Saturday, 14 May 2011

GST off domestic fuel - it's not complex.

I have emailed to ask Senator Le Breton to take the vote on GST exemptions in two parts - one on food and one on fuel.

The arguments will be made that we have heard many times before about "complexity" with GST exempt on food. They may win the day on that; to be a realist, there would be a much more complex system if GST was exempt from food.

However, removing GST from fuel wouldn't fall to the argument about complexity, and its opponents would have to try something else!

After all, there are not many companies supplying domestic fuel, and it is easy to flag up domestic users as exempt - after all, a number of Finance Sector Companies can be flagged as exempt easily - Trust companies, for instant, are exempt from GST, so have to be flagged on the customer database on utility companies so that their bills do not include - and no one says that is "complex" - so flagging domestic users in addition would not be a problem. And normal businesses would still pay.

It seems strange that a pensioner should collapse (as happened early this year) because of trying to heat his home by putting his gas oven on, and he pays GST on domestic fuel and yet Trust companies and Banks, with plush offices and money rolling in, are exempt from that burden! Perhaps they should be included to make up for the shortfall?

A commentator on the early draft of this blog noted " I was struck by his point that banks pay no GST on fuel while ordinary people do!"

And no one is going to question what fuel is - heating oil, gas, electricity or coal - or is someone burning Jaffa cakes out there to keep warm? Utility companies - JEC, Gas - have a "domestic" tariff, so they know if the user is a business or not. As for coal or wood, I'm not aware of any businesses keeping warm with a fireplace blazing away! There is NO complexity - the Institute of Directors argument for simplicity falls down.

The one exception would be people who run a business from home, but that is only going to effect very small businesses, and they also can only claim a small proportion of their heating costs as office expenses against tax anyway, so I think that can be let though. It is not as if they are massive million pound turnover businesses!

Another factor about fuel is that it is soaring upwards at the moment, which means that the value of fuel duties gained on petrol and diesel are increasing anyway, without the States having to intervene. There is also a certain inconsistency in these duties are not levied on marine fuel. Both of these (the "natural" increase, and duty on marine fuel) would help the shortfall.

I've seen Philip Ozouf's release, and it is totally geared to the food issue. He doesn't tackle the domestic fuel situation at all, just the food one, which is another reason for taking the proposition in two parts. He obviously hopes the argument will be presented as one, and fail as one vote.
Another factor to note - fuel costs impact on food prices, but with a time lag. Domestic fuel, however, can go up very rapidly, and this would need changes in the allowances to income support / GST bonus to react as quickly.
Quite frankly, I'm not sure the system can react that quickly - I remember seeing some change relating to that brought by either Ian Gorst or Paul Routier, and it had to go via the States - not good if it happens when the States are not sitting, or it gets into the waiting list for propositions!
Also there are a good many people who are not eligible for income support, because they are just above the thresholds for help. These people - often pensioners who own their own home - are struggling and while one can shop around for food, it is not possible to do so for fuel nearly as easily. There is only a limited number of suppliers, and some (coal) may not be possible if you don't have a chimney, for example. Pensioners are particularly vulnerable, as their body's thermal regulation is poor.
I think the Green lobby, in calling for greater fuel efficiency rather than exemptions, are in grave danger of alienating people. They do not seem to be in touch - and I mean real communication - with organisations like age concern and pensioners, or for that matter, young people struggling with new families. If the Green States members vote against exemptions on fuel, I think they will face a considerable backlash. There is a danger of being perceived as driven by ideology to the exclusion of compassion; that may not be the actual case, but it will be seen to be the case.

The Green idea is that greater fuel efficiency will lead to lower costs. But I'm not convinced by that "greater fuel" efficiency argument - fuel is so expensive anyway that people won't be ramping up the amount they use vastly, but it may be the difference between enough heat to live, or abject misery. What happens when all the fuel efficiency /home improvement that can be done has been done, and it still is not enough? All the insulation in the world won't prevent heat loss completely.

[I've more to say on this, including the Kema report commissioned by the States which is extremely poor in terms of its statistical methodology, but that will be coming next week in a separate blog entry, along with how I think we can make real fuel savings]

I really don't think taking GST off domestic fuel will cause people to go to tropical conditions. (On the other hand, if GST exempt companies (such as trust companies, banks) had to pay GST on utility costs, they would be more likely to watch the heating)

And even people on relatively higher incomes are also struggling. Pay is often frozen at the moment, but other costs go up and up. It is true that there is more slack, but a lot of costs are rising - rent goes up, food goes up, petrol goes up, bus costs go up, clothing costs rise (and if you have growing children, that is not "optional", especially for school uniform), and rates go up.
A few of the comments I've seen on Facebook [names have been removed]:
A: We are going down a very dangerous road with GST on food and energy bills and this will be seen by all when the elderly are being admitted into hospital due to not eating properly or due to the cold. We already know that many of the elderly struggled with heating their homes properly in the winter prior to GST. The hospital will also see health and weight problems increase as those on low incomes struggle to make ends meet and provide less fruit and veg and more bulky/filling foods. If you only have £50 to spend it doesn't matter whether GST is 3%, 5% or 10% you still only have £50.
B: A friend of mines Income Support has gone up a grand total of 68p to cover the GST increase.
C: Totally agree ....our wages have been frozen for 2 years now so we didn't get the GST rise etc grr
D: I have just given up on heating our home, can't afford even the storage heater in the main living area we just put on loads of layers and have hot water bottles just something we have grown to live with over the years that's just they way it is
E: GST should not go up, and should be exempt on food and domestic fuels, just receive electric bill which is crazy, looks like no heating this coming winter and also no lighting. Le Sueur & Ozouf are okay, they are both loaded so can afford it, they need to think of the people who are struggling day to day just to live. Or at least of people, who cannot work due to ill health & oaps, they are the ones to suffer more.
F: The amount of oaps i know who are already struggling, and are worrying how they are going to cope with the rise, some are already struggling...they worked all their life, paid taxes, and this is the thanks they not fair
G: I understand your comment about GST and the income support, either way something should be done to help people more, I have noticed myself things are a lot tighter than they were 17 years ago when I had my accident. I also have quite a few friends with children and some are really struggling and not getting much if any help at all. People are also assessed on their previous year's earnings so certain departments might suddenly remove or drop benefits/help to people because the year before they had earned a few hundred pound or similar too much and there current situation doesn't even come into the equation.

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