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STATES OF JERSEY
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GOVERNMENT PLAN 2020–2023 (P.71/2019): NINTH AMENDMENT (P.71/2019 Amd.(9)) –
SECOND AMENDMENT (P.71/2019 Amd.(9)Amd.(2)) – COMMENTS
Presented to the States on 21st November 2019 by the Council of Ministers
STATES GREFFE
2019 P.71 Amd.(9)Amd.(2)Com.
COMMENTS
Deputy G.P. Southern of St. Helier proposes the following in his amendment P.71/2019 Amd.(9)Amd.(2) –
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For the words "increased from the proposed £250,000 to £500,000" substitute the word "abolished"; and for the words "between the Standard Earnings Limit and the Upper Earnings Limit" substitute the words "above the Standard Earnings Limit".
2 PAGE 2, PARAGRAPH 1 –
For "4%" substitute "6.5%".
The Council of Ministers opposes this proposal and urges States Members to reject the amendment.
This amendment significantly increases the contribution income into the Social Security Fund by removing the upper earnings limit and increasing the contribution rate above the Standard Earnings Limit.
Additional contributions
The Government Plan 2020-2023 proposes an increase of £3.3 million in contributions levied on the employers of higher-earning staff and Class 2 individuals (self-employed and others). The amendment increases the extra yield to £27.3 million as follows –
Government Plan | Second amendment to ninth amendment | |||
Contribution Rate above Standard Earnings Limit | Increase from 2% to 2.5% | Increase from 2% to 6.5% | ||
Annual Upper Earnings limit | Increase from £176,000 to £250,000 | Remove limit | ||
Total extra contributions | £3.3 million | £27.3 million | ||
Comments
The Council of Ministers rejects the amendment for the following reasons –
• Impact on businesses: This would significantly add to the cost of doing business. Businesses that employ people who mainly earn over £50,000 a year and self-employed people above this income level would be affected. The most affected businesses could limit their activity or even leave Jersey. We would not only lose Social Security contributions, but also the Income Tax and GST that they pay.
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P.71/2019 Amd.(9)Amd.(2)Com.
• Unallocated Government income: This amendment raises over £27 million of additional contributions from local businesses and residents in 2020, with £12 million allocated to increased parental benefits, and an additional £15 million which has not been allocated to any 2020 expenditure.
• Change in behaviour: Increased risk that significantly higher contribution rates will change behaviour at higher earnings/income levels and not raise the expected extra revenue.
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P.71/2019 Amd.(9)Amd.(2)Com.