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FOCUS: The bid to scrap '20 means 20'... and other big budget battlegrounds

FOCUS: The bid to scrap '20 means 20'... and other big budget battlegrounds

Wednesday 31 August 2022

FOCUS: The bid to scrap '20 means 20'... and other big budget battlegrounds

Wednesday 31 August 2022


Jersey's longstanding '20 means 20' tax rule could be scrapped and landlords temporarily banned from putting up rents, if Reform Jersey politicians get their way in next month's 'mini budget' debate.

Unveiled last month, the Government's proposed £56.5m package aims to help islanders better cope with cost of living rises with the help of rising tax thresholds and falling Social Security contributions.

The 'mini budget' also proposes doubling contributions from the ‘Cost of Living Temporary Scheme’ from £20 to £40 per person per month to December and doubling the Community Cost Bonus to £516 in October, while cold weather payments will also rise.

No action is being taken on housing costs specifically, though Ministers said they would strongly encourage landlords not to put up their rents.

Ministers say their plan follows a "timely, targeted and temporary" approach in line with the advice of its economic advisers, and best serves individuals and families.

However, echoing the comments of business groups and charities, some backbenchers say it doesn't go far enough and are looking to amend the final package - some more drastically than others.

States Members are due to debate and vote on the measures on 13 September.

Ahead of the big day, Express takes a look at the amendments put forward so far...

Finish with '20 means 20'

Proposer: Deputy Sam Mézec (Reform)

Deputy Sam Mézec is pushing for the end of Jersey’s ’20 means 20’ tax rule from January 2023. 

Instead, all taxpayers would fall under the marginal relief system, with the basic rate reduced from 26% to 25% - this, he argues, will “see the tax liability reduce for tens of thousands of islanders”, while “those who earn the most will be required to pay slightly more.” 

“Most taxpayers are Marginal Rate payers. Every taxpayer with a tax liability currently between 1% and 19% will see their tax reduce as a result of this proposal. This will see more money put in their pockets to assist them in affording their increasing bills and expenses. “

Noting that Jersey has become a “more unequal society where the wealthiest have got wealthier and the poor have got poorer” according to the latest report on islanders’ average earnings, he added: “This trend has been in place for over a decade, and successive governments have failed to take action to reverse it. 

“By putting all taxpayers on the same footing, our tax system will be simpler and fairer. We will all pay under the same rules and be treated equally.”

Deputy Mézec estimates that his plan – which he says Treasury have worked “closely” with Reform Jersey on over several years – will see an extra £12.1m in revenue raised, after the increases in tax allowances.”

“This will help offset the cost of the other measures and reduce any pressure in the future to cut essential public services or raise alternative taxes, in order to return to a balanced government budget.”

 

New personal tax allowance

Proposer: Deputy Tom Coles (Reform)

Workers income tax.jpg

Deputy Tom Coles wants to introduce a new personal tax allowance, to help offset the tax burden on islanders on low incomes. 

Explaining how his proposal would work, he said: "The term of relative low income is defined as 60% of the median income. The 2022 median income for a full-time employee was reported as £750 per week, making the relative low income £450 per week or an annual income of £23,400.

“The proposed 12% increase to the tax threshold, taking the threshold to £18,550, would still leave an individual receiving a relative low income, without further deductions, liable for tax on £4,850 of their income, an amount of £1,309. This amendment would mean individuals receiving relative low income would no longer be paying tax.”

 

More help for pensioners

Proposer: Deputy Moz Scott

pensions.jpg

Deputy Scott wants a higher personal income threshold of £20,512 to be introduced for over-75s who do not have more than £25,000 in income. 

She says her propoisal aims to “alleviate the relatively high amount of pensioner poverty in the Jersey compared to that in the UK.”

“Until its removal in 2015, income tax law provided for a higher income tax allowance for individuals aged 65 or more (the relevant age was lower in years preceding year of assessment 2014),” the Deputy explained.

“I have been indirectly informed by Revenue Jersey that the reason for the removal of the age-enhanced threshold, was it was considered unfair for the tax system to discriminate on the basis of age rather than income level, with the result being that a 20 year old earning £25K would pay more tax than a 75 year old (who does not pay social security contributions) with the same level of income). 

“This argument overlooks the difference in earning potential between a person of working age and a person well past retirement age, with inflation having caused the value of income to fall in real terms. It also overlooks the significant amount of pension poverty that we have in the island.”

 

Temporary ban on raising rent

Proposer: Deputy Sam Mézec (Reform)

keys-house-home-rent-landlords.jpeg

Deputy Mézec wants to introduce residential rent controls for two years – including a suspension on rent rises and moving all fixed-term tenancies to open-ended ones. 

Noting that the Government is only encouraging landlords not to increase rents rather than taking action, Deputy Mézec said: “…It ultimately constitutes just words rather than tangible action to protect people from what may be the harshest increase in their living expenses they will face. 

“The only way to be sure that tenants are protected from extraordinary rental inflation is to impose a ban on rent increases and introduce protections for tenants from having their tenancies ended to get around this ban.”

If “no real action is taken”, he said there is a risk that islanders won’t feel any benefit from the mini budget, as “any extra income they receive will simply go towards paying the rent.”

 

Help 6,000 more homes access Community Costs Bonus

Proposer: Deputy Lyndsay Feltham (Reform)

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Deputy Feltham wants the income threshold for accessing the Community Costs Bonus – which exists to provide targeted support to low-income households likely to be the most impacted by the cost of GST on food - to include all households where no member has had a tax liability of more than £2,735 for the previous year.

If approved, she estimates that the amendment could make a further 6,000 homes eligible, with a potential cost of around £3m. 

She says the reason for her amendment is to better target the Community Costs Bonus “to include households with a relatively low income but are not eligible to receive income support-related benefits. It acknowledges that people in this scenario are more likely to be adversely affected by high inflation and increased cost of living than higher earners.”

The Deputy is also proposing that the application deadline for eligible households is extended by six months to make it “more accessible to eligible households who are unaware they can claim.”

 

Don’t double the Community Costs Bonus

Proposer: Deputy Max Andrews

“In the Mini Budget proposals, the Community Cost Bonus will be doubled from £258.25 to £516.50, if approved, which demonstrates a 100% increase. Alternatively, I propose the CCB be increased by 12 %from £258.25 to £289.24,” Deputy Andrews said.

“This amendment will see an aggregate budget allocation of £2,024,680 instead of £3.6 million to support 7,000 households. Measuring the CCB increase with Retail Prices Index (RPI) is sufficient enough without the need to double the CCB, because an CCB increase at 12 percent will provide sufficient coverage for Islanders in real terms.”

 

Reduce Social Security Contributions for longer

Proposer: Deputy Catherine Curtis (Reform) 

Deputy Catherine Curtis is proposing that the proposed 2% reduction in employee Social Security Contributions in the mini budget should be extended until March.

“The proposed temporary reduction in social security contributions will end at the most expensive time of year,” she explained.

“January is the time of year when households are more likely to have overspent and get into debt. The increasing cost of heating will also make January, February and March a more expensive time than spring and summer.

“There is already a huge strain on households to manage living costs, as identified in the mini budget. Many working households, especially those with children, will be paying a very low rate of tax or no tax, so will not necessarily benefit from the tax threshold changes, and it will be a hardship for them to have an increase in their social security contributions immediately after Christmas.”

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