THROUGHOUT the 2022 election campaign, one of the major issues regularly brought up was the problems many Islanders face with the growing cost of living.
Community organisations such as Citizen’s Advice and food banks have reported seeing ever-increasing requests for their services, while the annual rate of inflation hit 7.9% last month – after the largest 12-month jump in more than three decades.
Treasury Minister Ian Gorst and Social Security Minister Elaine Millar have announced a package of increased tax thresholds, social security cuts and benefit hikes, which will be debated by the States Assembly when it reconvenes in September after the summer recess.
Deputy Gorst said: ‘The Chief Minister committed to producing an exceptional budget in the first 100 days of office to support Islanders with the pressure they were feeling with family budgets and the cost of living crisis.
‘The Social Security Minister and myself are announcing the measures that we are proposing to support Islanders with these difficulties. Measures which are targeted, timely and temporary in line with Fiscal Policy Panel advice and they are supporting low-income families, pensioners and middle-earning taxpayers.’
He added that income forecasts for the Treasury Department had allowed ministers to put together the package of measures.
‘We are in a somewhat fortunate position with the forecast extra income,’ he said. ‘That forecast extra income together with already forecasted budget increases means that we can provide this support to Islanders with the cost of living.
‘Some of the extra income is around a strongly performing economy, increasing interest rates and increases in inflation. We believe it is an affordable package but it is the right thing to do in a targeted, timely and temporary way.’
He added that the additional money put back in Islanders’ pockets would allow them to ‘make the right decisions for them as individuals and families’.
– Tax measures
As part of the mini-budget, income tax thresholds will be increased by 12%, including child allowances, additional allowances and child care tax relief.
This should mean that a single person on the marginal rate would be £520 better off next year, while a married couple with two children earning around £50,000 would take home around £1,243 more.
Plans to cut the de minimis level – the threshold under which GST is not charged on imported goods – to £60 have been deferred by six months until next July.
Deputy Gorst said: ‘From a tax point of view, what we are proposing is we will increase income-tax thresholds above the current level of inflation by 12% from January of next year.
‘The reason we are making these changes now rather than waiting for the normal budget is because Revenue Jersey sends out an ITIS rate. In order for Islanders to see the benefit in their ITIS rate and feel the benefit in their pocket we need to apply and make those changes now.
‘This will be felt by Islanders in their first pay packet in January.’
– Social security measures
Employee contributions will drop by 2% from October if the mini-budget is approved next month.
This means that class 1 employee contributions will drop from 6% to 4% while class 2 contributions – for self-employed and unemployed Islanders – would drop from 12.5% to 10.5%.
Deputy Millar said that this would benefit 54,000 people who would ‘see an increase in their take-home pay from October’.
As well as social security cuts, a series of benefits measures to support those on lower incomes has also been put forward.
At the end of March, former Social Security Minister Judy Martin announced the Cost of Living Temporary Scheme, which runs until the end of the year and provides £20 per person a month for households on income support, which equates to an extra £80 for two adults and two children.
Deputy Millar confirmed that this would be doubled with immediate effect, meaning a family of four will have an additional £160.
Meanwhile, the community cost bonus, which was set up following the introduction of GST to support Islanders who do not earn enough to pay income tax but do not qualify for income support, will be increased to £516 from October.
Deputy Millar said: ‘Currently, that is about 1,000 Islanders who claim this bonus, but we believe there are up to 7,000 more eligible for it but not currently claiming.’
She added that there would be a campaign to encourage more people to take up the community cost bonus.
Old-age pensions will increase by 7.7% in October in line with inflation, while a £600,000 scheme to provide free period products for all between now and the end of next year is also being planned.
There will also be an extra rise in income support in January to match September’s inflation rate.
Cold-weather payments will rise to £70 per month from October 2022 to March 2023 and will not be dependent on temperatures, as they currently are.
And Deputy Millar said that a scheme to provide extra support to families with children with under five years’ residence in January 2023 was also in the works, although she was unable to provide any details on those plans at this stage.
‘We are aware there are families who have been here less than five years that also need support.
‘We are currently trying to work out how best to support those families and I should be able to give some detail in the latter part of this year,’ she said.’
– Additional measures
Both ministers said that the government was committed to engaging with private-sector landlords and estate agents to minimise potential rental increases as part of the work to tackle the cost of living.
Deputy Gorst said that it was the right approach to work ‘proactively’ with landlords rather than legislate for them, adding that it was in ‘their best interests to keep their tenants at a difficult time like this’.
He said conversations with landlords would be had in ‘short order’.
Deputy Millar also said that she had asked the Employment Forum to consider increasing the minimum wage to £10 per hour from October with a further increase to around £10.80 from January. The minimum wage currently stands at £9.22 per hour.
Reform Jersey leader Deputy Sam Mézec has already lodged a proposition calling for the minimum wage to increase to £10 per hour by the autumn before eventually being brought in line with living wage further down the line.
– Fuel duty
Despite growing calls to slash fuel duty, the mini-budget contains no proposals to do so.
An online petition, launched by ATF Fuels director Jonathan Best earlier this year, said consumers were facing a cost-of-living crisis ‘on many fronts’ and called for the introduction of an ‘immediate’ fuel-duty cut of 2.5p per litre.
It has now gained more than 5,000 signatures, meaning it has passed the threshold for consideration for debate by the States Assembly.
Deputy Gorst added that the success of the petition and the fact it would now be brought before the States Assembly was another reason fuel was not included within the emergency budget.
‘That is the reason why there is no change in this package of measures, because ministers will have to consider fuel duty then,’ he said.
