New benefits deal could cost £20m.
Friday 27th January 2012, 2:30PM GMT.
Social Security minister Mark Dorey
SOCIAL SECURITY has put forward proposals that could see £20m. a year spent on improving benefits and tackling poverty in the island.
The report, which recommends higher rates of benefit, improved rent support for low income families and combining the rent rebate system with supplementary benefit, will be debated by the States in March.
However, it gives only estimates of how much extra the new Income Support system, would cost – somewhere between £8m. and £20m. a year.
There is also no indication where the extra money would come from, something that both the Treasury and Resources Department and the Policy Council have objected to.
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I hope the States see through this and send SS packing until they can put a proper proposal together, by that I mean a full report with clear detail on how these grand ideas can be funded properly.
What on earth is the point in debating this issue with the critical details such as how to fund it completely missing?
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Ah I love it.
So they don’t know how much the ‘scheme’ will cost and don’t know where the money will come from either.
Aren’t they supposed to be saving money?
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Why would the states ever vote for that? Surely this must be a wind up by the Guernsey Press. Isn’t one black hole enough?
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In these lean times, why are we increasing benefits? Any money that could be allocated to this area should surely be spent on getting people back into the work place (so that they can fund their own families and contribute to society) rather than rewarding them for doing nothing.
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Well done at last SS, well done Mr Editor GEP opinion,
Shame on the objectors those politicians should take the twighlight walk now.
Fund it easy,
A decent minimum wage so we are not susidising private profit.
A punative tax 200% on excess property profits so we dont subsidise them either.
End Overseas Aid until its sorted, I’m sure the kids at the bottom would rather you used your own money to salve your middle class consiance.
Trash a flagship Vanity project or two after all what is the real priority?
End funding to the Arts, Sport etc whatever it takes.
Wait for the avalanche of posts from the haves trying to justify the unjustifable that this shameful situation be allowed to continue any longer.
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Does this new system mean that those in the private sector will get help with their rents as well?
This is good news for them and even better news for greedy landlords who will put rents even higher as they will know it is a guaranteed income.
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dorey, brouard, le lievre and the rest of SSD are a bloney disgrace – please go now
what planet are they on?
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Publising this without the key details and the timing -stinks of election tactics!
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Hi M
Firstly, benefits aren’t just paid to the youngsters you see smoking outside Edward T Wheadon house. For example, supplementary benefit is also paid to pensioners (32% of claims).
Secondly, if you read the Billet – as I’ve just been doing, hence the stat above from page 977 – you’ll find there’s a huge emphasis on getting people back to work where possible.
Seems the big price tag comes because Guernsey has been soft-pedalling on its responsibility to keep vulnerable people out of poverty for years and years. The current Supp Ben system is forty years old. Procedures have stayed pretty much the same in that time and rates have been set based on the previous year.
Finally SSD have ripped the old system apart and taken a detailed look at what different groups of people actually need just to keep their chins above water. No pensioner in Guernsey should be afraid to use their heating. As the Editor said in the Comment column yesterday, the cost comes not because SSD are being over-generous but “…because the island’s worst off have so little”.
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Well said Ellis. If any of you are concerned about what SSD are proposing maybe you should go and read the Billet, this isn’t just a “back of a fag packet” proposal.
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I think we should try and get some rational debate into this topic.
First of all in my view, it is about time the States had a dedicated debate on the plight of the poorest section of our community. We can find any amount of time to discuss the finance sector and our own pay but very little it would seem to discuss the lives of people who find living in Guernsey a daily struggle. Much of what is in these draft proposals is about what we can do to get people to help themselves, its about getting people back into work or training so they can fend better for themselves in the future.
Housing’s interest in this, is about the rebate scheme merging it with the benefits system makes perfect sense and remove duplication between the two departments, after all a rent rebate is a benefit. At present if you live in social housing you actually get quite a lot of help from the States, for instance you pay no more than 25% of your income in rent which includes you refuse and water rates, with hefty rebates for those on low and fixed incomes. However if you happen to live in the private rental sector you get no help with your rent at all and many find themselves having to live on what is left after the rent is paid which in some families is not very much, it is quite frankly a scandal.
There are lots of working families in the private rental sector who just can’t, no matter how hard they work make ends meet. What some of these proposals are saying is that it should not matter where you live, if you are entitled to help and if your weekly income falls below a minimum level, depending on you family circumstances then you should be able to get it.
It is also about lifting the benefit cap, at the moment it is set at £450 pounds per week regardless of you family circumstances, which is completely unfair and so it is the same if you have one child or six that cannot be right.
It is natural for those looking at this to think this document is all about people on benefits, it is not, it is mostly about people who even though they are working lots of hours still cannot earn enough to live properly in this community and at long last proposals to do something about it. All of us know that the gap between the haves and the have not’s in Guernsey gets wider every year.
As for benefits, there are many people on benefits because of no fault of their own, who are living below the poverty line mostly because of the benefit cap. The new proposals will help your family according to its individual needs.
As I said there is quite a lot of stick in this report when you read the detail as well as the carrot that will help more people regardless of where they live. The funding issue is a problem but remember when you look at these figures that we already forgo 10 million in rent rebates so even though the figures are scary there is already some slack in the system. I understand the arguments over funding and none of this will happen over night but it must at least be right that we have a debate on the subject.
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Deputy Jones – I totally agree with you, a debate needs to be a priority.
I would also be interested in getting accurate figures of the levels of poverty on Guernsey. I think some islanders would find it eye opening to realise, for example, how many young people pass through the various care / support projects….or how many are homeless. You don’t need to be sleeping in a cardboard box to have no fixed address, the hidden homeless are those who “sofa surf” and live on the kindess of friends.
Surely this must have a bearing on falling education standards – a topical issue at the moment.
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Agreed, plus figures to be published on the wealth gap between rich and poor over the last 10 years so we can all see if this differential is increasing or not.
Let’s not have a repeat of the GCSE debacle in which key indicators such as the above are not disclosed to the public.
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Well said Minister Jones.
Can we also address the Elephant in the room, there are not sufficient good quality housing units on the island to meet demand, therefore simply giving more people more money to compete for insufficient units is simply by supply and demand going to cause rental and purchasing inflation. In a years time people will be back in the same position financially compromised by the cost of their roof.
What is the shortfall in housing units across the board, overcrowded,poor quality, homeless,adults still with parents, lodging in single rooms etc and not just the rental sector. Owner occupier families are also overcrowded and financially pinched, the WHOLE demand.
Also if we are using public money to bring the low paid up to the mark the minimum wage needs to be set at a realistic level. Why should Joe Public subsidise the private profits that Fred the builer gets by underpaying his staff?
What percentage of the 5000 odd (2010 figures) of active housing licences pay below the mark of needing Social Security support?
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I’m sure measures could be taken to improve the fairness of social housing tenants compared to private tenants, but this is about improving the allocation of existing resources within social services… the debate would need to be about where £8-20m of cuts come elsewhere in the department to fund these measures, if adopted.
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Top post Dave Jones. Very well said indeed.
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It is a shame that Social Security have made a mistake in bringing this forward without more fully worked proposals.
I am fortunate enough to be able to describe myself as one of the ‘haves’ rather than ‘have nots.’ Like all taxpayers, I have no wish for the taxes I pay going to support the feckless or work shy. But I agree entirely with Dave Jones that the question of support for the weakest in our society is ripe for debate.
However, the solution will be broader than a remodelled supplementary benefit and rent rebate system. It is time to look at the role of and interaction with universal benefits – which is alluded to in the Department’s report – such as family benefit, paid primarily to mothers at a cost of £9m a year and introduced in 1950, when the economic role of women was very different to 2012.
The interaction with the tax system also needs to be considered. In recent years, because of the international pressures on our finance sector, the focus has understandably been on corporate tax strategy. We have no proper personal tax strategy – other than (rightly) maintaining the headline income tax rate at 20% – but there is considerably more to tax than this, including the impact of indirect taxes, particularly on the poorest. This is an area of considerable interest to me and one on which I would want to focus if I am lucky enough to be elected as a Deputy on April 18th.
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I don’t entirely agree with lifting the benefits cap and having it reflected by the number of children you have. It does not encourage sensible family planning.
I think if you decide to have children they are your own responsibility and you have to take it seriously. I think it should be enough for two kids – I think that’s fair. I would not want those less well off not to be able to have kids but I don’t think they should be having more than the average family not on benefits can cope with, and have them subsidize the extra children that they themselves would struggle to afford. I think it would just cause a load of resentment.
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Have you considered that some might be on benefits through no fault of their own – divorce, bereavement, redundancy etc…and that not all are single parents? having children is a great responsibility and i don’t think people will be very impressed by your suggestion that benefit families have kids randomly and seemingly without care. You cannot penalise a family of more than two just because you think it’s not fair for them to claim more. The current system is old and needs changing. Benefit is NOT a child subsidy and should not be regarded as such – please consider your wording in future. it is comments like these that lead to discrimination and embarressment for people in dire circumstances.
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Ali
I see what you mean – not the best worded. Of course I know people are on them for all different reasons. I think your reading into something I didn’t say however as well. Do people actually get benefits for being divorced?
If someone is already on benefits with children I think there should be a cut off at some point. Single parent or a couple I don’t discriminate. They could be a unmarried same sex couple and I would not care. (All the power to them as far as Im concerned.) That is not the issue.
However if you can’t afford the kids you already have and they are being taken care of at the expense of others having another one after a certain amount of children it is not fair on those not on benefits who are struggling and cannot afford to have more kids. Why should it be someone else’s responsibility that might not even chose to have kids? People should feel the negative as well as the positive consequences for their actions. It will not thrust the children into poverty, money will just have to be stretched a bit further. It seems quite common now that the salary of a working mother just about covers their childcare costs, it is really expensive bringing up a child. I know of a fair few families that would have more children it they could afford too.
I’m just thinking about what is fairer to everyone else in society as opposed to the individual. You make the good point that there are many others that need the money too for very deserving reasons but the problem is limited resources.
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Corporate tax at 10 % would help fund this!
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benefits for the healthy should be enough to live on but not enough to encourage the spongers in our soceity I personally work with someone who was unemployed for two years and is now working. If he stayed on benefits he would be £40 better off per week. Something must be very wrong with a system that gives no advantage to earn a wage now there talking about giving out more. Madness.
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I strongly agree with the Social Security Department’s proposals to modernise the Supplementary Benefit Scheme, which appear in Billet D’Etat V of 2012. They will be debated by the States in March and I welcome such a debate on local disadvantage. However, it is very frustrating that these reforms are unlikely to be implemented any time soon.
This package of reforms would go a long way to reduce income inequality and disadvantage in Guernsey. Although it is clear that Guernsey is a wealthy and successful society, there are some people in our community who are socially excluded. The figures in the States Strategic Monitoring Report for 2011 suggest that around 16% of island households are living in relative poverty; i.e. below 60% of median earnings. They also show that around 18% of children live in relative poverty – which is almost 1 in 5 of our children. Many of the people in relative poverty actually are in work already and hopefully this debate will get rid of the myth that it is only those who are on benefits who are living below the statistical poverty line. As the Guernsey Press has already pointed out on the 27th of January, these realities are scandalous in such a society as Twenty-First Century Guernsey.
The package of measures that the SSD is putting forward seem to be a good blend of seeking to raise the minimum income levels of those in need, via Income Support, plus a new emphasis on getting people off benefits and into employment. As with anything worthwhile, this package of reforms would not be a cheap option. The Report from SSD in the Billet suggests that the cost would be anywhere between £8.35 million and £20 million. However, the SSD has not indicated how these well-intentioned measures would be funded at this stage. In addition, the Treasury and Resources Department has said that this policy would not be “financially prudent” in the current fiscal circumstances. This is regrettable in my view.
Of course we are living in difficult economic circumstances. We have an annual budget deficit to deal with and public spending is obviously going to be squeezed. However, surely a clear financial plan can be developed over time for funding this initiative in the medium term? There is still some waste and inefficiency in public services; and there is also a range of questionable funding priorities in the current system. Money can be saved and / or re-allocated to help fund this.
Tackling relative poverty and social exclusion are clear priorities which are set out in the States Strategic Plan. As such, I believe that serious and urgent thought should be given to identifying how this policy priority could be funded and then implemented. Until that happens, our island society is scarred by social division.
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Chris Green
Agreed,poverty in the island should be investigated and the results acted upon to assist the genuine needy but as a starting point I would like SSD to explain which of the myriad of poverty definitions they are basing their report on
We can all recognize the TV pictures of absolute poverty in several African countries,where people are forced to live on $1 or $2 a day.This is often caused by despotic governments,civil wars,droughts and the apparent lack of any lessons in family planning
India also appears to have a problem with absolute poverty despite being a nuclear country with an ongoing space programme.Absolute poverty therefore does not exist in the island
Relative poverty is sometimes defined as having to live on less than 60% of median earnings.But in an island with such diverse occupations as finance and law at the upper end and the more menial labouring tasks at the lower end of the pay scales it would need a massive leap to bring the lower group up to anywhere near 60% of the upper echelon pay rates ( 60% of a Lawyer’s £600 per hour is £360 per hour!)
Social exclusion is probably the closest to the island’s perceived poverty problem but some definitions of social exclusion include not having sufficient income to have regular meals at a restaurant,or visit a cinema or have a holiday off island
I’m not sure that those middle income earners who are by no means well off but do not consider themselves to be in any kind of recognised poverty would be rather upset that their taxes may be used in future to bolster the takings of Crabby Jacks,the Mallard or Disneyland Paris
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Chris –
Great to know there are candidates standing with a real social conscience. Most deputies make all the right noises – until the point where they see the sums.
So if you get in, you’ll be in the minority and will have to fight your corner hard. In particular, you’ll be up against the widely-held belief that there just aren’t many people in Guernsey who are truly poor.
Hence I am genuinely interested to know what personal experience you will be able to draw on to be able to illustrate your case. Forgive me not knowing this already, but have you been a Parish Procurer? Do you do Duty Solicitor work?
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Ben,
I guess I can draw on my last 10 years of legal experience in Guernsey as an Advocate. I have advised some of the “have nots” first hand in that time so I think I have some insight into relative poverty in the island. What also concerns me is the degree of inequality between the top and the bottom. That should not be allowed to get much worse in my view. Indeed, there’s quite clearly some real inequality between the so-called middle class and the top from what I can see.
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Chris
How about removing the upper earnings limit on Social Security contributions for a start. Why should middle earners pay a greater percentage of their earnings in tax and social security than high earners? You are part of a profession where the highest earners earn vast amounts in salaries and partnership share outs. Does it really affect anyone if they earn £940k rather than £1 million?
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Middle Earner,
I believe that SSD have already accepted the case for lifting the cap on Social Security contributions for higher earners, following a couple of attempts by Deputy Fallaize to amend the system. This is being phased in over a few years and is already generating extra revenue.
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Iv seen mention of those in private rented accomodation struggling to make ends meet. There are some genuine cases who just havent been educated enough to learn how to help themselves better. There are others who will continue to spend beyond their means. They cant have takeaway but can afford a few packets of fags a week. Or cant afford to go outbut do posess (on finance) an ipad or a nice car for instance (none essentials) Then there are those that a few years ago were kicked out of states houses and forced in to the real world. All along they were living beyond their means, having kids and nice cars. Whithout tax payers money to back them, they cant survive. I have my own house and more than one business with a partner who earns a good wage but we still cannot afford to have a child because of child care costs. One of us would have to give up work. I have no sympathy for those in states houses who keep having kids. This wouldnt happen if they were in the private sector. As Dave has said, these people struggle with their rents. I was made redundant and created my own work. Anyone who cries about their rent needs to shut up, grow up and look after themselves. Work more hours, do anything. Dont cry that the states are making your life hard. We are all born with the same choices in life, its not the honest hard working tax payers fault that some want the easy life with no ambition to have something of their own, or an inheritance for their multiple children…
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I did not know wether to laugh or cry when I saw this one defending the regime that prevents their gene’s being passed on, then my mind turned to Darwin and the survival of the fittest: I am sure some financiers grandchildren will enjoy their unborn offsprings heritage. Reap what you sow.
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Middle earner
The assembly have already tried that idea, but the right wingers were not impressed, as it might have upset their rich friends.
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Valeite/Middle Earner
Deputy Fallaize and I have twice sought to modify the Upper Earnings Limit but the current States have lacked any real appetite for such a move.
I fully recognise the economic situation in which we find ourselves and I accept that the States has a responsibility to exercise appropriate prudence in response to that situation. However, it seems that the current States have been persuaded that ANY attempt to induce the very wealthy to pay a little more towards the upkeep of our community would frighten High Net Worth Individuals away to even more accommodating jurisdictions.
The theory appears to be that such a move would immediately serve to scare the financial services sector away to similarly benign jurisdictions. Readers will have their own views… perhaps depending upon their circumstances and their understanding of the local economy.
I applaud Chris Green for his balanced assessment of the consequences of the distribution of wealth in our Island.
Are we all in it together?
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Sean McManus/valeite/Middle earner
Raising the Upper Earnings Limit as a means of increasing revenue has its attractions, but is not without issue. Firstly, it would not raise the sorts of sum we are talking about here; secondly, it breaks the ‘insurance’ based principle on which Social Insurance was founded. If you do this – as the UK did many years ago with National Insurance – it just becomes an increase in taxation. If you accept that, you might as well combine the Social Insurance and Income Tax systems. I am not averse to that – my point simply is it becomes a much bigger issue.
In short, to reiterate my earlier post, you cannot look at Social Security (whether benefits or contributions) in isolation, without looking at taxation (in all forms) – and vice versa, of course. This highlights again the need for the development of a personal tax strategy.
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Gavin
Merging Social Security and Income Tax is an eminently sensible idea, but one that I didn’t suggest due to the 20% level of personal tax being sacrosanct.
As for the “insurance” based principle, is this not already broken when general taxation is used to top up any shortfall in social security?
Personally I would make income tax 25% and introduce a payroll tax of 7.5% with no upper limits whatsoever. This would raise revenue and enable personal allowances to be raised, thereby helping the lower paid. At the end of the day it’s not that complicated, although some people would argue it is in order to defend their position.
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Ray
Looking through the Billet, the definition of poverty that SSD are using is NOT ‘less than 60% of median earnings’. So no, we don’t have to worry about inflated salaries at the top end skewing everything.
Instead SSD are taking as their guide the Minimum Income Survey they did last year. Guernsey people were asked to define what pensioners, families, single people etc would need for a minimum socially-acceptable standard of living.
I say ‘guide’ because it seems that, at this stage, SSD are not recommending that the levels suggested by the MIS study should be implemented in full.
To give an example, the MIS recommended £231 a single person needed an income of £231 a week, excluding rent. SSD’s suggested new rate of Supp Ben is £153 a week for the first year and £172 after that.
Yes, the MIS did include elements of social inclusion like the occasional meal out, buying a present or sending a kid on a school trip. I’m guessing that your kind of reaction is what caused SSD to “take a view” on the MIS recommendations, rather than implementing them wholesale.
I understand your aversion to funding someone’s social life but nevertheless I appreciate SSD’s efforts to at least consider what level of social inclusion should be included. There are many people claiming Supp Ben who simply cannot work, like pensioners for example. The Supp Ben rate is what they have to live on. Year in, year out. Should we really be imprisoning people in their own homes, unable to be able to afford to go out and participate in their local community at all?
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Ellis
I’ve just finished skimming the 147 Billet pages on this subject.Thanks for pointing me in that direction.I now understand why some deputies claim that they often have too much reading material thrust at them!
There has certainly been a great deal of work put into the report,most of it makes good sense and if implemented properly it will do a lot to help the most vulnerable in our society
My reservation,which has been shared by several posters in the past,is that inevitably in every society there are certain people who will milk the system for just that little bit more than their proper entitlement
The Billet talks of introducing new posts of case managers to encourage claimants into work where possible.Visiting officers,which they have now,will be sent out from the comfort of the office to assess fair rents for those claiming the proposed new maximum £500 per week rent allowances in the private sector
It is imperative that those case managers and visiting officers have more Rottweiller and less Poodle in their make up otherwise they will be trampled over by those seeking out any gaps in the system
Whilst the SSD are ‘hoping’ that landlords will display a positive behaviour let’s not bank on it.I would be surprised if there is not a boost in buy-to-let properties in the next couple of years with hungry eyes on the gravy train
Send the trainee staff to a London Borough for a couple of weeks to observe and become aware of all the potential fiddles,such as sub-letting council and rent assisted houses,non existent dependants,phantom injuries etc and let’s introduce punitive punishments for those tenants and landlords who attempt to bend the rules to their advantage
It is climed that the report is flawed because it gives no indication of where the funding will come from! Doh .. where does all States funding come from?
Social Security contributions will obviously have to be hiked (to sit alongside all the other stealth tax hikes over the last couple of years)
Whilst most of us will reluctantly accept that as a legitimate living expense no-one likes being ripped off by those who are always on the look out for something for nothing,so if this new scheme is going to be introduced let’s ensure that it is accompanied by watertight-as-a-crab’s-arse legislation with extremely punitive penalties for misuse of any part of the system
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Ray –
Take your point about Deputies and Billets. I only read the reports I’m interested in and, if you actually want to dig into them, do some research and play with the figures, you can spend considerable time on each one.
Helps a lot to get other people’s perspectives too so thanks for your take on it. Better case management is definitely worth investing in.
Just a small point on the funding side – doesn’t Supp Ben come from General Revenue rather than Contributions? I thought it was a safety net that kicked in when contributory benefits (pensions, invalidity benefit) and other income weren’t enough to support the household.
I appreciate that whether increases in Supp Ben come from tax or contributions doesn’t make any material difference to the impact. What do you reckon to the idea floating about that family allowances should be abolished instead?
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I totally agree with the concept that the whole benefits “system” needs to be reviewed.
However, concentrating on the proposal as reported, as the Americans would say “lets do the math”.
If we assume that 1,000 households are claiming benefits, an extra £20 million a year in anuual costs means £20,000 extra a year for each household…or is that too simplistic??
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Peter –
Looking at the Billet page 1037, I’d say yes, way too simplistic.
The total cost for existing Supp Ben claimants is set to go up from £23m to £26.5m (best case) or £29m (worst case). That’s a £4-6m uplift for the 2273 current claimants (page 977). Which equates to £1500-£2600 per person per year if you want to look at it that way, but obviously each person’s increase will vary according to circumstance. On page 1026, SSD say that long-term Supp Ben rates will go up by £14 a week for a single person and £50 a week for a couple.
The big cost increase could come, not from existing claimants but from the number of new people who will be eligible to claim Supp Ben if the thresholds rise. Huge disparity between best and worst case here – could be £2.4m, could be £11.7m.
All of the above is just from a layperson’s reading of the Billet, don’t take it as gospel. Someone from SSD feel free to jump in if I’ve misinterpreted anything….
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The rentiers over here have had it so good for too long.
We used to have a rating system run by the cadastre which set rents on properties. This system, or one like it, is sorely needed again. It was totally iresponsible to have removed it. Also a rentiers license should be required. Combine rent control with a better minimum wage and alot of the problems will diminish. Problem here is quite a few deputies and civil servants are rentiers.
Whilst i’m ‘at it’, how many local market properties can be purchased by non locals and then rented out to locally qualified residents? I think i’m right in saying that anyone living anywhere in the world is not excluded from acquiring as much as they like.
Just sort it out, it’s not as difficult as it is made out to be.
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Hi Peeps
Thank you for the emails asking how i am,well still taking in the sun and drinking my pimms and boddingtons chaser
This thread tells us all we need to know about modern day guernsey
RIP THE GOOD OLD DAYS
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Strangeways?
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Just strange.
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Gavin St Pier
I believe you are standing for election in St Sampsons.
Well you seem to have all the answers, so we shall see.
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Many posts appear to recognize the need for social benefit reform.
Let’s just say the next States manages to push through further public sector efficiencies but there is still a shortfall in being able to meet the cost of these sensible reforms.
To address the shortfall would we prefer to:-
1. Introduce GST
2. Increase income tax rate
3. Remove mortgage interest relief (mentioned in the billet)
4. Hike social insurance rate
5. Some sort of corporate tax reform
6. Do without some other services
7. Kick the report in the long grass
8. Something else?
and who’d be a deputy this time round?
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Hobbesvlocke,
There is certainly a good case for looking at the removal of mortgage interest tax relief. Personal tax allowances for higher earners could also be reviewed, with a 20 means 20 policy. However, I am not at present convinced that a GST or VAT system would be wise; surely that would hurt those who would benefit from these reforms most. I wouldn’t wanto “give with one hand” only to “take away” with the other. Nither do I think that we should
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Neither do I think that we should rush into increasing income tax. The headline rate of 20% across the board remains very attractive to HNW individuals, combined with the lack of taxes on capital in Guernsey. We should perhaps look again at corporate tax rates though.
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For me, to progress these proposals, I would take the hit on mortgage relief, but only if there was some movement on corporate tax reform and no imposition of GST/VAT.
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Agreed, I would too.
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And one that I know Ray will appreciate.
“He who knows only one country knows no countries” – so wrote the political sociologist Seymour Lipset in his comparative studies on the conditions for democracy in different countries.
This is exactly how I felt when I read the billet on social reform. That is, it seemed perfectly sound to me, but it is on the only social benefit report I have ever studied..
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Hobbes
Just another jumped up Yank’s version of how to rule the world
I see that Mitt has trounced Newt in Florida!
I’m waiting for a Wayne v Clint battle in UK politics
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The Jersey experience suggests that GST falls hardest upon those least able to bear further pain.
The current trend towards loading additional fees and charges for services and utilities also hits poorer households disproportionally hard.
The “Are we all in it together?” question is not just glib politics. Do fellow posters believe our community has any appetite for redistributive taxation?
Do fellow posters believe that the 20% headline income tax is essential to maintaining international confidence in Guernsey?
Do you believe that the corporate sector are paying their fair share?
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Sean,
1/ Are we all in it together?
Answer: Probably not, I don’t think there would be much appetite for redistributive taxation from the corporate sector or wealthy individuals as it is inevitable that it would cost them more money.
2/ Is 20% headline income tax essential to Guernsey?
Answer: Probably.
3/ Do I believe that the corporate sector are paying their fair share?
Answer: No,however Guernsey has sold its soul to finance related business and somehow we have to try and keep them here without bankrupting the normal working man.
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Talk is so cheap.
Protecting the imported HNW tax exiles, the high end earners and the finance industry from contributing their fair share to our economy always appears to be the main priority in this island, nothing else.
Social reform – and social security reform so it’s fairer – is all good, but will anyone, ever, have the cahonas to address what someone described as ‘the elephant’ in the room?
I doubt it.
We are a wealthy island, an offshore, no less, with good tax breaks. We are home to a healthy finance industry, we have good employment, and are still in a firm financial position despite the recession and the plight of the Euro, yet for many years now, bizarrely and for no apparent reason, local people, WORKING local people, honestly struggle to pay their rent or their mortgage.
WHY?
What is the point of putting yet another placating sticking plaster over the symptom when we are refusing to treat the cause?
I guess this latest truth avoidance scheme will keep us peasants from revolting for a while longer (perhaps til the next elections), but I do sincerely hope we won’t accept being treated like numpty mushrooms forever.
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Guernsey Elephant News
Following the lifting of gagging order, it can now be revealed that after the final States debate held in January, the States of Deliberation was flattened by a herd of stampeding elephants.
Apparently, some elephants that were being looked after by Gamekeeper Sillars at locations sited at La Mare, Baubigny and Les Beaucamps escaped their pens.
Gamekeeper Sillars had previously assured an apathetic population that, while he was in charge, these creatures would never ever escape.
Co-incidentally, the largest and scariest elephant in Guernsey (housed by a business elite operating mainly in the upper parishes) was let loose by its owners.
Pictures of this massive threatening beast had often been distributed to timid States members who, occasionally, had considered removing the tax breaks which were required to keep it fed.
This elite, worried by impending discussions on the continued necessity of these tax breaks, decided that the best thing to do was to show the States the damage that occurs when they don’t get their way.
Happily, we can confirm that the white elephant with the soon to be lengthened driveway is still in place and continues to attract very few visitors.
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Hobbes
It’s been explained many times by the Zoo keeper that the white elephant’s driveway is not going to be lengthened,merely shifted towards the West
The fact that a part of the old driveway will be left in situ is neither here nor there in the grand scheme of things
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Agree totally,
However to raise a different question, if 60% of Guernseys population want a stated standard of living for their pensioner parents, divorced children, grandchildren in single parent families, their sons and daughters not to be in penury after paying their rent etc,
WHY DOES THE EXECUTIVE THINK THEY SHOULD HAVE SOMETHING ELSE?
By what RIGHT do this self serving clique think they can DENY THE WILL OF THE PEOPLE?
In a democracy even if you dont like the vote you abide by it!
The issue at stake is do the people bring the States to heel or continue to allow them treat the views of the population with contempt.
The MIS report should be adopted in full and our delegates simply deliver, THAT IS DEMOCRACY.
On next Aprils Manifesto’s we may have to substiute the phrase “I have served on the States….” for “I have ruled on the States…”.
I believe we are at a seminal moment in the Political developement of the Island and I hope the public will end this cabal.
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Zab
Is your 60% hypothetical? I can’t find it anywhere in other posts
Democracy in Guernsey comes around every four years.You are given the opportunity to support about five candidates in your own mini district and are then left to hope that the remaining 40 Guernsey candidates are chosen well by other voters spread around this tiny rock
Once the voting process is done and dusted you have no further real voice in matters of state for another four years
I’m not sure if it was Plato or Hobbesvlocke who once said ‘If voting changed anything they would abolish it’
Perhaps you are pushing for a referendum
opportunity on important matters where your 60% figure would make a difference but I can’t see that on the horizon
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I’m not sure of the exact derivation, but the phrase ” If voting changed anything, they’d abolish it” is the title of a book by Ken Livingstone.
Ray, all these years of reading the Daily Mail, and it turns out you’re a socialist after all.
Added to your thoughtful response to post 22 on social reform, all I can say is…..
Welcome Home :-)
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Ray,
I believe the benchmark was the level the majority felt nessecary for inclusion in our society. Lets not forget that this was not just some random researchers, the Joseph Roundtree Trust do this all over Britain. Let us also not forget Mark Dorey and Dave jones appeared at the start to endorse it until the shameful failings were higlighted in the published document.
For probably the first time in history the people of Guernsey were asked what they wanted and they spoke clearly and consicely.
Yes I do believe in Direct Democracy it would end in a moment the abuses we have to suffer, give us referenda, recall and initiative, but the political class do not want that.
A limited attempt by Ivan Rihoy 25 or 30 years ago was crushed and never revived.
In the absence of direct democracy this survey is as close to an expression of the will of majority of Public desire as you will get short of taking to the streets.
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Zab
I had the feeling that the number sixty featured somewhere in the latest survey of what the majority of Guernsey people want and now I’ve just remembered … sixty is not actually 60% of the population … sixty is the total number of people interviewed by the school kids from Loughborough which SSD has deemed an adequate survey to back up their proposals
I’m not saying that they are bad proposals but just for once,especially when 20M a year is at stake, I would be in favour of digging just a little deeper into the consultant’s slush fund to have the Loughborough findings checked out
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Sean McManus,
Although I consider myself to be on the progressive side of this debate, I do not believe that there is currently a massive appetite for re-distributive taxation in Guernsey; i.e putting up income tax for higher earners. Having said that, I don’t think there has ever really been a fully informed debate on this locally. Perhaps now is the time for that to take place against the backdrop of these proposals?
However, there would to my mind be a firmer body of support for corporate tax reform so that the corporate sector did once again pay its fair share.
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I disagree. I think it is dangerous to disturb the headline corporate tax rates, which attract business to Guernsey and which must remain competitive with similar jurisdictions elsewhere.I would submit that this sector generates far more, directly and indirectly, in gdp than the HNW individuals moving to Guernsey for personal tax planning reasons.
78% of Guernsey’s States revenue comes from income tax and much of that is generated by workers who work for, administer and advise the zero rated sector. Don’t forget that the zero rates legisation embeds anti-avoidance “deemed distribution” provisions for resident tax payers, so they pay income tax on any dividends, real or deemed paid by Companies. No Guernsey resident tax payers can avoid tax by using companies to trade.
Nobody wants it, but if choices have to be made, and more money found, then I think Guernsey should be looking at the marginal rates for the upper income earners. There must be scope for a modest increas in the basic rate above a certain level. I find it astonishing that there is a cap on income tax for upper earners – one I believe that was indeed designed to attract HNW people to Guernsey, but is open to anyone earning above the prescribed limit.
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I agree that corporate tax reform should not be undertaken lightly.
Unfortunately, for a number of reasons, the deemed distribution arrangement doesn’t seem to be generating as much revenue as originally anticipated.
Also, for the avoidance of doubt, am I right in thinking that non-Guernsey residents who hold shares in most types of Guernsey company do not pay any corporate tax in Guernsey?
If so, this means that non-Guernsey residents are making profits using a lot of Guernsey’s resources (in terms of land, labour and infrastructure) and not paying anything back into the Island.
Consequently, on 1st January 2008, to what extent, did we cease being a Crown dependency and become an exploitable colony instead?
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An interesting comment about the Island becoming a colony. Certainly, its fiscal autonomy,supposedly guaranteed by convention going back hundreds of years, was trampled on by the UK Government, like some Imperial overlord, without a second thought.
An EU code of conduct group chaired initially by the Labour MP Dawn Primarolo, started the process of determining which tax practices in the EU and its near neighbours were apparently “harmful”. Guernsey’ s exempt regime for certain companies was deemed to be harmful. If Guernsey could not discriminate generally between different types of companies, those trading in Guernsey paying tax and those not trading in Guernsey and not owned by Guernsey residents, then all companies had to be treated the same way. The only way of keeping the lucrative finance sector companies in Guernsey and ,essentially, keep them tax free, was to make all companies (except certain utilities and other specific types of companies) tax free. That way the EU (bless them) could not cite discrimination as a reason for attacking Guernsey’ s tax regime. The current regime was therefore imposed as a result of EU pressure.
The EU countries, of course, can do what they like. They practise more forms of apparently discriminatory practices than Guernsey ever did. They call it “being competitive”. If Guernsey does something similar, it’s “harmful”. It’s hypocritical and undemocratic, but that’s the EU for you.
So, to answer your question. Yes, you are right, non -residents do not pay Guernsey tax on dividends from most Guernsey companies, but that is the price one has to pay to keep foreign investment in Guernsey. It is better to generate taxable income for residents from that than to have no investment at all, on the footing that it is better to have 20 per cent of something than 100 per cent of nothing.
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DoG
A stout and sensible argument for the status quo.
But digressing slightly, let me tell you about fear. I’m allowed. I’m an expert. For many years, it’s been my constant and, at times, only companion. In fact, I’m so scared I can only bear to parade my views secretly, under a ridiculous alias, on an internet forum so obscure that, in the whole world, there are only about a dozen regular contributors.
And yet your post outlining concerns about, at this stage, only talking about changes in tax and population law could very easily have been written by me.
0-10 may have saved us all but at what cost? :-
1) It has ensured virtually full employment in the finance (in the broadest sense) sector. This has meant that high salaries in finance are still the order of the day. This fiscal protectionism continues to make Guernsey uncompetitive salary wise. And actually its the lowest paid non finance workers who have paid the price of this strategy.
2) Guernsey is quite good at innovating financial products – PCCs, speedy QROPs changes etc. But the problem with finance is that these new products are easily replicated in other jurisdictions.
So, it is hard to maintain a competitive advantage.
3) As a consequence of 1 and 2 above, we can only compete on tax. So where do we go next with this strategy?
Will we find ourselves eventually paying companies to stay here?
It would appear to make sense to do so up until the point that this “Danegeld” starts to exceed the unemployment benefit payable for the whole finance working population.
4) If Finance has been the working drug of choice, then 0-10 has turned it into crack cocaine. We can’t think beyond the next fix of a new office setting up in Guernsey. Also, it has removed our confidence that we are worthy in our own right and confirmed that we exist, in the eyes of the world, only as a tax break.
5) Understandably, much of the States time and resources is concerned with maintaining the finance industry. Further, it is a brave person indeed who wants to stay in Guernsey and do anything other than finance. This means, although there is talk, there has been little success in finding alternative industries.
Thus, we are unlikely to produce a Steve Jobs whose inventions generated billions in real wealth.
In Guernsey, he would probably have been bashing his brains out whilst incrementally increasing his spreadsheet skills in an office full of petty politicking.
Taking all of the above, my greatest condemnation of 0-10 is that it has turned a once proud, resourceful, inventive and brave population into people like me.
I would look at altering the tax structure a little bit. This may mean that some businesses would leave. In this case, Guernsey finance companies would again have to act like a proper business competing on cost, service, sustainable innovation and the ability to organise and manage – instead of just zero tax.
Only strong businesses survive long term. 0-10 encourages weakness.
Finally, because I’m the scarediest of the scared (except, of course, when I am the mighty hobbesvlocke, Scourge of the Establishment, Seeker after Truth etc), I’m convinced that whole swathes of finance are at the mercy of the UK chancellor’s pen.
So we might as well start to wean our self off the finance drug now and commence our cold turkey sooner rather than later.
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DoG
You speak a lot of sense there. If we were to raise corporate tax then we would soon end up raising income tax as well, because we would need to collect more tax revenue to replace the lost income tax from having fewer people employed in the finance sector.
Although GST would be my preference, as a high earner I would accept a 25% rate of income tax on all taxable income in excess of £100k but I would limit this to tax on earned income rather than investment income so that the rentier market doesn’t become uncompetitive.
I would also reintroduce Dwellings Profits Tax but would apply it on all gains on residential property gains on a sliding scale from 5% down to 1% over 5 years, after which time any gains would be exempt.
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Thanks GM. I think a lot of people in your position would share your view on marginal rates – they just haven’t been asked.
GST is more of a thorny issue. It does affect the poor the most and there will be significant resistance as a result.
Interested in the DPT route -hadn’t considered that, but I certainly think it should be on the table.
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DoG
Many thanks your reply
I agree with everything you say bar the last phrase which is effectively saying that there are only two possible outcomes for 0-10 either:-
We get 20% of something if we stay the same or 100% of nothing if we change anything at all.
If we take that at face value then there’s no point in discussing it. I’m not sure that’s helpful.
It’s like when I ask my youngest to choose between eating his tea and staying up late or not eating his tea and going to bed early.
Luckily for me, he is not old enough to say, “What about all the other choices that might be available to me, Father, including, inter alia:-
• Eating a bit of tea and staying up a bit late
• Not eating my tea and playing quietly in the lounge
• Not eating my tea, going to bed early but play video games for a while instead of going immediately to sleep
• Eat up all my tea stay, up late and perhaps going to a toy shop tomorrow”
I think we need to be able to talk freely about tax reform without immediately conjuring up a doomsday scenario.
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Fair point, but the analogy of the children’s bedtime choices puts me in mind of the tale of the Fisherman and his wife, with the children representing the wife.
Sometimes, one can wish for too much and maybe there aren’t that many choices.
What keeps Guernsey wealthy is the current tax system and particularly the ability to offer tax neutrality to people who are not resident on the Island. We can debate the ideological soundness of this as much as we like, but it will not change the basic premise that that is what attracts the bulk of investment into Guernsey, and, as a result, generates directly and indirectly, most of Guernsey’s tax revenues.
Remove the zero rate and you remove the basic foundations for inward investment for the finance sector. To me, that does represent a doomsday scenario, because Guernsey has very little in the way of natural resources and alternative export options and very much competition from larger, cheaper, warmer places, with more friends and treaties than Guernsey has.
Of course, oil may be discovered within Guernsey’s territorial waters, and then its new best friends in Whitehall will become all heroic and send a warship and maybe a member of the Royal Family to make sure everyone is nice and cosy. Until that happens, Guernsey has to be cautious and guard its assets jealously.
I am happy to debate across the board, but I am mindful of what happens when all options are on the table, the most recent example being the population review and the inclusion of the open market within that review. That set a few hares running and devastated the open market as a consequence. Imagine that on a much larger scale and you have an idea of what could happen to the Finance Industry.
So, for me – it’s a red line issue.
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What I really meant was possibly widening the 10% part of the Zero-Ten package to increase the tax take. I agree that we should be very cautious in this area before embarking on significant reform, as we must maintain a corporate tax environment that is competitive and good for our general economy.
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Replies to the questions I posed seem to indicate a reluctance to consider any change in the 20% headline rate of income tax.
There appears to be more support for the reintroduction of some form of corporate taxation. I assume that posters have fully considered the potential impact on our finances given the current stance of competitor jurisdictions.
There also appears to be some support for revisiting the Upper Earnings cap for Social Security and some would even reconsider mortgage relief.
Any views re. the currently very low minimum wage? This is particularly interesting in the light of Social Security’s latest Green Paper and the apparent willingness to pay rent rebates and supplementary benefits to top up household incomes while employers are effectively subsidised by taxpayers for paying low wages.
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The first thing that I would say about the minimum wage is that there should not be a lower rate for younger workers. This is just age discrimination in my view. Secondly, over time, we should look again at whether the adult rate for the minimum wage should be tied to some proportion of median earnings, if the policy is going to remain worthwhile. I agree that some employers are being, in effect, subsidised by the SSD at the moment.
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I have always wondered why the minimum wage was less for those that were younger. The only thing I could come up with was that is was to encourage employers to take on young workers with no experience and that take a lot of work to train up.
It does seem unfair though that they can do exactly the same job and get paid less. If my above reasoning is correct I think other initiatives may be better suited to encourage taking on younger workers.
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Just as long as we do not go for a GST/VAT style tax as that has always hit the poorest people the hardest, unless its only put on Super Yachts!
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DoG,
In stating your case for keeping the zero-ten strategy you appear to believe that what keeps Guernsey wealthy is the current tax system.
Whilst this may be true I would argue that as a whole Guernsey is not wealthy – whilst the corporate sector is most definately wealthy it is to the detriment of those that are not employed in it.
If it really is doing so much towards Guernseys wealth in general then why does Social Security find it necessary to discuss the need for a £20m scheme to cover benefits and poverty in the island?
It will eventually reach the point that the corporate business sector will be taking more out of the island than it gives back, in fact it already seems that way to many of us.
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Lets cut to the chase,
many working people are only clearing bottom line benefit rates for example
A Single person on say £10 ph ( well above minimum wage ) after tax and SI this is down to maybe £327 pw, another £130 a week for your room in a former hotel with no cooking facilities £197 and they are already below the MIS figure of £231.
A working lone parent on the same rate + £15 child allowance clearing £365 ish Rent 2 bed flat £220 left with £145, base line supplementary is after rent about the same. £165 below MIS rate.
A huge slice of the population in dire financial straits, and poor housing and surprise surprise no proper figures on how many people affected. Still pile on the indirect taxes and repeat the mantra how well we’re doing, that one passed its sell by date way back. How about aligning States Members pay with bottom line benefit after all if its adequete for the consituants …
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