Fallaize fails to get high earners to pay more
Thursday 25th September 2008, 11:30AM BST.
MAKING high earners pay more in contributions is likely to be back before the States again after it rejected the concept yesterday.
Deputy Matt Fallaize’s amendment to raise the upper-earnings limit, and in turn reduce the States grant – so making more money available elsewhere, was defeated by 31 votes to 16 as members baulked at such a drastic revision with the amount of information available.
For some, timing was a factor as the Social Security Department is aiming to release a green paper in December about future funding arrangements for the contributory funds.
‘One-third of the States was in favour – as the debate went on I thought that if we got that we would be doing quite well, particularly considering a lot of those that voted against were not opposed to the principle but were unsure of the timing,’ said Deputy Fallaize (pictured).
‘I suspect if the Social Security Department was not about to release its green paper it might just have done so based on the principle. I think the States will debate this issue again in the not too distant future,’ he said.
‘The upper-earnings limit based where it is has had its day.’
- A report on the debate appears in today’s Guernsey Press
- To read Guernsey Press stories in full click here for subscription details. Individual editions are now available online.
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Why dont they just stop giving out benefits to everyone that wants them
And actually make some people actually go out and work for a living. They will then pay there social security instead of claiming off it.
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Gsygal – considering that we have almost full employment in Guernsey, I can’t see how you can justify your comment. In any society there will be people who need support. Some people may “play the system” – but the employment figures locally show that this really isn’t an issue in Guernsey.
Well done Matt for bringing this issue to the fore, and congratulations on gaining the support of a third of the house.
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Great politics, one third in favour meaning two thirds voted against it; but principle and timing again are the watch words along with unsure and suspect.
And if you make anything of that you might make a good politician and make sure more money is wasted talking about it than doing something.
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Matt Fallaize – I am in the 5% and frankly getting sick and tired of paying for the 95% for getting the same services as everyone else. I have to pay twice as much as my neighbour to put out 2 bins yet have a smaller family, I am having to pay for new cesspit at a cost of 10k because I live “in the country” with no future plans to ever put me on main drains and whilst you feel we should contribute more, what is in it for me?
The more tax you make me pay the less I shop in Guernsey and will continue to do so as I have to save elsewhere. oh dear!!!
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Whilst I applaud Matt F for having the guts to propose such a move I do question the lack of back to work schemes there are for those who can work who are unemployed and not unemployable. We do not have full employment in the island because we do have unemployment. It would be interesting to see how many thousands of guest workers we have working in Gsy who have registered and are working and living legally. I for one think that we need to do more for those unemployed and also tackle the real reasons why we have so many youngsters who can not find work. We seem to be just ignoring these teenagers but we are creating a feral group whereby unemployment becomes a generational pastime along with crime. It matters not what ability a person does have society should still respect and support al individuals. Still Gsy is turning into a selfish UK town and this will be it’s demise.
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i agree with pete it has already started we are all very selfish and it is costing us our island.I also wonder how many non locals are living and working legally.
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PC – why are you so “sick” of paying into your community? From what you have said, I can only read you as a person who epitomises all that is wrong with our society. Not everyone is fortunate enough to have the intellect/skills/luck to make it into the top 5% of earners. You should be grateful that life has dealt you your lot, and take a moment to think about the fact that the people who empty your cess pit and take away your rubbish live a far less privileged life than you. Or maybe you think we should do away with the public services altogether that you so despise contributing to? Fancy emptying your own cesspit and taking your rubbish to Mont Cuet?
Discontent is growing in this island not because of a growing “feral group” but because more people are getting wise to the notion that they will never ever reach the lifestyles of those to whom we are told to aspire. Greed and selfishness are what breed social ills.
Unfortunately it seems that our elected are still in the thrall of that elite 5% who have the audacity to complain about their state of affairs. Give people a sense of a fair society and achievable goals and then, perhaps then, we will see a genuine desire in every person to work and contribute to our community.
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It would be easier if this ‘tax’ wasn’t just SI but incorporated into income tax (better still a wealth tax!).
If we had followed a better model of taxation, maybe a better sewage system could have been invested in?
It’s all very well boasting and bleating that as an elitist you don’t feel you should pay a penny more (no doubt you feel you should be paying less), but the more civilised countries realised deacdes ago that public services and amenities need funding publicly, the private sector rarely delivers, and so we find ourselves in the skewed mess we are in now.
All the time that this contribution is ‘ring fenced’ then the argument can be made as you say, ‘why should I pay more’. Similar arguments are made in the UK for the replacement of Council Tax with Local Income Tax.
The way out? One central wealth tax, maybe as a function of income, but based on the unearned profits due to market forces (house prices and the like), which means that success is measured with respect to ‘standing’ in the community i.e. the strongest should do more work. It’s a natural expression of human social interaction.
Granted, controls on the welfare state need addressing. Just because the richest pay more doesn’t mean that the workshy naturally benefit. On the contrary, the strongest should be respected as role models and named and applauded year on year for their dynamism and entrepreneurial skills. All salaries and efforts to contribute to the community should be accessible for scrutiny to incentivise the majority. By placing an emphasis on the relationship between hard work, contribution to society and the just respect earned, plus a more rigorous vetting and job placement system, then maybe we can educate the disenfranchised to pull their weight. That would please all, no?
I’m not talking about hammering the rich, or flatlining their efforts, just smoothing and assimilating the abilities of the best we have into the bigger picture.
It would make people proud, wouldn’t it? The same as the more able little old ladies that devote their time and effort to help their peers because nobody else will.
Or nurses and teachers.
You think you can swan about with noses in the air feeling superior (and spoiltly put upon), but that will never earn respect, and so the oft repeated ‘wealth disparity causes societal division leading to entrenched social immobility’ is a direct reaction to this mentality.
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Belinda, Firstly, I have no issue with my income contribution and rightly so as this is the society I live in and should be used as everyone elses to improve our society. What I struggle with is with the mentality that if Guernsey has a problem we get the “if we tax the high earners by this amount we can get X pounds” and then no one expecting any complaints. Why should a service be income or size related? What next? Taxi drivers charging rates based on the size of your house? If Matt F wants more tax in coffers then maybe should look at taxing cigarettes to UK rates and then those who use the services more are paying for them. On second thoughts, please tax the high earners more so they can sleep better than the masses of Guerns who evade tax through the “cash price” trading.
But they will sleep easy given they know if Guernsey has a problem, the states will look at the 5% as its their moral responsibility to pay for services they may never use or are paying for separately through sending children to local colleges or through health insurance schemes.
Final comment, if everyone paid a little bit more then I would not have had an issue but we can not suggest middle or income earners pay more and obviously thats just not politically correct
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For once Lawrence I have to agree with you, if the politicians want to level the playing field why don’t they look at, house holders for example
Why do cesspit users pay for sewage removal and main drain users don’t at the end of the day the main drain system needs maintaining as well, if you had 20000 houses on mains contributing £300 a year that would bring in 6mil
Why does St Peter Port get two rubbish collects a week and the rest one, surely its cheaper to do just one?? Why not charge per bag?? That would stop people who put out three for four taking advantage and others who recycle would save.
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Contrary to some of the more wild suggestions I have heard, I do not wish to tax the wealthy to the point of extinction.
My amendment was a modest proposal to raise an additional £5.7m. a year, and make the tax and contributions system slightly fairer in the process.
At present, income is taxed at 20%. Notwithstanding a very modest personal allowance, it is 20% whether you earn £30k, £100k or £500k a year.
This flat rate is comparatively very attractive for high earners, who in most other places in the world would be living under a progressive tax system and would therefore be in a higher tax bracket and paying at a considerably higher percentage rate on a portion of their earnings.
My amendment did not seek to establish anything approaching a progressive system. Instead, I was proposing extending the flat rate – 6% for employed, 10.5% for self-employed – to those earning above £70k a year as well as those earning less than that.
The insurance principle behind Social Security was abolished two years ago. All contributions remain ring-fenced for use on traditional Social Security benefits such as pensions and specialist health insurance. But a redistributive scheme of contributions applies where you pay into the fund according to your means in order that everyone can benefit according to need.
You may disagree with the breaking of the insurance principle – but that was the historic decision made by the last States. And as I said in my speech in the Assembly, I do not recall a single candidate standing at the last election on a platform of pledging to re-introduce the insurance principle.
Social Security is now a ring-fenced tax. Anyone who claims otherwise is holding onto an anachronism that disappeared two years ago.
At present, if you earn £30k or £40k a year – in fact, if you earn anything up to around £65k a year – you pay contributions on 6% of every penny you earn.
However, if you earn £100k a year, you pay contributions at a rate of less than 4% on every penny you earn.
It would be preposterous and hugely regressive were we to introduce a system of income tax where you paid at 20% if you earned £65k a year, but, say, 10% if you earned £200k a year.
It is an equally preposterous and regressive notion when applied to Social Security contributions.
As I say, my amendment would have helped make the system fairer for all. And it would have raised a not inconsiderable sum of money at a time when public finances are under unprecedented pressure, and we are in desperate need of raising more revenue post-zero-10 in order to deliver pressing capital projects such as new schools at Les Beaucamps and La Mare de Carteret, improved mental health facilities, and solid and liquid waste plants.
Incidentally, my proposal to raise the cap on Social Security contributions also featured prominently in my election manifesto. So I found claims by some deputies that I had no right to bring forward my amendment somewhat disappointing.
Nonetheless, I was able to persuade only one-third of the States that now was an appropriate time to raise the cap, and so my amendment was quite properly defeated. It was a democratic decision which I fully respect.
One more thing. After the debate, at least half-a-dozen members who voted against my amendment told me privately that they did not oppose the principle of lifting the cap, but felt this was not the right time given that Social Security is due to publish its long-term contributions and benefits green paper later this year.
My guess is that were that green paper not on the horizon, the House would have been split almost 50/50 on my amendment. And I stick to what I said straight after the debate – the upper earnings limit, at least at its current level, has had its day and won’t last much longer.
May I thank the many people who called or wrote to offer their support on my amendment; to those who were opposed, I am sorry that I was unable to persuade you of the merits of my case on this occasion. And well done to those who won the debate this time.
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Matt you said
“At present, if you earn £30k or £40k a year – in fact, if you earn anything up to around £65k a year – you pay contributions on 6% of every penny you earn.
However, if you earn £100k a year, you pay contributions at a rate of less than 4% on every penny you earn.”
This is not true for the self employed who actually pay a lot more then this per pound, so your amendment would penalise those you choose to take the risk to run their own business, when in fact the affected employees would have more likely had the amount covered by their employees.
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Well put Matt. You did a fine job.
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Yes Matt, well done.
It is amusing to see how hysterical the wealthy get when their inequitable tax burden is questioned.
When I say amusing, I mean quite sad.
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Harry,
I have a great deal of sympathy with the position of the self-employed. Mind you, I have been self-employed for the past three years, so some might say “you would say that”.
However, I am of the view, and have been for some time, that self-employed people have historically had a poor deal with Social Security – paying contributions at a higher rate than employees, and in some instances receiving less help when in need.
I said in the States last week that I hoped Social Security’s green paper would include options for a better deal for the self-employed.
However, under the present system with the contributions cap where it is, a self-employed person on £30k, £50k, or £65k a year pays contributions at a rate of 10.5% on every penny earned, whereas the self-employed person on, say, £100k a year pays at a rate of 6.8% on every penny earned.
The current system is failing the 80%+ of low- and middle-income self-employed islanders who are having to pay at a percentage rate that is higher (and in some cases double) the percentage rate paid by high earners.
In no way did my amendment propose to leave the self-employed with a worse deal. Ironically, the people who would really ‘hammer’ entrepreneurs are those that advocate a return to the very insurance principle which has hit the self-employed so hard and for so long.
Some States members said they opposed my amendment because of concerns about the self-employed. They refused to raise the cap and levy a rate of 10.5% on self-employed people earning between £70k and £115k a year. Having rejected my amendment they then voted with the department’s recommendation to levy a rate of 10.5% on all self-employed people earning less than £70k a year. I ask you – how was that fair to the 80%+ self-employed on £70k a year or less?
Anyway, as I said in my earlier post, the States rejected my amendment democratically. I did my best to make the argument in favour of it, but failed this time.
I don’t think there is anything more I can add on this issue at this stage. Thanks to all for your feedback – good and bad.
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Please try again at some stage Matt, as any logical person can see the current system is grossly unfair and requires changing as a matter of some priority.
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Lawrence, its not half as amusing as watching a socialist try to tear apart everything about Guernsey’s very successful economy.
Remind me again how many unemployed people we have, how many homeless we have, what our average wage is, what a good medical system we have and what fine exam results our pupils achieve and compare all of those statistics with any other economy you choose to select. Seems to me that we are not doing too much wrong other than not looking after the genuinely poor as well as we should.
However in order to help the truly needy there is actually no need to throw out the baby with the bathwater and undo everything that works in Guernsey by becoming the socialist state that you so desire. As a high-earner I am probably one of the few who agreed with Matt Fallaize’s proposals to lift the cap on social insurance and if that projected extra £5.7m was to help those who genuinely need it then I really don’t have a problem with that, but as for wealth taxes, progressive rates of taxation etc – they are totally unnecessary.
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Yes, David, let’s bring in something like GST to fill the hole.
Nobody is wanting a baby/bathwater moment, just some equality of burden.
How come we have such a high illiteracy rate, David? A health system dependent on Insurance companies? Sewage on the beaches? Rising mental health concerns? The worst housing crisis since the 60s? We are supposed to be rich and successful. Maybe you are, David, but many aren’t, and have little hope of ever becoming so. Of course you are right that destabilising the finance industry would result in some hardship, but I don’t really see the correlation between a progressive tax regime and finance houses running for the hills.
Surely the corps should be in it for the long run? Stable politics, happy population, reciprocal admiration? Or do we just want to build Guernsey up into a Monaco?
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Lawrence I have always been a fan of GST and remain so, provided that it is accompanied by tax credits to effectively make it a non-issue for low earners, and that the revenue raised is used where it should be used, to benefit those who really need it.
How bad is our illiteracy rate and how serious is the problem ? Not bad enough to cause unemployment of more than 200 which is an extremely low rate by any standards.
How much of a problem is it that so many people rely on insurance companies to provide health cover ? As long as those who aren’t able to rely on insurance companies receive the health care that they require under the social insurance system, where’s the problem ? I would not wish to see the States invest massively in health services when so many people wouldn’t actually need to use it because of their private insurance arrangements which they seem happy to pay.
Sewage on the beaches ? Yes, that’s a big problem in anybody’s book. Likewise the growing mental health concerns.
Biggest housing crisis in 40 years ? There are shared ownership arrangements in the marketplace which can be adpated and tweaked for the Guernsey market and which are probably more ideal for Guernsey than they are for the more diverse UK market. Natural market forces are not going to solve this problem but nor are the States going to build hundreds of cheap houses or supply cheap land.
So my solution would be to introduce a GST, raise the ceiling on social insurance contributions, introduce related tax credits for the low earners and expand shared ownership housing schemes. This won’t crack the beach sewage or mental health challenges though, which are far harder nuts to crack.
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David asks “How bad is our illiteracy rate and how serious is the problem ?”
Look at the College of Further Education and you will see just how nuch of a growth area remedial work is.
The nunmber of stff employed on remerdial work has increasee substantially in the past 4 years.
Add this to the special schools and you have a major question to ask of the Education Department and the failure of the secondary modern schools to provide the basics for these youngsters.
To give credit to the CFE staff,at least those few who were there five years or so ago, they worked wonders with these youngsters.
It still leaves the question of how the teachers in the seconfdary moderns failed.
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Stephen I believe you have a strong education background but does the fault definitely rest with the secondary schools ? I would have thought that a significant element of the process of learning to read and write would normally take place prior to age 11 and therefore within the primary school system. Is it too late by the time they reach secondary school age ? I am not questioning your specialist knowledge but as a layman I wonder whether the “blame” is being laid in the right place.
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Matt Fallaize seems to be from the old Labour school of politics, ie the tax and spend type of politcian. Populist and envious of the rich.
I am in the top 5% and already I buy everything I can off this expensive little island. Taxing me more means I spend less on island as I will try to do this even more. I suggest he thinks carefully before carrying on with his ill thought out politics of envy/
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Chris
Envious of the rich? Who would want to be envious of being so greedy? Those who work hard to ensure that your quality of life is maintained should not be treated with so much disdain. And you wonder why people are starting to suspect that this inequality need not be lived with?
Are your riches more deserved than the non-riches of a nurse or of a teacher or a road sweeper? Are you so qualified and so important to our society that you probably earn SO much more than the cogs and wheels of our ‘rich’ society? I doubt it very much. The money movers and avoidance facilitators should not get a bigger slice of the pie than the others. Salary and bonus should be based on sustainable merit, not vanity and greed.
This ‘expensive little island’ is getting more and more expensive because the rich can afford to pay for it and so the prices rise.
That leaves those on below RPI increases (generally locals) year-on-year to suffer as a result of your profligacy. Soon only the non local wealthy will be able to afford ANY house, and will no doubt buy-to-let at ‘market’ prices and so compound the situation. The distortion in these markets means that as a direct result of unequal pay and tax responsibilty, it impacts directly on the majority and restricts their abilities to improve their lot.
It would seem that your politics dates back to the middle ages and the power of the landowner. Deputy Fallaize is merely hinting at other economic models that are proving more successful at marrying social need with individual avarice.
There is no envy in politics, only a desire for justice for your electorate. Otherwise you’re in the wrong game.
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Chris
You are totally wrong about Matt Fallaize. He is avery pleasant young man with a strong social conscience and whose onjective is a better Guernsey for all.
Your comments say more about you than they do about Deputy Fallaize.
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David
Just read your informative reply.
Yes, the primaary system must also have let down those who were also let down by the secondary moderns.
What amazed me at the CFE was the development of so many remedial students in a short period of time. This applies to both numeracy and literacy. I recall some electrical apprentices who could not add a half and a quarter on reachiung the CFE. I didn’t believe it until I was shown the test papers they were given by the Maths lecturer (in those days the CFE had one Maths lecturer). That was circa 1990. Within a few days they were making up for lost time.
If the CFE staff (and I am talking of 5 years and more ago) who were not specialist teachers, could achieve so much in so litle time; how come the specialist primary and scondary teachers failed , and failed for 9 years?
I don’t know the answer.
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Lawrence states:
“Are your riches more deserved than the non-riches of a nurse or of a teacher or a road sweeper? Are you so qualified and so important to our society that you probably earn SO much more than the cogs and wheels of our ‘rich’ society? I doubt it very much. The money movers and avoidance facilitators should not get a bigger slice of the pie than the others. Salary and bonus should be based on sustainable merit, not vanity and greed.”
Sounds rather like communism to me…
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David states:
“Sounds rather like communism to me…”
Sounds rather a feeble response to an innocent question to me…
But still, it is well understood that the finance industry brings in the dough. That is good and necessary. It’s the individual aspect of rewards earned above merit that some folk see as divisive and illogical. Worse than that is the incessant defence of tax mitigation that sees the better off paying less in proportion to the people that clean their houses and offices.
Tax credits paper over the cracks of immoral salary and bonus schemes. We shouldn’t need them. They are expensive to run, notoriously inaccurate and generally difficult to understand if you are uneducated or old.
It may well be the best we can manage over here since the wealthy will throw their toys out of the pram at any mention of social justice, as we have seen.
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Lawrence – good luck with your communist recruitment campaign within Guernsey. You will need it !
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Perhaps David would care to justify (not merely explain) why ““… your riches more deserved than the non-riches of a nurse or of a teacher or a road sweeper?”
How does David eplain the relative contributions?
How is someone in finance more deserving than a nurse?
Afetr ball these questions have been asked for many years without the retort that it is part of a communist recruitment campaign.
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The amendment did not fail in my view as it has highlighted, indirectly, a flaw in the way our Island Revenue is configured. Whether Matt agrees I would not know but the funding that is needed to keep the Island healthy is little different to the principle that governs the need to keep the Island educated. The difference being that health needs are indeterminate whereas education can be assessed. So it is a little crazy to pluck figures from the ether and work out a pro rata scale when the figures can only be a guess and a poor one at that. As such health ought to be funded wholly from general tax revenue and the present system of contributions abandoned.
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Single bloke, self employed, £40,000 – no other allowances. GSSA and IT around 26% (10,400).
Same bloke £79000 – GSSA and IT around 28%(22100).
At £109000 – GSSA and Tax 26%. (28,300)
At £200000 – GSSA and Tax 23%. (43,000)
Hardly a burning injustice. In every case, the higher earner contributes substantially more.
Plus, with more to spend, the states get more in all the other taxes, too.
By the way, Rich old age pensioner with £300k income pays £2054 at 2.6%. And there’s a few of them around, too – some in the states.
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