Forward Guernsey has decided to go ahead with the idea of cutting 0.5% from the rates paid by employees and the self-employed in 2027.
It floated the idea last month, ahead of the States’ 2027 Budget debate, and yesterday confirmed that it would shortly submit an amendment to legislation on social security rates due to be debated by the Assembly at its next meeting.
‘In the end, the only easing provided by the States in the Budget debate was limited to continuing mortgage interest relief, holding alcohol duty increases to RPI and limiting the increase in fuel duty,’ said Forward Guernsey leader Gavin St Pier.
‘A reduction in employee and self-employed social security contributions will help a far greater proportion of the population facing cost of living, States’ utility and other tax increases, without impacting general revenue.’
The move would reduce rates to 7.1% instead of 7.6% for employees and to 12.1% instead of 12.6% for the self-employed.
It would cut the cost of contribution payments by about £500 a year for a couple both earning around the average full-time wage.
It would also effectively cancel out the impact on household budgets of an increase in the minimum contribution to the secondary pensions scheme which will come into force in January.
Deputy St Pier said that he and his colleagues in the island’s only political party were ‘currently drafting an amendment to the Social Security Contributions Ordinance’, the article of legislation which the Employment & Social Security Committee will present to the States to set contribution rates in 2027, albeit the rates were approved by the Assembly at policy stage only a few weeks ago.
‘At this stage, we don’t know whether the proposal has widespread support,’ said Deputy St Pier.
He said Forward Guernsey’s amendment for a 0.5% cut was ‘presently for 2027 only’. But the party has expressed an interest in trying to extend it into future years until an overhaul of social security contributions, including the introduction of a personal allowance, takes effect in 2029, as part of the long-term tax package recently agreed by the States.
The amendment would not affect contribution rates in 2027 for employers, which are due to rise from 7.1% to 7.2%, or for the non-employed, which are scheduled to increase 11.8% to 12% for those under pension age and remain at 3.8% for pensioners.
Forward Guernsey has estimated that its proposed 0.5% cut to rates for employees and the self-employed 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.