The Cost of living Mini-budget – Mini-Budget 2022 – P.80/2022 was lodged on 2nd August 2022 and proposes a package of taxation and social security measures to address cost of living concerns including:
- increasing the personal income tax thresholds and allowances by 12% above the 2022 thresholds and allowances, in accordance with the Table in Appendix 2 of the report accompanying the proposition, to take effect for the year of assessment 2023;
- temporarily reducing by 2 percentage points Class 1 and 2 social security contributions for the period 1st October 2022 to 31st December 2022, comprising a reduction, in respect of earnings below the standard earnings limit (SEL), from 6% to 4% for the Class 1 employee contribution rate, and from 12.5% to 10.5% for the Class 2 contribution rate;
- doubling the value of the Community Costs Bonus for 2022 by increasing the value of the bonus from £258.25 to £516.50.
- setting a fixed value at £70 per month for the Cold Weather Bonus and Cold Weather Payments, regardless of temperature, for the winter months (October 2022 to March 2023 inclusive); and
- postponing the commencement of the obligation for offshore retailers to register under the Goods and Services Tax (Jersey) Law 2007 from 1st January 2023 to 1st July 2023.
The Covid-19 pandemic and the Ukraine crisis has caused a shift in the macroeconomic landscape for Jersey. Disruptions to global supply chains has resulted in rapid increases in energy costs which has transformed a calm economy of low volatility, low interest rates with positive returns and predictable monetary policies into one with higher inflation, more volatility and less certainty.
This has resulted in a fall in 'real' disposable income for islanders which is predominately caused when high inflation outstripping wages, benefits and taxation increases and affects the affordability of goods and services across society. It is likely that low-income households are to be hardest hit by the cost-of-living crisis.
The Chief Minister's vision statement to the States Assembly on 5th July 2022 confirmed that a Mini Budget would be proposed by Ministers, within the first 100 days of appointment, to address the cost-of-living crisis. The Statement confirmed that the proposition would include a suite of measures to deliver targeted support to Islanders ahead of winter 2022.
In a television interview on 5th July 2022 the Chief Minister confirmed the intention for the debate of the Mini Budget to occur during the first sitting of the new assembly – this is scheduled to take place on 13th September 2022.
Previously the Chief Minister has lodged propositions requesting the removal of GST on menstrual sanitary products [P.66/2022] – the consideration of GST exemptions might be applied in the Mini Budget or the Finance Law for 2023.
Under the Public Finance (Jersey) Law 2019 (11 (4)) only the Minister for Treasury and Resources may lodge draft legislation that contains a taxation draft.
The Minister has also confirmed in a briefing to the Panel on the 28th July 2022 that the Proposition will include benefits amendments which will involve the Minister for Health and Social Security.
Considering the Proposition involves the remits of both the Minister for Treasury and Resources and the Minister for Social Security, the Panel has agreed to co-opt Deputy Southern, Chair of the Health and Social Security Panel.
The Panel's review aims to address the following key areas of concern:
- Decision making – does the Proposition provide sufficient evidence to quantify proposal outcomes and detail how interventions will achieve goals.
- Distributional impact analysis – has the Proposition assessed the impact of intervention on different groups in society. Moreover, does the proposition have any negative effects for groups in society according to characteristics such as income levels or geographical location.
- Targeted support – does the Proposition provide targeted relief to those most impacted by cost-of-living increases.
- Impact on inequality – will the proposed budget measures exacerbate wealth and income inequality within Jersey on the Gini index which is a measure of statistical dispersion.
- Future taxation and/or borrowing measures – how will monetary relief provided through the budget measures be recovered (i.e., through either taxation or borrowing).