Billet Blog: 1-2 November 2016


Billet Blog: 1-2 November 2016

The first of three States Meetings in November (we meet again on 15 November to talk about the Policy & Resources Plan, and on 30 November to debate other business, no doubt including the future of secondary education) will begin with the Budget, and will also include the Committee for Employment & Social Security’s annual report on Benefit and Contribution rates. In addition, there will be business carried over from the last meeting, and a few other small items.

Billet d’Etat XXVI – 1 November 2016 (read it online here)

The States of Guernsey Annual Budget for 2017
(link) Responsible Committee: Employment and Social Security

The Budget is the only item of business on the first day of the November States Meeting. I wrote a blog post here where I tried to look at the combined impact of the Budget and Benefit / Contribution Rate proposals (which will be discussed on day two) on ordinary Guernsey households. The bottom line is probably not much change. There are some regressive measures (that is, measures which hit all households equally regardless of their ability to pay) – such as increases in TRP – and some decent progressive measures, such as changes to document duty (which should reduce the costs of buying housing at the lower and middle end of the market) and the gradual removal of personal allowances for people with income above about £140,000. There is a useful summary of changes on pp85-86 of the Budget.

Two amendments have been laid: the first, by Deputy Roffey, directs P&R to investigate some form of motor tax for next year’s Budget, in order to balance the drop in income from fuel duty; and the second, by Deputy Ferbrache, seeks to introduce 15% GST on the supply of legal and accountancy services [edit: Deputy Ferbrache has withdrawn his amendment].

The Committee budgets for 2017 are set in the appendix to the Budget. All Committees are required to find 3% savings on their current level of spend. Most have reported that will be achievable: however, the Budget also says there will be additional 5% savings in 2018 and 2019 (para 1.17) to help reduce the deficit. Those targets will be, as P&R put it, “exceptionally challenging.”

The Budget recognises that there has been, and continue to be, insufficient money allocated to the capital reserve to fund the development of our infrastructure at an appropriate level. In 2016, £37m should have been allocated to the capital reserve. In the end, only £18m was allocated, in order to balance the books. We’re now being asked to reduce that further, to £13m, as the in-year deficit was larger than expected. Against that background, P&R are looking at new ways to increase revenue next year, including by the return of £4m in Guernsey Post shares and £6m in Guernsey Electricity shares, and a direction on the States’ Trading Supervisory Board to return at least £5m to the capital reserve from its trading assets in 2017 (see paras 7.5-7.18).

Finally, although there are no specific recommendations on either, the Budget addresses the current situation with Aurigny (paras 9.30-9.41), which the States will have more opportunity to discuss when the Strategic Review of Aurigny is complete; and with the Bond (paras 9.20-9.29). The States has so far managed only to lend on £132m of the £330m bond, and the rest of it has been reinvested with other States’ investments – getting off to an inauspicious start last year, when the investment return fell nearly £6m short of the interest payment due: a situation which has apparently now been remedied. The most concerning statement, to me, is in para 9.29, where P&R expresses an intention to investigate whether bond funds can be lent on to “organisations which are not part of, or wholly owned by, the States.” As I understand it, the bond was initially issued with very strict lending criteria and, as soon as those begin to be relaxed, the States is moving into dangerous territory.

Although the propositions themselves are generally fairly benign, the Budget is full of meaty subjects, and it is likely to be a long and lively debate.

Billet d’Etat XXVII – 2 November 2016 (read it online here)

Items Deferred from Meeting on 12 October

There are three items deferred from the meeting on 12 October: the end of the debate on the Island Development Plan; a small policy letter from P&R on Double-Taxation Arrangements; and the ESS Committee’s report setting the 2017 Minimum Wage. I have covered the IDP here, and the other two reports in the October Billet blog here.

The States debated and reached a decision on all the amendments to the Island Development Plan during its October meeting. A number of the agreed modifications have been brought together in a summary amendment (Amendment 33), which will now need to be endorsed by the States, together with approving the Plan as a whole. Although the October debate was long and heated, it centred mostly on three topics – affordable housing, tourism, and parking – while the majority of the Island Development Plan, which covers a much broader scope, was largely unchallenged, and the general spirit of the debate was to try and ensure that the Plan could be amended sensibly, so that its adoption was not delayed.

Other Business

Benefit and Contribution Rates for 2017 (link) Responsible Committee: Employment and Social Security

As discussed above, I have tried to look at the combined effect of the tax and social security proposals in a separate blog post. Both Committees recognise the importance of continuing to work together – following the precedent set by the Personal Tax, Benefits and Pensions Review in 2015 – to ensure that the two systems work together fairly and effectively.

The general effect of these proposals will come as no surprise. There is a 0.5% increase on all contribution rates, as decided by the States in its debate on the Supported Living and Ageing Well Strategy, which will be used to provide a few more years of life to the long-term care insurance fund, which subsidises the costs of residential and nursing care. The actuarial reviews of the three Social Security funds (the social insurance fund, for contributory benefits; the health services fund, which funds the contracts for secondary healthcare and other medical costs; and the long-term care fund), which are attached to this report (p66 onwards) show how challenging it will be to sustain the funding of the social security system as the population grows older.

In keeping with another policy agreed by the States, pensions will be increased at RPIX + one-third of the additional rate of increase in earnings, which, this year, is only 0.8%. The same rate will be applied to contributory benefits. Non-contributory benefits will be increased at the rate of RPIX only (0.6%). The rate of Family Allowance will be reduced from £15.90 to £13.50 per week in 2017, in keeping with the States’ decision to reallocate that funding towards provision of universal preschool education.

The biggest disappointment, on the part of my Committee, is the fact that the States approved the report of the Social Welfare Benefits Investigation Committee in March and no progress has been made on finding the funds to implement it – meaning the earliest possible start date, now, is 2018. The changes were meant to ensure that income support for the poorest households lifted them above an intolerable level of hardship. For many of us, that kind of need only crosses our radar when we get involved with individual casework at our parishioners’ request – however, it’s more widespread than we realise: in my Budget and Benefits analysis, I found that one in five households here lives on less than £17,800 a year – many of whom are pensioners – and even households with income into the £20,000s may need some additional support if there are children involved.

As discussed here, I will also be challenging propositions 23 and 24 of my Committee’s report, which seek to impose a five-year residence requirement on people in certain parts of the Open Market before providing any access to support.

Legislation Laid Before the States

The items in this section are statutory instruments (orders and regulations) which are agreed and put into action by individual Committees of the States, in line with their powers and duties. The States do not have to approve these (they are in force from the moment the relevant Committee decides) but we do have the power to annul a statutory instrument if we don’t agree with it. This would be quite an unusual move. There won’t be any debate about these items unless there is a motion to annul one of them.

This month there are two regulations made by the Committee for Employment & Social Security to amend the list of items which can be prescribed locally, and to update the prescription forms used by doctors and dentists.

Legislative Business

The High Hedges (Guernsey) Law, 2016 (link) Responsible Committee: Development and Planning Authority

This law creates a complaints process for people whose homes are affected by a neighbour’s high hedge blocking out the light. Under the law, the Development & Planning Authority will be able to direct alterations to those hedges (including a reduction in height down to two metres, but not less) in order to reduce their negative impact, if the complaint is upheld. There will also be an opportunity for the owner of the hedge to make representations and, if need be, to appeal.

The Income Tax (Guernsey) (Amendment) Ordinance, 2016 (link) Responsible Committee: Policy and Resources

This ordinance makes some amendments to the income tax law, including: giving the Director of Income Tax the authority to notify people that they don’t have to submit a tax return, when all their income is taxed at source; to remove the right of appeal against interim assessments (but maintaining the right to appeal against decisions of the Director of Income Tax); and to make it possible for a ‘reward scheme’ to be set up for people who provide information to Income Tax which leads to the recovery of unpaid taxes. It also provides for people to receive Guernsey income tax allowances in connection with their Guernsey old age pension, even if they are not resident in the island.

The Financial Services Ombudsman (Bailiwick of Guernsey) Law, 2014 (Amendment) Ordinance, 2016 (link) Responsible Committee: Economic Development

This tweaks the Financial Services Ombudsman law to make sure that terms in the legislation which relate to the Guernsey financial services sector can also be read as relating to the Jersey equivalents, in light of the fact that the function is shared between the two islands.

Prison (Guernsey) (Amendment) Ordinance, 2016 (link) Responsible Committee: Home Affairs

This ordinance provides that the Committee for Home Affairs will appoint the members of the Independent Prison Monitoring Panel, with States’ approval, and allows for public sector employees to become members of the Panel.

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