Retired States staff worry at pensions review

The following considerations appear to be central to the proposals set out by the Treasury and Resources and Social Security departments in their joint States report:

• that the introduction of some form of alternative indirect taxation, for example, a consumption tax, is essential for the proposals to work as envisaged;

• that Guernsey is heavily dependent upon the high proportion of States income received through direct taxation relative to indirect taxation when compared with other jurisdictions such as Jersey or the Isle of Man;

• that the established practice of paying certain benefits on a universal basis, rather than according to need, is no longer appropriate;

• that demographic changes, such as increasing life expectancy, will result in greater demand within public health and welfare budgets;

• that the entire outline proposals, if accepted and implemented in full, would neither generate additional income nor any net increase in States expenditure.

In the light of these considerations, there will be those who might feel tempted to regard the proposals as being little more than rearranging the deckchairs on the Titanic. However, it is necessary to resist that temptation for a number of reasons.

First, while acknowledging that not all pensioners, large families and those requiring frequent medical treatment will be equally hard hit by these proposals, such austerity measures nearly always hit those least able to make choices that would mitigate the most damaging consequences, notwithstanding the report's recognition of the need to protect pensioners from the impact during the transition period.

By way of illustration, we offer the example of an RSEA member who requires a minimum of four doctor consultations at £44.25 each and 12 nurse consultations at £10.65 each per year, at current subsidised prices. The former currently costs £177.00 and the latter £127.80 per year. The removal of that subsidy will lift those figures to £225 and £199.80, increases of £48 and £72 respectively. This represents a total minimum increase of £120, approximately 40% per year. The financial consequences would be more severe should the individual concerned have to attend the doctor or nurse more frequently, a not entirely improbable prospect given advancing age. In addition, it would appear that prescriptions, currently free of charge, would cost £1 per item. For those with age-related medical conditions, these increases may well be difficult to deal with and, notwithstanding assurances about protecting the pensioner, some elderly islanders may go so far as to avoid visiting their medical practice. In any event, the States report declares that '(a) number of the measures recommended require significantly more work to develop transitional arrangements and ensure that suitable mechanisms are in place to protect those on low incomes'. It is essential that those mechanisms are determined as soon as possible if pensioners are to feel that any such assurances have substance.

Second, the uplift in personal income tax allowances, ostensibly to offset the increase in certain charges because of the withdrawal of universal benefits, will afford little comfort to those whose modest incomes prevent them from benefiting from such allowances. Interestingly, the argument for the withdrawal of universal benefit does not seem to apply in respect of the granting of a universal allowance within the income tax system. Increases in personal tax allowances will, of course, only benefit those whose income will exceed the proposed level of £17,500.

To put this figure in context, the maximum annual rate for old age pension from January 2015 is £10,450 for a single person, given a full contribution record. This leaves a balance of £7,050 from other forms of income before that person would be liable for income tax, assuming that no further tax allowances were available. In 2011, the Pensions Consultative Committee established the Joint Working Group, with Rodney Benjamin, a former actuary, as independent chairman, to review current public service pensions and make recommendations regarding future provision. It produced a profile of public service pensions in payment which indicated that approximately 1,375 pensions, over 42% of the total, were less than £6,000 per year. At that level, with the annual increases as approved by the States, the equivalent pension for 2015 would now be £6,720. These figures suggest that almost half of the association's members might no longer be liable for income tax, but, of most importance, neither would they be eligible for current universal benefits such as free prescriptions or the grants towards the costs of medical appointments.

It is apparent that a strongly embedded local culture of 'paying your own way' remains. There will be many who won't want to appear to go cap in hand for assistance when they have proudly worked for their families and for their island community over many decades. Some of those still in employment may benefit from support from their employers and the proposed changes may be phased in. However, there remains a view amongst those whose income is below the threshold that increasing the level of tax allowances has limited appeal other than to those who seek to impose such change.

SEAN MCMANUS, chairman, Retired States Employees' Association,

Peter Hughes, secretary, Mac Hamel, Steve Park, Mike Prosser, Tony Rowe, Sue Ryde – committee members.