AFTER criticising the government’s proposed Budget over the inclusion of what he described as “plundering” measures to reduce the annual grant paid to the Social Security Fund, a backbencher has submitted an amendment setting out alternative plans.
The Budget which ministers have put forward for debate in the States Assembly next month includes an annual reduction of £50 million to the grant, with the money being used to support the government’s capital programme and living wage transition plans.
Through his amendment, Deputy Sir Philip Bailhache is proposing to halve the reduction to the grant, and for the outstanding amount to be covered through reductions in spending or, if necessary, taken from the Strategic Reserve, a long-term fund established in the 1980s to protect the economy against downturns.
“There is no doubt that spending reductions can be achieved,” he states in the report accompanying his amendment. “That is the broad purpose behind this amendment.”
Although he cites taking money from Strategic Reserve as a potential way of balancing the books, Deputy Bailhache said that his main intention was to encourage the government to review spending.
“[The amendment] is intended to require the government to maintain fiscal stability, which this Budget does not do,” he adds, quoting advice from a recent report by the Fiscal Policy Panel that the government should focus on “limiting growth in day-to-day spending, reducing borrowing and increasing the levels of saving and investment”.
The representative for St Clement acknowledges previous decisions to reduce the money paid into the Social Security Fund for one-off funding to support the transition to a living wage and fund capital projects.
But he argues that the plans for the grant to be further reduced by £50m per year across the span of the 2026-29 Budget go too far, going against “solemn undertakings” made by ministers during a debate in early 2023 not to do this.
Deputy Bailhache states: “In this [2026-29] Budget, any pretence that the Social Security Fund and the Social Security (Reserve) Fund were not pots of money to be plundered if the need arose, has vanished.
“Indeed, the government quite openly states that, in its view, too much money is in the pension funds and that maintaining the grant at its current level is an inefficient way of managing capital.”
He also references additional comments from the FPP report in which the panel spells out reservations about reducing the grant to the Social Security Fund, which is financed through contributions from employees and employers and used to provide benefits like short-term incapacity allowance, carer’s allowance, and old age pensions.
The FPP stated that a comprehensive actuarial assessment of future pension liabilities should be carried out before the grant to the fund was cut, saying that making such a reduction ahead of the 2025 review being published was “not prudent”.
Picking up on the concept of prudence, or the lack of it, Deputy Bailhache states: “The simple answer is that the government is unable or unwilling to control its spending or, more generously, is simply spending more than it is receiving in revenue – it is choosing to balance its budget not by cutting expenditure, or raising taxes, but by withdrawing money from the Social Security Fund.”
It is anticipated that a series of other amendments will be lodged in the coming days, with the Budget debate scheduled to take place during the week commencing Monday 8 December.
