States Members’ Remuneration Review Body: recommendations for November 2014 to May 2018.

STATES OF JERSEY

STATES MEMBERS' REMUNERATION REVIEW BODY: RECOMMENDATIONS FOR NOVEMBER 2014 TO MAY 2018

Presented to the States on 26th August 2014 by the Privileges and Procedures Committee

STATES GREFFE

2014   Price code: B  R.122

CHAIRMAN'S FOREWORD

The  Privileges and  Procedures  Committee  is  pleased  to  present to the  States  the recommendations of the States Members' Remuneration Review Body (SMRRB) for the lifetime of the next Assembly, namely November 2014 to May 2018.

The  terms  of  reference  of  the  SMRRB  require  the  Review  Body  to  present  its recommendations  to  PPC  and  the  Committee  is  then  obliged  to  present  the recommendations to the States forthwith.

The revised Terms of Reference agreed by the States in June 2012 for SMRRB state – "10.  The  Review  Body's  recommendations  on  the  actual  level  of

remuneration  and  expenses  payable  to  elected  members  shall  be

implemented automatically unless a proposition seeking a debate on the recommendations is lodged au Greffe' within one month of the

date of presentation."

PPC is again grateful to the members of the SMRRB for the work that they do on an honorary basis to reach their recommendations. I would like to play particular tribute to the Chairman, Mr. Julian Rogers, whose term of office will come to an end this Autumn.  Mr. Rogers  has  been  Chairman  of  the  Review  Body  since  it  was  first established in 2004, and he has dedicated many hours to the difficult task of assessing the  correct  level  of  remuneration  for  members  and  chaired  the  SMRRB  very successfully for 10 years.

The Committee also wishes to extend its thanks to everyone who contributed to the public consultation that was undertaken by the Review Body in June 2014.

Deputy J.M. Maçon of St. Saviour

Chairman, Privileges and Procedures Committee

STATES MEMBERS' REMUNERATION REVIEW BODY

RECOMMENDATIONS FOR November 2014 to May 2018

Summary of conclusions and recommendations with regard to remuneration (including expenses)

The Review Body recommends –

• No change in States members' total remuneration and expenses (currently  £42,600  and  £4,000  respectively)  for  the  period November 2014 to May 2018, but with the abolition of the current distinction between the 2 elements and with remuneration for elected  members  being  defined  instead  as  a  single  figure  of £46,600  for  the  life  of  the  next  Assembly.  Nevertheless, notwithstanding  this  recommendation,  the  Review  Body  will conduct annual reviews of remuneration each Autumn during the 3½ year life of the next Assembly to ensure that this amount remains appropriate and the Review Body will then make further recommendations for each calendar year between 2016 and 2018 if considered appropriate;
• The abolition of the £600 IT allowance that has been payable to members on request for 2014 with IT costs for members in future being met instead from their £46,600 remuneration payment;
• The introduction of pension arrangements for States members, including  matched  contributions  from  the  States,  from  1st January 2016 to coincide with the introduction of the Medium Term Financial Plan 2016 to 2019.

In addition, the Review Body intends to conduct a detailed review during 2015 of the remuneration arrangements for States members, with a view to recommending an appropriate future pay framework for members.

Basic remuneration

As in previous recent years, the Review Body has sought to strike a balance between the competing requirements in its terms of reference that it must have particular  regard  to,  but  not  be  bound  by,  "the  principles  that  the  level  of remuneration available to elected members should be sufficient to ensure that no person  is  precluded  from  serving  as  a  member  of  the  States  by  reason  of insufficient  income  and  that  all  elected  members  should  be  able  to  enjoy  a reasonable standard of living" whilst also having particular regard to, but not being  bound  by,  "the  economic  and  fiscal  situation  prevailing  in  Jersey,  any budgetary restraints on the States of Jersey and the States' inflation target, if any, for the period under review".

The Review Body has taken particular note of the financial forecasts contained in the Draft Budget Statement 2015 which was published in July (P.129/2014) which show, inter alia, a difficult fiscal situation for Jersey and also indicate that there will be a requirement for all States departments to find savings for 2015. In the light of the recently published Budget information, the Review Body anticipates that there is likely to be considerable pressure to contain increases in public sector pay in the coming years. Information received by the Review Body indicates that there also remain a number of private sector employers who are still considering no pay increases or limited pay increases for 2015. The Review Body has also taken account of the Average Earnings Index published on 20th August 2014 and notes that the current weekly remuneration of States members, some £896, places them just below the average weekly earnings for financial services and the public sector (see Figure 7 in the Average Earnings report) which are the highest paid groups, and places members well above the average for all sectors of £670. The average salary in the Private sector, excluding the Finance and Public Sectors sector, would be £530 per week.

Having taken account of these and other factors, and having considered the responses to its Consultation Document issued in June 2014, the Review Body has concluded that the current total remuneration package of £46,600 remains an appropriate figure for the lifetime of the next States Assembly.

Expenses

The  recommendation  to  integrate  the  former  expenses  allowance  with  basic remuneration was arrived at from 2 perspectives. First, from our understanding that, while most States members tend to treat their basic salary and allowance for expenses as income, their individual requirements differ widely. Secondly, many of the consultation responses suggest that since States members are technically self- employed persons, then their expenses should be treated on the same basis as everyone else in that situation.

At present, States members receive an annual expenses allowance of £4,000 and any claim for tax relief for this amount or less is accepted without detailed receipts by the Comptroller of Taxes. Where a claim for tax relief exceeds £4,000, detailed receipts are required for the overall amount. This arrangement has evolved from

the time when all elected representatives received an expenses allowance and the remainder of their remuneration was means-tested.

The manner in which the Comptroller will decide to treat expenses incurred by States members in the future is outside the remit of the Review Body and entirely a matter for the Taxes Office.

Pensions

Pensions  for  States  members  have  been  recommended  by  the  Review  Body previously  but  have  not  been  implemented.  The  Review  Body  considers  it appropriate now to press the issue by recognising pensions as deferred pay, and therefore  part  of  a  total  remuneration  package,  and  is  making  a  firm recommendation  that  pension  arrangements  should  be  introduced  from  1st January  2016.  This  date  coincides  with  the  start  of  the  next  Medium  Term Financial Plan which will cover the period 2016 to 2019, and this will enable adequate provision to be made in the Plan for the cost to the States of matching pension contributions. The Review Body intends to undertake work during 2015 to  develop  the  detail  of  voluntary  pension  arrangements  which  would,  as previously recommended, involve the matching by the States as employer' of pension contributions made by members up to an agreed maximum amount for those members choosing to take up that opportunity. Any arrangements would need to be in line with local rule changes on pensions which are to be introduced generally.

States members are currently at a particular disadvantage in this respect as their pay is not progressive but reset for each term of office. They may leave after several terms of office, or only one, with no pension and only one month's remuneration as a form of severance payment, and the Review Body therefore believes it is important to put in place proper pension arrangements. It is also appropriate  to  recognise  that  our  recommendation  that  the  current  annual remuneration payment should not be increased from £46,600 must be seen in the context of this recommendation on pensions, as the payment by the States of matched pension contributions represents deferred pay and therefore increases in the future the overall remuneration level of elected members.

Social Security

States members are classed as self-employed. However, by concession, they are effectively  treated  as  employed'  for  Social  Security  purposes  only.  Those members who would pay self-employed contributions for both themselves and a notional employer can, if they apply, receive a taxable refund equivalent to the amount that an employer would pay in respect of an employee earning the same amount as a States member.

Review of remuneration levels and pay structure

The Review Body has been in existence for 10 years and, when it was established in 2004, an existing remuneration level was already in place. Throughout the 10 year period since 2004 the Review Body has largely approached its task by assessing what annual increase, if any, has been appropriate in relation to the previous year's remuneration.

During  the  recent  consultation  exercise  undertaken  by  the  Review  Body,  a number of interesting and thoughtful points emerged about the matters it is charged with keeping under review. Not least, there was thoughtful commentary about the pay structure of the States as well as the level of members' remuneration under  present  rules.  The  Review  Body  is  also  conscious  that  reform'  and modernisation' of the States remain on the agenda in one form or another, and that the fiscal position is tightening in times that continue to be challenging economically. All these factors lead the Review Body to the view that, during the next period it needs to take a fresh and thorough look not only, as usual, at the level  and  composition  of  States  members'  remuneration,  but  also  at  the  pay structure more generally. This work will be undertaken during 2015 with a view to developing an appropriate future pay framework for elected members.

The Review Body is aware that an appropriate future pay framework for elected States members' is usually understood by observers, commentators and members themselves to imply (among other things) pay differences based on differing levels of responsibility, but Article 44 of the States of Jersey Law 2005 currently makes it unlawful to pay different amounts to different members (with the exception of payments for a pension scheme). The Review Body nevertheless considers that one option that needs to be considered as part of its overall review is whether a system of differential pay based on levels of responsibility would be appropriate. The Review Body is conscious that States members voted in May 2014 against repealing  Article 44,  but  it  was  struck  by  the  overwhelming  view  from respondents in the recent consultation that remuneration levels should not be the same for all elected members and that those with additional responsibilities should receive more. A review of the Hansard report from the May 2014 debate shows that some members were understandably uneasy about taking a decision to repeal Article 44 until it was clear what a system of differential pay might look like, and the Review Body considers that it is therefore appropriate for it to undertake this work to allow a future Assembly to take an informed decision on this subject.

Thanks

Thanks are due to the Greffier of the States, Michael de la Haye, O.B.E., for his own substantial administrative help and that of his Department in supporting the activities of the Review Body.

States Members' Remuneration Review Body

TERMS OF REFERENCE

1. The Review Body will make recommendations to the States, through the Privileges  and  Procedures  Committee,  on  any  matters  relating  to  the remuneration  and  expenses  of  elected  members  as  it  considers appropriate.
2. The Review Body shall take any steps it considers necessary to gauge public opinion on the matters within its purview. Equally the Review Body shall seek the opinions of members of the States from time to time as it considers appropriate.
3. In forming its recommendations the Review Body will take account of any matters that it considers to be relevant and will have particular regard to, but not be bound by, the following matters –

1. the principles that the level of remuneration available to elected members  should  be  sufficient  to  ensure  that  no  person  is precluded from serving as a member of the States by reason of insufficient income and that all elected members should be able to enjoy  a  reasonable  standard  of  living,  so  that  the  broadest spectrum  of  persons  are  able  to  serve  as  members  of  the Assembly;
2. the  economic  and  fiscal  situation  prevailing  in  Jersey,  any budgetary restraints on the States of Jersey and the States' inflation target, if any, for the period under review.

Membership

4. The Review Body shall consist of 5 members, none of whom shall be a member of the States.
5. The members shall be appointed for a period of 5 years and shall be eligible for re-appointment for one additional 5 year term.
6. The  members  shall  be  appointed  by  the  Privileges  and  Procedures Committee following requisite consultation with the Jersey Appointments Commission.  Before  making  any  appointments,  the  Committee  shall nevertheless be required to present a report to the States setting out the names of the proposed appointees, and the appointments shall not be confirmed by the Committee until at least 15 days after the presentation of this report.
7. The Review Body shall appoint one of its members as Chairman.
8. The quorum of the Review Body is 3.

Recommendations

9. The Review Body shall report its recommendations to the Privileges and Procedures Committee which shall present them to the States forthwith.
10. The Review Body's recommendations on the actual level of remuneration and  expenses  payable  to  elected  members  shall  be  implemented automatically  unless  a  proposition  seeking  a  debate  on  the recommendations is lodged au Greffe' within one month of the date of presentation.
11. The Review Body may make recommendations on other matters within its terms of reference to the Privileges and Procedures Committee but any such recommendations shall not be implemented until they have been agreed by the States.

Membership of the SMRRB

Mr. Julian Rogers (Chairman) Mr. Brian Bullock

Mr. Maurice Dubras Mr. John Mills, C.B.E.