Michelle Le Clerc: Social conscience

Oh dear, I have been watching too much of Bridgerton.

For those of you not acquainted with the books or the TV series, the narrator always starts their gossip sheet with those words. This, however, is not a gossip sheet. When Heidi and I agreed to re-launch our podcast The Long And The Short Of It with the Guernsey Press, we agreed we would also write an article for the Press to complement the podcast.

Why do all the best ideas come when you wake early and cannot sleep? All the inspirational sentences and narrative just flow. Or when you are walking the dog? Which in my case is pushing the dog in his dog pram, poor thing – you get the idea. But the minute you sit in front of the laptop all the words disappear and you are left with a blank page before you.

I am not going to resort to AI. I am a tech luddite. So it was with some surprise that I downloaded the latest States’ budget and saw that Copilot was offering me a summary. 182 sheets of paper reduced to six pages. What is there not to like? I wonder how many AI-created speeches are going to be heard over this political term? But it is worth noting that you really need to sense check anything produced by AI as some of the numbers in the summary were not correct.

Anyway, back to this article, I can honestly say that these are all my own words.

They are about the forthcoming States debates on the budget and non-contributory and contributory uprating reports, which set spending, taxes etc. for 2026. Heidi and I will talk through the Budget in our next podcast.

The non-contributory policy letter will be debated with the budget in the first week of November. This covers rates for income support and other social security programmes funded by general taxation rather than by social insurance contributions. The States call this formula-led expenditure. This means benefits for which one qualifies through a test of need as well as universal or near-universal benefits such as family allowance.

The contributory policy letter is the one being debated this week. It sets out rates of benefit for things like the States pension and sickness which are funded from social insurance contributions made by employers, employees, the self-employed and non-employed.

I have to admit that the presentation of these two annual policy letters was always a time of dread for me. It was often a rough ride for the Social Security president and committee, who often faced a real grilling.

I always received pushback from former Deputy David De Lisle, as well as from the Economic Development Committee, about increases in employer contributions. It is usually around this time that uplifts to the minimum wage are debated, which often involves differences of opinion between Social Security and Economic Development.

Pushback came from those who frequently distanced themselves from the social policy committees. With insensitive words like ‘feckless’ often used with very little understanding of some of the deep-rooted social problems we have in Guernsey.

These days these policy letters seem to go through virtually on the nod, particularly the non-contributory proposals debated at the of end of the budget debate. Perhaps deputies are exhausted after days of debating the budget and just want to get home.

This time the contributory report proposes a further 0.1% increase in social insurance contribution rates, both for employers and employees. This is part of a 10-year plan of sustainability, as we are taking out more than we are putting into the Guernsey Insurance Fund. This fund is where pensions are drawn from as well as other benefits. Pensions make up 87% of the benefits paid out from this fund. The policy letter takes three pages just to explain the ‘double lock and look back policy’ for pensions, which is the complicated way ESS now arrives at the full pension rate each year.

The use of social insurance contributions to bolster the empty coffers is now very worrying. Whereas any increase in income tax or a new goods and services tax are met with outrage, the under-the-radar increases in social insurance contributions go through relatively unnoticed. However, I expect that during debate there will be some concern from Economic Development, as this is an additional cost to employers, as well as employees, on top of the secondary pension contributions they are now required to make, hindering much-needed economic growth.

However, as my good friend Deputy John Gollop is fond of saying: ‘You can’t have the penny and the bun.’ If the Assembly keeps deferring decisions on tax reforms, these social insurance increases will continue, as agreed in 2021, for a decade.

The Long-Term Care Insurance Fund is also part of the contributory benefits report. If you are really looking for a can that has been kicked down the road, look no further. Established in 2003 to provide financial support to those needing residential or nursing care, it has been the subject of much controversy. It was a controversial debate in 2003 which led to the introduction of the scheme, and it continues to divide opinion, particularly as the money is running out as the need increases with our ageing population.

When approved back in 2003, it came with a warning that additional funds would be needed after 15 years to sustain the fund. The ESS committee of 2016-20 put forward proposals to sustain the fund and to include funding home care from it. The main funding element of the proposals was rejected, partly because of the timing of the policy letter just before the general election that year, and because of an implied promise that the value of a person’s home would never be included in any means testing for the long-term care benefits.

However, with a growing need to stabilise the fund and encourage growth in the care home sector, it was agreed in early 2025 to increase the co-payment made by recipients of bed-based care over a five-year period. This was to cover living and accommodation expenses. From January 2026, it will rise to £396.76 per week and from July £414.61, if the proposals are approved.

Compare this to the proposal to increase the States pension to £292.09 per week and you can see those in care are facing a shortfall of at least £104.67 per week from January, £122.52 from July. This is for a standard rate bed, often in short supply as many of the beds available frequently come with an additional premium. They say the devil is in the detail and I do believe that until you have a loved one in care the real cost of care remains unknown to most people.

In addition to the co-payment requirement, a residency requirement was also approved earlier this year. When these changes are fully introduced, a person will be unable to claim benefit from the LTCIF until he or she has paid a ‘user care cost contribution’ of up to £10,000. The exact sum will be means tested. If you have capital assets (e.g. savings) of more than £15,000, excluding the value of your home, you will be expected to pay the full £10,000 upfront, as well as your co-payment on an ongoing basis. After you have paid your £10,000, which will pay for approximately 12 weeks in a residential care bed, you will be eligible for benefit from the LTCIF, but you will still have to pay your weekly co-payment. For those unable to pay the user care cost contribution or the full co-payment, a claim for income support can be made.

I always think that many people rarely understand the make-up of income support claimants. People might be very surprised if they looked at Table 6 of this year’s policy letter. Most claimants are not single mums, but pensioners and the long-term sick.

Which brings me nicely to the non-contributory policy letter being debated this week.

We have no actual numbers of how many LTCIF claimants also claim income support, or who might need to claim following these changes. But the approximate costs were in a previous policy letter, debated in January, and were estimated at £1.3m. for 2025, growing to £2.1m. for 2026 and £3.7m. per annum by 2030. Just to reiterate, these costs do not include home care costs, a report on which is due back during this political term. Watch this space for the an interesting and potentially explosive debate on proposals sure to be expensive.

One or two other parts of the policy letter interested me. The first was social housing rents. These are the maximum amounts of assistance available to income support claimants towards the cost of social housing rented properties as well as private rented properties. The rates are set and approved in the non-contributory policy letter but will be included in the budget as both income and expenditure to the States. It will be interesting to see next year how the policy of the new Housing Committee in setting rents will affect future income support expenditure.

The States received £26.5m. in rental income for 2024, with expenses of £9.5m. (£6.1m. of which was on maintenance). £10.1m. was then paid out in income support rental costs, which gives a net income of approximately £4.8m. per year to States general revenue funds. These funds were previously ring-fenced for housing but now go into the central pot – and that is not an insignificant amount of income.

Then there are proposed changes to legislation punishing benefit-related offences. I am unsure what is driving these changes. Alignment with Jersey and the UK, according to the policy letter, but why?

If you trawl through the Guernsey Press and look at the cases of benefit fraud brought to court, they are relatively few. And if you look at cases of tax fraud brought to court, there are almost none. Yet more than £6m. of undeclared income and overstated expenses were discovered by Revenue Services in 2023.

The proposals now being put forward of maximum sentences of seven years in prison appear to me to be over the top. Of course we must discourage any type of fraud. But most benefit fraud is committed by some of the poorest in our community, usually without the means to pay fines or repay benefits, and it costs many tens of thousands of pounds to keep someone in prison.

I hope our newly-elected States members do not approach the debate with the hackneyed views of some of their predecessors. They must take seriously the burden of contribution increases on employers and employees. But I hope they take the time really to understand the range of people claiming income support. As well as many of them being pensioners, as I mentioned earlier, many others are in work and are receiving a top-up to their low earnings, in some cases quite a small top-up.

Most of all, I really hope that they will quickly realise just how precarious the funding of our pensions and long-term care has become – and act with purpose and principle.