Government Plan 2021–2024 (P.130/2020): eighth amendment [P.130-2020 Amd.(8)]

STATES OF JERSEY

GOVERNMENT PLAN 2021–2024 (P.130/2020): EIGHTH AMENDMENT

Lodged au Greffe on 30th November 2020 by Corporate Services Scrutiny Panel

STATES GREFFE

2020  P.130 Amd.(8)

GOVERNMENT PLAN 2021–2024 (P.130/2020): EIGHTH AMENDMENT ____________

1  PAGE 2, PARAGRAPH (a) –

After the words "Article 9(2)(a) of the Law" insert the words –

", except that the 2021 Estimate for Personal Income Tax shall be reduced by £260,000 by amending Child Tax Allowances in accordance with the table below with other affected in lines Summary Table 1 to be updated accordingly

".

CORPORATE SERVICES SCRUTINY PANEL

Note:  After this amendment, the proposition would read as follows –

THE STATES are asked to decide whether they are of opinion

to receive the Government Plan 2021 – 2024 specified in Article 9(1) of the Public Finances (Jersey) Law 2019 ("the Law") and specifically –

1. to approve the estimate of total States income to be paid into the Consolidated Fund in 2021 as set out in Appendix 2 – Summary Table 1 to the Report, which is inclusive of the proposed taxation and impôts duties changes outlined in the Government Plan, in line with Article 9(2)(a) of the Law, except that the 2021 Estimate for Personal Income Tax shall be reduced by £260,000 by amending Child Tax Allowances in  accordance  with  the  table  below  with  other  affected  in  linesSummary Table 1 to be updated accordingly;

2. to approve the amounts to be transferred from one States fund to another for 2021, in line with Article 9(2)(b) as set out in Appendix 2 – Summary Table 2 to the Report;

(c) to approve the proposed borrowing to be obtained for 2021, in line with Article 9 (2)(c), up to and including the amount set out in Appendix 2

– Summary Table 3 to the Report;

(d) to approve each major project that is to be started or continued in 2021 and the total cost of each such project and any amendments to the proposed total cost of a major project under a previously approved government plan, in line with Article 9(2)(d), (e) and (f) of the Law and as set out in Appendix 2 - Summary Table 4 to the Report;

(e) to endorse the efficiencies and other re-balancing measures for 2021 contained in the Government Plan as set out in Appendix 2 Summary Table  6  and  reflected  within  each  gross  head  of  expenditure  in Appendix 2 – Summary Table 5(i);

(f) to  approve  the  proposed  amount  to  be  appropriated  from  the Consolidated Fund for 2021, for each head of expenditure, being gross expenditure less estimated income (if any), in line with Articles 9(2)(g), 10(1) and 10(2) of the Law and set out in Appendix 2 – Summary Tables 5(i) and (ii) of the Report;

(g) to approve the estimated income, being estimated gross income less expenditure, that each States trading operation will pay into its trading fund in 2021 in line with Article 9(2)(h) of the Law and set out in Appendix 2 – Summary Table 7 to the Report;

(h) to approve the proposed amount to be appropriated from each States trading operation's trading fund for 2021 for each head of expenditure in line with Article 9(2)(i) of the Law and set out in Appendix 2 – Summary Table 8 to the Report; (i) to approve the estimated income and expenditure proposals for the Climate Emergency Fund for 2021as set out in Appendix 2 – Summary Table 9 to the Report;

(i) to approve the estimated income and expenditure proposals for the Climate Emergency Fund for 2021as set out in Appendix 2 – Summary Table 9 to the Report;

(j) to approve, in accordance with Article 9(1) of the Law, the Government Plan 2021-2024, as set out at Appendix 3 to the Report.

REPORT

This amendment has been lodged alongside an amendment to Child Care Tax Relief to assist families with the cost of living increases within Jersey which have not been adjusted since 2011. By prioritising an increase to the child tax allowance for the first time since 2011 it will provide help to families dealing with the rising cost of living who may also be struggling due to the pandemic. This is in line with the Government's strategic priority to "Put Children First" and is particularly important to help negate the financial impacts of COVID-19.

Households with a child under the age of 16 can currently claim a  marginal rate exemption increase of £3,000. The additional child allowance available to single parents is £4,500. We propose to increase these amounts to £3,060 and £4,590 respectively. The childcare allowances are available to all parents.

Since the last increase of child allowance in 2011, RPI has risen 20.6%.1 If following RPI child allowance would be increased by £612, with additional child allowance being increased by £918. When considering a suitable amendment rate, the Panel also took into account the impact of COVID-19 on public finances and concluded to propose a proportional increase of 2%.

The  Panel  has  been  informed  by  Revenue  Jersey  that,  as  part  of  the  review  on Independent Taxation, the Revenue Policy Development Board will be considering if these allowances ought to be adjusted structurally; and/or transferred away from the tax system (into an alternative delivery vehicle) with the advent of Independent Taxation from the 2022 year of assessment. The Panel believes that increasing the allowance for 2021 will serve in the intermediary time period.

The Panel has received correspondence from the Children's Commissioner which highlights  that  although  child  tax  allowance  alone  will  not  address  entrenched inequalities, any lever available which may combat child poverty should be explored to better protect, respect and fulfil children's rights in Jersey.2

The Panel suggests that increasing this bonus is a sensible way to support economically active parents financially supporting children, helping to put children first and meet the Common Strategic Policy.

This amendment will apply to the "Child Allowance" and "Additional Allowance for Children" available to all marginal rate taxpayers.

The allowances will continue to be restricted in line with any unearned income a child has in their own right.

Financial and manpower implications

The cost of increasing each allowance is shown in the tables below. There are no manpower implications.

1 https://www.gov.je/Government/JerseyInFigures/BusinessEconomy/Pages/Inflation.aspx

2 Submission – Children's Commissioner- Government Plan 2021 Review - 23 November 2020

The  Panel  has  been  informed  that  the  economy  and  the  tax  base  have  changed considerably, with a severe recession in 2020 and a forecast fall in the amount of personal income tax collected this year. The Income Forecasting Group has forecast a permanent reduction in the tax base in the longer term, relative to the pre-pandemic forecast, but it is not possible at this stage to be definitive about how this might affect the estimate of the tax impact of proposed tax changes.

The total cost is:

£225,000 - Child Allowance £35,000 - Additional Allowance £260,000 - TOTAL