Dear Sir, 

An extremely important aspect of the Tax Reform Paper has been entirely forgotten (or ignored) by those who should know better, namely the effect of the proposed reforms on the position of the Guernsey Insurance Fund.

The Guernsey Insurance Fund pays the Old Age Pension, Long Term Care, Unemployment Benefit, and other financial support benefits, and is funded purely from Social Insurance Contributions and returns on the investments bought by the Fund.  The last published actuarial valuation of the Fund was in 2019 and revealed that, unless contribution rates were increased, the Fund would run out by 2039.  

So, in October 2021 the States approved an escalating increase in contribution rates that would ensure that the Fund would be able to support these benefits until beyond 2080 with cover more than of 2 times annual outgoings at that time.  So, can we all relax?

Apparently not.  The Tax Reform paper significantly changes the position of the Guernsey Insurance Fund:

–       It increases SI contributions into the Fund by a net £2m annually

–       But it permanently increases benefits payable by the fund arising from the inflationary aspects of GST (1.9%).  On Old Age Pension alone this would amount to around £3.4m annually

The proposed recurring additional income in no way covers the permanent increases in benefits payable by the Fund arising from the inflationary aspect of GST.  It is almost impossible to see how the Guernsey Insurance Fund is not seriously damaged by the proposals.

The next actuarial review of the Fund was due as at 31st December 2024, but apparently the only data available to the Government Actuary is for a year earlier and the report is not yet ready for publication.

Before Deputies can vote on whether the Tax Reform Paper makes sense, they absolutely must know how the proposals affect the ability of the Guernsey Insurance Fund to continue to be solvent for the foreseeable future.   They need to see a full report from the Government Actuary, as up to date as possible, and with the full effects of the inflationary aspects of GST within the Tax Reform Paper made clear.

All further discussion should stop until that information is publicly availably.  I have asked for an Amendment that stipulates this.

Peter Rose