Will OAPs be the first hit?
Tuesday 25th September 2012, 5:00PM BST.
TREASURY and Resources’s stance on the benefit upgrades proposed by Social Security is a real kick in the teeth for pensioners. It also represents the first major split in a Policy Council, which hitherto has put up a more united front than the old Soviet politburo.
That show of unity is now under threat and it’s no surprise that on one side of the dispute is Treasury and Resources. The turn-up for the books is that the other party isn’t HSSD or Education, but rather Social Security.
Its new minister was hand-picked by the chief minister and everybody assumed he was selected because of his instinct for spending constraint.
But now T&R are accusing his department of reckless and unaffordable expenditure with its proposed benefits upgrade. Yet T&R seem too spineless to propose any alternative.
What’s going on? It’s as clear as mud.
The report from SSD repeatedly stresses the importance of their proposals being debated at the same time as T&R’s budget.
This all looks a bit silly now that the budget has been postponed for as yet secret but allegedly ‘very good’ reasons.
Then we have both SSD and T&R bewailing the lack of sustainability of the insurance fund. They both say it needs addressing urgently. Yet we’ve been told by Social Security that the reason for the delay is a request to hang fire from the Fiscal Strategy Group – of which the T&R minister is a key player.
It all looks a bit like a Brian Rix farce.
T&R’s solution is a fundamental review of the whole tax and benefit system.
That probably is needed, but the outcome is unlikely to be pleasant.
The more immediate issue is how much to put the old age pension and other contributory benefits up by next year. Under SSD’s standard formula the amount paid to senior citizens would go up by 4.1%, which is 1% over inflation. But this year they want to trim the real terms increase to 0.5% because wage rises have been so low in recent years.
T&R say this is still being irresponsible in the present financial situation and warn members of the consequences of supporting the proposals. But, as I said earlier, they offer no alternative. Now perhaps they have an amendment up their sleeves – a flat RPI increase perhaps – but if so it would have been helpful to mention it in their letter of comment.
Instead, we are left with the department responsible for the island’s purse strings effectively telling members to reject SSD’s proposals.
I know they claim that they are not going quite that far, but, frankly, those are weasel words. When T&R implies something is unaffordable that’s code for ‘reject it’.
If the States did that it would mean a 3.1% reduction in the real value of old age pensions.
And this at a time when so many basic requirements such as electricity and milk are going up in price. Surely that can’t be right, no matter how tight things may be?
On the other hand, perhaps we shouldn’t be surprised. After all, the departments may well look to the chief minister for a lead on big policy issues. And don’t forget that, in his first major interview after being elected, Peter Harwood flagged up pension increases as one area where the States might have to be less generous in future.
If this is the ‘new reality’ for our States then we’ve come to a pretty pass. I think all realists understood that all of those hopeful election promises were so much eye-wash and that there were some painful measures in the pipeline.
But for the first target to be OAPs is a pretty sad reflection on this island’s priorities.
In some ways, however, it’s good that at last this false harmony among ministers has been shattered. Guernsey’s non-party political system has a number of drawbacks, but it also has some benefits. One is that every politician should be able to speak frankly without being shackled by the ‘party line’.
Some really hard decisions need to be made about how to balance our books.
Surely it’s far better for the gloves to come off now and all of the options to be properly thrashed out rather than avoiding the issue by pretending to be in a false harmony?
So, to that extent T&R should be congratulated for getting such a devilishly difficult discussion going.
But OAPs are a truly perverse choice of target to commence their drive for lower States spending.