Go after the right target
Suggestions by the Commerce and Employment minister that the burden of providing an island-wide old age pension could be eased by reducing its value might be controversial – but she has a point.
Suggestions by the Commerce and Employment minister that the burden of providing an island-wide old age pension could be eased by reducing its value might be controversial – but she has a point.
Not in breaking away from the policy of seeking to give over-65s an annual RPI-plus increase, but in saying that the pension should not be regarded as a living wage.
Even the Social Security Department would agree with that and has tried on many occasions to persuade islanders to make provisions over and above the basic States pension.
The point is that funding old age has never been more expensive or more onerous to finance, which is why there are now only three of Britain's top 100 companies currently offering final salary schemes.
Attacking Guernsey's OAP is going after the wrong target. As a first step, the States has to close the public sector's final salary, index-linked schemes to new entrants to reduce the burden on taxpayers.
But that is only the start. The Social Security old age pension is a bare minimum for those who, for whatever reason, have been unable to make the necessary private provision and to restrict future increases in its value is to drive further into relative poverty those whom this island ought to have a social and moral contract to assist.
The damage, of course, has been inflicted by the politicians who, lacking the courage to tackle out-of-control government spending elsewhere, believed that savaging the States contribution to the OAP was the cash equivalent of a magic wand.
Now, the reality is clear. With the insurance element removed – contributions previously simply funding benefits – social security payments have become a tax. In turn, that means the 20p in the pound headline rate of income tax is a myth. It is now, with social security and other charges, closer to 33% and Treasury and Resources is determined to make that higher.
Penalising pensioners isn't the issue. States members, who have been superb at spending other people's money, now have to show their commitment to cutting waste.
There are wholesale reforms needed within government – but there is no one leading them.
n Health and Social Services have asked us to make clear that reference here yesterday to 'Social Services' meant the Social Security Department.
