By Ben Shenton
THE Bank of England website has a useful inflation calculator. For example, if you had £10,000 in 2007 (17 years ago), you would need £16,539.30 to purchase the same goods and services in today’s money (UK inflation rates, Jersey’s are often slightly higher).
Of course, the change in purchasing power will depend on the inflation rate prevalent during the period. For the past 17 years inflation has been relatively contained and for this period the average inflation rate was 3.0%.
If we were to take the period 1970 to 1987 (also 17 years), average inflation was 9.6% and you would need £47,416.11 in 1987 to have the same spending power that £10,000 had in 1970. The above is quite simplified, but it illustrates the point on how inflation affects the pound in your pocket. Therefore, if someone should offer you 17 years of interest-free credit whereby the amount you repay is the same as the amount you originally owed, you should bite their hand off.
Historically, Jersey taxed individuals on a prior-year basis, and there was a transition to current-year in order make life easier and accelerate the speed at which the tax office gets our money. The original plan was to increase the tax burden of those on prior-year by charging them for their current-year tax, plus a large portion of the prior-year tax they owed. This was not acceptable as many members of the public were struggling to survive without an additional tax burden.
After public pressure, primarily through a petition, the tax office relented and if you still owe your prior year 2019 tax you can pay it off over 17 years (interest free). The amount won’t change regardless of interest rates or inflation. In some respects, it is the “deal of the century” and I would urge those with this outstanding tax liability to log into the government website, sign into the 17-year repayment plan, and print off the contract you will have between yourself and the government, just in case a future government regrets the current generosity.
With finances it is always good to plan and take advantage of any good deals. The true cost of living in Jersey, including taxation, duty, increased charges, new charges and extra administration burdens has accelerated worryingly over recent years. An edition of the JEP last week summed up the problem. There was a story about people struggling to live, followed by a politician saying that the government are going to help keep costs down, followed by an article about a States-owned facility saying that charges would go up by more than cost of living for the next few years. Three different worlds.
