Linking pensions to tax debate a sensible move
A SURSIS is a motion to reschedule debate and does not change any of the propositions in a policy letter. Nothing changes except the date on which we make the decisions. So why has a simple sursis rescheduling debate of secondary pensions to 23 November, six months from now, caused so much irritation for some deputies? The Assembly agreed by a majority to reschedule the debate for two very sensible reasons. Firstly, we are in unprecedented and unpredictable economic times due to Brexit, Covid and the Russian war on Ukraine. As highlighted repeatedly in the debate, economists are predicting stagflation, a horrendous economic environment not seen since the mid-1970s. Something which would impact the island hard with high inflation mixed with a weak job market; how much will people have in their pockets if that economic storm hits us?
Our government must try and help during the potentially challenging times ahead to ensure people can survive as we face the potential of a worldwide recession. The warning signs are clear to see and rescheduling the debate provides time to evaluate developments before making difficult decisions. Secondly, we should not consider the introduction of secondary pensions with the associated costs to both workers and companies in isolation. It needs consideration alongside tax increases, utility/fuel charges and other measures which reduce people’s disposable income and negatively impact their living standards.
Deputy Ferbrache recommended that the secondary pensions be debated at the same meeting as the tax review, possibly in December, enabling a comprehensive debate on the combined impact of relevant schemes/taxes/charges on our community. A suggestion supported by numerous deputies, me included. Proposals for introducing secondary pensions and tax increases are directly linked.
Of the £85m. additional tax revenue we are told we need to raise, £9m. is to offset the lost tax revenue on secondary pensions’ tax-exempt contributions. Effectively we are asking workers and employers to contribute to secondary pensions while paying higher taxes to offset the drop in tax receipts caused by the introduction of those secondary pensions. Linking the tax and secondary pension debates will enable the States to analyse the combined impact on people’s disposable incomes and company profitability.
The unsustainability of the States pension was raised in the States as far back as 1976. The pension fund will eventually run out once contributions can no longer offset pay-outs to retirees due to Guernsey’s ageing population.
The proposal requiring companies to provide pension schemes for all their employees funded jointly by the company and deductions from workers’ wages is a practical solution.
Without companies providing pension schemes, we will see continuous additional welfare claimants increase costs for the States, necessitating further tax increases. I am supportive of the introduction of secondary pensions, as I believe most deputies are, but in a balanced approach once we know how much we are taking from people’s pockets during these extremely challenging times. I suspect some deputies did not want the secondary pension and tax review debates linked as prior approval of secondary pensions could then be used as justification for tax rises.
They are now trying to portray the rescheduling and linkage to the tax debate as a sign of a weak Assembly kicking the can down the road, but this could not be further from the truth. Instead, this more focused Assembly is assessing critical issues like this in a more comprehensive and business-like way, considering the combined impact of far-reaching decisions plus the economic environment when introducing policies initiated long before Brexit, Covid and the Ukraine war entered our everyday conversations.
While I acknowledge that this Assembly is far from perfect, the majority vote for the sursis last week was an eminently sensible decision. It shows our community has a government that will consider all relevant aspects when the secondary pension proposals are debated alongside the tax review later this year.
DEPUTY CARL MEERVELD