Social security needs root and branch review

SOCIAL SECURITY has largely been the forgotten element in the tax review debate dominated by a goods and services tax and much-desired economies within the public sector.

Yet it should not be ignored. Social security is the fastest-growing element of expenditure within the public sector since the introduction of the zero-10 tax system, increasing by more than a fifth in a decade. Much, but crucially, not all, of this is down to changing demographics.

Uncontrollable increases at social security are down to the number of claimants, especially in the current climate, pensioners. Controllable increases are driven by changes in benefit rates, which is within the gift of the States.

Employment and Social Security is caught up in a tangle between attempting to address pensioner poverty while resisting significant increases in benefits, including the old age pension, in its annual considerations on uprating.

The committee has jumped in advance of the tax review verdict with the publication of this year’s annual uprating report, outlining increases in contribution rates for both the Guernsey Insurance Fund and the Long-term Care Insurance Fund.

The Guernsey Insurance Fund has been in deficit since 2009, has a near-£20m. shortfall predicted this year, which could double next. The principle that social security payments, should be paid each year from what is received, and not to have a buffer fund is now completely unsustainable. However reserves currently standing at more than £700m. could be exhausted by 2039, and an extra £28m. is needed each year to make the fund sustainable as it stands.

It is just one element of social security ripe for review, as recognised by ESS, Policy & Resources and the Tax Review steering group.

There is plenty of inequity in the social security system, and now the whole basis of it has effectively moved from payments linked to benefits received, to simply being another tax, the decision to tackle those inequities is well overdue.

Even if benefits are not going to be means-tested any time soon, restructuring of rates, allowances and limits certainly needs to be supported by deputies next week in the tax review debate.

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