people who do not just have a postal address here, but people who come to live in our Island and immerse themselves in our community. Surely more of these individuals would be of benefit to all Islanders. The Deputy of St. Mary questioned as to what were the downsides of 1(1)(k)s and he gave 2 examples. He mentioned the displacement effect regarding coastline properties. Well he lost me there because not many locals can afford properties in the £3 million plus bracket. Does he mean that our hoteliers in the past have also displaced Islanders from these locations? He also mentioned a possible adverse effect on inflation. Well I disagree with him there. It would just mean that we would have fewer plumbers, fewer electricians, and fewer tradesmen. The cost of those services would not go down; it is just that we would have less employment. Deputy Pitman and I have different definitions of what is fair and I could probably add Deputy Higgins to that as well. I believe that both Deputy Pitman and Deputy Higgins would favour a more progressive tax system where I personally would favour a proportional tax system. I believe the majority of States Members would deem that the mildly progressive system that we currently have is an appropriate one. But today this argument is not really about fairness; it is about what is right for Jersey. To respond to the Deputy of St. Martin, wearing my Treasury hat, the Treasury is currently undertaking a major review of taxation. Our

system needs to be modernised. Issues that are currently being looked at are better enforcement, collection of taxes by utilising the services of the tax office and Social Security to see if we can make it more efficient, looking at current-year assessments, looking at individual assessments, and making it possible to do online filings and returns. We will set out the direction that we propose to take in the budget and we will be happy to provide Members with a report in September. I would like to comment on Senator Le Gresley's points because I was one of those 5,000 or so individuals that voted for Senator Le Gresley because overall his package of what he was proposing was one that attracted me. But one of those elements was a 30 per cent tax rate and that did not appeal to me. While we do need extra revenue for areas such as education, health and social services, we can do this by implementing the C.S.R. (Comprehensive Spending Review) process. We do not need to do it by redistribution. We can do it by being more efficient in our expenditure and by growing our economy. The Treasury is committed to finding solutions. Constructive solutions, that is; not destructive. This proposition would be destructive. Treasury is committed to 20 per cent income tax, it is committed to keeping the G.S.T. at 5 per cent and it is committed to Zero/Ten. Certainty and stability is what we need and it will lead to prosperity for all Islanders. Higher personal taxes alone will not bridge the gaps in our society. My response to Senator Le Gresley and to Deputy Higgins is to say to look at the U.K. They have a very progressive tax system in the U.K. but it has failed to bridge the gaps in their society, so why would such a system work here? We can address the social issues that we have or we can do so in a different way. We do not have to do it with progressive taxation. Constantly debating the option of increasing our tax rates is damaging to our reputation locally and internationally. It indicates instability and creates uncertainty. Neither of these are good for business; good for Islanders. This damage was evident last year when the international media seized on the option in the consultation paper as mentioned by Senator Cohen. It  stopped a number  of  business opportunities  from coming to  Jersey.  Businesses thrive on certainty and this Assembly needs to come to a decision on what Jersey should be about. Jersey is a very successful international finance centre - and I for one make no apologies for that - which has been built upon a 20 per cent tax rate. It is without doubt the finance industry that will be most affected by this proposition. By protecting effectively our one and only industry and allowing it to prosper we can ensure that Jersey itself can diversify and can continue to provide the high level of public services that we currently enjoy. Stable tax rates are also cited among the strongest signal as a jurisdiction that is committed to supporting its financial services industry. This is an opportunity for this Assembly to send a clear message about the commitment to the finance industry, to Islanders and to the international arena. Therefore, I strongly oppose this proposition and request

that Members do so. Deputy M.R. Higgins:

Can I seek a point of clarification? The Deputy said that the debate was not about fairness, he said it is about what is right for Jersey. Could he clarify who it is right for: the wealthy; the corporations or the foreigners?

The Bailiff :

That is not a genuine point of clarification, Deputy ; that is a comment. Deputy D.J.A. Wimberley of St. Mary :

Well can I try a genuine point of clarification? [Laughter] I did ask this question in my speech, expecting him to reply. Will the Minister's review of the effect of 1(1)(k)s consist of his personal opinions on the subject or will it be a proper rigorous evaluation of the pros and cons of encouraging more 1(1)(k)s?

Deputy E.J. Noel:

I have mentioned this numerous times over the last couple of weeks. It will be based on the evidence that we have. I have mentioned before, I can only think of benefits of 1(1)(k)s to this Island. I welcome them; I wish we had substantially more. I, for one, cannot see any downsides to these individuals coming here and becoming part of our community.

The Deputy of St. Mary :

So the answer is it will not be a proper rigorous evaluation.

The Bailiff :

Well that is a comment rather than a clarification. Now Senator Routier.

10. Senator P.F. Routier:

I will be very, very brief. I am a bit concerned that Members may have got hold of the wrong end of the stick from something that Deputy Higgins mentioned. He commented that the Economic Development team were bereft of any ideas when it comes down to economic growth. I do not understand why he is saying that because I know from the work that we are doing within the team, and we are currently reviewing the draft Economy Growth Strategy Plan - I have had a copy of it; the Minister and our team, we have been sharing it over the last few weeks - and that will be lodged as a Green Paper in June. So I want to give some reassurance to Members that there are some very, very good ideas within that document. We already do have a current economic strategy which is working and is enabling people to grow their businesses, but as far as the new growth strategy is concerned, it will be, as I say, a Green Paper in June. So I do not want Members to go away with the idea of thinking what Deputy Higgins has said was true.

The Bailiff :

Does any other Member wish to speak? Very well, I call upon Deputy Southern to reply. Deputy J.A. Martin of St. Helier :

Can I just ask a procedural matter before and it may help the Deputy ? I think the Minister for Treasury and Resources said the Deputy is going to offer us to vote on (a) and (b) separately. Is that correct?

The Bailiff :

I do not know, it is up to the Deputy .

Deputy G.P. Southern of St. Helier :

If I may? Yes, we discussed this yesterday and it is possible to take the introduction and part (a) .. Deputy J.A. Martin:

Perhaps I could finish my question and then you could .. either the Deputy or the Chair. My impression was we were going to be able to vote on (a) and (b) separately and I would ..

The Bailiff :

I can say from the Chair, that certainly is possible: (a) and (b) are clearly separate matters. Deputy J.A. Martin:

Right. So the end of (b) where it says: "by application of the rates in paragraph (a)(iii) above" if (a) falls, that is not binding?

The Bailiff :

I have been asked earlier before this debate started. [Interruption] But, yes, I ruled that what that means is the rates set out in paragraph (a)(iii). So, in other words, even if (a)(iii) is rejected it still would be open to Members to say that 1(1)(k)s should be taxed at the rates set out in (a)(iii). It could equally have repeated the rates set out in (a)(iii).

Deputy J.A. Martin:

So it is binding?

The Bailiff :

So (b) can be taken separately from (a) even if (a) is rejected. Deputy G.P. Southern :

Just to finish off, I believe that (a)(i) can be voted on separately and hold together, adopting the principle of individual taxation and higher rates, and that (a)(ii) and (a)(iii) can be both done separately.

The Bailiff :

Yes. The only point I want to clarify on that, Deputy , just so there can be no doubt, is that the way you have structured your proposition, to make (i), (ii) and (iii) subsidiaries to the introductory words to (a), that is the way you chose to structure it. So it does mean that therefore if you adopt (i) you are adopting the first 5 lines of (a) and (i). That is the way you have drafted it. Conversely, of course, it must mean that if (i) is rejected, then the Assembly has rejected the first 5 lines of paragraph (a). As a result, paragraphs (ii) and (iii) will automatically fall. So I just wanted that to be clear for Members, because Members, if they vote for (i), are approving the first 5 lines of paragraph (a) because it all reads together and (i) is a subset of (a). Conversely, if they were to reject it, then they cannot vote on (ii) and (iii) because they fall within it. I hope that is clear.

Senator P.F.C. Ozouf :

Because if (a)(i) was accepted or voted on then I would need to respond to it as it is a request to me;

1. deals with individual returns ..

The Bailiff :

I hope you are not going to make a speech. [10:45]

Senator P.F.C. Ozouf :

No, no, it is a question .. individual returns but (a) supports the concept of higher rates. Am I correct in assuming that there is not an option in this proposition, as currently drafted, for Members to support the principle of individual returns without also committing to a higher rate of tax, unfortunately?

The Bailiff :

Well I thought that was what I just said: that (i) is a subsidiary of the principle set out in the first 5 lines of (a). So they stand together but, equally, they fall together. So, just to be clear, if (a)(i) is voted down, then the Assembly cannot move on to vote on (ii) or (iii). If, on the other hand, (a)(i) is accepted, then the Assembly can move on to vote on (ii) and (iii) separately. I hope that is clear.

11. Deputy G.P. Southern :

Yes, and that has been made clear to me both yesterday and today, and I am happy to proceed on that basis, and I will be bringing the parts as requested. Where to start? Let us start with Senator Ferguson. It is always a joy to get hand-bagged by our very own Margaret Thatcher. Because we disagree so fundamentally on the free market and capitalism that I know when she does hand-bag me - and it hurts sometimes - that I am on the right track. [Laughter] Especially, I am pleased to be compared to Denis Healey who was known in his day as "the bruiser". He was a heavyweight. So I thank the Senator, for that is what I call a compliment. However, what she has to say was merely, I believe, a repetition of what the Minister for Treasury and Resources had to say, the Assistant Minister had to say and the Minister for Economic Development had to say which was that if we were to introduce a higher rate of tax for those who earn higher incomes, the entire finance industry would collapse and leave the Island, along with every wealthy person or high

earner on the Island. Now I put it to you, ladies and gentlemen, Members, the reality. The reality is for someone earning as an individual £80,000 a year, this proposition requests that they pay an additional £500 a year tax. Is any single person going to leave the Island over that sum? I do not believe they will. For someone earning £100,000 we are talking about the total of £1,500 in extra tax; a relatively small amount. Would you up sticks if you were in that position - and some of you may be - and move straight away to Singapore? Or to the Isle of Man where I keep saying it rains for 10 months of the year? No, you will not. Would you say: "Gosh, how unbearable. I must move home. I must change job. I would much rather move to the Isle of Man and pay 20 per cent V.A.T. (Value Added Tax). I do not mind that but I am not going to pay an extra £500 a year tax to that Government. I might move to Singapore where I will meet a 20 per cent top rate of tax and I will meet a 20 per cent rate on every pound I earn for social security contributions." So it does not say that we charge 40 per cent tax but effectively it does. "So I am going to move because I would much rather pay Singapore social security fees than pay tax to this Government where I live and where I earn a currently quite good living." Ditto. The logical sequence is that somehow increasing personal tax, increases the cost of doing business. Nobody has explored that. The Assistant Minister did not explore that. How? If this Government which sets the tax rate decides to raise taxes, whether it is G.S.T. or income tax .. [Interruption] No, I will not give way. The Assistant Minister has had his turn. Not a very good turn, in my opinion, but he has had his day, and it is my day now. If the Government sets the rate, whether it is G.S.T. or income tax, or social security contributions, whatever, that this is automatically a cost for business. It is not. We know full well that G.S.T. at 3 per cent came with a wage freeze. We must not engage in that inflationary cycle. There will be no wage rises to compensate for G.S.T. Ditto. We have been told time and time again by this Minister for Treasury and Resources that there are wage freezes out there. Times are hard; there are wage freezes in the private sector, in the finance sector which, admittedly, this will affect most. Wage freezes out there because of the economic situation. Is the economic situation any better? Are we into growth? No, we are not. If we are in recession, are employers going to be: "Oh, you have had a tax rise. Oh, we better pay you some more. Voluntarily, out of

the kindness of my heart, I will raise your wages then because you pay more tax." Will they? That is a funny sort of employer. I have not met many employers like that. They did not do it for G.S.T.; they will not do it for income tax. So it is not an automatic add-on, bolt-on cost. All the arguments from the Ministers concerned, or Assistant Ministers concerned, are absolute arrant nonsense. There is no reason why any wealthy individual should up sticks over sums which are very, very moderate increases indeed and which they, I believe, can well afford in sharing the burden of the economy. I will address some of the remarks made by Deputy Noel because I found them quite, quite shocking. Because he followed this logic that says increased taxes means increased wages means increased costs of doing business means that not only will relatively wealthy individuals leave the Island but the businesses will leave too. He seemed to argue that what we as a government should be doing should be looking after our only industry. He described it as our "only" industry. That is the first time any Minister has done that: puts the cap on so-called diversification that we have been aiming for. Our only industry, he described it. We must protect our finance industry and we do that by having a stable regime, so this stability thing was thrown-in. Now, I mentioned it yesterday when the previous government in the U.K. brought in a 50 per cent tax rate. According to the Minister for Economic Development: "Industries left in droves." Were they coming here? I do not believe so. They did not. The Minister has been overdosing on the Daily Mail. [Laughter] The evidence says there was not a mass exodus in any way, shape or form. The Minister may well believe it but he is misguided. The Assistant Minister talked about protecting our only industry and the stability of the regime. He said: "The Treasury is committed to 20 per cent. The Treasury is committed to G.S.T. at 5 per cent." For how long? "The Treasury is committed to Zero/Ten." Well, hang on, Zero/Ten is a move away from the stable regime we used to have: 20 per cent personal tax; 20 per cent company tax; 20 per cent every which tax. It was a 20 per cent rate. This Government has already moved away from that stable regime by introducing the race to the bottom: Zero/Ten. The fact is that we have £140 million deficit hanging around that we still do not know how to deal with which is, in part - and, in fact, in majority - caused by our move to Zero/Ten. The move to "Ten" halved the revenue that we got from our "only" industry, as he describes it, and the move to "Zero" put another big hole in the economy, one that we have not solved. When he talks about stability, where is the stability, if we have Zero/Ten? We have had it for some time. We have tried to fiddle with it to make sure we have got some extra revenue from it by deemed distribution and look-through, and we failed to do that. We are still working on how we can get some more revenue from the "Zero" end of Zero/Ten. Where is the stability in that? There is none. So the stability argument is not a correct argument either. The way that the Assistant Minister presented: "We have to protect our only industry." May I remind him who he is serving? Is he serving our only industry? Is he in this House to serve our only industry? Is that his priority? Is that his essential duty? No, it is not. It is to serve the people out there: the voters. The finance industry does not vote; people vote. I know when I have talked in recent campaigns, like Senator Le Gresley, there is a lot of support out there for progressive taxation or introducing a higher rate on the wealthy. That is the fact. So bear that in mind, Assistant Minister, through the Chair, when you come to vote. Oh, I enjoyed that bit. The thrust of the argument against moving to progressive taxation is one which has had no evidence in it, apart from this statement that is repeated until it feels true that industry will leave; that the wealthy will leave, full stop. I think I have shown that at the rates I am talking about, they will not, especially considering that Singapore, Isle of Man, we are already competitive with them. If we make this increase we do not become uncompetitive. Now some people have talked about: "I am not sure about the £70,000 because it is an expensive place to live, Jersey." Senator Breckon and Deputy Martin both made the point: "We are not sure that that is probably correct." If that is the case, then the way this proposition is structured, it is open for them to vote for (a)(i) and to not vote for (a)(ii) but to vote for (a)(iii). If you want to start at £100,000, and certainly that is a statement that has been made on the Senatorial hustings by some Members here, then that is perfectly open to do. In terms of the 1(1)(k)s, I think, again, the Assistant Minister seemed to be somewhat and, indeed, the Minister for Treasury and Resources: "This is absolutely wrecking 1(1)(k)s." No, it is not. It is saying that when you do your deal with the 1(1)(k)s .. [Interruption] There are no deals. When you decide how much of their revenue they will bring through the Island in order that they should pay some tax to this Government for the joy of living in this Island, when you make that arrangement - no deals are done - make it clear to them that instead of paying on that element of their income that they are directing into the Island, instead of paying 20 per cent, they will be paying 30 per cent like all the others who have high levels of income. That is what it says. It does not wreck 1(1)(k)s; it presents different terms for

1(1)(k)s. Certainly, that is something that many people out there tell me that we ought to be doing. The Bailiff :

Sorry, can I ask the Senators there please to be quiet? It is the tradition of this Assembly that Members should listen courteously to other Members during debates. [Approbation]

[11:00]

Deputy G.P. Southern :

The other thing that has been thrown at me today and yesterday was Deputy Southern comes to this House with a proposition but where is the growth, where is the growth proposition in what he is saying? There is no growth in this. Where is the economic growth plan of the Minister for Economic Development, the Minister for Treasury and Resources referred to yesterday? It is non- existent. It is not before this House, it is in the process of being written. It does not exist. When the Minister for Treasury said yesterday: " Deputy Southern has no plan for growth" he should have followed that up with: "And neither have I." [Laughter] No, Sir, I will not give way. I will not give way. Fiscal stimulus is indeed propping-up the economy and well done for having done it. Well done for having done it, but that is not an economic growth plan by any stretch of the imagination. What he should have said yesterday: " Deputy Southern does not have an economic growth plan and neither do I, because my last one ran out in December 2009 and we have not made

a new one yet." That is the reality. So that is the reality on growth. Do not think I must vote against this because it does not contain an element of growth, that is a good reason for not voting against it. Dear oh dear, absolutely not true. What this proposition is and what Senator Le Marquand and Senator  Le Gresley among others pointed out that progressive taxation  is  fair taxation. That those who can best afford it can shoulder their fair share of the burden. This is a modest increase in that burden, it comes alongside and balances the rest of the package which is cuts and G.S.T. increase and Zero/Ten, et ceteraI, and rise in the impôts, most of which are

regressive.   Changes  in  social  security,  which  is  not  progressive  or  regressive  but  simply proportional and fair when we see that brought for 2012. Again these measures kick in at £70,000, if we accept (a)(ii), or £100,000. They target only the top 20 per cent of earners on this Island and say: "We are asking you to shoulder a fair share of the burden for the problems that we are in, and into the future." I believe this is the way forward, this is the fair way forward. As I said in my opening remarks, if we do not do it today I believe we will, sooner or later, be doing it in some shape or other because we will be moving to increase fairness and equity in this society one way or another. The way to do that, contained in this particular proposition, is through taxation. I maintain the proposition and call for the appel on part (a)(i), and should that pass, (a)(ii), (a)(iii) and (b).