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Tax thresholds will rise and Social Security contributions will fall as part of the new government’s ‘mini-budget’ to help islanders cope with rising prices - but a change in fuel duty does not feature.
Headline measures include a 12% increase in income tax thresholds from 1 January, which should leave a family of four with a £50,000 household income around £1,200 better off next year, and a three-month 2% reduction in SS contributions on the employee, or self-employed, side.
Ministers say its "timely, targeted and temporary" approach follows the advice of its economic advisers and best serves individuals and families.
Businesses will also benefit, they argue, by people having more money to spend. There will be more business-specific measures included in the Government Plan, which will be debated at the end of the year, according to the Treasury Minister.
The 12% increase in thresholds and allowances, including Child Allowances, Additional Allowance and Child Care Tax Relief, is on top of an inflation rate of 7.9%.
Other measures include a six-month delay to reducing the GST threshold on internet sales, which was due to fall from £135 to £60 on 1 January but will now come in on 1 July.
CLICK TO ENLARGE: Proposed allowance rises for islanders included in the mini-budget.
Ministers will also double contributions from the ‘Cost of Living Temporary Scheme’ from £20 to £40 per person per month from this month to December and double the Community Cost Bonus to £516 in October.
Only 1,000 islanders are currently taking advantage of the Community Cost Bonus – which is not dependent on receiving Income Support – yet the Government believe that up to 7,000 people could be eligible.
It will therefore mount a campaign to publicise it further.
CLICK TO ENLARGE: Government estimates of how islanders will be better off following the rise in tax thresholds.
The States pension will also increase by 7.7% - in line with the pension RPI – from October. That equates to a £18.13-a-week increase for a single person and a £30.10 rise for a couple.
Cold weather payments will rise £70 per month from October 2022 to March 2023 and won't be temperature-dependent as it is now.
There will also be an extra Income Support rise in January to reflect the September RPI figure, which the Government say will return £6.4m to lower income families.
It has also pledged to develop a scheme to support families with children who have not lived in the island for at least five years, as all other schemes require five years' residency.
The ‘mini-budget’ – which Chief Minister Kristina Moore promised as part of her ‘100-day plan’ – will mean that £14.7m will stay in the pockets of islanders and not go to the Treasury this year.
Next year, and following years for recurring measures, the total cost of the package is £41.8m, although that falls to £30m when forecasts for increased revenue are factored in.
The Government say that it discounted cutting fuel duty following the advice of the OECD, which recommended that “jurisdictions with administrative systems that can roll out targeted measures which support income should focus on these measures rather than on measures that support price”.
Pictured: The Government say that they want to review the fuel market before committing to any duty cuts.
This is because supporting income-focuses measures are more progressive, their impact on Government revenue is more phased, and cutting fuel duty runs counter to carbon-cutting initiatives.
This week, however, an official petition launched by the head of fuel provider ATF calling for an immediate reduction in fuel duty surpassed 5,000 signatures, meaning it will be debated in the States Assembly.
Addressing this, Treasury Minister Ian Gorst said: “That is the reason why there is no change in this package of measures, because ministers will have to consider fuel duty then.
“Also, we have seen in the last week, when we were finalising measures for this mini-budget, that there were some falls in prices at the pump.
“To some extent, these mirrored declines in the crude pride but strangely we also saw some retailers increasing their prices. We didn’t have enough time to ensure that, if we did bring forward reductions in fuel duty, they would be sufficiently passed on for a sufficient length of time.”
As part of the #100DayPlan the Ministers for Treasury and Resources and Social Security have lodged a proposed Mini Budget to put money back in your pocket. This is an extensive package of measures to address the cost of living crisis.
— Government of Jersey (@GovJersey) August 2, 2022
▶️ https://t.co/Y92HRbdIHT pic.twitter.com/xqKH1MP3pJ
He added: “Ministers have committed to doing a quick review into what is happening in the fuel market, because some strange things seem to be occurring.
“We want to engage with fuel providers to understand what is happening. We don’t want to reduce fuel duty for it to go into their pockets.”
The mini-budget will be debated by the States Assembly at its sitting on 13 September, leaving just over a month for backbenchers and scrutineers to critique and suggest tweaks to it.
Reform Jersey has already said it has "concerns" about the measures, in terms of "whether they will provide adequate support for those who need it most."
In a statement, the party, which has 10 States Members, said: "Upon first inspection, it appears unclear whether the combination of temporary and permanent changes are focused enough to mean that those who are struggling the most will receive the greatest proportional benefit, rather than those on relatively higher incomes. There is a risk that these measures could therefore prove to be regressive and end up increasing inequality in the long-term."
Pictured: Reform Jersey's States Members.
They continued: "It is unclear whether the long-term costs of the structural changes to the tax system have been considered, and whether they risk creating financial pressure in the future to cut public services.
"The proposition also contains no tangible action to address one of the biggest inflationary pressures facing households, which is the increasing cost of private sector rents.
"Reform Jersey’s States Members will begin examining this proposition immediately, with a view to bringing amendments in time for debate in September, if necessary."
Over the coming months, Express will be focusing on how islanders are being affected by the rising cost of living locally and what is being done to resolve it.
Are you feeling the pinch? Are you leaving the island or know someone who is? We want to hear your story, and are happy to speak in confidence.
Email editor@bailiwickexpress.com.
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The Jersey Consumer Council has created the following price comparison tools to help islanders compare the costs of different essentials...
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