We are the Corporate Services Scrutiny Panel. It's our role to scrutinise Jersey's government on matters of public importance, policy and legislation which falls within our remits.
What is the Mini-Budget?
The Covid-19 pandemic and the Ukraine crisis have caused a shift in the macroeconomic landscape worldwide. Disruptions to global supply chains have resulted in rapid increases in prices which have transformed a calm economy of low volatility, low interest rates with positive returns and predictable monetary policies into one with higher inflation, more volatility and less certainty.
This has resulted in a fall in ‘real’ disposable income for Islanders which is predominately caused when high inflation outstrips wages, benefits and taxation increases and affects the affordability of goods and services across society. It is likely that low-income households will be hardest hit by the cost-of-living crisis.
As part of the Chief Minister’s 100-Days Plan, the Cost of Living Mini-Budget (P.80/2022) was lodged on the 2nd of August 2022 to address the cost-of-living crisis. The proposition includes a suite of proposed taxation and social security measures to deliver targeted support to Islanders including -
- increasing the personal income tax thresholds and allowances by 12% above the 2022 thresholds and allowances, to take effect for the year of assessment 2023;
- temporarily reducing by 2 percentage points Class 1 and 2 social security contributions for the period 1st October 2022 to 31st December 2022, comprising a reduction, in respect of earnings below the standard earnings limit (SEL), from 6% to 4% for the Class 1 employee contribution rate, and from 12.5% to 10.5% for the Class 2 contribution rate;
- doubling the value of the Community Costs Bonus for 2022 by increasing the value of the bonus from £258.25 to £516.50.
- setting a fixed value at £70 per month for the Cold Weather Bonus and Cold Weather Payments, regardless of temperature, for the winter months (October 2022 to March 2023 inclusive); and
- postponing the commencement of the obligation for offshore retailers to register under the Goods and Services Tax (Jersey) Law 2007 from 1st January 2023 to 1st July 2023.
The Panel's Review
The Panel launched its review on the 4th of August 2022 to consider the following key issues:
- Decision making – does the proposition provide sufficient evidence to quantify proposal outcomes and detail how interventions will achieve goals.
- Distributional impact analysis – has the proposition assessed the impact of intervention on different groups in society. Does the proposition have any negative effects for groups in society according to characteristics such as income levels or geographical location.
- Targeted support – does the proposition provide targeted relief to those most impacted by cost-of-living increases.
- Impact on inequality – will the proposed budget measures exacerbate wealth and income inequality within Jersey.
- Future taxation and/or borrowing measures – how will monetary relief provided through the budget measures be recovered (i.e. through either taxation or borrowing).
The Panel engaged with the public on social media as well as in person via pop-up stands and were able to receive a range of comments and written submissions from Islanders, businesses and key stakeholders on the proposed budget. The Panel requested submissions from 34 key stakeholders to help inform its review.
Public hearings were held with the Minister for Treasury and Resources and the Minister for Social Security.
The Panel also wrote to the Minister Treasury and Resources and Minister for Social Security with additional written questions.
The Panel created a survey requesting Islanders to share their views on the Mini-Budget and received 541 responses.
Our review has resulted in 9 key findings and 6 recommendations . A summary of these findings and recommendation follows next. Alternatively, to read them all in detail, click on the full report below.
Decision Making
Fundamental to the Panel’s review was the requirement to determine how the Government’s proposed Mini-Budget measures were informed and evidenced to provide support to different types of households from increases in the cost of living.
The Panel requested the views of a range of stakeholders to identify the level of consultation undertaken by Government to help inform the proposed Mini Budget measures. In addition, the Panel sought to understand what analysis data was used by the Government to evidence the measures proposed.
The Panel found that Government consultation with stakeholders occurred on an informal basis and involved only two representative organisations specific to business and the charitable sector. No clarification has been provided to confirm how stakeholder consultation informed decision making in the proposition. From evidence received, it is apparent that broader consultation on the measures would have been welcomed by stakeholders.
Consequently, the Panel has recommended that the Council of Ministers must ensure that reference is specifically made to stakeholder consultation and how it has informed decision making in relevant propositions, to support transparency within the States Assembly.
The Panel sought to further identify what analysis data, evidence and modelling was used to inform the Mini-Budget measures. The Panel observed that the findings of the 2019/2020 Income Distribution Survey had not been published prior to the development of the measures and therefore was not available to inform the Mini-Budget proposals.
Moreover, the Panel sought to understand what alternative measures (like a one-off direct financial payment - akin to the Spend Local Scheme provisioned as a result of the COVID-19 Pandemic) to those proposed within the Mini-Budget were considered by Government as part of the development process. In addition, where alternative measures were considered but not included in the Mini-Budget or were being considered within an alternate context (e.g. to be proposed within the next Government Plan).
The Panel found that 91% of Islanders engaged with the Spend Local scheme when it was utilised as a fiscal stimulus measure during the COVID-19 pandemic. However, the re-using of Spend Local cards was discarded by the Minister for Social Security in the package of measures as it would take a period of up to 6 months to implement.
In light of the premise that certain measures were discounted as a result of them not aligning with other Government Priorities, the Panel sought clarity of the alignment of the measures to Government principles and policy. Noting the Government’s ratification of the United Nations Convention on the Rights of the Child to ensure the enjoyment of children’s rights for all Jersey’s children, the Panel sought to understand whether any Children’s Rights Impacts Assessments (CRIAs) were carried out on the proposed measures.
The Panel found that no Children’s Rights Impact Assessment [‘CRIA’] has been completed for the measures proposed and recommended that the Council of Ministers must provide an abridged statement to clarify what consideration was given in the proposition to Children’s Rights and the impact on children, to demonstrate alignment to the UN Convention on the Rights of the Child (UNCRC).
Impact
Considering that the Mini-Budget measures intend to address the cost-of-living crisis by helping Islanders with recent increases in food, heating and housing costs , the Panel sought to identify the real impact of the proposed measures on Islanders and to identify whether the measures are appropriately targeted to those Islanders who require assistance most during these challenging times.
Consequently the Panel sought to further understand the challenges that Islanders are facing in respect of cost-of-living increases. Moreover, it sought to understand whether the proposed measures are appropriately and sufficiently targeted to the needs of Islanders and businesses.
Furthermore, it wanted to identify any disparities or negative effects of the proposals on any particular groups of society to aid in determining where potential further action could be taken to meet Islanders’ needs more appropriately. The Panel was also keen to understand the longer-term implications of the proposals on the inequality of income and wealth in Jersey.
The Panel has identified that the cumulative financial impact of the measures is difficult to quantify as, other than for those Islanders receiving Income Support, the Government does not have detailed data on the number of people at each income level and their family structure. The Panel also identified that without complete and up-to-date data on the income distribution, it is not possible to estimate the impact of measures for each income decile.
During the review process the Panel observed through evidence gathered the following groups as being in most need of assistance or as seeking further support during this challenging time:
- Low-income families
- Pensioners
- Carers
- Students
- Small businesses
- Rental market
The Panel found that the Minister for Children and Education is responsible for providing the business case to secure additional financial support for students in response to the cost-of-living crisis. However, no such business case has currently been provided to the Council of Ministers.
In light of concerns with regard to the rental market, the Panel found that the proposition provides no tangible action by Government to reduce inflationary pressures in the rental market as it only encourages landlords to avoid inflationary increases to rent and has recommended that the Council of Ministers must consider the timeline to implement the Fair Rents Plan and examine whether it should be expedited or amended to prioritise the cost-of-living crisis.
The Panel sought to understand what analysis had been undertaken by the Government to identify the impact of the Mini-Budget measures on income inequality in Jersey and found the following:
- Despite numerous requests in writing and at the public hearing, no clarity on the impact of the measures on income inequality was provided.
- The package of measures is focussed on indirect payments and not direct payments and is therefore not progressive and will not primarily assist the most vulnerable households hardest hit by this cost-of-living crisis.
- The absence of real time data resulted in the use of assumptions when developing the support measures.
- The Government Plan 2023-26 may contain additional measures to assist with the cost-of-living crisis. However, no detail has been provided to the Panel.
In light of its findings, the Panel has recommended that:
- The Council of Ministers must identify and access accurate and suitable real time data when evidencing proposed support measures.
- The Council of Ministers must clarify the overall financial investment required in resources (manpower, marketing, equipment etc) to deliver the measures proposed in advance of the debate of the proposition.
- The Council of Ministers must consider additional progressive support measures such as targeted one-off payments which could include food or energy vouchers, to ease the costs of living crisis for low-income households, pensioners, students and small businesses in the Government Plan 2023-26.
Survey Results
Through a survey, the Panel reached out to Islanders requesting their views with regard to the Mini-Budget measures. The key themes identified through the 541 responses received included the following:
- 27% of respondents fell into £20,001 - £40,000 total annual household income bracket
- 72% of respondents were aged between 31 - 65
- 47% agreed or strongly agreed that their household would benefit from the Government’s Mini-Budget
- In the last month, over 70% of respondents noticed the cost of living rise the most in food
- When asked: ‘What would help you to address cost of living concerns?’, the most common responses were:
- removing GST on food and essential items
- reducing fuel duty
- support for small businesses
- Reducing healthcare costs
- Increasing student grants
- Cheaper bus passes
- Capping rent prices
The Panel extends its gratitude to those who responded to its survey which has helped to inform its review.
Implementation
The Panel sought to evaluate the implementation in respect of the proposed package of support as well as the proposed communication strategy.
It was highlighted that it was not possible to isolate the evaluation of the potential inflationary pressures resulting from four of the proposed measures in the proposition either individually or as a combination, as any impact will feed into general levels of inflation. The measures where inflationary pressures could not be determined included:
- a) increasing the personal income tax thresholds and allowances by 12% above the 2022 thresholds and allowances, in accordance with the Table in Appendix 2 of the report accompanying the proposition, to take effect for the year of assessment 2023;
- b) temporarily reducing by 2 percentage points Class 1 and 2 social security contributions for the period 1st October 2022 to 31st December 2022, comprising a reduction, in respect of earnings below the standard earnings limit (SEL), from 6% to 4% for the Class 1 employee contribution rate, and from 12.5% to 10.5% for the Class 2 contribution rate;
- c) doubling the value of the Community Costs Bonus for 2022 by increasing the value of the bonus from £258.25 to £516.50; and
- e) postponing the commencement of the obligation for offshore retailers to register under the Goods and Services Tax (Jersey) Law 2007 from 1st January 2023 to 1st July 2023.
It was highlighted that potential inflationary pressures generated by measure d) – the uplift of the Cold Weather Bonus could be partially evaluated by monitoring energy price data routinely collected by the Government of Jersey. However, it was also indicated that it might be difficult to isolate the effects of measures in the energy price date due to the impact of other variables.
The proposition highlights that funding of £0.1m in 2022 will be provided to support a public communications campaign.
It is concluded that an important aspect of the mini budget is to ensure that good information is readily available on price comparisons as well as Government benefits and support to help families with cost-of-living pressures.
Funding will be provided to support community organisations and publicity campaigns. The Government will also encourage and support community-based projects such as a community shop/hub and related support and advice services.
However, the communication plan was not reviewed by the Panel or placed into the public domain. It is not clear who the strategic community organisations are who government will work with to achieve this aim or how the funding will be proportioned to achieve this measure within the proposition.
Financial Implications
The proposed changes to the income tax thresholds (£34.1 million) will result in a reduction to revenue. The Minister for Treasury and Resources confirmed that the Fiscal Policy Panel forecasts of the economic conditions and the work of the income tax forecasting group confirmed that this option was viable as income is expected to exceed the forecasts in the current Government Plan 2022-25 by more than the costs of these measures.
It is also confirmed that the increase in tax funded Social Security benefits arising in 2022 will be met by underspent departmental allocations for 2022 while the costs for 2023 will be met by the increase in income referred above. The reduction in Social Security contributions will be met by the Social Security Fund, which has significant reserves and can absorb the £9m cost without any long term implications
The Fiscal Policy Panel highlighted that the Government should consider whether any of the support could be readily withdrawn in the event that the gloomy predictions prove to be overblown and that Government will need to consider all the policy implications should there be a persistent higher energy price level
What happens next?
The Panel has presented its report to the States Assembly and has requested that the Minister for Treasury and Resources and Minister for Social Security present a Ministerial Response to the Panel's key findings and recommendations by 27th October 2022.
The States Assembly are due to debate the Cost of Living Mini-Budget 2022 at the States' sitting commencing 20th September 2022.
Panel membership
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