Migration Policy Development Board: Interim Report

2019  R.140

Migration Policy Development Board Interim Report

24th October 2019

Foreword by the Chair of the Migration Policy Development Board

In order to advise all parties of the work of the Migration Policy Development Board and to help inform the debate on this emotive, yet complex issue, I have pleasure in publishing this interim report of the Migration Policy Development Board.

The Migration Policy Development Board is an advisory panel for the Chief Minister on policies relating to a more responsive control over who can live and work in Jersey, it is not a decision making body.

This report summarises the Board's research surrounding migration controls and how any changes could be used to help reduce the island's reliance on inward migration.

I would like to thank all of the Board members for their hard work and dedication in discussing and researching these matters.

The Board continues to gather evidence from the island's business sector as well as wider stakeholders in the community as part of its ongoing work.

The Board publishes details of its meetings and evidence online.

Anyone who wishes to provide additional evidence or comments to the Board is welcome to make a written submission to MigrationPolicy@gov.je  

Connétable Christopher Taylor

Migration Policy  Development Board

__________________________________________________________________________________________________

Interim Paper __________________________________________________________________________________________________

1. Introduction

The Migration Policy Development Board (MPDB) was established on 7th March 2019. Its purpose is:

To develop comprehensive migration policy proposals which will deliver more responsive controls over who can come to live, work and access public services in Jersey, improving consistency wherever practical and helping to reduce the Island's reliance on inward migration.' (see Appendix 2).

The MPDB acts as an advisory panel for the Chief Minister on policies relating to a more responsive control over who can live and work in Jersey, it is not a decision making body.

The initial background and context of the MPDB is covered in the document. Project Scope – Developing a New Migration Policy Development Board' (see Appendix 3)

To date the MPDB has considered a number of factors which impact upon, and which are impacted by, amendments to the controls of migrants to Jersey. The matters considered by the MPDB are summarised below, are published at: www.gov.je/migrationpolicy, and are included

in the appendices to this report. The home page of this site also contains a full list of the Board members.

2. Brexit

The future effects of Brexit on the island's economy are not yet known.

The UK Government intends to remove the right of EU nationals to live and work freely in the UK, and require EU nationals to apply for immigration permissions to do the same. These changes will be mirrored in Jersey. The impact of these potential changes upon the flow of EU migrants to Jersey is not yet clear.

Future migration controls will need to have flexibility within them to adapt to changing circumstances.

3. Summary of MPDB research

1. Jersey Customs & Immigration Service (JCIS) & Immigration Controls (Appendix 4)

The Common Travel Area (CTA)[1] is established as a matter of law to facilitate free movement of British and Irish citizens between the UK, Republic of Ireland and the Islands. There are no formal immigration border controls in the CTA.

The UK set the primary legislation for Immigration matters and to maintain the legitimacy of the CTA Jersey needs to follow the UK's Immigration Rules. Jersey can amend these to some

degree through secondary legislation in some areas, e.g. in relation to work permits, but must not have weaker border controls than elsewhere in the CTA.

EEA[1] citizens are currently allowed free movement to Jersey and do not require Immigration permission to work.

 JCIS uses various Immigration laws to control the access to the island and work for all persons who are not British or Irish citizens or members of the EEA.

3rd country citizens (those who are not EEA nationals) are required to have immigration permission to enter and work in Jersey.

Following Brexit it is expected that EEA nationals will be treated in the same way as 3rd country nationals, and will require Immigration permissions to enter Jersey and to be able to work.

Immigration' work permits are issued to employ 3rd country nationals

• where the employer can demonstrate and provide evidence that the vacancy cannot be filled from within the permit free UK and EEA labour market; and

• for up to 9 months for unskilled seasonal employment in the hospitality (150/year quota) and agricultural sectors (130/year quota).

This scheme is on a trial basis for a 2 year period until the end of 2020.

2. Population Office and Migration controls (Appendix 5)

The Population Office administers controls on residential and employment status through the Control of Housing & Work (Jersey) Law 2012 (CHWL), whose purpose is:

To enable Jersey to preserve and maximise the benefits of its resources. To further those aims, the Law aims to control the overall population density of Jersey and the availability of work and housing for people with strong connections or associations with Jersey, and, more generally, in such a way that is in the best interests of the community'.

The controls apply to housing and work, recognising that British and European (EEA) nationals do not require immigration permission to live or work in Jersey. This approach of restricting housing and work is similar to that adopted in Guernsey and the Isle of Man.

This legislation applies to all people looking to live and work in Jersey regardless of their nationality.

The CHWL controls population by delimiting access to employment and to certain categories of housing.

The Chief Minister is responsible for the Law and delegates those responsibilities to the Assistant Chief Minister, who chairs the Housing and Work Advisory Group (HAWAG). This Group currently includes the Ministers for Housing and Social Security, and the Assistant Minister for Economic Development. HAWAG meet approximately every two weeks to consider applications, and to develop polices in support of the Law.

Officers have delegated powers to make decisions under the Law, but may refer applications to the Assistant Chief Minister - in particular, where there is a concern about Jersey's reputation in commercial or financial matters; or where an applicant appeals a decision; or for larger applications where there may be a significant impact.

Guidelines are published under CHWL in some areas but decision making is not transparent under the current system. This leads to a significant volume of enquiries from businesses, as well as the need to refer a high proportion of individual cases to HAWAG.

The current application of the CHW system allows for graduation' from registered to entitled to work status after five years in Jersey. In 2017 it is estimated that 16% of registered staff graduated, and were subsequently replaced by new migrants with registered status. This annual and automatic graduation has led to an increase in the population of approximately 600-700 each year, including dependents. The link https://youtu.be/REwLYj7q8dI gives a more detailed explanation.

The current application of the CHW system allows businesses to hold licences for registered and licensed staff that are not being utilised. At the end of December 2018 of the 5,896 permanent registered permissions issued to businesses, 4,279 were filled, meaning 1,617 registered permissions were vacant (27%).

Whilst some businesses hold spare' permissions to ease recruitment, in some cases the holding of registered permissions can form an unintended competitive advantage. Some of these permissions have no expiry date.

3. Estimating government receipts and expenditure for Jersey households (Appendix 6 & 7)

Statistics Jersey has published a report that provides theoretical estimates of the level of government receipts and expenditure to and from Jersey households (i.e. the revenues from and the costs of such a Jersey household), calculates a tax break-even point' for specific households, and compares the differences in these figures between recent residents (migrants) and a theoretical 5 year resident. Examples range from a single adult to a couple with three children and identify the significant government costs associated with larger family units.

As it is an analysis of household types at a particular point of time, these estimates do not take account of the changes that naturally take place in a household over time.

A major study commissioned by the UK government noted: When considering the contribution of each individual migrant, it must be remembered that today's working adult, paying large amounts of tax, will become tomorrow's state pensioner, with above-average healthcare costs. Today's secondary-school pupil, educated at the expense of the taxpayer, will tomorrow contribute through the income taxes they pay once they enter the labour market. From the perspective of a policy-maker, therefore, what really matters is whether an additional migrant is likely to make a positive or negative net fiscal contribution over their entire time in the UK, from the day of arrival to the day they leave or the end of their life' (The Fiscal Impact of Immigration on the UK, MAC, June 2018[2]).

Every individual comes with different impacts on the Island.

4. Long-term Expenditure & Revenue Model (Appendix 8)

The Chief Economist has developed a model which combines demographic, fiscal and economic data to project Government expenditure and revenue through to 2050. The impact of three variables – productivity, net migration & sectoral composition – upon these projections are modelled.

Conclusions from the modelling are that there will be continued long-term structural pressures on public finances. It is likely that a combination of policy options will be needed to maintain balanced budgets. These could include:

• productivity improvements within sectors;

• sectoral shifts from low to high productivity sectors;

• targeted inward migration;

• savings and efficiencies;

• new/increased sources of revenue to be identified.

5. Jersey Resident Population Estimate (Appendix 9 & 10)

Population growth is predominantly driven by the net inward migration rate. The resident population of Jersey at year-end 2018 was estimated as 106,800.

During 2018 the resident population was estimated to have increased by 1,200 persons, with net inward migration accounting for 1,100 of the annual increase, and natural change (births minus deaths) accounting for 100 of the estimated annual increase.

Whilst Statistics Jersey cannot predict the future population of Jersey, it can apply different rates of net inward migration to the current population to give a range of forecasts to indicate the possible impact upon the overall population level, the relative increase in the proportion of elderly, and the impacts on the dependency ratio.

The estimates suggest the following:

• as the population ages the dependency ratio increases;

• as the net migration rate increases the dependency ratio decreases;

• as the net migration rate increases, the rate of increase in population increases.

The rate of inward migration has little impact on the ageing of the resident population in the short-medium term. The number of people aged over 65 will increase steadily over the next 30 years, whatever migration controls are in place. With no inward migration this would lead to a reduction in the number of working age people, as more older people leave the work force compared to the number of younger people joining the workforce.

A net inward migration rate of approximately +325 a year will maintain the working age population at around today's level. Inward migration below this would lead to a smaller working age population; migration above +325 would lead to a larger working age population.

A net inward migration rate of approximately +325 a year will lead to an increased dependency ratio. Inward migration below this level would lead to higher increases in the dependency ratio; migration above +325 a year would mitigate some of the impact of an increasing dependency ratio.

6. Social Security Fund (Appendix 11)

The Social Security Fund (SSF) of the States of Jersey is primarily designed to provide benefits in old age, and on death and incapacity to those who have paid the required contributions. The SSF is financed by a combination of social security contributions from individuals and employers and a States grant.

An actuarial review of the SSF as at 31st December 2017 (published March 2019) includes projections over the period from 2017 to 2077.

Two main sets of results are presented in this report:

• the projected "break-even" contribution rates; this is the rate that would be required in order for contribution income to equal expenditure on benefits and administration

costs, ignoring any balance built up in the two funds and the investment return earned thereon;

• the combined balances in the Social Security and Social Security (Reserve) Funds (together "the Fund"), as a multiple of annual expenditure, assuming that the current rates of contribution remain unchanged

Based on the central assumptions, the ageing of the population means the breakeven contribution rate will rise above the current total contribution rate (10.5%) over the next 5 to 10 years under all migration scenarios. This puts pressure on the Fund, which (based on the current benefit and contribution structure) is expected to decline during the following 20 years and not recover unless net immigration is maintained at or around 700 people a year (or investment returns are substantially greater than assumed in the central assumptions).

Indeed, under the lowest assumption for future inward migration (325 a year) the Fund is expected to be extinguished during 2070. Once the Fund is extinguished, the contribution rate would need to be raised to at least 13.1%.

The Board is due to explore this further in its final report.

6. Migration Systems (Appendix 12)

Australia, New Zealand and Canada are often quoted as exemplars of immigration selection systems. In the main this is because they invest heavily in their immigration systems, continually evaluate their economic and skills shortages, assess how well migrants integrate, and frequently adjust their systems and policies accordingly.

These systems control the immigration of foreign migrants who make up the majority of migrants into their countries. Little account needs to be given to the free movement of citizens from outside of their own countries.

In Jersey the free movement of EEA nationals, the continued (regardless of Brexit outcomes)

free movement of British and Irish citizens within the CTA, and the reliance upon the UK's immigration system would make the implementation of a Jersey immigration system' to control inward migration problematic in Jersey.

In order to stay within the CTA, Jersey cannot utilise immigration controls on British and Irish citizens - who account for the majority of inward migration to Jersey.

The other Crown Dependencies (Guernsey and the Isle of Man) are impacted by the same considerations. All Crown Dependencies have sought to manage their population growth by controlling access to employment and/or housing in order to preserve and maximise the benefits of their limited resources (e.g. housing and land). This approach is UN Human Rights compliant.

Jersey will need to continue to rely on the control of access to housing and employment as the key direct means by which to control inward migration, and therefore the overall population level. The performance of Jersey's economy, and the skills of the resident working population, will also affect demand for inward migration over the medium and longer term.

Historical statistics indicate that whilst the current CHW system in place in Jersey provides for controls in respect of both access to housing and work, the current application of those controls has allowed inward migration levels to continue at a higher rate than that desired by successive Governments.

7. Migrant access to services (Appendix 13)

It is right to ensure that adults who access public services have paid a fair contribution into the system that they are using.

Migrant access to services such as healthcare, education and benefits is currently complicated and confusing with different rules operating in different parts of government.

Many migrants, especially those with shortage skills, are operating in a global market where multiple jurisdictions are competing for their services. Migrants often look to compare the packages available to them in each potential destination and the services that a migrant can access need to be clear, fair, logical, and well communicated.

8. Skills (Appendix 14 & 15)

Ensuring that the domestic workforce has the right mix of skills, aligned to the current and future needs of business, government and society, is key to reducing the skills vacuum that draws migrants to the island today.

Where skills gaps and labour shortages cannot be avoided, plans can be made to attract migrants with the required skills to fill those spaces.

In an island with limited resources a balance must be struck between the number of migrants and their dependents that can come to live and work in Jersey, and the benefit that those migrants bring in helping to drive our economy and diversify our community.

Whilst looking to control net inward migration Jersey must be mindful that migrants' skills are in demand globally. For the most in-demand migrants, factors such as business environment, income and opportunities, and settlement prospects play an important role.

The Education Minister is currently undertaking a major review of the Jersey education system which will set the ambitions of Islanders for the next 20 years.

9. Island Plan, Housing & Infrastructure (Appendix 16 & 17)

Work is underway on the Island Plan 2021 to 2030, which will help shape Jersey's future.

The new Island Plan will set out and plan for the island's positive growth over the next ten years and provide the framework against which planning decisions are made. The plan is key to delivering sustainable development; balancing the future economic, environmental and social needs of the island in a way that is best for Jersey and which reflects the vision and aspirations of islanders.

The recommendations of the MPDB and subsequent new migration policy will form an important part of the Island Plan's considerations.

The Objective Assessment of Housing Need[3] considers future housing needs, in relation to a number of population scenarios and is used to draw out the demand for housing to be considered in the next Island plan, as directed by any given migration policy. It identifies that demand could range from 2,000 additional houses, if net migration was zero each year from 2021-2030; to around 7,000 homes if net migration continues at around 1,000 a year. In

addition Statistics Jersey has estimated that a shortfall of 1800 homes has arisen in recent years due to net annual migration being higher than forecast in the current Island Plan.

The recent Island plan strategic option paper, in relation to the assumptions around migration levels used to derive housing demand, states that;

"In the absence of a clear migration policy direction and associated regulatory levers to effectively manage migration, the preparation of the new Island Plan would need to be based on planning assumptions about migration and population levels over the plan period. This would need to reflect the evidence of migration and population change, based on trends."

The adoption by the States Assembly of a migration policy will allow the Island Plan process and the review of the independent Planning Inspector, to take account of the proposed outcomes of the new policy.

Considerations over this period include the impact of decreasing household sizes, the increase in ageing population, and requirement for key workers.

The infrastructure of the island includes transport, energy generation and distribution, water supply, sewerage, digital, coastal resilience, and social & community buildings and space.

Infrastructure is upgraded to achieve a proportionate balance between expected demand, the supply of a finite resource and the security and resilience required. Different infrastructure reaches capacity at different points in time. Some upgrades require significant investment once step changes in demand are reached.

For example, the new liquid waste treatment works, due for completion in 2022, is based upon a population of 118,000. It has a design life until 2045 and has potential for expansion for an additional 20% capacity.

10. Related strategies

The impact of any changes to CHW Law controls and the level of the future population will be inextricably linked with related government strategies such as skills5, the future economy programme, housing, and the Island Plan.

4. Principles

Having reviewed the available evidence in detail, the Board agrees that maintaining recent rates of population growth would be unsustainable.

It believes that migration controls, combined with other government policies, can be used to reduce the Island's rate of, and reliance on, inward migration.

Achieving a sustainable balance across Jersey's environmental, social and economic needs will require migration controls that are adaptive, transparent and trusted.

Following its considerations so far, the Board is now working to the following principles:

1. General principles

• Amendments to the Control of Housing & Work Law and/or its operation can be used to create a more responsive migration system.

• The future use of the Control of Housing & Work Law controls should work seamlessly with Jersey Customs and Immigration Service controls for non CTA migrants.

• Control of Housing & Work Law controls and the governance of the Control of Housing & Work Law will be transparent and include clear guidance to all employees, employers and dependents.

2. Potential impact of changes to CHW Law and/or its operation

• Changes to the application of Control of Housing & Work Law controls will only impact overall population levels if they are used alongside other government policies (e.g. skills strategy, economic framework, housing strategy, Island Plan)

• Changes to the application of CHW controls will need to be managed carefully to avoid unintended negative impacts on the economy and society

• Failure to adapt to the tightening of CHW controls may lead to the closure of existing businesses.

3. Improving controls on new migrants

• Criminal checks on all applicants will be included for all levels of Control of Housing & Work Law permissions. This is already in place for anyone applying for a 9 month work permit.

• A serious conviction in Jersey may lead to the withdrawal of an individual's Control of Housing & Work Law status.

• A form of photographic or digital identification will be included on all Control of Housing & Work Law cards

4. Family life

• Control of Housing & Work Law controls will recognise family life with spouses and civil partners gaining CHW status from their partner.

• Control of Housing & Work Law controls will ensure that all children accompanying new migrants are registered on entry to Jersey

• The overall system of controls should ensure that migrants feel valued and welcome

5. Fee levels within the Control of Housing & Work Law

• Fee levels within the Control of Housing & Work Law will form part of the control mechanism

• Control of Housing & Work Law permissions may require applicants to pay a contribution to cover access to Jersey healthcare as part of the application process.

6. Decision making within CHW Law

• Decision making on the overall availability of permissions (renewals and new) across different sectors and skills levels will be taken by executive members (e.g. Ministers) with regular reviews to reflect current conditions, with those guidelines published

• Decision making on individual cases (applications from businesses and individuals) will be undertaken by officers working to the published guidelines

5. Next stages

This report summarises the Board's research to date and sets out some core principles.

The Board are meeting with invited stakeholders throughout October & November 2019, to help it develop its final proposals for changes to the operation of the Control of Housing & Work Law. These will include representatives from agriculture, hospitality, finance, utilities and small businesses. The Board will also meet environmental groups and representatives of charities and minority community groups.

In addition, the Children's Commissioner will meet the Board to discuss the impact of migration controls on children and advise on meaningful engagement with children and young people.

In these stakeholder meetings the Board will discuss four hypothetical work permissions as shown in Appendix 1.

This report will also be published on the Board's website and the Board welcomes written submissions on possible changes to the operation of the Control of Housing & Work Law.

Questions to consider include:

1. Do you think that the Island needs increased controls on who can live and work in Jersey?
2. Do you agree with the Board's assumptions in section 3?

What are your thoughts on the hypothetical permissions W, X, Y and Z. For example:

3. What are the pros and cons of issuing time limited permissions to businesses and / or individuals? How would this impact your business?
4. Should individuals be able to automatically graduate' from one permission to another?
5. Should dependents (partner and children) be able to move to Jersey with a new migrant?
6. Should fees be different by sector or skill?
7. Should fees include an upfront premium to access health care?
8. Do you think the CHW system should set fixed quotas ?
9. Who is best placed to identify skills gaps?
10. Who is best placed to allocate permissions?
11. Would you accept increased administration in order to improve the control of the overall CHW system?
12. How else would you change the CHW system?

6.  Proposed timetable

• Ministerial Decision to approve a Migration Policy Development Board (MPDB) – 8th February 2019

• MPDB established – 7th March 2019

• Research & policy development – March-September 2019

• Interim report published - October 2019

• Brexit – 31st October 2019?

• Targeted consultation – October - November 2019

• Review consultation findings – December 2019

• COM report published – March 2020

• States debate on COM proposals – Spring 2020

Appendices Index

Appendix 1

Hypothetical system of work permissions

Appendix 2

Terms of reference https://www.gov.je/SiteCollectionDocuments/Government%20and%20administration/ID%20T erms%20of%20Reference%20NS.pdf  

Appendix 3

Migration Policy Development Board Project Scope https://www.gov.je/SiteCollectionDocuments/Government%20and%20administration/P%20M igration%20Policy%20Development%20Board%20NS.pdf  

Appendix 4

Jersey Customs & Immigration Service, Immigration Controls and Work Permits https://www.gov.je/SiteCollectionDocuments/Government%20and%20administration/ID%20J CIS%20Presentation%20Immigration%20Controls%20and%20Work%20Permits%20NS.pdf  

Appendix 5

Control of Housing and Work (Jersey) Law - Briefing session for Migration Policy Development Board https://www.gov.je/SiteCollectionDocuments/Government%20and%20administration/ID%20 Control%20of%20Housing%20and%20Work%20Law%20Briefing%20session%20for%20MPD B.pdf

Appendix 6

Statistics Jersey – Presentation - Estimating Government receipts and expenditure from Jersey households https://www.gov.je/SiteCollectionDocuments/Government%20and%20administration/ID%20S tatistics%20Jersey%20Presentation%20on%20Estimating%20Government%20receipts%20and %20expenditure%20from%20Jersey%20households.pdf  

Appendix 7

Statistics Jersey – Background report - Estimating Government receipts and expenditure from Jersey households https://www.gov.je/SiteCollectionDocuments/Government%20and%20administration/R%20St atistics%20Jersey%20Report%20on%20Estimating%20Government%20receipts%20and%20ex penditure%20from%20Jersey%20households.pdf  

Appendix 8

Chief Economist – Presentation – Long-term expenditure & revenue model

https://www.gov.je/SiteCollectionDocuments/Government%20and%20administration/ID%20E conomic%20Unit%20Presentation%20Longterm%20expenditure%20and%20revenue%20mo del.pdf

Appendix 9

Statistics Jersey – Presentation – Jersey resident population 2017 estimate & Jersey population projections 2016 https://www.gov.je/SiteCollectionDocuments/Government%20and%20administration/ID%20S tatistics%20Jersey%20Presentation%20on%20Jersey%20resident%20population%202017%20 estimate.pdf  

Appendix 10

Statistics Jersey – Jersey resident population 2018 estimate https://www.gov.je/SiteCollectionDocuments/Government%20and%20administration/R%20P opulationReport2018%2020190621.pdf  

Appendix 11

Government actuary's report on the financial condition of the Social Security Fund as at 31 December 2017

/assemblyreports/2019/r.31-2019.pdf

Appendix 12

Paper – Migration systems in other parts of the world https://www.gov.je/SiteCollectionDocuments/Government%20and%20administration/Migrati on%20systems%20in%20other%20parts%20of%20the%20World%20-%20Final%20- %20020519.pdf

Appendix 13

Paper – Migrants' access to services https://www.gov.je/SiteCollectionDocuments/Government%20and%20administration/R%20D iscussion%20Paper%20Migrants%27%20access%20to%20services%20for%20MPDB.pdf

Appendix 14

Children, Young People, Education & Skills - Presentation – Migration: Impact of skills https://www.gov.je/SiteCollectionDocuments/Government%20and%20administration/ID%20 Presentation%20on%20Migration%20-%20Impact%20of%20Skills.pdf

Appendix 15

Paper – Skills https://www.gov.je/SiteCollectionDocuments/Government%20and%20administration/R%20D iscussion%20Paper%20Migration%20Policy%20Development%20Board.pdf

Appendix 16

Presentation – Island Plan & Housing

https://www.gov.je/SiteCollectionDocuments/Government%20and%20administration/ID%20 Presentation%20on%20Island%20Plan%20and%20Housing%20RD.pdf

Appendix 17

Presentation – Infrastructure & carrying capacity https://www.gov.je/SiteCollectionDocuments/Government%20and%20administration/ID%20I nfrastructure%20presentation%20270619.pdf

Development Board

Appendix 1:

Hypothetical system of work permissions

Building on its stated principles the MPDB has produced a hypothetical system of work permissions. Four new types of CHW permission ("W", "X", "Y", "Z") are outlined below.

 They are examples of the type of changes that could be made. They are not firm proposals.

Please note that these are purely hypothetical work permissions. They are not policy proposals and all contain weaknesses.

They are not proposed as a future migration control system but are designed as a starting point to stimulate conversation, challenge the thinking of the Board, gauge the potential impact upon different sectors and businesses, on communities and on migrants themselves, and so to judge the potential effectiveness of different levers.

Development Board

Appendix 2:

Terms of reference

Migration Policy Development Board

Development Board

Appendix 3:

Project Scope

Migration Policy Development Board

Developing a New Migration Policy Policy Development Board

Project Scope

21 March 2019

1. PROJECT ASSUMPTIONS

1. In recent years, net migration has been at record levels as our economy has produced more jobs.
2. This economic activity is important as it generates job opportunities locally, and the taxes that pay for public services. Nevertheless, the level and nature of inward migration fundamentally affects Island living. In particular, housing affordability is a challenge.
3. While some migration is necessary to bring in new skills and experience, and to

help business grow, successive governments have sought economic growth driven by productivity improvements, and not migration.

4. The Council of Ministers has pledged to reduce reliance on inward migration in the Common Strategic Policy.
5. This will be done alongside work to deliver a more sustainable economic future based around productivity and skills, feeding into a new Island Plan and as part of balancing population pressures against environmental needs.
6. The terms of reference for the Board are agreed as follows:

Purpose:

To develop comprehensive migration policy proposals which will deliver more responsive controls over who can come to live, work and access public services in Jersey, improving consistency wherever practical and helping to reduce the Island's reliance on inward migration.

In doing this, the Board should:

• Rely on statistical and economic modelling, including long term fiscal modelling and analysis of the implications for taxes, services, and our economy, of migration;

• Consult with local businesses and may wish to survey public opinion;

• Review the migration policy lodged by the previous Council of Ministers;

• Be cognizant of and cover wider population issues, such as fiscal policy, the ageing demographic, public service provision, planning, transport policy and the impact of migration on housing affordability;

• Cover immigration controls, i.e. controls at the border of the Common Travel Area, as well as controls over work and housing, ensuring a consistency of approach;

• Anticipate and prepare for changes to British immigration controls related to Brexit, in particular, any future limitations on movement by EEA nationals.

• Consider policies which affect new migrants and their families, including access to services and housing;

• With the agreement of the Chair and the Chief Minister, any other matter which may be relevant may be considered.

• Provide, following approval by the Chair, a draft report to the Chief Minister. The findings will also be provided to the Council of Ministers, following which the report will be published as soon as practical and appropriate.

2. BACKGROUND AND CONTEXT

1. Common Strategic Policy 2018-22 (CSP)

https://www.gov.je/SiteCollectionDocuments/Government%20and%20administratio n/Common%20Strategic%20Policy%202018%20to%202022.pdf

The CSP specifically covers the establishment of the Migration Policy Development Board to develop an agreed population and migration policy.

We will create a sustainable, vibrant economy and skilled workforce for the future

We will do this by delivering an economic framework to improve productivity, by nurturing and strengthening our financial services industry, by enhancing our international profile and promoting our Island identity, by delivering the best outcomes from Brexit, and by improving skills in the local workforce to reduce Jersey's reliance on inward migration.

Where we need to focus our efforts

We will establish a Policy Development Board to develop an agreed population and migration policy that balances population pressures against economic and environmental needs.

What we will achieve

As a result of our actions during our term of office, we will:

• Improve Jersey's economic performance

• Support and strengthen our financial services sector

• Support and strengthen our tourism industry

• Continue to diversify our economy, including ongoing support for our digital sector and the development of our philanthropic sector

• Be outward facing and promote Jersey on the international stage

• Increase the skills of our workforce with an enhanced focus on digital

• Improve productivity to reduce population pressures

• Develop and implement a comprehensive migration and population policy

2. Population projections

https://www.gov.je/SiteCollectionDocuments/Government%20and%20administratio n/R%20Population%20Projections%202016%2020161013%20SU.pdf

Total projected population size 2015 – 2065 under different levels of migration Since 2001, net inward migration has averaged 700 people per year. However, it fluctuates considerably each year, depending upon Jersey's economic performance.

https://www.gov.je/government/planningperformance/futurejersey/examine/busine ssenvironment/pages/migration.aspx

Net annual migration reached a high in 2007 of 1,400, just before the economic crisis, and in 2015 rose again to 1,500, as the economy delivered record employment growth. This dropped to 1,300 in 2016, but remained high. The latest figures for 2017 show a further reduction to 1,200.

Jersey's resident population is currently estimated to be 105,500, with net inward migration accounting for 77% of the increase over the past ten years.

This was reflected in the 2017 figures, with natural change (births minus deaths) accounting for only 100 of the overall increase- the lowest level recorded since 2002.

Factors, such as Brexit and exchange rate changes, are likely to influence the migration indicator, with the next reporting due in June 2019.

3. Ageing population & dependency ratio

By 2035, Statistics Jersey projects that, there will be 11,000 more people aged 65 or over living in Jersey, and around 3,000 more people over the age of 85 as we live longer lives. These are existing residents growing older. This will place sizeable pressures on our public finances.

The Migration Policy R.134/2017 reported that an ageing population means we need to import more skilled workers into our medical and care sectors. Over the period 2016-2026, at least an additional 280 full time employees are expected to be needed in Health & Social Services alone to fill vacancies for doctors, nurses, paramedics, and social workers. In addition, many more care workers will be needed across both public and private sector care provision.

The dependency ratio (the ratio of non-working age to working age persons in the population) is predicted to rise. The dependency ratio in Jersey was 50% at year- end 2015.

Dependency ratio 2015-2065 under different levels of net migration

A high dependency ratio represents a high number of non-working age being supported by a relatively small number of working-age residents.

4. Housing https://www.gov.je/Government/Pages/StatesReports.aspx?ReportID=4193

The January 2019 Objective Assessment of Housing Need Report estimates that almost 7,000 additional homes will be required in Jersey by 2030, assuming that recent trends in net inward migration (+1000/year) continue.

5. Infrastructure

An increasing population impacts upon resource management and infrastructure, such as the availability of clean water, solid and liquid waste treatment facilities, traffic on the roads, energy requirements and security of supply, and food security. To date, the planning and specifications for most significant infrastructure has been based on a net figure of +350 per annum. The more recent population scenario reports show that actual migration has been significantly higher than this for a significant period of time. This means we are already at risk of eroding the capacity and life-span terms of our existing infrastructure and resource provision over the short, medium and longer term.

6. Previous Population Policy Reports

A number of population and/or migration policies have been put forward by Government. In recent years these include:

1995

1999/2002 2004

2009

2014 2017

"2000 and beyond" Strategy – States policies should be designed

to achieve a permanent resident population the same or less than the current level' (estimated 85,000)

Population to remain at the same level as autumn 1995

A cap of 1% per annum on the increase in the working population Allows maximum inward migration at a rolling 5 year average of no more than +150 households per annum (equivalent to net +325 people) to be reviewed and reset' every 3 years

Interim Population Policy 2014-2015 Net migration +325 people per year

"Migration Policy" – net immigration over the next 20 years to be lower on average than it has been since 2001'.

This Policy was withdrawn before debate.

The matter of population or migration control has bridged a number of elections but to date most iterations have been deemed to have failed in controlling the rate of migration to the island.

These policies have often met with delayed political decision making and political and public challenge.

This MPDB provides an opportunity to put in place a policy that can truly address the island's ability to control inward migration, taking into account a wide range of evidence and considering the relative risks of failing to implement effective actions.

7. Review Previous Migration Policy

The terms of reference for the MPDB request that the board should review the migration policy lodged by the previous Council of Ministers.

The Migration Policy R.134/2017 presented to the States on 8th December 2017 suggested a number of changes including the introduction of:

• work permits for registered workers of up to 10 months if seasonal and temporary';

• work permits up to four years if employment is year round;

• criminal record checks for applicants;

• photographs on Registration Cards;

• improved monitoring of migration in Jersey.

/assemblyreports/2017/r.134-2017.pdf

On 18th July 2018 the Chief Minister agreed to withdraw the proposed migration policy, stating we need greater consultation before we proceed in debating this policy', and that while the proposals in the policy for a work permit regime would function under different Brexit scenarios, precisely how they would operate will depend on how negotiations are concluded.'

https://www.gov.je/news/2018/pages/WithdrawalOfMigrationPolicy.aspx

8. Brexit

The outcomes and impacts of Brexit are not yet clear. However, the UK Government intends to remove the right of EU nationals to live and work freely in the UK, and require EU nationals to apply for permissions to live and work in the UK. EU nationals currently form a significant part of Jersey's community and workforce. Any changes to the UK Immigration Rules will impact directly upon Jersey, and require EU citizens (who are not settled') wishing to work in Jersey to obtain permission to work, by way of a work permit, in the same way as third country nationals, such as USA, Kenyan or New Zealand citizens do presently. New EU citizens would also require permission to live in Jersey.

UK Withdrawal Agreement: https://www.gov.uk/government/publications/withdrawal-agreement-and-political- declaration

The UK's future skills-based immigration system: https://www.gov.uk/government/publications/withdrawal-agreement-and-political- declaration

3. GOVERNANCE

1. The Board will be supported by the Director-General, Strategic Policy, Performance and Population Department.
2. The Board will be supported by officials, to the same standards and applying similar practices, including around the production of evidence, options, any reports and public engagement, as officials would apply in supporting individual Ministers.
3. Officials are under an obligation to produce reports and provide thereon free and open access to information to members of the Board, and impartial advice.
4. Board members will respect the impartiality of officials, and maintain the confidentiality of any information or advice provided, in so far as it is not already in the public domain.
5. Minutes of meetings will be taken and published as soon as practical and appropriate, subject to the relevant FOI exemption concerning policy under development.
6. The findings of the Board will be drafted into a report by the executive support staff and, following the approval by the Chair, provided to the Chief Minister. The dissent of any member will be noted where requested. The findings will also be provided to the Council of Ministers, following which the report will be published as soon as practical and appropriate.

4. DRAFT TIMESCALES[1]

• Ministerial Decision signed to approve a Migration Policy Development Board (MPDB) – 8th February 2019

• MPDB established – 7th March 2019

• Research & policy development – March-September 2019

• Interim report published - October 2019

• Consultation – October - November 2019

• Review consultation findings – December 2019

• Draft report to Chief Minister– January 2020

• Submission to Council of Ministers – January 2020

• Final report published – March 2020

• States debate on proposals – Spring States' sitting 2020

Project Board Deliverable:  

The Board will produce a report outlining proposals for lodging in the Spring States Sitting 2020.

5. ENGAGEMENT

5.1.  The Board will need to agree a communication plan on the level of public and stakeholder engagement required for this process.

6. PROJECT RISKS AND OBSERVATIONS

1. There is no single answer to improve the island's control of inward migration. The decisions that need to be made to truly reduce the island's reliance on inward migration are unlikely to meet with universal approval, with the public or politically, but are important to ensure that the island can strike the right balance between having a sustainable economy, a balanced population and meeting its environmental needs.
2. Any migration policy proposals are unlikely to convince all States Members or all Island residents. There is a risk that proposals will re-galvanise the arguments for and against migration and not provide the closure that everyone wants about the correct migration policy for Jersey.
3. The biggest risk facing the project and the Island is failing to consult adequately with the various stakeholders, and failing to ensure that all parties understand the implications of not agreeing a sustainable and effective migration policy.

Other risks include:

4. Reputational damage to the Government of Jersey and States Assembly if the new migration policy has little, or no effect, on controlling migration levels.
5. Reducing the Island's reliance on inward migration could stifle business, and/or undermine  the  Island's  economy,  unless  it  is  matched  to  an  improvement  in productivity.
6. Relevant time is required for research and the full implications of proposed changes must be mapped in the short and long term.
7. Making decisions based upon incorrect data/historical data.
8. Increased controls on migrants may reduce the attractiveness of Jersey to migrants.

9. Reducing migration could mean higher costs for consumers.
10. The social inclusion of migrants is important to ensure that those migrants that want to live and work in Jersey continue to feel a valued part of the Island community.
11. Any system must not be so prescriptive that it fails to allow Jersey to respond flexibly to labour market needs and economic conditions.

This project is closely linked with three other major projects:

12. A key dependency of this project is the delivery of a skills strategy and an economic framework that improve the skill level and productivity of the local workforce.
13. A new Island Plan will be agreed in 2021. Migration policy proposals need to be consistent and complimentary with the new Island Plan.
14. A separate Policy Development Board is examining the structure of the housing market, looking at both short and long term measures.

The project is also dependent on a range of other factors including:

15. Jersey is part of the global economy, and subject to economic cycles. When economic performance improves, this has historically dramatically increased the number of workers that businesses request.
16. The outcomes and impacts of Brexit are not yet clear. Any future migration policy will need to take full account of the actions of the UK post-Brexit.
17. The impact, and influence, that changes to the UK's immigration system will have upon any future migration policy are not yet known.
18. Sterling falling in value against other countries, may make wages less attractive, and reduce the number of people who want to work in Jersey.
19. Immigration from the EU is going to reduce and businesses will need to adapt accordingly.

Migration Policy  Development Board

Appendix 4:

Immigration Controls & Work Permits Jersey Customs & Immigration Service

Justice and Home Affairs

Customs and Immigration Service Briefing Paper

To:  Migration Policy Development Board Submitted By: Acting Assistant Director Paul Le Monnier Date:   15th March 2019

Subject:  Immigration Controls and Work Permits

Introduction

This briefing paper provides an overview of Immigration controls in Jersey. We tend to think of immigration control at the border, but a considerable amount of immigration legislation and control deals with regulating people either before they leave their home country or once they are in Jersey.

The UK Immigration Act 1971 (the Act), was extended to Jersey by the Immigration (Jersey) Order 1993[2]. It is the primary legislation governing the procedures for "leave to enter" and "leave to remain" for overseas nationals and is the basis of immigration controls in the UK and Jersey.

The Act vests powers in the Minister for Home Affairs to make directions to the practice to be followed for regulating entry and the stay of persons in Jersey who do not have the right of abode. These directions are known as the Immigration Rules (the Rules). The Minister may also make rules as to the practice to be followed for regulating the taking of employment by persons not having the right of abode.

Common Travel Area (CTA)

The UK, Channel Islands, Isle of Man and the Republic of Ireland collectively form the CTA. The CTA is established as a matter of law to facilitate the principles of free movement of British and Irish citizens between the UK, Republic of Ireland and the Islands. There are no formal immigration border controls in the CTA. Border checks are undertaken at the first point of entry to the CTA. Persons who have been granted entry into Jersey are therefore able to travel freely to the UK. In practice, this means that "leave to enter" and "leave to remain" granted in Jersey is deemed to apply in the UK.

Non-European Economic Area (non-EEA) nationals are subject to the immigration rules of the CTA jurisdiction they are entering and residing (visa requirements, restrictions on employment and length of stay).

Jersey's position in the CTA is crucial in maintaining the integrity of the CTA by having robust immigration controls to prevent illegal entry and abuse.

Jersey Immigration Rules

The Rules set out the requirements to be met by Non-EEA nationals seeking to enter Jersey. The Rules also set out the requirements that need to be met to extend their stay in Jersey for either a limited or indefinite period.

The Rules cover provisions for visitors, students, employment and family members such as spouses, civil partners, partners and dependent children under 18. The Rules also set out how the deportation provisions apply, including the circumstances in which a person is liable to deportation. They also provide a comprehensive framework for assessing and determining claims for asylum in Jersey.

Immigration Controls

These can be split into 3 categories:

1. Pre-entry – Entry Clearances (visas)

The Jersey Customs and Immigration Service (JCIS) Casework section is responsible for working in partnership with British Diplomatic Posts overseas to manage entry clearance (visa) applications for non-EEA nationals seeking to enter Jersey. Applications are assessed against the criteria set out in the Jersey Rules and will approve or reject applications as appropriate.

Applicants are subject to a number of mandatory checks which vary depending on the migration route but include checks against the UK police criminality database, UK Warnings Index and Immigration database.

2. On-entry – Border Immigration Control – JCIS Frontier Section

A physical immigration control is undertaken on all scheduled commercial movements from outside the CTA at the 3 designated ports of entry namely, St Helier, Gorey and Jersey Airport.

European Economic Area ("EEA") nationals are admitted on production of a valid national identity card or valid national passport and do not require leave to enter under the Rules because of exercising rights of free movement. Non-EEA nationals are granted leave to enter at the controls by way of their entry clearance (visa) which confers leave to enter or by granting leave to enter with a stamp in their passport.

Passengers are subject to mandatory checks on entry and further questioning where necessary.

3. After-entry – Limited leave to remain and Indefinite leave to remain (settlement)– JCISCasework Section

Persons who have valid leave to enter or remain may apply to extend their stay provided they satisfy the requirements of the relevant immigration category in the Rules.

After a person has lived in the UK and/or the Islands for a certain length of time, they may be able to apply for permission to remain here for an indefinite period (settlement). The right to apply for permission to stay will depend on a person's current immigration category. Normally a person becomes eligible to apply for settlement after 5 years lawful residence.

Applications for further leave and indefinite leave to remain are subject to further mandatory checks including checks against the UK police criminality database.

Irish Citizens

Irish citizens are not subject to Immigration controls and are free to travel, live and work within the CTA. The Republic of Ireland is not considered to be a "foreign country" for the purposes of UK immigration laws, and Irish citizens are not considered to be "foreigners". They have a special status which is separate to and pre-dates the rights they have as EU citizens.

Irish citizens are treated as if they have permanent immigration permission to remain in the UK and Islands from the date they arrive. They may, however, still be liable to deportation or exclusion. The rights of Irish citizens in the British Islands are rooted in the Ireland Act 1949 which was registered by the Royal Court. This position will not change irrespective of the outcome of Brexit.

EEA Nationals

Currently EEA Nationals and their family members enjoy free movement and are admitted at the Immigration controls on production of a valid national identity card or national passport which establishes their identity and nationality. They may enter, live and work in Jersey through Protocol 3 to the UK's Act of Accession.

As a result of the UK leaving the EU the status of EU citizens living in Jersey will change. The UK government reached a deal with the EU to operate a scheme known as the "EU Settlement Scheme" which allows EU citizens to remain in the UK post Brexit. Jersey has launched its own similar scheme. This allows those that have been resident in Jersey for more than 5 years to apply for "settled status". Those that have been resident for less than 5 years may apply for "pre-settled status" and are able to continue to build time until they reach "settled status". This also applies to their non-EU family members.

Applicants to the scheme are subject to UK police criminality checks.

EU nationals will have until the end of the transition period, 31st December 2020, to apply. If the UK leaves the EU with a deal free movement will be maintained until that date.

If the UK leaves the EU without a deal on 29th March 2019 EU nationals arriving in Jersey after that date will have to apply for temporary leave to remain to stay for longer than 3 months.

When free movement ends after 31st December 2020 there will be a new skilled based immigration system which has yet to be designed.

Non-EEA Nationals

Non-EEA nationals are subject to Immigration control. There are nationals who will always require a visa to travel to Jersey irrespective of the purpose or duration of their stay. These nationals are deemed "visa nationals".

All other Non-EEA nationals, as appropriate depending upon their status and reason for seeking entry, are required to apply for a visa prior to travel and do so via the UK Visa Application Centres. These visas are referred to the JCIS Casework Section for authorisation to issue or refuse and are assessed against the requirements of the Rules.

Work Permits

JCIS Casework Section is responsible for the issue of work permits under the Immigration (Work Permits) (Jersey) Rules 1995 and in line with the policy of the Minister for Home Affairs. There are 2 categories of work permit holders, skilled and unskilled. Work permits are issued to non-EEA nationals pre-entry to the Island for new employees and post entry for extension of work if required.

The Customs and Immigration Service must ensure that the operation of the work permit scheme strikes a balance between the political obligation to protect the resident labour market and growing the economy, by allowing overseas staff, who bring significant experience and expertise, to take employment in Jersey.

Work permit applications are considered from employers in all sectors on a case by case basis and in line with current policy. However, an employer must demonstrate and provide evidence that the vacancy cannot be filled from within the permit free UK and EEA labour market.

In  addition  JCIS carefully  review  and  consider  the  immigration  aspects  of  work  permit applications to guard against the risk of those who may seek to abuse these controls by not complying with the terms and conditions of their visas.

Work Permits in the majority of cases are issued for no more than 3 years in the first instance and can at the end of this period be granted for a further 3 years subject to satisfactory applications.

Until recently the unskilled category only catered for seasonal employment in the hospitality industry for those who were granted permits prior to May 2004. The policy has now been amended by the Minister for Home Affairs to allow for unskilled seasonal workers in both the agricultural and hospitality industries following applications by both the Jersey Farmers Union and Jersey Hospitality Association. Both sectors articulated a strong business case for the need to recruit non-EEA workers due to difficulties they have been facing recruiting from within the EEA.

The policy allows for the seasonal employment for up to 9 months in both sectors. The number of permits is capped at 130 for the Agricultural industry and 150 for the Hospitality industry. Applicants are subject to the mandatory checks at the visa application stage and are also required to provide Police certificates that summarise criminal history. This is a pilot scheme that will be reviewed in 2 years.

The UK has faced the same issues in recruiting workers for the agricultural sector and has introduced a similar pilot scheme.

Paul Le Monnier

Acting Assistant Director Immigration and Nationality

Development Board

Appendix 5:

Control of Housing and Work (Jersey) Law – Briefing session for Migration Policy Development Board

Population Office

Migration Policy  Development Board

Appendix 6:

Estimating government receipts and expenditure from Jersey households Statistics Jersey

Migration Policy  Development Board

Appendix 7:

Background report - Estimating government receipts and expenditure from Jersey households Statistics Jersey

Estimating government receipts and expenditure for Jersey households

Page intentionally left blank

Contents

Introduction .......................................................................................................................................... 70 General assumptions and limitations ................................................................................................... 72 Personal income tax .............................................................................................................................. 74 Assumptions ...................................................................................................................................... 75 Private pension tax relief .................................................................................................................. 75 Interest tax relief............................................................................................................................... 76 Allowances and rates ........................................................................................................................ 78 Goods and services tax ......................................................................................................................... 79 Assumptions ...................................................................................................................................... 79 GST model ......................................................................................................................................... 80 Impôts (excise) duty .............................................................................................................................. 83 Alcohol .............................................................................................................................................. 83 Tobacco and road fuel ...................................................................................................................... 84 Underreporting and Impôts changes adjustments ....................................................................... 84 Tobacco model .............................................................................................................................. 84 Road fuel model ............................................................................................................................ 86 Combined Impôts model .................................................................................................................. 86 Social security / health insurance contributions and supplementation ............................................... 87 Employee contributions .................................................................................................................... 87 Employer contributions .................................................................................................................... 88 Supplementation .............................................................................................................................. 88 Limits and rates ................................................................................................................................. 89 States of Jersey expenditure ................................................................................................................. 90 Health ................................................................................................................................................ 90 Education .......................................................................................................................................... 91 Fee paying and non-fee paying schools ........................................................................................ 91 Jersey Premium ............................................................................................................................. 92 Income support ................................................................................................................................. 94 Components .................................................................................................................................. 94 Accommodation component ........................................................................................................ 94 Other components not included ................................................................................................... 95 Components used ......................................................................................................................... 95 Other States of Jersey expenditure .................................................................................................. 96 Estimates for illustrative households .................................................................................................... 97 Potential applications / future development ..................................................................................... 109 Estimates from model income distributions................................................................................... 109 Full time worker models ............................................................................................................. 109 General population models ........................................................................................................ 113 Overall tax / contribution rates ...................................................................................................... 118 Estimates of "take home" pay ........................................................................................................ 121 Notes ................................................................................................................................................... 124

Introduction

This report provides estimates of the level of government receipts and expenditure to and from individual Jersey households. These estimates are based on very broad household information consisting of the household type (number of adults and children) and the level of household income1. We are specifically considering households that contain at least one working adult.

These estimates represent anticipated average levels of government receipts and expenditure from model households and will not reflect a household's specific circumstances.

For the purposes of receipts, we are considering:

• Personal income tax

• Goods and Services Tax (GST)

• Impôts (excise duty)

Excluded from the receipts calculations are:

• Company income tax

• GST payable by companies which includes International Service Entities (ISE)

• Stamp duty

• Island-wide rates

• "Other income"

Stamp duty and Island-wide rates collectively total approximately £50 million of tax revenue received per year and the majority of this revenue is likely to be derived from Jersey households. At this stage, due to the nature of how these receipts occur (particularly in respect of stamp duty) we have not attempted to provide estimates for these items, however they could be the subject of subsequent work. These receipts equate on average to approximately £1,100 per Jersey household per year.

In respect of government expenditure, specific consideration is given to that which provides the main areas of tax-funded services directly to an individual or household. These are:

• Health

• Education

• Income support

An allowance for "other" States expenditure is also included, to reflect, on some level, services not included above but which could still be considered as being directly funded from individual households.

In addition to the above items, which focus on general States of Jersey revenue and expenditure, consideration is also given to the receipts received in respect of the main ring-fenced funds, namely:

• Social security

• Health insurance

• Long-term care

These items represent a significant level of receipts from Jersey households and estimates for receipts into these funds have been included to assist in the presentation of the overall context and also to facilitate additional future work. We have not considered estimated expenditure from these funds at this time, but again this could be the subject of future work.

The current commitment of the States to make an annual contribution into the Social Security Fund (often referred to as "supplementation") is also considered. While this does not represent either government receipts or expenditure to / from a household, it does have an important impact as to the balance of funds that are ultimately available either as general tax revenue, or within a ring-fenced fund.

The combination of receipts and expenditure allows for the estimate of a net tax balance at an individual household level which is the primary measure presented in the outputs, both before and after the impact of supplementation. This measure should however be viewed as a starting point for further analysis and policy discussion as it is intended that the findings of this report and associated modelling serve as a useful tool for future exploratory work, rather than being viewed as a final outcome.

General assumptions and limitations

The intention of this report is to consider government receipts and expenditure from a very broad category of Jersey households based on a limited set of criteria / inputs. The only inputs considered in this initial report are as follows:

• Number of working age adults in the household

• Number of (school age) children in the household

• Total household earned income

• Income split (if more than one adult is working)

• If the household is entitled to receive income support

The key advantage of restricting the number of inputs in this way is that it allows for relatively easy interpretation of the final estimates and measures which are broadly reflective of a large number of households. However, restricting the inputs in this way does introduce a number of limitations into the estimates. By necessity, the outputs of the completed modelling will be very broad averages and therefore not reflective of any particular household's individual circumstances.

For example, the approach used to model if a child attends a fee-paying or non-fee-paying school is based on a probability, where the probability of that child attending a fee-paying school is estimated based on the level of household income. This results in a gradual change in education expenditure as household income changes. In reality that child will either be in fee-paying education or not, and therefore these modelled intervening states do not reflect actual expenditure for a particular child, but instead an average estimate of expenditure across all households that meet those criteria.

More complex models can also be produced, which, through the use of additional inputs, can better reflect household's individual circumstances. Additional areas that could be explored in future include:

• Tenure, such as owner occupier, private rental, social rental

• A more granular age breakdown of both children and adults

• Specific inputs, e.g. if a child attends a fee-paying school, or if a household pays into a pension

These more complex models can provide better quality overall estimates and also areas for further exploration, but are reliant on having more detailed information available if considering these estimates on a wider population level.

In order to estimate many of the components that are required for subsequent calculations, additional analysis has been conducted on the results of the 2014/15 Jersey Household Expenditure Survey (HES)2. This analysis has primarily been conducted using regression analysis3 techniques and based around the above inputs being used as independent variables. Regression techniques are subject to limitations, especially around the final choice of functional form, which can result in erroneous estimates around the extreme tails of a distribution (where there is usually limited data available in order to provide such estimates). Estimates in this report therefore do not consider extremely low (below £5,000) or extremely high levels of income, and care should be taken with any subsequent analysis in these areas.

Finally, the estimates produced have been based on households which contain at least one adult working for an employer. These estimates have not been designed to represent unemployed, self- employed or pensioner households, although these could be the subject of future work.

Personal income tax

Personal income tax represents the single largest element of revenue received by the States of Jersey, equating to over £400 million in revenue in 2017. This represents over half of the total general revenue received by the government.

The amount of personal income tax payable by a household in Jersey is the lower of two distinct calculations, the first being the 20% or "standard" rate of tax and the second being the 26% or "marginal" rate of tax. The marginal rate allows for a number of exemptions which results in those households with the lowest income paying no tax, and a progressive rate of tax applying as levels of income increase. The standard rate of tax has much fewer allowances (this was reduced significantly as a result of the "20 means 20" policy) and therefore generally is applied to those households receiving a higher income.

In addition to the personal income tax system, Jersey also has a Long Term Care (LTC) scheme which is collected via the same system as income tax. The contribution for this scheme is based on the household's total income, but takes into account the allowances and reliefs that are available under the income tax system. There is also a cap on the maximum amount payable under this contribution scheme. For the purposes of this report the calculation of the LTC amounts has been incorporated into the calculations for personal income tax but the resulting receipts are shown separately in the outputs.

The figure below illustrates the effective rate of personal income tax for an example (single person) household.

Figure 1 Effective personal income tax rate (including LTC)

Transition to standard rate

Overall allowance exceeded

As illustrated above, the nature of the Jersey personal tax system is that a household will generally pay no personal income tax up to the level of their overall allowance, and then a progressively higher rate of tax until it transfers from the marginal to the standard rate.

In respect of modelling estimated tax receipts from individual households, the nature of the system means that provided household characteristics and income is known, estimated tax receipts can be calculated directly from this information. Levels of personal income tax (including LTC) have therefore been calculated based on information supplied by the income tax policy department and are based on the 2018 allowances.

Assumptions

For the purposes of this report the following assumptions have been used in order to provide estimates of expected income tax receipts from example households:

• expenses allowance (ignoring pensions, see below) are assumed to be zero

• all couples are assumed to be married

• all children are assumed to fall within the "lower" children group in respect of allowances

• single parents are assumed to claim Additional Personal Allowance (APA)

• Child Care Tax Relief (CCTR) is assumed to be £590 per child (this is the average amount claimed per child obtained from tax data)

• where the household structure includes a couple, different assumptions can be made on the split of income and these are detailed in the individual scenarios (for reference purposes, the average split of income as recorded by the tax office is approximately 70%/30% overall or alternatively 60%/40% if only looking at married couples where both parties are working)

It is important to note that changes to these assumptions can have a substantial impact on the estimates of personal income tax revenue. In particular the Jersey income tax system treats unmarried couples very differently to married ones, with unmarried couples assessed separately for tax purposes, while married couples are generally treated as a single tax entity. In addition individual household circumstances can have a significant impact on reliefs such as CCTR.

Private pension tax relief

Under the Jersey tax system there is a relief available in respect of payments into an approved private pension fund. A large number of Jersey taxpayers receive this relief (just over 15,000 in 2016, equating to around £11 million of relief), often via payments through an employer organised pension scheme. This relief is an available deductible for both standard and marginal rate tax payers.

In order to provide an input across all households, pension payments has been estimated from analysis of HES data using a mixed model4 approach, with the resultant final model being as follows:

exp(17.398 + 1.571 ( ))

= (1.950 + 0.875 ( ))

1 + exp(17.398 + 1.571 ( ))

These estimates are illustrated in the figures below, with the first figure showing the probability of a household making payments into a private pension and the second, the overall resultant estimate.

Figure 2 Probability of paying into pension scheme

Figure 3 Estimated pension payments

Interest tax relief

An additional relief available under the Jersey tax system is for loan interest payments payable for the:

• purchase / extension of a main residence

• purchase / extension of a commercially let property

• purchase of machinery and plant

• acquisition of a trade, partnership share or trading company

For the majority of households, this relief is typically claimed on the mortgage interest for their main residence. This relief is gradually being phased out and will be completely abolished by 2026. At present it still however represents a substantive factor in estimating tax receipts from households (in 2016 some 9,000 tax payers claimed this relief, equating to around £11 million of total relief). The relief works as a deduction against income for those households subject to the marginal rate, and is capped at a maximum limit.

In order to provide an input across all households, mortgage interest has been estimated from analysis of HES data using a mixed model approach, with the resultant final model being as follows:

exp(19.697 + 1.717( ))

= (4,436 + 0.03702( ))

1 + exp(19.697 + 1.717( ))

These estimates are illustrated in the figures below, with the first figure showing the probability of a household making mortgage interest payments and the second the overall resultant estimate.

Figure 4 Probability of making mortgage interest payments

Figure 5 Estimated mortgage interest payments

As expected, lower income levels households have a very low probability of being owner occupiers and thus generally do not benefit materially from the presence of this relief. At higher incomes, where both the probability and expectant payments increase, this becomes a more substantive relief (where the household is still subject to the marginal rate of tax).

It is important to note that this approach does not reflect the reality experienced by individual households, but rather that experienced as aggregated across the population. In reality, a household will either be paying a mortgage and subject to this relief, or not. An alternative approach would be to include a factor such as tenure, or explicit mortgage payments within the inputs, which would provide a more granular breakdown and reflect those specific household's circumstances better.

Allowances and rates

The table below details the allowances and rates used for the purposes of the estimates produced in this report, which are based on the values used in 2018:

Table 1: Personal income tax allowances and rates

Standard rate

Lower child allowance  0 Higher child allowance  £6,000 Additional personal allowance  0

Tax rate  20% LTC rate  1%

Marginal rate

Single threshold  £14,900 Married threshold  £23,950 Second earner  £5,850

Marginal lower child

allowance  £3,000 Marginal higher child

allowance  £9,000

Marginal additional personal

allowance  £4,500 Marginal child care tax relief  £16,000 Maximum interest paid  £12,000

Marginal tax rate  26% Marginal LTC Rate  1.3%

LTC threshold  £170,256

Goods and services tax

Jersey introduced a Goods and Services Tax (GST) in 2008, initially at a rate of 3% and subsequently increased to 5%. GST is an indirect consumption tax placed on goods and services and based on the value of the product sold. In 2017 total GST receipts totalled around £88 million (although not all of this will have been collected from Jersey households).

In order to analyse this tax, and to provide a mechanism of modelling expected GST receipts from households, we have conducted an analysis on data from the 2014/15 HES.

Assumptions

In order to model the amount of GST collected from households we have made assumptions about the proportion of household expenditure that would be subject to GST. These assumptions are based around the classification system used in the HES[1].

For the purposes of estimating GST expenditure, each category of expenditure (to a 3-digit level) was further classified into expenditure that would be expected to be subject to GST and those that would not. Full details of this breakdown are shown in the table below:

Table 2: Classification of expenditure for GST purposes

HES classification group  Subject to GST  Not subject to GST

1. Food & non-alcoholic drinks  X
2. Alcoholic drinks & tobacco  X
3. Clothing & footwear  X

1. Net rent paid  X
2. - 4.6 Household fuel & power  X

7. House purchase costs  X
8. Rates  X

4. Mortgage endowment payments  X
5. Household goods & services  X

1. Pharmacy & other medical products  X
2. – 6.4 Doctors, dentists & opticians  X

6.5 Other medical related services  X

7.1 – 7.2 Transport  X

7.3.1 – 7.3.2 Bus, coach and taxi fares  X

3. Travel by air  X
4. – 7.3.5 Travel by sea & other travel & transport  X

1. Postal services  X
2. – 8.3 Communication  X

9.1 - 9.5 Recreation & culture  X

9.6 Package holidays (including cruises)  X

10.1 – 10.2 School and higher education fees  X

10.3 Other education costs  X

11. Restaurants & hotels  X

12.1 – 12.2 Personal care & personal effects  X

3. Home care  X
4. Nursery, crèche & childcare  X
5. Insurance  X

1. Bank, building society, post office & credit card charges  X
2. Other services & professional fees  X

1. Capital improvements, main dwelling  X
2. Licenses fine and other non-consumption expenditure  X
3. Charitable donations and subscriptions  X

Based on this breakdown, for an average Jersey household it is estimated that expenditure on GST will comprise 3.2% of their total expenditure (£25.48 of £806.20) or 2.4% of their gross cash income (£25.48 of £1,053).

GST model

Following some exploratory analysis, for the purposes of estimating household payments of GST, a linear modelling approach utilising natural logarithmic transforms has been preferred. This has been fitted using data from the 2014/15 HES with the final model being:

( ) = 0.28346 + 0.61828 (  ) This model uses gross cash income5 as the input rather than earned income.

The figures below illustrate this model, plotting both GST expenditure by income, and the effective GST rate (GST paid / gross cash income).

Figure 6: Estimated GST paid against household income

Figure 7: Estimated effective tax rate of GST

It is worthy of comment that at relatively low income levels, the effective GST rate exceeds 5% (the actual current GST rate). As observed in the HES, within these low-income households groups are a number  where  household  expenditure  exceeds  household  income.  It  is  assumed  that  these households will be utilising funds derived not from current income (i.e. savings) in order to fund this expenditure. The focus of this report is, however, on households that contain at least one full time worker, and therefore this lower part of the distribution is not considered.

Impôts (excise) duty

The States of Jersey receive almost £60 million a year in Impôts (or excise duty). Impôts consists of indirect taxation on the following specified goods:

• alcoholic beverages

• tobacco

• hydrocarbon oil (principally road fuel)

In each case, the charge is applied based on specified volumes, rather than price, which creates some additional complications when attempting to estimate tax receipts from these items.

In respect of duty collected from tobacco and hydrocarbon oils we have conducted an analysis on data from the 2014/15 HES combined with data collected as part of the production of the Jersey Retail Price Index in order to provide estimates of household expenditure on these taxes based on household income.

In respect of alcohol a different approach has been preferred.

Alcohol

Alcohol provides a challenge in estimating excise duty receipts from expenditure related data. This is largely due to excise duty being charged based on volumes rather than being related to price. A £5 bottle of wine would attract the same duty charge as a £50 bottle of wine, and there are substantial variations in price between products compared to the amount of excise duty they would attract.

There is quite a substantial volume of literature concerning the potential relationship between household income and volume of alcohol consumed, and the conclusions on this subject are far from definitive. What is clear is that if such a relationship does exist, the impact on average household consumption from changes in income will be comparatively small. Other factors will have a much greater impact than household income, and therefore for the purposes of this study it will be assumed that the volume of alcohol consumed will be solely dependent on the number of adults in the household (i.e. fixed alcohol consumption per adult population).

On a per-unit of alcohol basis, the charging of Impôts in Jersey is independent of where that alcohol is served (whether sold from off-licence shops or on licenced premises). In addition whilst there is some variation between the types of alcohol that are consumed by differing income groups, this can largely be ignored when considered on an overall basis. This is primarily due to only minor differences occurring between the amount charged per unit of alcohol on beer and wine (where consumption does vary between income groups). Whilst the amount charged per unit of spirits is substantially higher than other types of alcohol, this particular item of expenditure has the smallest variation between different income groups.

Based on the above assumptions and data from Customs concerning the levels of different alcohol duty collected (wines, spirits and beer etc.) it is assumed that receipts in respect of alcohol will be estimated at a fixed amount of £230 per adult in the household.

Tobacco and road fuel

Tobacco  and  road  fuel  do  not  have  the  same  challenges  as  alcohol  in  respect  of  estimating consumption based on expenditure data. This is because the differentials in price between items is substantially smaller than is the case with alcohol. As a result, in order to estimate Impôts receipts from these items an analysis of spending data from the 2014/15 HES survey has been conducted. Due to the specific nature of these items and the way Impôts are charged this does however require certain specific treatments / adjustments.

Under-reporting and Impôts changes adjustments

It is acknowledged within the HES survey that spending on tobacco (and certain other items) is typically under-reported and therefore the raw HES data understates the level of expenditure on these items. This is a known issue and this is already adjusted for in respect of certain other Statistics Jersey publications (such as the weights used in the Jersey RPI). To accomplish this, the level of expenditure for households is adjusted upwards based on the known quantity of tobacco actually sold in the Island (from Impôts data).

In addition, the actual rates of Impôts have increased since the time of the 2014/2015 and a further adjustment is required in order to account for that change. These adjustments have been made to the original dataset prior to any analysis being conducted.

Tobacco model

In respect of tobacco products a mixed model approach has been preferred and the resultant fitted coefficients are detailed in the table below:

Table 3 Coefficients for regression models

Logistical regression  Linear regression

model  model

Intercept  Slope  Intercept  Slope Cigarettes  0.17391  -0.06161  10.4093  -0.3364 Cigars and other tobacco products  -0.947  -0.2096  7.9766  -0.1952

In a similar way to the model for GST, these models uses gross cash income rather than household earned income. These models are illustrated in the charts shown below.

Figure 8 Impôts receipts from cigarettes

£900

£800

£700

£600

£500

£400 Duty paid

£300

£200 £100 £0

£0 £20,000 £40,000 £60,000 £80,000 £100,000 £120,000 £140,000 £160,000

Gross cash income

Figure 9 Impôts receipts from cigars and other tobacco products

£40 £35 £30 £25 £20 Duty£ paid15 £10 £5 £0

£0 £20,000 £40,000 £60,000 £80,000 £100,000 £120,000 £140,000 £160,000

Gross cash income

As reported in the HES, lower income households, on average, spend more on tobacco products than those on higher incomes and this is reflected in the estimates of receipts from those households shown above.

Road fuel model

The road fuel model again uses a mixed model approach based on gross cash income. The resultant coefficients and a chart illustrating the results are shown below:

Table 4 Coefficients for regression models

Logistical regression model  Linear regression model

Intercept  Slope  Intercept  Slope Road Fuel  -4.824  0.528  3.18444  0.27478

Figure 10 Impôts receipts from road fuels £600

£500 £400 £300 Duty paid

£200 £100 £0

£0 £20,000 £40,000 £60,000 £80,000 £100,000 £120,000 £140,000 £160,000

Gross cash income

Combined Impôts model

Combining the above models results in an estimate for total receipts from Impôts based on a combination of household income and number of adults in the household. These estimates are illustrated below:

Table 5 Estimated Impôts receipts

£1,600

£1,400

£1,200

£1,000

£800

2 Adults Duty paid £600

1 Adult £400

£200

£0

£0 £20,000 £40,000 £60,000 £80,000 £100,000 £120,000 £140,000 £160,000

Gross cash income

The final model is broadly independent of income, due to the combination of tobacco (higher receipts from low-income households) and road fuel (higher receipts from high-income households).

Social security / health insurance contributions and supplementation

Jersey operates a social security contribution system, which provides a range of social benefits to Islanders.  These  primarily  include  the  provision of  old  age  pensions,  incapacity  allowances  and contributions to primary costs, but also includes a number of other benefits. These are primarily administered by way of two ring-fenced funds, the Social Security Fund and the Health Insurance Fund.

These funds derive the majority of their income via the social security contribution system, with the majority of working adults paying class 1 social security contributions. Class 1 social security contributions consists of two distinct elements:

• employee contributions – which are paid by the employee and based on and paid out of their gross earnings

• employer contributions – which are paid by the employer and based on the employee's gross earnings

There is a further class 2 contribution mechanism, which is payable if the individual is:

• self-employed

• unemployed

• earning below the lower earnings limit

• working less than eight hours per week

• studying

• bringing up a family

Many such individuals are however able to access low-income contribution relief, which excuses that individual from paying class 2 contributions (at the expense of some future benefit provisions). There are also a number of contribution credit options available for those in particular circumstances (such as being unable to work due to sickness or injury, students in full time education and stay at home parents). As a result, the majority of class 2 contributions comes from self-employed individuals. Approximately 9% of all social security contributions comes from class 2 contributions.

As well as social security contributions, the Social Security Fund (but not the Health Insurance Fund) receives income from general tax revenue through an annual grant ("supplementation").

For the purposes of this report, the primary interest is in respect of households that will be contributing class 1 contributions and also any supplementation that may apply.

Employee contributions

Employee contributions are calculated based on a percentage (the employee contribution rate, currently 6%) of gross earnings. The total amount of gross earnings that this applies to is capped with reference to the standard earnings limit. Any earnings that exceed this limit are ignored in this calculation (effectively capping the total contributions at 6% of this limit).

Employer contributions

Employer contributions are calculated based on two different rates:

• For gross earnings up to a maximum of the standard earnings limit the employer standard contribution rate applies (6.5%).

• For gross earnings above the standard earnings limit and below the upper earnings limit the employer upper contribution rate applies (2%).

Any earnings that exceed the upper earnings limit are ignored in respect of this calculation, effectively providing an upper cap to the employer contributions.

Supplementation

Class 1 and class 2 contributors with earnings below the standard earnings limit in a given month, but above the lower earnings limit receive a full contribution record for that month. For this group, the Social Security Fund receives a monthly contribution from employee and employer that is below the maximum amount. To maintain income into the Fund at an agreed level, historically the States has provided a "top-up" supplement to bring the total income received to the maximum as set by the Standard earnings limit. This process is often referred to as "supplementation" and it protects the total income paid into the Fund each year. This process applies only to the Social Security Fund, which receives a contribution of 10.5%. The remaining 2% is paid into the Health Insurance Fund which does not receive any direct States funding.

Historically the value of the States grant was based on the exact cost of supplementation for the year in question. The introduction of an additional 2% upper contribution rate from 2012 reduced the size of the grant needed from the States as extra income is now paid into the Fund from the employers of higher-earning workers. Since 2012, the value of the grant has been reduced in line with these extra contributions received.

Since 2015 the actual grant provided by the States has been fixed over the course of the most recent Medium Term Financial Plan (MTFP). This has resulted in a reduction in overall income to the Social Security Fund when measured against the theoretical income that would be derived from the principle of collecting a standard contribution from each insured person.

For the purposes of this report, we treat supplementation as follows:

• For an individual whose combined social security employer and employee contributions (excluding contributions to the health insurance fund) fall below the 10.5% level of the standard earnings limit, supplementation is assumed to address the shortfall of this balance. This results in a debit showing for the balance of tax income, and a corresponding credit would be noted for the total Social Security Fund income.

• For an individual who earns above the standard earnings limit, a credit is shown at the upper contribution rate for tax income, and a corresponding debit for the Social Security Fund. This reflects the fact that while the money is collected via the social security contribution scheme, this does not increase the overall value of the social security fund but rather reduces the amount of money the States needs to contribute to it by way of the grant.

The above approach reflects the historical principle within the Social Security Fund that the Fund receives a standard amount per contributing worker. This approach overstates the actual current monetary flows between tax revenue and the Social Security Fund, and should be viewed as modelling the flows sufficient to maintain social security income at the level commensurate with the standard earnings limit.

Limits and rates

Social security contributions and supplementation are calculated based on the 2018 Social Security rates and limits:

Table 6 Social Security rates and limits

Standard earnings limit (monthly)  £4,290 Upper earnings limit (monthly)  £14,188 Lower earnings limit (monthly)  £908

Maximum rate class 2 contribution

(monthly)  £734.21

Total employee contribution rate  6% Total employer standard contribution rate  6.5% Employer upper contribution rate  2%

In respect of the split between the social security and health insurance funds the following breakdown has been used:

Table 7 Split between Social Security and Health Insurance funds

Social Security Fund  Health Insurance Fund Employee rate  5.2%  0.8% Employer rate  5.3%  1.2%

It is assumed that for working adults they fall within the class 1 contributions regime, and as with income tax, different scenarios for the split of income between adults occupying the same household are considered.

It is assumed that if an individual earns less than the lower earnings limit, then they will not be subject to social security contributions or supplementation.

States of Jersey expenditure

Government expenditure in Jersey includes a number of services provided directly to Islanders, together with other items of expenditure. The items specifically considered here represent the largest groups of expenditure and also those which can be well determined as services provided directly to households / individuals.

Health

The largest single broad area of government expenditure in Jersey is the provision of health. This accounts for around £220 million of expenditure a year, or approximately £2,100 per capita. Average costs per person do however vary quite substantially by age group, with older members of the population typically requiring more care than the younger groups.

For the purposes of this report therefore, estimates of per capita consumption by broad age group have been obtained using data from the Patient Level Information and Costing System (PLICS) for 2017 and then inflation adjusted to 2018[2]. The broad groups are shown below:

Table 8 Health costs per capita

Age group

Child (0-17)

Working age adult (18-65) Over 65

Over 85

Cost per capita (2017 values)

£1,462 £1,649 £3,578 £4,521

Cost per capita (Inflation adjusted to 2018) £1,519

£1,713

£3,718

£4,697

It is important to note that the above figures represent broad population averages and will not be reflective of the costs associated with any particular household. For the majority households the costs associated will be significantly lower than the above with the bulk of the costs associated with those individuals / households that may be suffering from a particular health-related issue at that point in time.

These costs do not include the provision of primary care (primarily GP and prescription costs) which are administrated via the Health Insurance Fund.

Education

The second largest broad area of government expenditure in Jersey is the provision of education. This accounts for around £100 million of expenditure a year.

Unlike health, which broadly speaking provides services for the entire of the population, the Education Department budget is largely directed towards funding education for children and young adults. With the provision of primary and secondary education representing the bulk of the costs incurred. As a result, for the purposes of this report we will consider that this cost is effectively a cost per child, rather than a cost per capita expense.

Fee-paying and non-fee-paying schools

Due to the nature of Jersey's education system, a relatively high proportion of children in Jersey attend a fee-paying school, which is also funded partially by government expenditure. There is a significant difference in the cost to the States if a child attends a non-fee-paying school than a fee-paying one. This is as a result of a difference in the funding provided via the Age Weighted Pupil Unit (AWPU), which is currently set at 50% of the full rate for the majority of fee-payable schools.

Based on the above, the assumption used is that the cost per pupil is based upon if they attend a non-fee-paying or fee-paying school, with the following values used:

Table 9 Assumed costs fee and non-fee paying

School type  Cost per pupil Non-fee-paying  £6,100 Fee-paying  £3,400

Note, that within these figures is a fixed per pupil allowance for additional shared costs of education that are not part of the AWPU (and therefore the fee paying amount is not simply 50% of the non-fee paying value).

Analysis of the 2014/15 HES data has allowed us to estimate the probability of a household sending their children to a fee-paying school by income. This was done using a logistic regression model, looking at households with children, and whether that household had expenditure in the school fees category of spending. Further breakdowns were then conducted to estimate the number of children within that household that were in fee-paying education. The final model is as follows:

exp(25.539 + 2.193 ( ))

( | ) =

1 + exp(25.539 + 2.193 ( ))

This probability model is illustrated below:

Figure 11 Probability in fee-paying education

As expected the probability of a child attending a fee-based school increases with household income. Based on this probability model and the assumptions on States expenditure per child, this can then be combined into an overall cost per child model which is illustrated below:

Figure 12 Cost per child

Jersey Premium

In addition to the general education spending discussed above, Jersey operates a targeted funding program for schools that directs additional funding based on set eligibility criteria. Whilst the overall expenditure on this program is relatively small (approximately £2.5 million in 2018), it results in an average level of funding per eligible child of around £900. This therefore does have a substantive impact in respect of the overall expenditure on these families and therefore this has been included in the estimates of education spending on households.

The eligibility criteria for the Jersey Premium are:

• all pupils who have ever been "Looked After Children" (LAC)

• children from households which have recently claimed income support

• children from households with "registered" status that would qualify to claim income support if they had lived in Jersey for five years

The majority of payments are made in respect of the latter two criteria and for the purposes of this report we have not attempted to model whether a household is likely to contain any LACs. Instead, a fixed amount of £900 per child has been included in education expenditure if the household would be subject to a positive rate on income support (ignoring any residency restrictions).

Income support

Income support is the largest tax-funded benefit provided by the States of Jersey, totalling just under £69 million in 2017. Income support provides support primarily by way of a weekly benefit payable to eligible households. It is therefore particularly relevant when assessing net receipts to and from households as it is one of the main mechanisms where money is transferred directly from tax revenue back to households, rather than through a provision of a service.

Income support is a household benefit, with the amount payable depending on the number of people in the household, where they live, their specific needs and the income and capital assets they have available. Income support is subject to a residency test, where at least one adult in the household must have been resident in Jersey for at least 5 years. There are also requirements for working age adults to be in employment, actively seeking work or subject to a specific work exemption.

Components

The amount payable under income support consists of a number of different components which are designed to provide support to specific family circumstances. These cover basic living costs, accommodation, childcare and other costs. Generally speaking each household will be in receipt of a fixed household component, an accommodation component based on the type of accommodation they require and individual components for each individual that makes up the household.

The intention of income support is to "top up" other household income. Therefore as household income from other sources increases the income support benefit decreases, until the household reaches a level of income where they are deemed to be self-sufficient. In order to provide a monetary incentive  to  increased  employment  income  there  is  also  an earnings  disregard,  which  allows  a percentage of other income to be disregarded from the income support calculation.

Calculations have been based on the "income support calculator" supplied by the Social Security Department and using the 2018 components.

Accommodation component

For the accommodation component, this has been calculated based on the following assumptions:

• the household occupies a private rental property

• the full accommodation component is paid

• the household is occupying a property that is deemed to be suitable for their needs, based on the household structure and the income support guidelines

• for a single adult (who can occupy either a bedsit or flat depending on their historic circumstances) this has been estimated based on the average split between the two possible components

It is important to note that a large number of households in receipt of income support will in fact be accommodated in social housing, with around half of all income support households residing in accommodation provided by Andium Homes. If an income support household rents a property from a social housing landlord then the accommodation component will represent the actual full cost of the rent charged (provided the household is occupying a suitably-sized property). This rent can vary considerably depending on the historic circumstances of the household in question, with some households subject to the current 90% of market rents policy, and others still subject to older rental agreements.

The private rental component is therefore used as a reasonable proxy to estimate government expenditure on that particular household. The actual cost of income support is subject to variation depending on the choice of social sector rent policy, with Andium currently making a significant return to the States each year in line with the agreed rent policy.

Other components not included

As well as the core living costs and accommodation components, there are a number of other components potentially available to households. These include specific health components, carer's and child care components. These have not been included in this analysis as they reflect very specific household and individual circumstances. These components represent around 9% of total income support spending (or approximately £1,000 per income support household).

Components used

The table below lists the 2018 income support components that are used in the estimates.

Table 10 Income support components

Weekly  Annual Individual components  component  equivalent Adult  £ 94.85  £ 4,932.20 Single parent  £ 40.39  £ 2,100.28 Child  £ 65.87  £ 3,425.24

Household component  £ 52.85  £ 2,748.20 Accommodation components

Hostel  £ 103.04  £ 5,358.08 Bedsit / lodgings (private rental)  £ 135.73  £ 7,057.96 One bedroom flat (private rental)  £ 200.13  £ 10,406.76 Two bedroom flat (private rental)  £ 256.27  £ 13,326.04 Three (or more) bedroom flat (private rental)  £ 275.03  £ 14,301.56 One bedroom house (private rental)  £ 229.39  £ 11,928.28 Two bedroom house (private rental)  £ 291.27  £ 15,146.04 Three bedroom house (private rental)  £ 340.13  £ 17,686.76 Four bedroom house (private rental)  £ 370.79  £ 19,281.08 Five (or more) bedroom house (private rental)  £ 410.48  £ 21,344.96

Income disregard  25%

Other States of Jersey expenditure

The above three expenditure groups, combined with the tax-funded elements of social security supplementation  represents  over  three-fifths  of  tax-funded  government  expenditure  (ignoring expenditure  funded  by  way  of  ring-fenced  funds).  This  leaves  approximately  £250  million  of departmental expenditure and £40 million of capital expenditure, which are not included in the expenditure assumptions so far detailed.

These remaining costs are generally not directly dependent on individual household activity but largely consist of services provided to the Island as a whole. These include things such as the provision of law enforcement,  maintenance  and  supply  of  Island  infrastructure  and  the  general  machinery  of government. How these costs are apportioned to households is somewhat subjective as whilst it is assumed the majority of these costs will increase in line with the Island's population, there are other "fixed" costs which will largely remain constant regardless of how the Island's population changes.

In addition, there are elements of tax receipts that are not represented in the modelling of households, and which are also used to fund expenditure. These include items such as corporate income tax, stamp duty and elements covered under "other income" sources. This equates to approximately £180 million of revenue not considered as part of the household modelling.

Based on a rough 1/3 to 2/3 split of fixed to non-fixed costs for the purposes of this initial report, the following assumptions have been made:

Total "other costs"  £290 million Less expenditure funded from  (-£180 million)

non-household sources

Remaining "other costs"  £110 million

Assumed "fixed costs"  £40 million Assumed linked to population  £70 million

This equates to a cost to proportion to households of £660 per capita. However, these assumptions can be varied to look at different methods of proportioning these costs and this report should be considered a starting point for further work in this area.

Estimates for illustrative households

The following pages detail the resultant estimates for a number of illustrative households for a range of different income levels. These illustrative households are as follows:

Table 11 Illustrative household types

Label  Description

HH1  Single Adult, 5 year resident

HH2  Single Adult, recent arrival

HH3  Single Parent, 1 child, 5 year resident HH4  Single Parent, 1 child, recent arrival HH5  Couple, both working, 5 year resident HH6  Couple, both working, recent arrival HH7  Couple, one working, 5 year resident HH8  Couple, one working, recent arrival HH9  Couple, one child

HH10  Couple, two children

HH11  Couple, three children

Number  Number of  5 Year  Income of Adults  Children  resident?  split

1  0  Yes  N/A 1  0  No  N/A 1  1  Yes  N/A 1  1  No  N/A 2  0  Yes  50% 2  0  No  50% 2  0  Yes  100% 2  0  No  100% 2  1  Yes  50% 2  2  Yes  50% 2  3  Yes  50%

Potential applications / future development

Whilst the primary purpose of this initial report has been the estimation of receipts and expenditure from the above illustrative households, these estimates should be considered as a starting point for further analysis and discussion. Presented below are some illustrations of additional analysis that could be conducted / potential uses of these estimates, which could assist in policy discussion and formulation.

These examples are in no way intended to be exhaustive, but simply represent some avenues of exploration that were evident from the production of this report.

Estimates from model income distributions

The basis of this report is looking at estimates for households of specific types and income; however this can of course be extended to groups of households. One such extension of this is to look at specific household structures and applying the estimates to a defined income distribution. This income distribution can either be drawn from empirical data, or alternatively a model distribution can be used in order to provide estimates for specific scenarios.

Full time worker models

One policy matter that has been subject to recent discussion is the potential introduction of a work permit system into Jersey. Such a system could be developed in a number of ways; however one potential system under discussion is based around the concept of a mechanism that permits adult workers to migrate to the Island for a fixed period of time with restrictions that ensure they leave after that set period has expired. It is anticipated that this could result in a proportion of total migration that is restricted to single adult workers, with limited (or no) associated dependents.

There are a number of potential model distributions available, however for the purposes of this example the Pareto distribution has been preferred. The Pareto distribution provides a suitable way of modelling an income distribution for full-time workers where there is a known minimum value of income (as a result of the application of a minimum wage). Applying such a distribution to the single adult household type provides a way of estimating government receipts and expenditure from this theoretical group.

It should be stressed, that this is looking at a hypothetical scenario, and the estimates are dependent on both the choice of distribution selected and that this group conforms to the various assumptions. The intention of this modelling is to provide a tool for policy exploration, with the various parameters and assumptions modified in order to model different possible scenarios and their potential outcomes.

The Pareto Cumulative Distribution Function (CDF) is defined as:

1 ( )  

( ) = {

0  <

And therefore is defined by two parameters,  being the minimum possible value of X (the expected minimum level of income in this scenario) and  which is a shape parameter (essentially indicating how "stretched" the resultant distribution is).

To give examples of how this can be used in practice, a Pareto distribution with the parameters

= 15,000 (representing the approximate level of income anticipated for a full time worker receiving

the Jersey minimum wage) and  = 2.5, has the form illustrated in the figure below. As an additional control, the "tail" of the distribution has been deliberately truncated at the 90th percentile in order to avoid the undue influence of a few higher earners that would not be expected in this scenario.

Figure 13 Example Pareto Distribution for 1,000 single adult households

The above distribution has an overall mean income of approximately £21,000 (or roughly £10.00 an hour based on a full time worker).

Based on the above theoretical distribution applied to 1,000 households (all with less than 5 year residency) this produces aggregate estimates as follows:

Table 12 Aggregate results from example Pareto model

Income tax receipts GST

Impôts

Total tax receipts

Education expenditure Health expenditure * "Other" expenditure Total expenditure

Net tax balance pre supplementation Supplementation

Net tax balance post supplementation

£1,408,000 £616,000 £937,000 £2,962,000

Zero £1,215,000 £660,000 £1,875,000

£1,087,000 £3,220,000 -(£2,133,000)

* For the estimate on health expenditure an additional factor of 0.8 has been applied to the overall spend (lowering the expenditure amount by a fifth) in order to reflect the fact that new arrivals are not immediately entitled to free health care in the Island.

To provide an alternative scenario, based on = 18,000 (equating to a roughly £1 increase in the minimum wage) and = 2 (indicating a more positively "stretched" distribution), please see the illustration below:

Figure 14 Example Pareto Distribution for 1,000 single adult households

The above distribution has an overall mean income of approximately £27,000 (or roughly £13.00 an hour based on a full time worker).

Based on the above theoretical distribution applied to 1,000 households (all with less than 5 year residency) this produces aggregate estimates as follows:

Table 13 Aggregate results from example Pareto model

Income tax receipts GST

Impôts

Total tax receipts

Education expenditure Health expenditure * "Other" expenditure Total expenditure

Net tax balance pre supplementation

£3,023,000 £727,000 £923,000 £4,673,000

Zero £1,215,000 £660,000 £1,875,000

£2,798,000

Supplementation £2,537,000 Net tax balance post supplementation £261,000

* See note above

The above two scenarios are purely illustrative, but demonstrate the impact that different income distributions have on the estimates of receipts and expenditure and as an illustration of how this type of modelling can be used to explore such scenarios.

General population models

Whilst the Pareto distribution is suitable for modelling the income distribution for full time workers, it is not the best choice to serve as a proxy for the more general population, where there is not a defined lower limit of income (due to some households not containing a full time worker). For these type of households we have preferred a log-normal distribution.

The log-normal distribution is defined based on two parameters and , with broadly equating to the resultant median of the distribution and operating as a shape parameter defining the level of skew in the distribution (values close to 1 approximate to a normal distribution, while increased values result in greater levels of positive skew).

A log-normal distribution with the parameters of = 60,000 and = 2 (which is an approximation of the shape parameter found in the overall Jersey population obtained from the most recent income distribution survey) has a shape illustrated in the figure below (based on 1,000 households). As an additional control, the "tail" of the distribution has been deliberately truncated at the 99th percentile in order to avoid the undue influence of a few higher earners.

Figure 15 Example log-normal distribution based on 1,000 households

The above distribution has a median income of £60,000 and a mean of £73,000 (note that these are combined household incomes).

Taking  the  above  distribution,  we  can  combine  this  with  our  model  household  scenarios.  For illustrative purposes we have used below a scenario based around a couple with a single child. The assumptions are therefore:

• Two married adults, both working (70% / 30% income split)

• Assumed to be 5 year resident

Using the above distribution for this household type results in aggregate (based on 1,000 such households) estimates as follows:

Table 14 Aggregate results from example log-normal model

Income tax receipts GST

Impôts

Total tax receipts

Education expenditure Health expenditure Income support "Other" expenditure Total expenditure

Net tax balance pre supplementation Supplementation

Net tax balance post supplementation

£9,702,000 £1,286,000 £1,162,000 £12,150,000

£5,675,000 £4,751,000 £2,949,000

£1,980,000 £15,354,000

-(£3,161,000) £3,090,000 -(£6,251,000)

Once again our assumptions can be adjusted and a change to the median household income, making

= 80,000, and an adjustment to our shape parameter of = 1.8, results in the following revised

distribution:

Figure 16 Example log-normal distribution based on 1,000 households

The above distribution has a median income of £80,000 and a mean of £92,000 (note that these are combined household incomes).

Using  the  same  example  household  type  above,  with  the  same  assumptions  results  in  revised aggregate (1,000 such households) estimates as follows:

Table 15 Aggregate results from example log-normal model

Income tax receipts GST

Impôts

Total tax receipts

Education expenditure Health expenditure Income support "Other" expenditure Total expenditure

£13,807,000 £1,519,000 £1,167,000 £16,493,000

£5,281,000 £4,751,000 £983,000 £1,980,000 £12,995,000

Net tax balance pre supplementation Supplementation

Net tax balance post supplementation

£3,498,000 £2,540,000 £958,000

The above two scenarios are purely illustrative, but demonstrate the impact that different levels of income  have on  the  estimates of  receipts  and  expenditure.  Income  distributions can  either  be modelled based on set forecasting assumptions, or derived from empirical data if available and the focus is on a more current scenario. Multiple models could also be combined to provide a more complete picture of an anticipated scenario.

Overall tax / contribution rates

Whilst not the primary purpose of this exercise there are a number of areas where the estimates of government receipts in particular can be used to provide some useful measures to aid in policy decisions. One such area is the concept of a total effective tax / contribution rate experienced by an example household. This is broadly defined as the average rate at which the household's earned income is subject to either a tax or some other form of government charge. We present here some examples of this type of measure.

For the purpose of these examples we are looking specifically at the following government receipts:

• Personal income tax

• Goods and Services Tax (GST)

• Impôts

• Social security and health insurance employee contributions

• Long Term Care (LTC) contributions

Depending on the purpose of the exercise, some of the elements above could be chosen to be excluded (such as contributions to the funds if this was not to be considered), and likewise additional elements could also be included (such as employer total contributions if considering payroll related contributions rather than pure household earned income).

The assumptions associated with the above receipts can of course be varied, and it is envisaged that these measures could be used to explore the impact of changes to these revenue measures on different households (such as a change to a tax rate, and allowance, or other criteria changes).

These estimates for overall contribution rates (total contributions / income) are illustrated below. Please note that each of these examples are assumed to have 5-year residency, and therefore at lower incomes the household may be in receipt of income support (which impacts their Gross Cash Income and therefore contributions in respect of GST and Impôts):

Figure 17 Overall contribution rate - single adult

Figure 18 Overall contribution rate - single parent, one child

Figure 19 Overall contribution rate – married couple, one working, no children

Figure 20 Overall contribution rate – married couple, both working (50/50 income split), two children

Each of these example rates all follow the same general pattern as a result of the differing influences each of the individual components have at different income levels. Broadly speaking this consists of:

• At low incomes the effective contributions initially decrease in line with increased income – these households will be paying a fixed rate (6%) of social security contributions, whilst the overall effective rate of GST and Impôts reduces as their level of income rises.

• Once the household exceeds their overall income tax allowance they begin paying personal income tax at a progressively higher effective rate, resulting in the overall rate increasing.

• When the individual workers within the household reach a level of earnings in excess of the Social Security standard earnings limit, then their effective contribution rate for this element begins to reduce – where this occurs is dependent on the number of workers and their individual income levels.

• When the household changes from the marginal to the standard rate of personal income tax then the effective contribution rate for this element becomes essentially fixed at the 20% rate

– for many households this represents the point where they would be subject to the highest effective overall rate.

• Finally, the upper threshold in respect of the LTC charge means that the effective rate for this element, and the effective contribution rate for this element declines once households exceed that level of income.

Estimates of "take home" pay

To give a final illustrative example of potential future policy discussion / exploration, the estimates produced in this report can be used to explore the interaction between the different elements of government receipts and expenditure. One such example is looking at the overall effects of the interaction between the overall tax / contribution system and the main direct benefit system of income support and how this equates to the concept of "take-home" pay.

For the purposes of these examples we are defining take home pay as the sum of earned income and income  support,  less  direct  taxes  /  charges  incurred  (income  tax,  social  security  employee contributions and long term care charge). This is broadly similar to the concept of the "Before Housing Costs" (BHC) measure used in the report on income distribution by Statistics Jersey (2015) and reflects a household's income received after the application of the tax and benefit system, but before any living costs (including housing) are taken into account.

The assumptions associated with the above elements can of course be varied, and it is envisaged that these measures could be used to explore the impact of changes to these elements on different households (such as a change to a tax rate, or income support criteria / components).

These estimates for "take-home" pay (BHC) for example households are illustrated below:

Figure 21 "Take-home" pay (BHC) - single adult

Figure 22 "Take home" pay (BHC) - single parent, one child

Figure 23 "Take home" pay (BHC) – married couple, both working (50/50 income split), no children

Figure 24 "Take home" pay (BHC) – married couple, both working (50/50 income split), two children

In each of the examples above there are three distinct areas of behaviour:

• At lower incomes, "take-home" pay increases from a base level of the sum of all the Income Support components that household is able to receive, at a rate of around 25p in every £1 (reflective of the application of the income support disregard)

• At a certain level (dependent on household circumstances) the household will become subject to income tax at the marginal rate, and above his point the level of "take-home" pay is essentially flat irrespective of increases in earned income

• Finally,  once  the  household  is  no  longer  eligible  for  income  support,  "take-home"  pay increases at a rate of around 70p in every pound (although this can vary depending on the household's  specific  circumstances)  as  the  income  disregard  no  longer  applies  and  the household is no longer in receipt of any income support payments.

Where these different elements occur is largely a function of the individual household circumstances and at what stage in the income distribution they become subject to income tax charges, and when they are no longer eligible for income support.

Notes

1 Household Income: For the purposes of this report household income refers specifically to earned income before the effect of taxes or benefits. This is the total earned income received by the household, regardless of the number of workers.

1 2014/2015 Household Expenditure Survey: For full details on this survey please see: https://www.gov.je/Government/Pages/StatesReports.aspx?ReportID=2084

1 Regression analysis: Is a set of techniques / processes used for estimating the relationships between variables. This allows for the estimation of a dependent variable, based on one or more independent variables. The analysis of the HES data was largely conducted using a combination of linear and logistical regression modelling and performed using the software package R.

1 Mixed model: This procedure involves the creation of two datasets from the overall HES data. The first was one which indicated (by way of a binary response variable) if that household has made a payment in respect of that item or items of expenditure or not. The other containing the log- transformed total expenditure amounts on these items, for those households that had incurred some such expenditure (so excluding all zero values).

The first dataset is modelled using logistic regression and the result transformed to produce an estimate of probabilities, i.e.:

exp( 1) Pr( = 1) =

1 + exp( 1)

The second dataset is modelled using ordinary linear regression in order to produce an estimate of expenditure, given that the household had incurred some expenditure on Impôts:

( | = 1) = exp( 2)

These two models can then be combined in order to produce an estimate for Impôt expenditure for all households via:

( ) = Pr( = 1) ( | = 1) + Pr( = 0) ( | = 0) Which given  ( | = 0) = 0 simplifies to:

( ) = Pr( = 1) ( | = 1)

Producing a final model of the form:

exp( 1)

Estimated Expenditure = .exp( )

1 + exp( 1) 2

1 Gross Cash Income: This is the sum of all gross household earned income plus any direct benefits received (for the purpose of this report this solely includes income support).

Migration Policy  Development Board

Appendix 8:

Presentation – Long-term expenditure & revenue model Chief Economist

Migration Policy  Development Board

Appendix 9:

Presentation – Jersey resident population 2017 estimate & Jersey resident population projections 2016

Statistics Jersey

Migration Policy  Development Board

Appendix 10:

Jersey resident population 2018 estimate Statistics Jersey

Migration Policy  Development Board

Appendix 11:

Executive summary & conclusions of Government's actuary report on the financial condition of the Social Security Fund as at 31 December 2017

Full report: /assemblyreports/2019/r.31-2019.pdf  

Appendix 12:

Migration systems in other parts of the world Migration Policy Development Board

__________________________________________________________________________________________________

Migration systems in other areas of the World ____________________________________________________________________________________________________________ Introduction

This report considers migration systems in place in a number of jurisdictions around the world:

• Australia, New Zealand and Canada, as widely accepted exemplars of how to operate effective and economically efficient migration systems;

• Bermuda and the Bahamas, as other island jurisdictions with limited land resources;

• Guernsey and the Isle of Man, as fellow Crown Dependencies and members of the Common Travel Area.

The migration controls in place in Jersey were considered at meeting 2 of the Migration Policy Development Board (MPDB)[1].

The controls discussed below relate specifically to discretionary work migration, which is the migration of individuals for work over which policy has direct and immediate oversight, and do not cover other categories of migration, for example family or refugees.

The controls in place within these jurisdictions all seek to meet gaps within the labour market which cannot be satisfied from the domestic labour supply within reasonable timescales without disadvantaging the resident labour force.

Some of the controls also include policy decisions which seek to protect the finite resources available within that jurisdiction e.g. infrastructure and housing.

Migration systems can be crudely categorised into two areas. Demand driven', where employers choose the migrants they need to fill existing vacancies, and the government then checks them to ensure they are eligible to enter e.g. at risk countries & criminal records, and merit-based' in which governments take the lead, selecting from prospective immigrants based on labour and human capital considerations, giving points' based upon, for instance, professional experience, education, holding a job offer, and the destination-country language proficiency.

In practice most employer-led and points-based systems are now somewhere nearer the mid-point along the continuum between labour-market and human-capital considerations.'[2]

Canada, New Zealand & Australia

Australia, New Zealand and Canada are often quoted as exemplars of immigration selection systems.

The 3 countries operate very similar immigration systems. In all these countries migration makes an important economic, demographic and labour market contribution as migrants bring skills in occupations and sectors which face shortages, as well as in regions where skilled labour supply is more scarce. They have complex but well-functioning and efficient systems that focus their labour migration policies primarily upon attracting and selecting highly skilled migrants, while protecting their resident workforce.

All countries operate a points-based system' that allocates points to attributes such as applying for a role on a shortage occupation list, qualifications, age, employment experience, previous in country residency/study, and language proficiency in English (and in the case of Canada French).

All invest in identifying shortage occupations and skills gaps within their labour market to identify the areas where migration should be focused.

Performance monitoring is embedded into the design of the migration systems and policies are evaluated on the basis of surveys and rich administrative data. These evaluations help adjust migration policies or fully reform them with the objective to make them more attuned to the needs of the labour market and the economy, while addressing any associated challenges.

Following criticisms of lengthy processing times all have introduced online systems to allow prospective migrants to register their interest in working or settling in the respective country (SkillsSelect' in Australia, Expression of Interest' in New Zealand, and Express Entry Pool' in Canada). Prospective migrants undertake an online points based assessment to be placed into a pool of those eligible to be considered. Countries then rank those candidates by their score and will invite applications from those with the

highest scores who meet the requirements for vacancies upon their shortage skills/occupation list.

Bermuda

All organisations in Bermuda are able to employ foreign nationals, provided that they can demonstrate that a Bermudian, Spouse of a Bermudian or Permanent Residents' Certificate (PRC) holder was not suitably qualified or available to be hired.

Employers may apply for Standard Work Permits valid for a period of up to five years, or a short-term work permit, valid for a period of up to 6 months.

Hotels and restaurants can recruit seasonal workers for up to eight months during the period between 1 April and 30 November in any given year, but must demonstrate that no resident Bermudian was suitably qualified or available to be hired.

Unless married to a Bermudian national, work permit holders are unable to gain the status of a permanent resident.

Bermuda also operates a number of job categories' which affects whether a role is eligible to be considered for a work permit[1]:

• Open – all jobs not categorised as closed, restricted or special.

• Closed - employers must hire Bermudians, Spouses of Bermudians or PRC holders. Jobs include: Airline Ground Agent; Retail Floor Supervisor; General Labourer; Office Receptionist; Painter;

Salesperson; Tourist Retail Salesperson; Taxi Driver; Wallpaper Technician; Grocery Packer; Cashier; and Courier.

• Restricted - employers must demonstrate that any locally resident candidates screened and recommended by the Department of Workforce Development have been properly considered. Jobs include: Bank Teller; General Bartender (customer facing); Carpet Installer; Commercial Cleaner; Entertainer/Musician; Fisherman; Photographer; Technical Salesperson; Travel Agent/Consultant; General Carpenter; Administrative Assistant; Room Attendant; Kitchen Porter; Dish/Pot Washer/Kitchen Assistants or roles similar thereto; Landscape Gardener (Entry Level); General Mason.

• Special - the application process for Special Category Jobs is the same as that for the Open category, except the employer must ensure that they meet additional role dependent requirements as specified. Jobs include: Child-Care Giver; Beauty Salon, Spa and Hairdressing Staff; Family Support; Fine Artist; Graduate Trainees; Hospital Nurse and Physician; Hospitality: Seasonal Work Permit; Interns; Live-In Domestic Employees (Private Home); Locum Pharmacist and Shared Pharmacists; Model and Casual or Part-Time Employment; Musician or Entertainer; Music School Teacher; Photographer; Restaurant Staff; Self-Employed Persons and Part Owners of a Bermuda Business; Categories of Jobs Identified by the Minister where there are large numbers of work permits.

National Training Plan

The National Training Plan calls for employers to play a key role in ensuring that Bermudians and Spouses of Bermudians are developed and employed in specific occupations which have a high number of work permit holders.

The following occupations have been identified as having a large number of work permit holders:

• Registered Nurse

• Qualified Accountant

• Waiter/ Waitress

• Mason

• Landscape Gardener

• Chef

Employers who employ more than ten work permit holders in the occupations listed above may be invited by the Department of Workforce Development and/or the Department of Immigration to participate in initiatives led by the National Training Board to boost the number of Bermudians and Spouses of Bermudians employed in these job categories.

Housing

In order to protect the pricing and stock of housing available to native Bermudians, Bermuda operates a two-tier housing system (based upon Government ascertained Annual Rental Values'). The majority of property[1] (approximately 75% of all property) is available to purchase by Bermudians, and a much more limited number of eligible properties is available (the top 5% of property by value) to non-Bermudians, and PRC holders (who can access approximately 25% of the available property).

Properties available to non-Bermudians tend to be especially categorised condominiums (typically £500,000 – £5 million purchase price) and freehold properties (typically in the range of £2 million– £35 million).

Work permit holders working for the Government are given assistance with housing, including placement in staff accommodation, and hotel workers on short term work permits are housed in staff accommodation.

Barbados

In limited instances, individuals who have special skills which are in short supply in Barbados may be granted a work permit for a specific post on the basis that there is no qualified Barbadian available for the post. Applications for work permits in these cases are processed by the employer and not the prospective employee.

Work-permits are issued as either short-term, valid for a period up to 11 months, or long-term, valid for up to 3 years.

Non-national participation in the retail sector is not encouraged, and similarly in the tourism sector every effort is made to restrict the operation of tourism ancillary services (restaurants, bars, ground transportation water sports, etc.) to Barbadian nationals, except in cases where the operation is unique and the expertise unavailable locally, or where the operation is likely to make a significant contribution to the local tourist product.

Workers can be granted the status of permanent resident after 5 years' residence. Housing

No restrictions on buying or renting property.

Crown Dependencies

The UK, Channel Islands, Isle of Man and the Republic of Ireland collectively form the Common Travel area (CTA). The CTA is established as a matter of law to facilitate the principles of free movement of British and Irish citizens between the UK, Republic of Ireland and the Islands.There are no formal immigration border controls in the CTA.

Whilst there are local differences (mainly in the areas of work permits for non – EEA citizens) the immigration rules of the Crown Dependencies are heavily reliant upon, and largely based on, the UK's immigration legislation.

Currently EEA nationals and their family members enjoy free movement and, are able to enter, live and work in the Crown Dependencies through Protocol 3 to the UK's Act of Accession.

This free movement causes some challenges to the Crown Dependencies in protecting the resident workforce, controlling population and the access to finite resources such as land, housing and infrastructure.

Each of the Crown Dependencies have tackled these challenges in slightly different ways, but all allow those with free movement to enter but then control access to employment and/or housing through local legislation.

Isle of Man

The purpose of the Isle of Man legislation is to protect the employment opportunities of Isle of Man workers as far as it is reasonable while enabling employers to obtain the workers they need. Anyone who is not an Isle of Man worker[2] requires a work permit to take up employment (including self- employment), except in the case of a number of occupations and certain employments of a temporary nature which are exempt.

Ordinarily applications are made by the employer and consideration is given to whether there are any suitable Isle of Man workers available, the importance of the position to the applicant's undertaking, the level of unemployment in that occupation, and any likely economic or social consequences of granting or declining the application.

Non-EEA nationals who already hold an Immigration permission that allows them to work are not required to apply for a further work permit.

One year automatic permits, which can be reviewed annually, are issued to the spouse, civil partner or cohabiting partner of a work permit holder or Isle of Man worker.

Housing

No restrictions on buying or renting property. Guernsey

Guernsey's Population Management Law came into force on 3 April 2017. It seeks to manage who can live and work in Guernsey, for what reasons, and for how long, and to influence the size and make-up of the population, to meet the Island's long-term needs.

The Law is supported by a range of policies setting out the types of people, often by looking at their employment skills and experience, who are able to live and work in Guernsey. The policies can be regularly reviewed and adjusted to match strategic aims as they change over time.

In general terms, the Law works by requiring everybody who lives and/or works in Guernsey (and who is aged 16 or over) to hold either a Certificate' or Permit' to show that they are allowed to live and/or work there. Certificates and Permits are issued for a number of reasons, including because of a person's strong connections to a person who is living in Guernsey, or because a person has been invited to work in Guernsey because of their essential skills, or because Guernsey doesn't have enough people to undertake all the jobs that need filling.

The Population Objective – the high level policy position of the States with regard to the size and make- up of the Island's population - is set by the States following political debate.

More detailed policies (e.g. what types of employment attract what length of Employment Permit) relating to the management of the Island's population are set by the Committee for Home Affairs.

A Population Employment Advisory Panel (PEAP) gives up to date information to the Committee about the Island's employment market, and the current and future needs of the Island's employers

There are six PEAP members, and an independent Chairperson, who represent the interests of all sectors of employment in Guernsey. The PEAP is a channel for information to flow to and from the Committee to the Island's business sectors, about the different levels of skills and manpower shortages in Guernsey and Employment Permit policies.

A Certificate' is issued to a person who is entitled to live in Guernsey, and who is able to undertake any employment in the Island.

A Permit' is issued to a person whose ability to live and/or work in Guernsey, is conditional. The Permit will explain what the conditions of residence are, but these can include things like working in a specific job, or living with a specific person. If the conditions of a Permit are broken, it becomes invalid.

There are 3 main types of permit[3]:

Short Term Employment Permit - up to 12 months, renewable annually up to 5 years, local market shared accommodation (can't have family join them). No further permits issued after 5 years.

Medium Term Employment Permit – up to 5 years, not renewable, Local market (can have family join them).

Long Term Employment Permit – up to 8 years, renewable, established resident status after 8 years. Access to Local Market.

Housing

Guernsey has a two-tier housing system and all accommodation in Guernsey is classified as Local Market or Open Market. The majority of Guernsey's housing (about 27,000 properties) is classified as Local Market, and is primarily reserved for people with an automatic right to live in Guernsey.

People who live and work in Guernsey because of their essential skills or to fill manpower shortages are normally permitted to live in Local Market accommodation. Depending on the type of employment and the skills the person brings, some people moving to Guernsey are given a Permit that invites them and their immediate family to stay in Guernsey long enough to become Permanent Residents'.

In general terms, adults who live in Open Market housing are not building up any right to live in Local Market housing.

Conclusion

Australia, New Zealand and Canada are often quoted as exemplars of immigration selection systems. In the main this is because they invest heavily in their immigration systems, continually evaluate their economic and skills shortages, assess how well migrants integrate and frequently adjust their systems and policies accordingly.

These systems control the immigration of foreign migrants who make up the majority of migrants into their countries. Little account needs to be given to the free movement of citizens from outside of their own countries.

In Jersey the free movement of EEA nationals, the continued (regardless of Brexit outcomes) free movement of British and Irish citizens within the CTA, and the reliance upon the UK's immigration system would make the implementation of an Australia/New Zealand/Canada-type Points Based system problematic in the Crown Dependencies.

The systems in place in Bermuda, Barbados, Isle of Man and Jersey tend towards the deman-driven' end of the continuum. They allow employers to decide which roles require filling and who they would like to fill those vacancies. These applications are then judged against set criteria by the relevant government departments.

The systems in Barbados and the Isle of Man protect the local workforce and help fill local skill shortages but do little to control population, however in these jurisdictions this is not their intent.

By having a two-tier housing system and a restricted and expensive supply of housing stock for migrants Bermuda does control population to some extent.

Historical statistics indicate that whilst the systems in place in Jersey control access to housing and work they have not been able to control population to the levels desired by Government.

Guernsey has now moved closer towards a merit-based' system, in so much as the Government highlights the skills gaps and specific roles it wishes to fill in advance and only considers applicants with the relevant employment skills and experience to fill those gaps. By regularly reviewing the employment skills, labour resource shortages and any changes in Government strategy it is able to have a greater control of the size and make-up of its population.

Some useful lessons that can be taken from the systems considered are to:

• Ensure that systems are flexible and responsive: predicting future skills gaps and labour needs is a difficult and imprecise task. Systems need to be able to respond quickly to changes in these shortages.

• Protect the local workforce: Inward migration cannot be used as a shortcut for business/Government to import skills at the expense of the local workforce. Investment in education, training, and re- training is vital to ensure that the local workforce remains relevant to the changing business need and is competitive in the global market.

• Monitor and review how well the system works: setting success criteria, gathering data and regular review of the system is required to ensure that it remains relevant, effective and efficient.

• Install integration policies for migrants: Gathering data on the integration outcomes for migrants allows integration policies to be produced and amended, such as examining migrants' barriers to labour market integration and connect new migrants with the relevant services they require as early as possible.

References:

Jersey Customs & Immigration Service Immigration, Controls & Work Permits https://www.gov.je/SiteCollectionDocuments/Government%20and%20administration/ID%20JCIS%20Presentation%2 0Immigration%20Controls%20and%20Work%20Permits%20NS.pdf  

Customer Local Services, Control of Housing & Work (Jersey) Law https://www.gov.je/SiteCollectionDocuments/Government%20and%20administration/ID%20Control%20of%20Housi ng%20and%20Work%20Law%20Briefing%20session%20for%20MPDB.pdf

Papademetriou, Demetrios G. and Kate Hooper (2019) Competing Approaches to Selecting Economic Immigrants: Points-Based vs. Demand-Driven Systems. Washington, DC: Migration Policy Institute

https://www.migrationpolicy.org/research/selecting-economic-immigrants-points-based-demand-driven-systems

Australian Government, Department of Home Affairs, Immigration and citizenship, Working in Australia https://immi.homeaffairs.gov.au/visas/working-in-australia/overview  

New Zealand Immigration, Work in New Zealand https://www.immigration.govt.nz/new-zealand-visas/options/work  

Government of Canada, Immigrate to Canada https://www.canada.ca/en/immigration-refugees- citizenship/services/immigrate-canada.html

Information from OECD (Organisation for Economic Co-operation and Development) Recruiting Immigrant Workers https://www.oecd-ilibrary.org/social-issues-migration-health/recruiting-immigrant-workers_22257969  

OECD (2018), Recruiting Immigrant Workers: Australia 2018, Recruiting Immigrant Workers, OECD Publishing, Paris, https://doi.org/10.1787/9789264288287-en.

OECD (2014), Recruiting Immigrant Workers: New Zealand 2014, Recruiting Immigrant Workers, OECD Publishing, Paris, https://doi.org/10.1787/9789264215658-en.

Government of Bermuda, Types of work permit https://www.gov.bm/types-work-permits

Government of Bermuda, Department of Immigration Work Permit Policy https://www.gov.bm/sites/default/files/WORK-PERMIT-POLICY-1st-MARCH-2015--as-at-27-March-2017.pdf  

Barbados Immigration department, Work permits https://www.immigration.gov.bb/pages/WorkPermit.aspx  Isle of Man, gov.im, Work permits https://www.gov.im/categories/working-in-the-isle-of-man/work-permits/

Isle of Man Government, A guide to work permits, https://www.gov.im/media/1359068/guide-to-work-permits-jan- 2018.pdf  

States of Guernsey, gov.gg, Quick guide to the Population Management Law https://www.gov.gg/CHttpHandler.ashx?id=102677&p=0  

States of Guernsey, gov.gg, Quick guide to Permits and Certificates https://www.gov.gg/CHttpHandler.ashx?id=102679&p=0  

The Population Management (Guernsey) Law, 2016 http://www.guernseylegalresources.gg/CHttpHandler.ashx?id=106845&p=0  

Appendix 13:

Migrants' access to services Migration Policy Development Board

__________________________________________________________________________________________________

Discussion paper – Migrants' access to services ____________________________________________________________________________________________________________

1. Introduction

Migrants form a valued part of the Island. New residents and businesses help to drive our economy, diversify our community and provide a range of opportunities for all of those living in Jersey. The Government recognises that any failure to support the integration of new migrants into our society exacerbates income equality and hinders economic growth, as it hinders individuals achieving their full economic potential.

The Government of Jersey's Common Strategic Policy 2018-22 (CSP) commits to creating a sustainable vibrant economy and skilled workforce for the future, whilst reducing inequality, and protecting our environment.

The following sections of the CSP are specific to migration policy:

CSP 3.5.9.1 Develop and implement a migration policy which enables migration to be targeted and deliver the greatest economic and social gain'.

CSP 4.2.2, to Provide clear rights to new residents as part of an agreed migration policy'.

Many migrants, especially those with shortage skills such as nursing, care workers, and doctors are operating in a global market where multiple jurisdictions are competing for their services. Migrants often look to compare the packages available to them in each potential destination.

Therefore, the services that a migrant can access need to be clear, fair, logical, and well communicated. It is right that a migrant considering moving to work in Jersey is fully aware of the services that they can, or cannot access, prior to their arrival. This also goes some way to ensuring that migrants are an integral part, and feel a valued member, of the community in which they will be working.

Migrants are brought to Jersey by a vacuum of required skills and/or labour shortages which are not met by the domestic workforce.

The contribution a migrant makes to the Jersey economy, society and the local community will be determined by their personal skills, circumstances and preferences, as well as their contribution to the public finances.

This paper discusses the access that migrants currently have to services and some of the considerations that can be given to the access of each service.

This paper considers three of the four main areas of public services where barriers to access may exist: health, education, and benefits. (Access to housing is a matter being considered by the Housing Policy Development Board).

This paper relates specifically to discretionary work migration, which is the migration of individuals for work over which policy has direct and immediate oversight. Considerations are also given for the

potential access of services for their immediate family (partner and dependent children). It does not cover other categories of migration, for example extended non-dependent family members or refugees.

2. International Background

Migrants for the purposes of this report are classified as those individuals, not born in Jersey, who come to Jersey to live and work. Therefore, this category includes all British, Irish, EEA and 3rd country nationals[1], and their immediate family, who leave their country of birth and come to work in Jersey.

The UK, Channel Islands, Isle of Man and the Republic of Ireland collectively form the Common Travel Area (CTA). The CTA is established as a matter of law to facilitate the principles of free movement of British and Irish citizens between the UK, Republic of Ireland and the Islands. There are no formal immigration border controls in the CTA.

Currently EEA nationals and their family members enjoy free movement and are able to enter, live and work in the Crown Dependencies through Protocol 3 to the UK's Act of Accession.

British and Irish nationals currently have free movement within the CTA, EEA nationals have free right of movement within the EEA and Jersey, whilst 3rd country nationals are controlled by the Immigration Rules.

Time required to access services

0 months

6 months

Register with CLS

Health card - subsidised GP visits & free liable for social security contributions prescriptions

liable for income tax Access to non-emergency hospital 'Registered' status treatment (if in receipt of income

'Licensed' status assessed by Revenue Jersey in previous 6

months)

Emergency treatment only

Access to some contributory benefits e.g. Access to publically subsidised' education  maternity grant, short-term incapacity

for pre-school (3-4) & compulsory school  benefit.

age (5-16)

12 months

Access to 'publically subsidised' education

for post 16 education (16-18) & 'further  2 years education' (19+)

Can vote Access to non-emergency hospital

treatment (if not in receipt of income

assessed by Revenue Jersey)

5 years

4 1/2 years 'Entitled To Work' status

Access to Back to Work support, Can export old age pension

income support

higher education funding

10 years

'Entitled' status - can rent or buy property Access to long term care scheme

Housing Health Education Benefit

3. Health[1]

1. Current situation

Jersey is not part of the NHS and has different rules to the UK, other Channel Islands and other countries. When first moving to Jersey migrants have to pay for most healthcare, including visits to the doctor, non-emergency treatment at the hospital, and other related costs, including travel costs.

After six months a migrant can apply for a Health Insurance Fund (HIF) health card. The health card gives discounted GP visits and GP prescriptions. It does not give access to free or discounted health care at the hospital or elsewhere. These rights are set out in Health Insurance Jersey) Law 1967[2].

The Government of Jersey has a Residents & non-residents charging policy'[3] whose primary purpose is to deter people travelling to Jersey with the intent of accessing free health care and treatment and to ensure that free access to health services is an appropriate, fair and reasonable use of Government funds. This policy is a non-statutory scheme which governs access to free hospital services.

It takes account of external agreements – including Reciprocal Health Agreements in place between Jersey and other countries – and provides for appropriate exemptions to charges.

This policy was developed by the Health department with a view to ensuring the best interests of Jersey residents and taxpayers are taken into account, placing significant emphasis on the expectation that those receiving free care and treatment are making an ongoing social and/or economic contribution to the Island.

This policy is based upon a person's CHWL status, with some exceptions, and is complicated.

Many workers in the hospitality and agricultural industries come to Jersey over many years but only work for periods of 6-9 months. Each time they return to the island their 6 month qualification period' for hospital services starts again. These migrants may therefore have paid more than 6 months of income tax payments on previous trips, but are only able to access emergency hospital treatment for the first 6 months of each return stay. Those migrants that have completed a 6 month qualifying period previously and have a Health Insurance Fund health card are able to access discounted GP visits and GP prescriptions.

Principle for discussion: everyone living in Jersey should have access to appropriate and timely healthcare. All Jersey residents make co-payments to cover some aspects of their health care but all major costs should be covered by a service that is free at the point of use or included in a compulsory insurance scheme.

Under the current rules, migrants could face significant healthcare costs during their first year in Jersey. Others may avoid necessary treatment on the grounds of cost.

2. Options for migrant access to healthcare

1. Compulsory private health insurance

Migrants could be required to have approved health insurance before they are allowed to register under the Control of Housing & Work (Jersey) Law 2012.

Whilst migrants only have access to emergency treatment for the first 6 months it is possible that any emergency treatment during that period could lead to significant expenditure.

Any emergency treatment is also likely to lead to non-emergency costs that will be the requirement of the migrant to pay.

Private health insurance to cover the first 6 months would ensure that all migrants had access to necessary healthcare and would allow the Government of Jersey to recoup costs for an individual during that period.

The requirements to have insurance can be placed on the individual or on their employer.

In higher risk industries, such as agriculture, the issuance of a short term work permit could be tied to the requirement for the employer to have private health insurance to cover the treatment and repatriation of their workers should access to health services be required.

The employer may see requiring the employer to pay for insurance as an employment tax, and a disincentive to employ staff. It could also be seen as an incentive to increase productivity or to invest in automation to complete the same tasks with less staff.

Passing the cost of insurance to the employer or workers could mean that those migrants who do not work (e.g. immediate family members) are able to access services without paying.

Private health insurance could be expensive to purchase in the open market, particularly for lower paid workers. A requirement to purchase private health insurance would likely have more impact on lower earning migrants. Some higher paid workers may already have health insurance cover included in their overall contract of employment.

Partners (with or without a legal relationship) and dependent children could also be required to have compulsory private health insurance. The definition of dependent children would also need to be agreed, to consider the treatment of young adults (for example aged under 25) who still form part of the worker's household.

To ensure that everybody contributes equitably other charges could be applied to all users of the health services, including non-working migrants.

2. Healthcare surcharge

A migrant could be required to pay a compulsory surcharge in advance to be able to access medical treatment on arrival. This could be levied on the individual or the employer.

The UK require non-EEA citizens applying for visas over 6 months to pay an upfront health surcharge in order to be issued with a visa for over 6 months. This fee is dependent upon the length of the visa given. Presently the fee is £400 per year, for example £2,000 for a 5 year visa. This charge applies separately to each family member, so for instance a family of 4 people applying for a 5 year visa would pay an £8,000 health surcharge.

This charge applies even if a migrant holds private health insurance.

This charge could be relatively easily applied to 3rd country nationals as a requirement of the issuance of a visa by the Jersey Customs and Immigration Service (applicants for visas to the Channel Islands are currently exempt as they do no not belong to the NHS).

Alternatively, the surcharge could be applied to the employer as part of a work permit fee. This could be set at a level to cover costs, or to dissuade applications for permits in certain sectors.

As with the private insurance option, any surcharge option would need to consider the coverage of partners, dependent children and dependent young people.

A healthcare surcharge would probably be set at a level below the cost of private health insurance.

Higher earning employees with private insurance included in their employment package would still be required to pay the surcharge. As such this option places less pressure on lower earning employees and their employers.