Forward Guernsey is considering proposing a 0.5% cut to the rates paid by employees and the self-employed.
The move would reduce contribution payments by about £250 a year for the average working person.
After annual inflation climbed again, to 4.6%, Deputy Rhona Humphreys told the latest Guernsey Press Politics Podcast that cutting contributions would be a quick way ‘to help people across the board’ who are facing increasing cost-of-living pressures.
The States would need to approve such a proposal, which would reduce rates to 7.1% for employees and 12.1% for the self-employed, and it was unclear how Forward Guernsey, the island’s only political party, would force a vote on the issue speedily.
Hear more from Forward Guernsey member Deputy Rhona Humphreys on the latest Guernsey Press Politics Podcast
‘We want to see the final shape of the 2027 Budget after all the amendments have been debated next week before deciding whether or not to proceed,’ said Forward Guernsey leader Gavin St Pier.
‘In its current form, all duties are rising with or above inflation, while at the same time the threshold at which the withdrawal of tax allowances begins is being whittled away by inflation and there is also the real prospect that nearly a quarter of families could lose their entitlement to family allowance. Recognising widespread cost-of-living pressures, we want to use the one mechanism that can offer some relief without impacting the very tight general revenue position.’
Deputy Humphreys, a member of Forward Guernsey, the island’s only political party, estimated that the 0.5% social security rates cut would result in an annual loss of about £7m. a year to the Guernsey Insurance Fund, which pays the old-age pension and a handful of other contributory benefits.
Since 2009, benefits paid out of the fund have exceeded contribution income collected, but investment returns on reserves of more than £800m. have resulted in growing annual surpluses. Contribution income and investment returns have been ahead of budget this year.
Social security contributions have been steadily increased in recent years, but the tax reform package recently agreed by the States anticipates reductions from about 2029, after the introduction of a new personal allowance similar to the one which applies on income tax.
‘Social security contributions have been steadily increasing every year since 2022, not least because of the indecision over future tax reform. For many working islanders, these increases have compounded the impact of rising living costs and wages falling in real terms,’ said Deputy St Pier.
‘Now a decision on tax reform has been made, there is greater certainty with which to plan.
‘We believe there is a strong case for considering whether some of that improved position can be used to provide modest, immediate relief to working islanders, rather than asking them to wait until 2029 for the benefits of the full tax reform package.’