RPI pension rises are not under threat – P&R
POLICY & Resources has said it will continue to back inflation-linked increases to the States’ old age pension.
It has rejected claims that it wants to scrap the policy and allow the real value of the pension to decline.
The senior States committee is asking the States to throw out proposals to spend about £2.25m. to put up the full pension by £7.26 a week between July and December so that it keeps pace with recent increases in the cost of living.
Employment & Social Security president Peter Roffey, who is leading the proposals, said P&R’s looked like it wanted to break the link between rising prices and increases to the old age pension.
But P&R has insisted that it opposes only the unusual move to increase the pension in the middle of the year. It said it has ‘no objection’ to inflation-linked pension increases once each year.
‘The logic of P&R’s argument is that non-means tested benefits should not rise in line with inflation, even at the annual uprating review,’ said Deputy Roffey.
‘If that is really P&R’s stance then it will be a major departure to established social policy in Guernsey.
‘Such a change should be the subject of a seminal debate, informed by proper policy papers, not an “on the hoof” decision to simply carve out some types of benefit from a general approach of maintaining their real values.’
P&R brushed aside Deputy Roffey’s concerns and said pensions should increase in line with inflation – but not until January.
‘The pension was increased by 7%, in line with inflation, in January this year and it will likely be increased by inflation, or slightly more if earnings exceed inflation, in January next year,’ it said.
‘While P&R expresses no objection to the policy of increasing pensions by inflation, or slightly more than inflation, the cost attached to this proposed interim uprating is sizeable, at more than £2m.
‘P&R’s comments relate specifically to the ESS proposals for an extraordinary mid-year uprating for all benefits, which is the matter facing the States, and not on the committee’s wider view of pensions or any other benefit.’
ESS also wants the States to agree an increase of 2.9% to a range of other benefits during the second half of this year. The total, one-off cost would be £3.5m.
‘There is no long-term cost to this proposal, although there is an in-year cost of £500,000 to general revenue and £3m. to the States’ insurance fund. It is important to note that the higher inflation rate has not only driven up demands on the fund, but also the income it receives,’ said Deputy Roffey.
States’ general revenue would fund only about 15% of the proposed additional spending. But P&R said it could not ignore deputies’ failure last month to agree a tax plan to fill a black hole in general revenue, projected at tens of millions of pounds a year.
‘That was the States’ decision which we must now all work with,’ the committee said.
‘The message in that debate and from the community was for spending restraint first and foremost. Therefore, it is not tenable to immediately sanction £3.5m. of unplanned expenditure in a way that is broad-brush rather than targeted.
‘Guernsey’s public finances are under immense pressure, with a growing deficit forecast to reach £100m. a year by 2040.
‘If the intention is to provide support to those who are struggling, it could and should be more targeted, which would mean a much lower overall cost.
‘Where households are not struggling, benefits should continue to keep pace with inflation, but this should be applied from 1 January as normal.’