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By J. Brock (FINN)

A meeting of legislative Assembly took place in the Court and Assembly Chamber of the Town hall at 0900hrs on Friday, 31 January 2014. Present were MLAs Cheek, Edwards, Elsby, Hansen, Poole, Rendell and Short. MLA Summers is away.

Also present was the Speaker the Hon Mr Keith Biles, the Financial Secretary, the Hon Mrs Nicola Granger, the Chief Executive, the Hon Mr Keith Padgett and the Clerk of the Assembly, Mrs Claudette Anderson-Prior.

Prayers were said by the Dr the Rev Richard Hines of Christ Church Cathedral.

After the usual reminder about mobile phones the first order of business was to elect Mr Anton Livermore as Deputy Speaker. Mrs Phyl Rendell proposed him. The Honourable Jan Cheek seconded the proposal. Mr Livermore took the Oath of Office and the Assembly resumed.

The conformation of the record of the assembly meeting held on 12 December 2013 was completed and signed as a true record by the Speaker with no objections or corrections.

KB: Just for the sake of record and indeed since we are now being recorded in other formats, if you like  both video and audio  I would like to point out that the only official record of the proceedings of this House are the written ones.

Papers to be laid on the Table:

Copies of Subsidiary Legislation published in the Falkland Islands Gazette since the last sitting of the Legislative Assembly and laid on the table pursuant to section 34.1 of the Interpretation and General Clauses Ordinance 1977:

1. Payments on Account of Tax, Employees Deductions Amendment Regulations 2013

KP: Mr Speaker, I hereby lay the aforementioned paper on the table.

BE: Mr Speaker, I would just like to say, as we are being recorded and people are seeing new legislation coming forward  a paper coming forward on tax  I would just like to reaffirm this is just a tidying up exercise. This is not a new tax and it enables people in particularly employers to ensure that they do not deduct and do not charge people who are earning less than £15,000.00 MST. So I would just like to say that.


Motion Number 1 of 2014 by the Honourable the Financial Secretary:

That this House refers the on-going deliberations on the 2014/15 budget to a Select Committee on the Estimates for presentation to the Assembly in June 2014 and therefore for the Select Committee on the Estimates to be established at this time.

NG: Mr Speaker, Honourable members, I propose this Motion today in order to commence the budget setting process for the 2014/15 financial year. As Honourable members will be aware for the last few years the Budget Select Committee has been opened earlier at the historic time of year of May. This has enabled the extended budget cycle to take place with formal committee meetings rather than informal meetings previously used. This has prevented repetition to ensure that the extended time-frame process was allowed and decisions were taken with appropriate consideration.

This year Executive Council approved the budget strategy principles that referred the strategy to Budget Select Committee for further definition.

I therefore recommend to the House that the Select Committee on the Estimates to open at this time to enable discussions to commence on the budget strategy so the final report will be put on to the June 2014 Assembly alongside the resulting Finance bill and Appropriation Bill.

The standing orders provide that membership of the select committee is all elected Members, the Chief Executive and the Financial Secretary. And it is proposed that the Committee be chaired by the Honourable MLA Edwards.

The purpose of the Select Committee on the Estimates will be to review the budget submissions from the government officers, related fees and charges and capital requests in order to provide advice in the Finance Bill to be presented to the Executive Council in June 2014.

Mr Speaker I beg to move that the select Committee on the Estimates is established.

The Honourable Roger Edwards seconded the motion. There was no objection or anyone speaking to the Motion and it carried. The Select Committee can be established.

Motion Number 2 of 2014 by the Honourable Michael Poole:

"This House believes that it is in the public interest for individual Members to indicate their initial views at the earliest opportunity, and prior to the final Budget deliberations, on the issue of Medical Services Tax and its possible abolition."

Note: There was interference during Mr Pooles speech. This section will be re-transcribed when a better tape is obtained.

MP: Thank-you Mr Speaker, Honourable Members sorry it is a wordy motion for quite a simple concept. I personally feel this Motion is useful for two reasons, firstly because the public (inaudible but thought to be the public demanded it) and secondly it is hoped that Elected Members will express their views on the Medical Services Tax and what they currently feel about it. (I would just like to) talk about how we came to this point.

Clearly MST was a campaign issue last November and it was discussed shortly after the election. We were asked at that point to look at ways we could possibly remove MST. That work was done very quickly and very well and in December Executive Council reviewed some options as to how that may be achieved and look for an alternative to MST as well. It was decided by Executive Council at that point to look at MST in the whole in the budget process over the next couple of months as we start to get into it.

MST is clearly a very important issue. The projections show it rising over £9Million over the next 5 years so in total terms it is about 3.5% of Government revenues so it is probably one of the single largest issues that we will be looking at over the next few months.

Some people might ask why we discuss this in the budget when generally would be public discussions. I feel it is useful to bring it out now for a couple of reasons. Firstly I think it is useful to see where we stand today and how our minds may be changed during the budget process either by our colleagues or (inaudible but sounds like our offices) and in print as well. And I think we also have personal objectives in the budget and I hope people will lay those out today.

From my prospective I would like to see MST removed and I would also like to see a budget that helps the lower earners in our community as in the previous budgets I hope to have an objective in the budget process to be.

My argument to have MST removed has three elements to it. Firstly I think the tax hurts those people who we want to have the most. It is lower earners  it hurts self-employed people and it particularly hurts small businesses as well. These are groups we would like to see given some support. So that is why I would like it to go.

Note: Interference ends here.

Secondly I feel there is also a community feeling the tax was miss-sold to them not deliberately but I think it was unfortunate not deliberately but I think it was unfortunate but it was miss-represented slightly and I think for that reason alone we should see the tax removed.

Finally I believe that removing MST early on in this government helps to fulfil campaign promises some of us made and it also sends a signal to the people that this is a government with an aim towards helping lower earners and is for helping businesses as well. It is something I personally would like to be associated with.

Quite rightly many will ask whether we would be willing to forego this amount of revenue in the next 5 years and how are we going to bridge that gap? We are already running a deficit and we clearly have a challenging budget situation but I personally have some ideas on how we could do that. I wont go into those now but in an appropriate time for those are discussions we will be having in the budget cycle.

So to conclude, I clearly have a strong view that we do need to see MST removed. I understand there is a budget process about these discussions. I understand there is a small chance that my mind will change during those discussions but at the very least I think it is in the public interest that people know where we stand today and they can see how our minds have been changed in that budget process.

Thank you Mr Speaker.

BE: Seconds the Motion: Mr Speaker, Honourable members, I would like to support my Honourable Colleague in this Motion. And he is right that MST was a very emotive part of the campaign. People know my views on MST. I think it is a very unfair  the tax is unjust  it needs to be changed so the majority of people do not pay it.

I am on EXCO. Not the last EXCO but the one before it I was persuaded by the Financial Secretary as My Honourable Colleague on the right has just said that we should hold fire and not abolish MST straight away but we should wait and view it in the round during the budget. Now, that was logical but I must say that when I was reading out on the radio the summary of EXCO I almost choked on that, having made it very clear in my election campaign that one of my prime concerns was to get rid of MST. It was difficult to say and I welcome this opportunity to tell the public that I am still committed to MST removal. I still believe that it is an unfair tax and I will be doing my best to make sure we abolish it or change it so the vast majority of those in the Islands do not pay this tax.

I think My Honourable Colleague says that it is unfair and came in at a time when the government of the day had to raise money as they were short of money. This government at the moment is in a slightly different situation where we are not struggling to balance the books as they were. So there was a need in that previous government to raise tax. And I think choosing MST was wrong. The natural way of raising more money for Government is to adjust the income tax. No one likes income tax and it was really Pitt the younger who introduced it to raise money for the Napoleonic wars and then scrapped it after the Napoleonic wars and somehow it crept back in. So its a long-standing way of Government to make  to raise funds and to me the government of the day should have used that.

Now perhaps de-facto having to raise income tax levels by one, two or even three percent was unpalatable. And they chose, for whatever reason  only those people who were on the government of the time can tell us why they chose MST but it was a flawed decision. It meant that the poorest members of our society paid tax from the first Pound they earned, which is not what would have happened had income tax levels been increased.

So I hope to remove this tax during the budget round and if not remove the tax, - actually take away the legislation  there are different ways. And as you are aware we have already introduced from this point in time a threshold for MST which applies to income tax in which the poorer members of society do not pay income tax until they reach a threshold. The threshold is going to be £15,000.00. And we have now introduced that same threshold for MST so you cant  you will not pay MST until you have earned £15,000.00 from the beginning of this tax year.

Our options apart from just abolishing the MST completely is to increase that threshold even more from £15,000.00 to maybe £40.000.00 - £50,000.00. And that would mean the vast majority of residents would not pay MST. So there are different ways of attacking the problem.

I hope, during the budget session that enough members will support either the need to either abolish it or change the structure such that the vast majority of people do not have to pay MST.

I support the Motion.

PR: Mr Speaker, I would like to speak up to the Motion. And I associate myself with the words of the Honourable Barry Elsby. We did in a recent Executive Council listen to the Financial Secretary and agree to take into account her comments and to look at this issue in the round at the Budget Select committee rather than perhaps have a knee-jerk reaction following the election. So I agreed to that. But I am still strongly opposed to this tax even though the threshold has been raised to £15,000.00 and many of the less well-off are out of it. To me it is an unfair tax. It hits the employer. Its an employment tax and furthermore hits the self-employed.

So I am minded to see it removed completely but in respect to My Colleagues who may have different views and taking into account and not having knee-jerk reactions I was willing to look at this in the Budget Select Committee. But I do commend My Colleagues to consider it carefully and hope that we can remove this tax and gain revenues from other sources.

I support the Motion.

IH: Mr Speaker, Honourable Members, I, too, have not changed my views on this tax. During the course of the last budget procedure I was very keen to abolish it or set it to Zero Percent. And I havent changed my views. However, I do recognise the fact that it is something that we have to discuss in the entire budget process and I am content to do that. And I am in agreement with my colleagues who have spoken that it would be nice to see it gone but it has to be addressed in the round.

I support the Motion.

RE: Mr Speaker, Honourable Colleagues, I, for one, am absolutely astounded to see this Motion come before the House. It was discussed in Gilbert House, It was discussed in EXCO and an EXCO decision was made and it is going to be discussed during the budget discussions. So why are we not coming forward? I do wonder if it is someone who perhaps has been a little bullied into putting this Motion forward. Everyone knows what I said during my election manifesto. I said I dont want to do away with the Medical Services Tax but perhaps we can reduce the rate to Zero.

I am happy for it to be discussed in the Budget Select Committee. Thats where it should be discussed in the round. And, quite frankly, I am astounded to see this Motion before this House this morning.

JC: Mr Speaker, Honourable members, I agree we need to make this decision when we have all the facts. I agreed with the recent EXCO decision, in which it should be looked at in the context of the whole budget.

Even after raising the threshold to £15,000.00 to match that of the normal tax threshold, it still raises a substantial amount of revenue. Therefore to totally remove it as the Honourable Michael Poole has said, we need to find a significant sum to substitute for it. We are nowhere near to balancing the budget at the moment without it. So not to look at it in the round would be irresponsible.

If the aim is to help the less well-off then thats been partly achieved by raising the threshold. And one of the options we will look at is raising the threshold further. I was a bit disturbed at the thought of raising it to £40,000.00, I think, as our Members dont want to pay it.

In my personal opinion the best way we can assist the less well-off is to complete the work on what is a genuine living wage and then match the Minimum wage to that. Self-respecting people dont want concessions or hand-outs. They want to be able to earn a decent wage and pay their way.

And for the record, as a small business owner, I have no objection at all to paying MST on behalf of my employees.

GS: Mr Speaker, Honourable members, I make no secret of my stance on MST during the election campaign. I dont have a problem paying it. I was paying it probably before some of the Honourable members were born. And even then I had no problem as a young person paying this.

I agree. We have already made moves that have stopped the lower paid having to pay this. There is further work being done on it and that will be brought forward to the Budget Select committee where it belongs.

I almost had the feeling that this Motion was something like ones in Europe where they keep asking the same question in different ways until they get the answer they want. This does belong in the budget session. I we have to be very careful. Get rid of this  as I said the Hospital as time goes on is not going to cost us less. As time goes on it is going to cost more. And be very careful what you do or you perhaps will be taking money away from things you may want to be doing as well.

So I look forward to the Budget session and we will see what comes out of that. As I say this is where this debate really belongs.

KB: The Honourable Michael Poole  as proposer you have an option to wind up your side of things.

MP: Thank you Mr Speaker, Honourable Members. Firstly, (I give) a thank you to everybody for responding to this Motion. Clearly it is a discussion for the budget process as is already the plan. And we will look at it, although I am glad to hear that at least some of my colleagues for their stand on it. It is going to be a challenge. I agree with the Honourable Jan Cheek that we cant afford just to see this thing go and not replace at least part of it. But I think that sometimes we are a little bit conservative in our budgets.

We do have a healthy bank balance and we can afford to give something back to the community. This is an easy and simple way to do it. If we were to send MST to the (into the ether?) I would to a date hopefully at some point this year so I appreciate everybodys views and I look forward to the budget sessions.

Thank you Mr Speaker.

KB: Honourable members, the Motion before the House is that "This House believes that it is in the public interest for individual Members to indicate their initial views at the earliest opportunity, and prior to the final Budget deliberations, on the issue of Medical Services Tax and its possible abolition."

Four MLAs were in favour of the Motion and two were against it. There was one abstention. The Motion was carried.

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