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Measures brought forward by the Government to address increases in the cost-of-living have received a mixed reception from local charities and business group, with several calling for more action.
The ‘Mini Budget’ includes measures such as 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 Social Security contributions on the employee, or self-employed.
Ahead of the proposals being debated and voted on in the States Assembly on 13 September, they're being reviewed by the Corporate Services Scrutiny Panel - a panel of backbenchers chaired by Deputy Sam Mézec responsible for analysing the work of the Chief Minister and Treasury Minister.
Several charities and business groups have been sharing their views in letters to the panel, which Express summarises below...
Jersey’s Fiscal Policy Panel
Pictured: The Fiscal Policy Panel was not consulted on “the size of the package in the Mini-Budget” according to its Chair, Dame Kate Barker.
The Fiscal Policy Panel - an independent team of top economists tasked with advising Government on its economic policy - was not consulted on “the size of the package in the Mini-Budget” according to its Chair, Dame Kate Barker.
They described the scale of the mini budget - £45m without the change to income tax allowances that was previously planned - as “significant” as it represents around 2% of estimated annual household income and less than 1% of the GVA estimate for 2022.
“It is likely to have a more significant impact for lower and middle income households,” the Panel noted. The Government needs to strike a difficult balance: doing too little will leave low-income households bearing disproportionate costs; doing too much will adding upward pressure on inflation.”
Whilst the Panel deems the package “reasonable” given the “deteriorating outlook”, they said their judgement was made against “a highly uncertain backdrop”.
They added that “long-term inflation” was not a major concern given the size of the package and the impact higher energy prices will have on households and businesses, however warning that the Government should be prepared to withdraw some measures should prices not rise as high as predicted.
On the flip side, the Panel suggested that, should “energy price shock proves prolonged” and interest rates fall, the Government might have to make some “difficult fiscal choices”.
Pictured: The Consumer Council said tax allowances might not be as effective as planned.
Carl Walker, Chairman of the Consumer Council, welcomed the “quick action” of the new Government, noting that the previous one had “ignored” their warnings and requests.
He welcomed the majority of the measures but raised concerns about how efficient, and how soon, they would be.
He said the Council was concerned that the effect of income tax allowances might not be felt “for some time” and could even be offset by the move to independent taxation and removal of prior year taxation.
The Council also noted that the reduction of Social Security Contributions would benefit all working islanders, but not benefit all islanders, as pensioners and those who don’t pay contributions will be unaffected. Members believe this measure, if adopted by the States Assembly, should be extended to the end of March 2023.
Turning to the increase to States Pensions, the Council described the measure as “much needed” but added that it will not immediately benefit pensioners and is below inflation, which is likely to peak between winter 2022 and spring 2023. They also suggested it will be virtually erased by the 5% JEC increase that will come into effect on 1 January 2023.
The Council also suggested many islanders, who either fall just above the income support threshold or below that of the Community Costs and Cold Weather Bonuses, will also need help.
Pictured: The Consumer Council is calling for the removal of GST on food.
They made a number of suggestions including not only the delay of the reduction on GST imports to 1 January 2024, rather than just 1 January 2023, but the removal of GST on food.
They also recommended energy cost support for all islanders, either in the form of a temporary removal of GST or a one-off £100 credit voucher and suspending the 9p fuel duty for three months.
The Consumer Council is also calling for support with doctor’s fees, which would see surgeries reduce their fees by up to £15 per visit; a Christmas Bonus for those on income support and State pension and a cap or rental band for private rental costs.
Finally, they are also calling for a review on UK brands who charge VAT equivalent prices on locally sold items, explaining them as shipping and location costs.
Pictured: The JHA raised concerns over the absence of measures directed at supporting local businesses.
Jersey Hospitality Association, which includes 300 members across the hospitality industry, welcomed the proposed changes but raised concerns over the absence of measures for businesses.
“We will have to wait until the main budget is published in the Autumn to see whether the new Government genuinely appreciates the pressure many of the small independent enterprises that make up our membership are facing,” Claire Boscq, the JHA’s Chief Executive wrote.
Ms Boscq noted the Government’s mini budget proposal doesn’t explain why the reduction in Class 1 Social Security contributions only applies to employees, noting rising costs remain a real concern for many businesses in the industry.
“Suitable accommodation remains extremely difficult to find and for the employee paying social security, it is unfair that they cannot access the benefits they pay into for the first six months they are here,” she added.
Ms Boscq also voiced the JHA’s surprise at the face the proposals didn’t include a reduction in GST.
“The quieter time during the winter will be upon us very quickly and many businesses are concerned what effect a recession will have,” she wrote. “We would argue that if inflation does continue its upward trajectory, we will see a recession which would have devastating consequences on ordinary islanders and businesses. Surely a reduction in GST would be a sensible option for the Government to consider.”
Pictured: The Government's proposals “falls far short” for the poorest on the island, according to the Trades Union Council.
The Jersey Trades Union Council, which brings together a number of local unions, said that whilst any measure which puts extra money in people’s hands is welcome the Mini-Budget any assistance, “falls far short” for the poorest on the island.
“The most recent cost of living figure (RPI) is standing at 7.9% and doubtful to drop much over the course of the next twelve months , the previous two figures this year were 3.8% and 6% respectively, meaning many households have been out of pocket for most of the year, struggling to survive under the current circumstances,” Leigh Devine, the Jersey TUC’s Secretary wrote.
Mr Devine wrote explained the proposed reduction of social security contributions would represent an extra £10 per week for those earning £500 but only £7.36 for those on the minimum wage over 40 hours.
“Yet the mean average wage in Jersey was £820 in June 2021 and would see these individuals benefitting from an extra £16.40 in their pockets, based on that figure, this is hardly equality,” he added.
“Both the lower figures, fall well short under the current climate, taking into consideration the costs of energy, food, and fuel. The poorest on the island require far more, to be able to live adequately and to not just exist and struggle, day by day, week by week.”
He described proposals to increase the tax threshold as “inadequate”, stating the proposed budget does nothing to address the issue of the poor measure of inequality in the island.
“It just makes matters worse,” Mr Devine wrote. “The lowest earners need and deserve more support.”
Pictured: The Trades Union Council wants tax thresholds to increase for pensioners and islanders earning less than £30,000 a year.
In addition to the proposals brought forward by Government, the TUC believes Social Security contributions should be covered for the rest of the year and the tax threshold should be increased further next year for the island’s lowest earners (under £30,000 per year) as well as pensioners on similar earnings.
“Households on benefits to receive equal support as to be across the board,” they added. “Rents should be frozen for the next 18 months with all properties available to rent regulated, providing fairer and hopefully more affordable accommodation. Cancelling or at least reducing GST on food and energy bills will a go long way to help all islanders.
“These would be more concrete measures to assist the poorest off on our beautiful island, providing them with some sort of security over the next 18 months.”
Mr Devine concluded his letter noting the required costs arising from those measures should be covered by the Strategic Reserve. “We need to help islanders and the poorest need to be top of the list. Surely this is the use for the Strategic Reserve!,” he said.
The Council also noted there should have been a “wider, more broad-church” consultation on the measures, including community groups, charities, social services , trade unions and others before the proposals were submitted.
Citizen’s Advice Jersey also supports the Government’s “proactive approach” ahead of what they say is expected to be “exceptionally difficult winter in terms of increasing costs”.
Claire Mulcahy, the charity’s Chief Executive Officer, said the proposals will provide “some reassurance” to the local community, particularly those in low-income households.
“However, CAJ does see islanders both on benefits and not on benefits equally struggling with their finances, whether this be rent, bills, groceries, debt repayments etc. some of those not on benefits are over the threshold, whilst others do not meet residency criteria,” she added.
She said it is currently “difficult” to say where the proposed measures will be effective to meet the extent of the expected cost hikes, which is currently unknown, suggesting “further measures” might be necessary later in the year.
She suggested reviewing the reduction in Social Security contributions towards the end of the year to assess whether an extension will be needed to cover the remaining winter months.
Express disassembles the mini budget in five minutes...
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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