The Employment & Social Security Committee wants benefits paid to the elderly, the infirm and the poor to be removed from a draft policy which aims to restrict increases in States expenditure to no more than the rate of inflation each year.
It submitted an amendment yesterday which will give the States the option of adopting the spending freeze for other budgets but not applying it to those which fund the old age pension and nursing care costs and the income support scheme, which replaced supplementary benefit in 2018.
‘These three areas of expenditure must be treated as necessary exceptions because they are statutory obligations, fundamentally driven by factors beyond the inflation rate, and designed to protect some of the most vulnerable members of the community,’ said ESS president Tina Bury.
The Assembly provisionally backed Deputy Mark Helyar’s proposal for a States-wide expenditure freeze during the first part of its landmark tax and spending debate in July. It will decide whether to adopt it as a formal States policy when the debate resumes next week.
Following the provisional vote in July, Deputy Bury warned that ‘serious cuts and impact on people’ were inevitable if the spending freeze was applied to social insurance benefits, which are funded through social security contributions, as well as to general revenue budgets funded through taxation.
She said yesterday that her committee felt it had to fight against ‘transferring the burden onto pensioners, disabled people, carers, low-income households and those requiring long-term care’ and that excluding social security and welfare spending from the freeze would at least ‘protect vulnerable islanders, uphold commitments previously made by the States and avoid creating greater social and financial costs elsewhere in the system'.
Expenditure from the Guernsey Insurance Fund, the vast majority of which goes on the old age pension, is expected to reach nearly £240m. next year. It also pays for incapacity benefit, unemployment benefit and parental benefits. ESS is legally required to pay such benefits to anybody who meets qualifying criteria. It said that capping expenditure would do nothing to lower the number of claimants but instead force cuts in the rates paid to them.
‘In the case of the States pension, it would erode the value of an earned entitlement that islanders have contributed towards for decades, increasing financial hardship among pensioners and potentially driving greater reliance on means-tested support,’ said Deputy Bury.
Expenditure from the Long-term Care Insurance Fund, which pays some of the costs of residential and nursing care, is expected to exceed £35m. next year.
ESS said that care costs regularly increased faster than inflation and that demographic changes were also increasing demand for care beds. It claimed there were only three ways of making the books balance – increasing States payments, higher costs for care home residents and their families, or homes accepting less income.
‘At a time when Guernsey needs additional care capacity to meet future demand, such a policy risks destabilising the private care home sector and discouraging investment and expansion,’ said Deputy Bury.
There is precedent for excluding social insurance spending from previous policies aimed at reducing or slowing States expenditure.
However, ESS also wants the spending freeze to exclude income support, which is paid out of general revenue funded by taxation rather than social security contributions.
The committee described income support – which costs about £60m. a year – as the island’s safety net and said it was legally obliged to assist people suffering financial hardship irrespective of the States’ budget position.
‘As with social insurance and long-term care benefits, demand cannot simply be restricted by an expenditure cap,’ said Deputy Bury.
‘Instead, compliance would require below-inflation increases in income support rates, reducing the real spending power of households in Guernsey and Alderney with the lowest incomes.’
The amendment was one of about 30 new amendments submitted yesterday, ahead of the resumption of the States’ tax and spending debate next Wednesday.
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