States Meeting Transcript - 22/09/2008

STATES OF JERSEY OFFICIAL REPORT

MONDAY, 22nd SEPTEMBER 2008

PUBLIC BUSINESS – RESUMPTION..........................................................5

1. Annual Business Plan 2009 (P.113/2008): fourth amendment (P.113/2008) Amd. (4) Amd. (4)(1)(6).............................................................................5

1.1 Senator P.F. Routier (The Minister for Social Security):.................................5

1. Deputy P.V.F. Le Claire of St. Helier : ...................................................7
2. Deputy G.C.L. Baudains of St. Clement : ................................................8
3. Senator L. Norman: ......................................................................8
4. Deputy A. Breckon of St. Saviour:.......................................................9
5. Deputy R.C. Duhamel of St. Saviour:..................................................10
6. Connétable A.S. Crowcroft of St. Helier:...............................................11
7. Deputy G.P. Southern of St. Helier:....................................................12
8. Deputy S.C. Ferguson of St. Brelade : ..................................................16
9. Senator T.A. Le Sueur:.................................................................16
10. Senator P.F. Routier:................................................................17 The Bailiff :...................................................................................19

2. Annual Business Plan 2009 (P.113/2008): fourth amendment (P.113/2008) Amd. (4) Amd. (4)(1)(7)............................................................................20

2.1 Senator P.F. Routier (The Minister for Social Security):................................20

1. Deputy A. Breckon:....................................................................21
2. Deputy J.B. Fox of St. Helier:..........................................................21
3. Deputy J.A. Hilton of St. Helier:........................................................21
4. Deputy C.J. Scott Warr en of St. Saviour:...............................................22
5. Deputy R.G. Le Hérissier of St. Saviour:...............................................22

6. Deputy G.C.L. Baudains:...............................................................22
7. Deputy P.V.F. Le Claire: ...............................................................23

8. Senator M.E. Vibert :....................................................................24
9. Senator L. Norman: ....................................................................24
10. Deputy G.P. Southern : ..............................................................24
11. Deputy G.W.J. de Faye: .............................................................25
12. Deputy J.A. Martin of St. Helier:....................................................25
13. Senator P.F. Routier:................................................................26 The Bailiff :...................................................................................26

3. Annual Business Plan 2009 (P.113/2008): fourth amendment (P.113/2008) Amd. (4) Amd. (4)(1)(8)............................................................................28

3.1 Senator P.F. Routier (The Minister for Social Security):................................28

1. Deputy G.W.J. de Faye:................................................................29
2. Senator B.E. Shenton:..................................................................29
3. Deputy P.V.F. Le Claire: ...............................................................29

4. Deputy S.C. Ferguson:..................................................................30
5. Deputy C.J. Scott Warr en: ..............................................................30
6. Deputy J.A. Martin:....................................................................31
7. The Connétable of St. Helier:...........................................................31
8. Deputy G.P. Southern :..................................................................32
9. Deputy R.C. Duhamel: .................................................................33
10. Senator F.H. Walker :................................................................34
11. Deputy K.C. Lewis of St. Saviour:..................................................34
12. Senator P.F. Routier:................................................................35 The Bailiff :...................................................................................36

4. Annual Business Plan 2009 (P.113/2008): fourth amendment (P.113/2008) Amd. (4)(1)(9)..................................................................................37

Senator T.A. Le Sueur:.......................................................................37 The Bailiff :...................................................................................38 Deputy P.V.F. Le Claire: .....................................................................38 Deputy R.G. Le Hérissier:....................................................................38 Senator F.H. Walker :.........................................................................39 4.1 Deputy G.W.J. de Faye (The Minister for Transport and Technical Services): ..........39

1. Deputy R.G. Le Hérissier: ..............................................................40
2. Deputy A.D. Lewis of St. John : ........................................................41
3. Connétable G.F. Butcher of St. John:...................................................41
4. Deputy C.J. Scott Warr en: ..............................................................41
5. Deputy J.B. Fox:........................................................................41

LUNCHEON ADJOURNMENT PROPOSED..................................................42 The Bailiff :...................................................................................42

LUNCHEON ADJOURNMENT................................................................42

PUBLIC BUSINESS - resumed..................................................................42

6. Deputy F.J. Hill of St. Martin : ..........................................................42
7. Deputy P.V.F. Le Claire: ...............................................................43
8. Deputy A.E. Pryke of Trinity :..........................................................44

9. Deputy R.C. Duhamel: .................................................................45
10. Senator J.L. Perchard: ...............................................................48
11. Senator F.H. Walker :................................................................48
12. Deputy A. Breckon: .................................................................51
13. Deputy A.J.H. Maclean of St. Helier:................................................52
14. Senator L. Norman:..................................................................53
15. Connétable K.A. Le Brun of St. Mary:..............................................53
16. The Connétable of St. Helier:........................................................55
17. Deputy G.P. Southern : ..............................................................56
18. Deputy G.W.J. de Faye: .............................................................56 The Deputy Bailiff :...........................................................................59

5. Annual Business Plan 2009 (P.113/2008): fourth amendment (P.113/2008) Amd. (4) Amd. (4)(1)(11)..........................................................................60

5.1 Senator F.H. Walker (The Chief Minister):.............................................60

1. Senator B.E. Shenton:..................................................................62
2. Deputy C.J. Scott Warr en: ..............................................................62
3. Deputy A. Breckon:....................................................................62

4. Deputy J.B. Fox:........................................................................62
5. Connétable M.K. Jackson of St. Brelade:...............................................63
6. Deputy P.V.F. Le Claire: ...............................................................63
7. Deputy R.G. Le Hérissier: ..............................................................63
8. Mr. T.J. Le Cocq Q.C., H.M. Solicitor General:........................................64
9. Senator F.H. Walker :...................................................................65 The Deputy Bailiff :...........................................................................66

6. Annual Business Plan 2009 (P.113/2008): paragraph (b), as amended................67

6.1 Senator T.A. Le Sueur (The Minister for Treasury and Resources): ....................67 The Deputy Bailiff :...........................................................................68

7. Annual Business Plan 2009 (P.113/2008): paragraph (c)...............................68

7.1 Senator T.A. Le Sueur (The Minister for Treasury and Resources): ....................68

1. Deputy A. Breckon:....................................................................68
2. Senator T.A. Le Sueur:.................................................................68 The Deputy Bailiff :...........................................................................69

8. Annual Business Plan 2009 (P.113/2008): paragraph (d) ..............................69

8.1 Senator T.A. Le Sueur (The Minister for Treasury and Resources): ....................69

1. Deputy A. Breckon:....................................................................69
2. Deputy R.C. Duhamel: .................................................................69
3. Senator T.A. Le Sueur:.................................................................70 The Deputy Bailiff :...........................................................................70

9. Annual Business Plan 2009 (P.113/2008): paragraph (e)...............................70

9.1 Senator T.A. Le Sueur (The Minister for Treasury and Resources): ....................71

1. Deputy A. Breckon:....................................................................71
2. Senator T.A. Le Sueur:.................................................................71 The Deputy Bailiff :...........................................................................71

10. Annual Business Plan 2009 (P.113/2008): paragraph (f)...............................71

10.1 Senator T.A. Le Sueur (The Minister for Treasury and Resources): ....................72 Senator F.H. Walker :.........................................................................72 The Deputy Bailiff :...........................................................................73

11. Annual Business Plan 2009 (P.113/2008): fourth amendment (P.113/2008) - second amendments 5 and 8 paragraph (f) .....................................................73

11.1 Senator F.H. Walker (The Chief Minister):.............................................73

1. Senator B.E. Shenton: ...............................................................73
2. Senator F.E. Cohen: .................................................................74
3. Senator P.F.C. Ozouf : ...............................................................74
4. Senator T.A. Le Sueur:..............................................................74
5. Deputy G.C.L. Baudains: ............................................................75
6. Senator F.H. Walker :................................................................75

12. Annual Business Plan 2009 (P.113/2008): paragraph (f), as amended.................76

1. Deputy A. Breckon:....................................................................76
2. Senator W. Kinnard:....................................................................77
3. Senator P.F.C. Ozouf :..................................................................77
4. The Deputy of St. Martin:..............................................................77
5. Senator T.A. Le Sueur:.................................................................78 The Deputy Bailiff :...........................................................................78

13. Annual Business Plan 2009 (P.113/2008): paragraph (g)...............................78

13.1 Senator T.A. Le Sueur (The Minister for Treasury and Resources): ....................78

1. Deputy P.V.F. Le Claire:............................................................79
2. Senator B.E. Shenton: ...............................................................79
3. Deputy J.J. Huet of St. Helier:.......................................................80
4. The Connétable of St. Brelade:......................................................80
5. Deputy K.C. Lewis : .................................................................80
6. Deputy C.J. Scott Warr en:...........................................................80
7. Deputy J.B. Fox:....................................................................80
8. The Deputy of St. Martin : ...........................................................80
9. Senator P.F.C. Ozouf : ...............................................................80
10. Deputy R.C. Duhamel:.............................................................81
11. Deputy A. Breckon:................................................................81
12. The Deputy of St. Mary:...........................................................82
13. The Deputy of St. John:............................................................82
14. Deputy S.C. Ferguson:.............................................................82
15. The Connétable of St. Helier:......................................................82
16. Deputy J.A.N. Le Fondré of St. Lawrence : ........................................83
17. Senator T.A. Le Sueur:............................................................84 The Deputy Bailiff :...........................................................................85 Senator L. Norman: ..........................................................................86 Senator P.F.C. Ozouf :........................................................................87 Deputy G.W.J. de Faye:......................................................................87 Deputy J.A.N. Le Fondré:....................................................................87 Senator F.H. Walker :.........................................................................87 The Deputy Bailiff :...........................................................................87

ADJOURNMENT................................................................................88

The Roll was called and the Dean led the Assembly in Prayer.

PUBLIC BUSINESS – RESUMPTION

1. Annual Business Plan 2009 (P.113/2008): fourth amendment (P.113/2008) Amd. (4) Amd. (4)(1)(6)

The Greffier of the States (in the Chair):

Very well. The debate continues on the amendments to paragraph (b) of the Annual Business Plan. The next amendment is part (6) relating to the revenue expenditure of the Social Security Department. Are you acting as rapporteur, Minister?

1.1 Senator P.F. Routier (The Minister for Social Security):

I am, Sir. It is great to be back. [Laughter] I am sure we are going to try and get through these next couple of days, get through the business that needs to be achieved. Some people still have asked me what supplementation is. Supplementation is the contribution from taxpayers to ensure that the future pensions of low to middle earners will be paid at the same level as those of high earners. It is as straightforward as that. We have a social and moral contract with the community to ensure that their pensions are protected. As the economy grows, as earnings rise, as numbers of workers increase, as the tax take of the Treasury increases, likewise the contributions the employers and employees pay, those increase and so does the taxpayers' contribution. That is basically what supplementation does. If Members have with them the documents which we are looking at on page 42, they will note that the income tax figures rise continuously over the years. Supplementation does exactly the same thing. If we see an increase in income tax, we should expect to see an increase in supplementation. The liability for the employer, employee and the States are unlike income tax to a certain extent in that it is calculated on a current basis. In advance of the year and in advance of the quarter and of the month in which workers earn their wages, the contributions of the employee and the employer are not known and can only be estimated. Only once those contributions are paid can supplementation be calculated. The problem with that is that the Public Finances Law demands that we set a figure for supplementation and are only able to surpass it by transferring funds from other items of expenditure. We are asked to provide the estimates of the cost of supplementation for 2009 and thereby set the cap for spending before we even know the full bill for 2007, before we even know the bill for the first quarter of 2008 and before we know the average earnings for 2008. So that sets the earning ceiling to which we work out our figures. We also do not know what the manpower growth is in the year that we are trying to forecast for. So anyone with the ability to foresee each of those factors with the accuracy demanded by the Finance Law will I suggest perhaps not need to work. If they have the crystal ball they could know all those figures in advance they would be doing really well. Putting these unknown variables aside, the increase in the budget set in the Business Plan for 2009 for supplementation is simply the budget. I stress the budget for 2008 up-rated by the estimate of the increase to average earnings for 2008. No allowance is made for the other variables which I described earlier like the growth in the number of workers. At an early stage the department knew that the budget being set aside for 2009 was insufficient based upon the figures it did have for the quarters 2007 known at that time. The department estimated back then that up to £2.1 million would be needed for 2009 and this was submitted to the prioritisation process. Once the 2007 cost of supplementation had been finalised and the first quarter for 2008 was known, the department revised its forecast for 2009. The various forecasts put the cost up quite considerably. The main reason as I said earlier was the growth of the workforce. This put the cash limit short of the expected cost for 2009 based on the latest information available. Between submitting to the Council of Ministers the revised estimate of up to an additional £5 million being needed and finalising the amendments, the average earnings figure

for June 2008 was published at over 0.5 per cent lower than that used throughout the Business Plan. So applying this alone to the forecast reduced the additional amount required to an order of £4.5 million down from the £5 million as expected. As I mentioned earlier, supplementation is the cost of the contribution of the States on behalf of the taxpayer to future pension payments as determined

by the Social Security Law. It is the obligation based upon existing legislation. When established the scheme was supposed to share contributions equally between employers, employees and the general taxpayer. Employees and employers make good their contribution and meet their obligation and it is only right that the States should do likewise. Even those legal obligations do not currently require the general taxpayer through the States budget to fund a third of the contributions. Had it done so, the bill for 2007 would have been £67 million and not the £59 million which was paid. Even though the share of the States contribution is running at less than a third of all contributions, we have been asked to look at ways of reducing the States obligation. I must stress at this point that while the cost of supplementation is a complex matter to forecast with absolute certainty, the facts behind the funding of future pensions is at one level quite simple. If we are to cut the cost of supplementation then either the level of pensions and benefits must be cut or someone else other than the general taxpayer must foot the bill. The department has separated the piece of work it is doing into 3 parts to identify options and provide more certainty to the cost of the States contribution to the cost of future pensions and to hold or reduce that expenditure. The first part is aimed at providing certainty to the cost of the States contribution so that we know well in advance what the bill will be and can build that cost into the Business Plan without the risk of having to lodge amendments late in the day such as this. To this end the department has been in discussion with the Comptroller and Auditor General and with regard to a method to fix the cost of the States contribution to the Social Security fund. Those discussions have led to agreement in principle of a method which would be acceptable and comply with G.A.A.P. (Generally Accepted Accounting Principles). The second part of the review has been concerned with options to cut the cost of supplementation which, while perhaps requiring changes to legislation, are options which can be considered without requiring a fundamental reconsideration of the principles and mechanisms of the scheme. The department has identified such options which will be brought forward in the coming weeks for consideration for debate in the form of amendments to the Social Security Law where required. It will be for this Assembly to decide whether they want to adopt those, obviously. Given that the changes will require States decisions and given that they include amendments to primary legislation not to mention system changes within the department and in the business community, these measures will not produce the full savings for 2000, even if adopted by the States. It is, therefore, vital that the States, based upon the current legislation, provide for the full cost of its legal obligations for 2009 and to allow for changes to be implemented. Even if adopted, the proposed savings are most unlikely to deliver the full £4.5 million shortfall against the budget for 2009 which now becomes the target for savings, given that additional money is only being proposed for 2009 and not for future years. It is most improbable that the £4.5 million per annum can be saved without fundamental change to the contribution system being introduced. The Business Plan that we are debating for 2009 includes an objective of undertaking consultation and developing proposals for possible changes to the Social Insurance Scheme which will include the funding. It will require wide public debate about the future contribution rules to ensure that those rules meet the needs and demands of a modern society faced with the challenge obviously of an

aging population. I know that there are those that believe that the system is not equitable in certain circumstances and the department is looking at ways of ensuring that there is a level playing field for all and has identified issues upon which it would like to have the views of the public. I know that there are also those that see that contributions above the cap should be increased turning it into a payroll tax. If that was to happen that would obviously apply to the higher earners and replace the contribution from general taxation which those higher earners already contribute to in paying their taxes. Such a significant step would be considered among the options for future funding of the scheme and the department is working with the Government Actuary to provide illustrative costings. Such measures form the third part of the review and require more extensive consultation and consideration and co-ordination obviously with general taxation policy. Our proposals for consideration in the coming weeks will concentrate on amendments which do not require wholesale rewriting of the law but can be accommodated within the current general principles and structure of the scheme. While we work towards options to reduce the supplementation, it is vitally important that the funds to make good the States current legal obligations to set aside funds for pensions of the low to middle earners are met. I urge Members to support this amendment.

The Greffier of the States (in the Chair): Is the amendment seconded? [Seconded].

1. Deputy P.V.F. Le Claire of St. Helier :

I think it is obviously an important thing to support, especially given the informative speech that we have had this morning from the Minister. I must confess that supplementation has always been something that I found very difficult to grasp. This morning a lot of the areas which I did not really understand before have become a bit clearer. The primary function is to provide for the needs of society. In an aging society we have obviously to make sure that those people that have worked long and hard all their lives are provided for. It was interesting to hear in his speech about the fundamental principle behind setting this up; that the employee would pay a third, the employer would pay a third and the States would pay a third. I am sure that that was something that was the convincing factor when the States agreed to introduce this at a time when many of the Islanders were objecting and carrying coffins of the person who wished to introduce it into the Royal Square for opponents to stand on top of. So it strikes me a little strange that due to financial pressures we are being asked to see if we can reduce the burden of the States from that commitment. It is a bit of an indication as to the financial squeeze that is coming upon the States when we have to go back to the fundamentals and start to review that. I do support the amendment and I do support the Minister. I just think that I would like to take this opportunity to just speak to him, if I may, about the future of the fund and the wide public debate that the Minister will be faced with and the challenge that he is going to be faced with in getting that across to people. The arguments against a payroll tax have been made concurrently that why should the businessman pay more when they are paying their taxes anyway? I think that is a relevant argument in some respects but proportionately the businessman is paying the same as an employer, as the employee: a third, a third, a third. I wonder, because I am not as up to speed on this as perhaps I should be. Many of us have not provided for ourselves in pensions in the way that we should have done. Many of the younger population and middle population of Jersey today are not doing so either. If they are anything like the other people in the world, they have not really made the provisions for themselves that one would have hoped they would have done. The business community has in many respects taken on board in the past salary packages that have included an element that would cover for pensions. The States do it themselves through a very generous final salary pension scheme. I wonder then how their argument would wear out in the future if a businessman has been setting aside monies for a generous company or personal pension scheme that has been tax planned out of his tax year so that if the tax plans allow him or her - I am not certain; that is why I am asking - to set aside money from their wages for an additional pension scheme then that would obviously reduce their final tax bill. I am afraid to say if there is going to be a fundamental rethink of this scheme then we are going to have to look long and hard at the exemptions to the tax that people can allocate their income to because that will reduce their tax burden and that will set aside for them a more generous private pension scheme which is not available to those who are on the lower to middle incomes. I know it is a tax question and I appreciate that the Minister for Social Security may not have the answers or wish to speak on this during his reply, but I would just like to say perhaps if he can lean over and speak to the Minister for Treasury and Resources to get an indication as to what are the allowances for this. If there is any thinking on those lines then I think that that would give more credence to looking again at whether or not those that earn much more money should have their Social Security contributions raised. If we are going to get away from the principle that the States pay a third then we are going to have to either cut pensions or somebody else is going to have to

pick up the shortfall elsewhere. We have always said that the benefits should be targeted towards the less well off. I think we need to apply that same philosophy and make sure that the contributions are applied to the better off because those of us in this community who can pay more

should be paying more. We have accepted - it is States mantra now - targeted support. The Minister has stood up on many occasions saying that we need to target the need. That is right. We need to target the need to pay contributions and benefits; benefits to those that are not wealthy, and if we are going to have greater contributions from any sector then I am afraid to say we are going to have to look seriously at whether or not that old argument of we cannot really introduce a payroll tax because it will drive business away because they pay enough tax as it is, I am afraid that is not going to wash. Not if there is going to be a fundamental change. We cannot have it both ways. We can support the Minister today because it is something the States are obliged to do by law and it would look ridiculous if we said to the ordinary man and woman on the street: "You have to pay a third and so have your employers but the States is copping out on their agreement that we forced into law on you." That would just make us look stupid. I implore the Minister and other Members of the States and the business community to accept the logical conclusion of this. We either take some money from somewhere else - and God knows where it would come from - to keep the benefits and pensions as they are and expect to be or we cut the pensions and we cut the future expectations of the public and the taxpayer and the Social Security contributions. We cut those expectations or we do what would be a sensible thing to do and we look at how people are paying their tax and whether or not we can accept as we did with second mortgages, as we have done with stamp duty, I am afraid to say as we are going to have to do with payroll contributions, whether or not we raise those ceilings of the business people that structure their payments in such a way making sure that they receive for three-quarters of the year a very paltry income with a large bonus at the end of it, thereby negating any real contributions on the Social Security perspective in terms of their income and planning their tax structure in such a way that they manage to avoid paying what they can adequately pay just to fit in - as Senator Shenton said last week - an extra skiing holiday or 2.

2. Deputy G.C.L. Baudains of St. Clement :

The Minister told us during his speech that this demand is due to the growth in the workforce which means presumably either the number of people paying below the contribution level is rising or the same number are earning less or, a third scenario, there are simply more people and the average are earning below the threshold. This does seem to me to be in contrast to the economic growth scenario that was given to us and that we would only encourage high earners to the Island. I wonder if that is perhaps not now the case. Sir, I would be grateful to the Minister if he could clarify that for me in his summing up because it is now obvious that economic growth has hidden costs and one is led to wonder what other costs are lurking in the background. The Minister spoke about the way Social Security is funded; of course which we are all aware. I believe it is a good system. I have no problem with that. Another question I have for the Minister is why has this come to us in the list of lower priorities in this amendment? Is it in fact a lower priority and, if not, why was it not in the main proposition? I am getting very concerned about these amendments, Sir. It does seem to me that the Council has no grip on expenditure whatsoever.

3. Senator L. Norman:

Very much in the same vein, because I do have sympathy with the Minister and I do understand the position that he finds himself in, but as we go through these amendments I am becoming more and more concerned. When the Business Plan was agreed by the Council of Ministers earlier this year, they were aware of the shortfall of funds for supplementation. They admit that in the report to the amendment. So knowing this spending was really a legal obligation, why was this sum, or a sum at least, not included as a must do in the original plan which was lodged in July? I am becoming more and more concerned that we have almost been conned in a way. I suspect that when the Business Plan was lodged in July the Council of Ministers knew that they were going to bring a last minute amendment just 2 weeks before the debate. To be honest with you, I just do not like that. As I say, I feel that we have been conned. They were going to bring this amendment because we put upon them quite rightly a cash limit and this amendment is nothing but a device to crash through that

cash limit barrier. Unless the Minister can tell me that they did not know, despite what is said in this report, or that they did not plan to bring an amendment - they were going to manage with what they had in the original cash limits - then I am going to be very, very tempted to vote against this part of the amendment.

4. Deputy A. Breckon of St. Saviour :

We should say at the outset of this that this is something that the Health, Housing and Social Security Scrutiny Panel tried to look at a couple of years ago. The estimates then for 2008, 2009, and 2010 were certainly less than £60 million. Not many years ago the level of supplementation was around £50 million to £52 million. In one year I believe it dropped year on year and I think perhaps there is maybe some complacency there. I think both Senator Norman and Deputy Baudains have picked on a point about the economic growth. This is perhaps the elephant in the room. Economic growth does all sorts of wonderful things but in the report there is some detail there which perhaps gives us some background to that but it is also linked of course to employment growth. It says in there, Sir: "Economic growth in recent years has led to increases in the workforce and as approximately 56 per cent of all workers are paid below the earnings limit [and the earnings limit presently is just over £40,000 I understand, so that is the level we are talking about] this leads to an increased cost of supplementation. Initial figures for 2008 show that the workforce is continuing to grow." The questions when the Scrutiny Panel asked, there was a shrug of shoulders and it was: "We do not really know. We do not know because it depends." People come and register for employment. If they go into a level where they need supplementation it is a regulatory requirement we must supplement people. Whether they are still here next year is by the by. It does not matter if they are in at an earnings level now. In some of the economic growth debates we were told that the idea was to attract young professionals that would be nowhere near supplementation. But of course when we look at the figures, that is not necessarily the case. The department did have an indication because it says so in the report accompanying this fourth amendment because it says, Sir: "At the beginning of 2008 the Department of Social Security indicated to the Council of Ministers based on the figures available at that time that the cash limit allocated to the department would require an additional £2.1 million for 2009 over and above the estimates previously provided for." Even at that early stage that was more than 100 per cent out if we are now saying it is £4.5 million. So perhaps the level of information, the statistics, the guesses, if you like, are well out. It is not necessarily the Minister's fault. He is faced with a situation that is presented to him perhaps from elsewhere, from Economic Development, but the question is, where is the quality information? People must register on a monthly basis and somebody must know where they are going and indeed where they have come from; if they are registering locally or from somewhere else or for the first time, the second time. This information used to be available but I think sadly it is lacking at the moment. It also goes on to say, Sir: "This increase was in respect of the additional costs arising from the increase in the number of workers and the lower than average earnings increase experienced by lower paid workers. This was included as a significant funding pressure in the 2009 Business Plan." Again, it has come as an amendment and it is something really that we are between a rock and a hard place here; something indeed we must do. Also in the report, Sir, it says: "However, the continuing growth in the economy, together with the increase in numbers in work and the effects on the cost of supplementation, has a significant impact on the forecast for 2009 and the revised estimates [these are again estimates] indicate that the department could be under-funded by up to £4.5 million." That is the latest guess I would suggest but again it is something that we must do. It does give some idea, Sir, of the figures because it says: "The initial analysis of the first quarter's data has shown that the growth in the

workforce has continued with the number of contributors having risen by 1.4 per cent over the same quarter of 2007. Of these contributors, the number of those whose contributions require supplementation has risen by 3 per cent to 32,062." Again, I would suggest that somewhere we need to link together this information and perhaps get some joined-up government because it is now 55 to 57 per cent of people in the workforce need supplementation. I do not think, Sir, at this stage

the House has any option to support this. It is really unfortunate the way it has been brought as an amendment when the Council of Ministers and indeed we all knew that something was required. They could not pin down the exact figure and probably even at this stage this is not right because again it is a guess of what is going to happen. We do not know. I know what the Minister is saying about perhaps using other methods to do that but that is not what we are discussing today. We are discussing £4.5 million for this. I will give it support, Sir, but I think in future the Minister, the department, the economic adviser, the Statistics Unit regarding the employment numbers and how all this comes together must inform us better about where we should be for future forecasting. We should not be coming with this as we are today, Sir, at the last minute. Although I support this, Sir, it is reluctantly.

5. Deputy R.C. Duhamel of St. Saviour :

In a similar vein to the last 3 speakers, this is planning on the hoof or an absence of planning. A number of Members have asked at various meetings that have been held over a period of years when we were determining whether or not we were going to open the floodgates and go for growth, what it meant to be bringing in somebody who was economically active and whether or not the benefits were all positive. For every person working in the finance industry there are a whole host of other jobs in support of that person or persons or family or children which have to be done. The Statistics Department have not come forward with a sensible estimate as to how much extra demand we place on immigration in terms of creating extra jobs. Indeed, following on from that calculation is the element of supplementation that would have to be applied to the Social Security fund to pay for the benefits that those persons might wish to receive. This is without looking into the pension problems that we are generating for ourselves because indeed pensions are another hidden cost that we have to take into account. So what have the States done? We have just gone ahead and we said we are going to go for growth because that is the best way out. Keep on growing and all our problems will be solved. I find the approach of the Council of Ministers on this one very, very underhand because what we are being told is that this is a £4.5 million hit to the pot of gold that the Minister for Treasury and Resources has suddenly found himself at the end of the rainbow with as happens every year after it stops raining. What are we going to do? We are going to spend it. We are going to spend it all. I do not mind spending providing it is done sensibly but this is indiscriminate spending. This is unplanned spending. This is unplanned, unforeseen expenses. We are being told, Sir, that the £4.5 million is one hit for this year. In fact, put your blinkers on. We are only discussing the Annual Business Plan for 2009 but part and parcel of the Annual Business Plan process is to identify funding pressures - whether they be capital or revenue - into the future. There is no mention as to how much there is going to be called upon in future years. Next year if the population grows again there might be £5 million, £6 million. We do not really know. I think this is the bit that I dislike most. It is all very well going for the balanced budgets and spending all the money, Sir, that is coming into your pot. That is the easy thing to do, but the harder thing to do, which is what we should be doing, is being prudent and it is called financial planning. We should really be sorting out our funds and our monies and our finances to ensure that we are not through the action of one department finding ourselves in a position of having to spend unnecessarily, or necessarily as the case may be, by another. I will be saying something in relation to Transport and Technical Services at a later stage in terms of their revenue spend because we have a number of hidden policy issues for indiscriminate spending there as well, Sir, but in this particular case we are between a rock and a hard place because the Council of Ministers have come at a very, very late stage and they have us over a barrel. If we do not cough

up the monies that we do have and allow them to be spent, what is going to happen? It is too late. It cannot be scrutinised 2 weeks before the debate. Some of the issues were raised earlier on so it is not as if we did not know about these things but we have not done our homework properly. We are finding the easy way out of our problems; just spend, spend, spend whatever has come in. I do not know how I am going to vote on this one at the moment, Sir, but I certainly would like the Minister to tell the House how he intends to quantify as best as he is able to do the amount of monies that will be called upon for future supplementation in the absence of a policy change, or if a policy change is forthcoming, which year will that policy change be promulgated? As I say, Sir, there is nothing in 10, 11, 12 or 13 and we should know. Prudent financial planning is what it is all about; not just spending what you have got.

6. Connétable A.S. Crowcroft of St. Helier :

It seems to me that what we are witnessing in this succession of amendments is the creation of a financial cushion for the next Council of Ministers. That will allow the Council next year to pay for things that it has not been able to get a handle on this year, or indeed for new, unforeseen, urgent items that come up. The obvious recent example of that is the support that was required for the prison that took money away from a sum of money that the States had previously voted for something else. The more of these amendments that go through, the bigger that financial cushion will be next year and the less need there will be for the kind of financial rigour that successive Ministers and committee presidents before them have been talking about. I must say, I am quite intrigued by the process that has led to where we are today. A number of Members have already referred to it. The sum of £2.1 million as a shortfall was notified, we are told, at the beginning of 2008. That figure is still at £2.1 million. Later on in the brief report we are told that it still could be £2.1 million but £4.5 million is as a result of revised estimates. It could be under-funded by up to £4.5 million we are told. Other Members have asked this question, when we are told that the Council of Ministers agreed in arriving at the plan, why did they agree that the additional funds would not be included? What was the thinking behind that? Are they not aware as we are that supplementation is the payment required under the law? This should be one of those items in the good old days of decision conferencing that simply went into the column "had to be paid". These are the ones that are put aside at the beginning. I am very curious to know what has happened to the financial planning process. Is it a case of getting through the Business Plan with a nice, but seemed to be austere, suite of proposals and then come in at the 11th hour with a whole series of amendments to provide that extra spending money that the Council of Ministers want to use? I do not know. I was not at the meeting. Perhaps we will be enlightened shortly. I think this issue of £4.5 million, why is it £4.5 million? It is not adequately explained. I see the figure of £2.1 million a couple of times. That is based on data that the department has had. I do not see the analysis that demonstrates £4.5 million is required. In fact if we look late on in the report section in the

amendment, we are told: "The department is undertaking further analysis of the data and revising forecast spend across other cash limited expenditure for 2008 to ensure if possible that the cash limit for 2008 is not exceeded. It is very unlikely this could be achieved in 2009 given the scale of the costs involved." I am not sure. Are we being told that the door is entirely closed, that other cost savings will be found and that the £4.5 million will not be required? I do not know. A number of speakers have said that we are between a rock and a hard place. We have no choice. I am not sure that is the case. If we are by law required to spend this money and if once the figures are in next year we know what the figure is - maybe it will not be £2.1 million; perhaps it will be £3 million, we do not know yet, but when we know the figures what is to prevent the Minister from coming back to the Assembly next year and saying: "By law I am required to find this money. You did not vote it through in the Business Plan last year. We have looked in all the other silos." That is the discussion which we have not heard much of in these amendments. Where is the end of silo thinking that we hoped that the Ministerial system of government would bring? Has one Minister said to the other: "Have you got an under-spend that we can use to deal with this problem before we go back to the States and ask for more money?" I certainly think that would be a much more prudent response. I am reminded of that and I think it has only happened the once. Perhaps there are other examples. Of that occasion when former Deputy Dorey came back to the States and returned £500,000, which I think it was the Agriculture and Fisheries Committee, under his presidency had not used. He came back to the States and returned it to the central coffers. There is precious little of that kind of thinking going on today. Before we come in successive amendments and ask for all this extra money, surely Ministers and their successors - and we do not even know who they are yet - should be tasked by this Assembly with the job of looking in all those silos before you come back for this money. We know it has to be paid but we do not yet know what the figure is. We do not yet know what will exist in other coffers of the States. So that is my first point I would like to make very strongly, Sir. I certainly do not feel that I have a gun to my head from the Social Security Law. I believe in voting down this amendment. I am giving a message to the Council of Ministers that they can come back any time next year and convince me that they need that extra money. The second thing that I am interested to know is - and I always love this phrase when you see it in any report from the civil service - "the department is actively pursuing." How many times have we read that? Presumably pursuing is enough on its own unless there is a history of inaction and that is why the word is put there. I have not been in the Assembly as long as Deputy Breckon but I know that when I started in the Assembly the department was actively pursuing an end to the supplementation problem because Deputy Breckon was one of many Members - and Deputy Southern too, I think - who has been trying to get some movement on this subject. At the 11th hour to come back to us and say we are actively pursuing it is a very lame excuse indeed. I would like to know if that active pursuit includes talking to our sister island of Guernsey because I noticed on the news the other night that they are now looking again at the possibility of raising thresholds to increase alternative ways of bringing money into their system. I would like a little more detail please about this active pursuit. I would suggest to the Minister, and indeed to all the Ministers, next time they come and ask for more money that they avoid the phrase "actively pursuing" because I think it is pretty meaningless. It is probably almost a tautology. The pension scheme was referred to and Members will know that certainly the Parish of St. Helier has been doing its best to wrestle with the fact that the final salary scheme to which this relates is storing up problems for future generations. The Minister touched on this subject. He did not say really how far up the agenda it was. I would be interested to know whether this is being pursued by the States because certainly one of the messages the Parish of St. Helier received when we tried to go it alone was: "Why do you not wait for the States to do it?" Well, we are waiting. Finally, the

issue of forecasting. I would, as I say, like to know more about where this figure comes from, the £4.5 million. It seems to me that forecasting, we have seen examples recently and the public must be really quite confused about the States forecasting because we have lots of staff, we have a Statistics Unit - I can hardly say the word - but it does seem to me that the forecasts keep moving. Maybe that is the nature of the animal we are dealing with; that is what happens with the economy. People who had crystal balls recently .. that is the wrong phrase. I am going to rephrase that. Anyone who had a crystal ball recently would have made an awful lot of money out of the volatility of the stock market and so on. I think we have recently found a whole lot of extra money from G.S.T. (Goods and Services Tax). What is going on in terms of the Island's forecasting? Why can the Minister not be a little more definite, a little bit more precise about the figure? I would like to know, for example, when will that figure be known? Could he come back next year and give us an exact figure? Could we then be asked as a new House to vote him the extra money if indeed we know that he has looked in all the other .. and spoken to all his Ministerial colleagues about the alternative ways of funding it? Sir, I am not convinced that this is the only alternative. Unless the Minister can convince me I will not be supporting the amendment.

7. Deputy G.P. Southern of St. Helier :

I hardly know where to start on this one. However, let us put it in context. What we have here is a series in the fourth amendment of 11 initiatives on which the Council of Ministers are under pressure. The Council of Ministers apparently find it very difficult to make decisions about prioritisation and who spends what where. We have had these 11 items brought literally at the last minute with very little time ..

The Greffier of the States (in the Chair):

Sorry to interrupt you, Deputy , but the Assembly is inquorate. I cannot raise the défaut when we are inquorate I am afraid. There are 28 people present but 2 are on défaut.

Senator F.H. Walker :

Could I propose that we raise the défaut on Senators Ozouf and Cohen?

The Greffier of the States (in the Chair):

It is a catch 22. We are not competent to do anything while we are inquorate.

Deputy G.P. Southern :

If you do not want to fly, you are not mad.

The Greffier of the States (in the Chair):

Once the Assembly become quorate we can raise the défaut. If one Member would return. All right, very well.

Senator F.H. Walker :

Sir, may I now then propose the lifting of your défaut on Senators Ozouf and Cohen?

The Greffier of the States (in the Chair):

Yes, indeed. I propose the défaut on Senators Ozouf and Cohen be raised. Those in favour? Those against? The défaut are raised. Deputy , please continue.

Deputy G.P. Southern :

It is like playing the Glasgow Empire. The audience leaves. [Interruption] Please do. Please do, feel free. Why have we had this series of 11 amendments at the last minute? What is this particular piece of amendment? If you look at the others; the nice pirouettes on G.S.T. on food and the lollipops that are being given out. Funding that nobody would find easy to oppose. Lollipops for the election. A debate just before an election. What is going on here? We are told this particular must be passed because it is a legal requirement. We could not possibly guess how much it was going to be in any way, shape or form, despite the fact that we are given strong indications. This has been an issue and it has been around - I have seen the paper - since the end of last year/beginning of this year. It could easily have been put into the overall scheme of the spending plan early on so that we had plenty of time to talk about it and discover what it means. Instead of which we have this last minute Johnny position where we have to find .. is it an extra £4.5 million, Minister? Is it an extra £4.5 million in total?

Senator P.F. Routier: Yes.

Deputy G.P. Southern :

Yes, okay. Why was it not put into the original plan? Because that would have meant to stick within budget we would have to throw out some nice to have things and make some hard decisions on things that are nice to have in an election year. They could not do that so we are brought at the last minute with the ultimatum you cannot vote this out. Wonderful. What a technique for running a whelk stall. I do not believe it is going to work for the whelk stall and it certainly does not make sense for a Council of Ministers. That is the context. Let us set another context. Here we have a Council of Ministers that, under Ministerial government, is supposed to be producing joined-up government. The current Minister for Treasury and Resources used to be in charge of Social Security until 2002 so he knows exactly what is going on with supplementation presumably and now as Minister for Treasury and Resources must walk around with sometimes in the air with a little light going on in his head saying: "We are going to have to deal with supplementation. It is going to be here soon. I wonder what is happening?" But what happens?  Hang on. We are told the economy is booming. That is the problem. Was the Minister for Economic Development not speaking to the Minister for Social Security and the Minister for Treasury and Resources and saying the business is booming? What was he saying about the overall fiscal strategy and the

economic growth plan? The economic growth plan, if I may remind Members, says we will grow the economy, grow the high value end of the economy. We will attract a young, go-getting, high worth, high salary, high contributing end of the job market. Immigrants will be top end. Of course we do not have a mechanism to filter out those people who are doing the rest of the service jobs keeping the finance sector going. We do not have a mechanism for that. We cannot stop them coming. What has happened? Clearly - and the figures are there - we have taken off the brake, we have pressed the accelerator on the economy. It is go for growth. Gung ho for growth at all cost and here is a cost. What happened? In 2007 over one-third - 34 per cent - of new jobs created were filled by immigrants; by newcomers. What type of immigrants; of newcomers? Supplementation tells us exactly what type. Yes, there were some at the high end who did not require supplementation but by and large a significant large number of low skill workers working for peanuts and requiring supplementation so the supplementation bill has gone through the roof. Why? Because the co-ordination and the planning of this Council of Ministers has gone to pot. All the fine-sounding terms, phrases about sustainable, about controlled, are being shown up for what they are. They are mere platitudes. Complete and utter platitudes to make us feel better while we drive the car with our eyes closed. That is what is happening and the chickens are coming home to roost. Some Members may remember back in 2002/2003 a young greenhorn Deputy coming in and saying: "Take a look at this supplementation thing. It is crazy. You have a policy that is going to lose us £90 to £100 million of tax, your fiscal strategy, and you have not paid one jot of attention to the fact that at the time around £50 million is going out from your tax revenues year in and year out and growing to supplementation; this arrangement where you have one third, one third, one third or almost one third because it is easy in most years just to let that slip and then play catch up later on when you have a bit of cash." We are already fiddling and fudging around the edges of it. We have allowed ourselves to drop in over the third principle anyway. I said way back then, and I cannot remember whether it was to the current Treasury and Resources Minister or the current Minister for Social Security, but I definitely brought the proposition. It said take the cap off supplementation. "Oh, we could not possibly do that. What is this back of the fag packet calculation? Oh, dear, danger, danger, danger. Stop." One of the things that was said because I remember the debate. I remember it well. Early blooding, I do not forget. I just keep coming back. One of the factors was: "Do not let this young firebrand do this. It is rash. It is foolish. We are working on it. Do not worry, it is in hand. We will come up with a solution." That was in 2002 or 2003. Hey, it is the end of 2008 and what do we have? We have this fudge. Nothing. No work gone into it; nothing done. This is a sorry tale of complete and abject failure to address serious issues around the Social Security funding and particularly supplementation. Even the simplest mechanism you could do, which would be to take off the cap, is dismissed out of hand by the Minister for Social Security. What would it do? What would it do? It would put contributions on a level playing field. Everyone in the Social Security fund saving towards their pensions but

paying for current pensions because that is what has happened. A bit extra goes in the pot. We are still building up the pot but effectively it is what we do with our contributions is we pay for today's pensions. That is part of our job. Taking off the cap would simply make that 6 per cent payable by all. At the moment with a cap at £40,000 a person earning £100,000 pays something like 1 per cent or under of his earnings towards the Social Security fund. I am just over this margin, am I not? So already I am benefiting a little bit; not quite by 6 per cent. The shop worker pays 6 per cent. The person on the shop floor pays 6 per cent. The plumber down the road is probably paying 6 per cent. But someone earning £100,000 is effectively paying 1 per cent. Is that a level playing field? I would say not. Is that progressive? Absolutely not. Is it proportional even? No, it is not. Who would that impact? It would impact only higher earners. If we did it properly instead of this crazy 20 Means 20 scheme that we have invented, which is fantastically complicated - only an accountant could have come up with it - a fantastically complicated way of hitting those middle to high earners, it kicks in too low. It hits a lot of middle earners and it is going to make them suffer. We might even be able to revise that; go back to that and look at that craziness and say: "Hang on, we have just done this with Social Security payments if we take the cap off. That is proportionate. We

know it only hits higher earners." Bingo. That is a way to get some fairness back into our tax system in the light. Back to we are about to lose £100 million and yet you cannot be bothered to plug this hole that says at the time £50 million, now £63 million is flooding out of this hole. Getting rid of the cap on supplementation would at the time have saved around £22 million or £23 million. I presume proportionately nowadays that would be around £28 million to £30 million. Has the Minister even considered this? Has he started up? Has he come with a Green Paper saying what do we do? No, he has not. He has come with some fiddle and fudge; some last-minute fudge at that. So what do we have? We have an economy racing away and we are sucking in low paid workers and supplementation is going up. We do not know what to do about it apart from come to this House and say: "Can I please?" Legally you have to do this. We have to spend this money. We are working on some fudges that will mean that we do not have to spend it another year. I think it was the third stage of this review we may review and come with some decent work, not my calculations, because I cannot be trusted, but some decent work which, finally, once and for all, might allow us to address this problem that has been sitting around gnawing at our finances for the past several decades; but certainly we have been aware of it as a serious problem, certainly for a decade and certainly in the last 5 years and absolutely, definitely ignored by these Ministers for the last 3 years: "If we do not open our eyes it will not be there. It will go away. Oh, that is difficult. Put it off." They promised to do that back in 2002-03. They have not, absolute failure. The first question that needs to be asked, and I will ask it, is if we do not vote this money what happens? We are defaulting by law on our position. £4.5 million in the fund does not occur. What is happening to that fund? Why, it is still growing. It is in credit. So that we are taking more than we need for immediate payments and we are putting some of it away. The Social Security Pension Fund is growing. It is calculated that it will grow until 2035. So what will happen? Surely it means that the fund will grow a little less. The end of the world does not happen if we do not vote this through, it appears to me, it is just that we weaken our own fund. Not a wise thing to do perhaps, but not the end of the world. All the wheels do not fall off at once; if we have any wheels on this wagon that is. So the answer to that clearly, if we break the law the A.G. (Attorney General) or the S.G. (Solicitor General) prosecutes us for defaulting on what we should be doing with our Social Security fund. I do not know. It is not clear here. We are just told we must by law do it, so you have to do it. Some choice that is. Why does the Minister bother bringing it? It is insulting. It is insulting this House. Sir, we have been asked to come up with this money because we have to, given no reasons at all, and this is basically a little mini fudge. Now, this particular Minister is very good at fiddling and fudging. He has persuaded us that we do not need a major review of Income Support, for example, because things that are wrong with it are only fiddles and fudges and we can do that as we go along and it does not really matter. So we can mend this by fiddling and fudging, putting a bit of oil on the machinery for the moment and it will work and it does not really matter and we are falling down in our major responsibility of addressing the hard questions and not just the easy ones. I am not convinced that this in fact is necessary. I wait for that assurance. Like the Constable of St. Helier, I wonder could this not be found another way? Is there not another way? Although, on consideration, it strikes me that there is another piece of madness and absence of joined-up thinking going on anyway because we did have a quite substantial pot of money - I think it is called a contingency fund - that we could at any stage during next year have come to and said: "Help, it is worse than we thought. It is £4.5 million. Can we do something about it? Can we spend this money, put it in the pot?" We could come with that except we have emptied the pot. Remember? When we were all absolutely worn out from a very long and interminable debate on the Energy from Waste plant, they came up with: "This is the way we are going to pay for it." Not staged payments over a number of years which you and I might think is sensible - £7.5 million a year, was it - we are going to pay for it all at once. We have just emptied all our savings out. So we put ourselves in a tight position as well. Again, another brilliant, wizzo idea from the Minister for Treasury and Resources that not a month down the line has us facing no choices on another hard issue on spending. This is symptomatic of a Council of Ministers who does not know what it is doing, have all of their bits crossed, their fingers, their toes, et cetera, and

they are just hitting and hoping. All we are getting from these Ministers are not hard decisions, well made, well thought through, brought to this House in a timely manner. We are getting fiddle and fudge and help and no options whatsoever because they made an endless series of one mistake and one bad judgment after the other. Unless I hear otherwise, unless I hear some sound argument about why we cannot pay this money, I will be voting against it.

8. Deputy S.C. Ferguson of St. Brelade :

Deputy Southern mentions pressures. I will remind Members we still have some £29 million worth of such items as maintenance and infrastructure. Why does the House think that the P.A.C. (Public Accounts Committee) feels so strongly on financial management and control and proper project planning? Members are attributing all this requirement on growth but it is partly an effect of I.T.I.S. (Income Tax Instalment System), collateral damage if you will. The House was very enthusiastic about bringing all Islanders into the income tax net. In the P.A.C.'s recent hearings on the accounts, and according to the Comptroller of Income Tax, the number of taxpayers has gone up by 36 per cent, much as a result of I.T.I.S., but the income tax collected has only gone up by about 10 per cent. As a result of the various discussions we had in the hearings about the tax and the supplementation, the Auditor General has, as the Minister said, been reviewing this and I understand he will be issuing a note on this. It is a complicated issue and we shall need further actuarial reports before we can make the plans to deal with it. Obviously it is partly a side effect of growth because of the work that is required to support the overall economic growth. In view of the current financial markets I would suspect .. in fact, I would go a little further than that and say I believe that the growth will not be as significant over the next few years. We do not have sufficient information to be dealing with this. It is one of the reasons why I supported the expansion of resources for the Chief Minister's office, because this sort of work .. if you are fiddling with taxes, you do need to look at the collateral implications. This is why the Public Accounts Committee is pushing for better financial management and controls. We must not forget that supplementation is largely for pensions and we cannot interfere with this without better information. If we follow Deputy Southern , we will be operating a pay-as-you-go pension system by 2035, if not earlier. We do not fiddle with people's lives in this way. This is why an informed and balanced review is required. We do not have sufficient information so I will be supporting this but with the proviso that a proper and intelligent review is made.

9. Senator T.A. Le Sueur :

Perhaps we should remind ourselves that what we are debating here is how much money we are going to be spending next year. We seem for the last half hour, in Deputy Southern 's speech, to be talking about fiscal policy, Social Security policy, Income Support policies. Today is the time when we decide, at one date in the year, our entire spending for the coming year. That gives a particular problem to Social Security and the Minister for Social Security in trying to calculate this question of how much to put aside for supplementation. As Deputy Southern said in his introduction, surely the Minister for Treasury and Resources knows all about supplementation. Well, I cannot say I know all about it but I know enough about it to be able to say that you cannot forecast it with as much accuracy as I would like as Minister for Treasury and Resources. Senator Routier has explained the reasons why one cannot forecast that with absolutely accuracy. I cannot remember which speaker it was now who asked when will we know what the actual spend for supplementation for 2009 will be and the answer is some time in 2010. The Accounting Officer for Social Security has an obligation for 2009 that he cannot exceed his budget and that legal requirement - just as a legal requirement to pay supplementation - gives the Minister for Treasury and Resources and gives all of us a planning headache. Certainly the fact that for the coming year the expected funding of supplementation has risen is, as I think we all appreciate, one of the factors of a buoyant economy. Yes, supplementation is rising and, yes, as Deputy Ferguson says, it is partly the effect of bringing in I.T.I.S. As the Comptroller of Income Tax said, that has caused his tax take to go up by 10 per cent. We forget, when we are thinking about this extra £4.5 million,

that we are going to spend on Social Security, the benefit that we get from the increased tax revenue we are collecting. Where are we collecting it from? Deputy Southern says that one-third of the new increased workforce were immigrants, as if there were something wrong about that, and that means that two-thirds of the increased workforce were local. Of that mixture of local and immigrant workforce, 56 per cent require supplementation to some degree. Now, I do not know whether that is from the one-third of the immigrants plus a bit more or the two-thirds of the locals less a few or, far more likely I suppose, a mixture of both but we should not blame or congratulate one sector of society for a function which affects all of us. Certainly I have absolute confidence that our economic growth policy is the correct one, just as I have absolute confidence that our fiscal policy is the correct one. But today is not a question in any case for debating whether those policies are right. It is a question for debating how much we need to spend. Now, some speakers, and I think Senator Norman was the first one, asked surely the Council of Ministers were aware earlier in the year that there was going to be a shortfall and the figure of £2.1 million was bandied around. Yes, indeed, Ministers did know earlier in the year but what we had, because what we had been tasked to do as a result of a previous Business Plan debate a couple of years ago, was to charge the Minister for Social Security and his department to look into ways in which supplementation might be amended and the Council of Ministers had hoped that the result of that would have come to fruition during this year. Sadly, with the result of changes to Income Support and other activities in the department it has taken longer and it is when we realised that that was not coming to fruition in this year that we appreciated that something would have to be done. Now, this is not the first time that this problem has arisen. Members may recall that for 2007 I brought a proposition to the States under Article 11(8) of the Public Finances Law to increase the funding available to Social Security to enable them to meet the higher costs of supplementation and that would be a route available for this House to do for the 2009 supplementation. We could wait until some time next year and bring in the proposition then to increase our spending. Article 11(8) allows me to bring those sort of propositions for unforeseen circumstances but could a Minister for

Treasury and Resources honestly come to the States in 6 months' time and say this was unforeseen. We have been debating it for the last couple of hours and it is clearly not unforeseen. We know about it. We know it is going to increase our annual spending and I think those who are concerned about the spending limits of 3 per cent or 4 per cent, whatever the percentage may be, might forget that when a Minister for Treasury and Resources brings additional spending requests during the year, that increases the percentage spend or the growth of percentage spend. What we have tried to as a States is to ensure better financial discipline by agreeing all our spending one day during the year, or in this case one fortnight during the year. That is, I think, a far better way to go about it but we cannot get away from the fact that for 2009 this money is going to have to be spent. It is, as the Minister for Social Security says, still less than one-third of the total contribution which comes between employers, employees and the States. It is a consequence of the fact that employers' contributions have gone up as well and so employees' contributions have gone up as well. They have gone up because the economy is booming and our tax revenues have gone up because the economy is buoyant as well. So this is, I think, no more than a natural consequence. There is nothing sinister about this particular amendment. It is just reflecting the fact that in the present circumstances that money, one way or the other, is going to have to be spent and we have to face that fact now rather than take the alternative, which Ministers previously have done, and brushed it under the carpet for 6 months and then asked the Minister for Treasury and Resources to bring it out again when everyone was talking about it some time next year. That is certainly not the honest way to go about things. If we know that this money is going to be spent, let us face up to that fact and agree that it has to be spent and pass this proposition.

The Bailiff :

I call upon the Minister to reply.

10. Senator P.F. Routier:

I thank the previous president of Employment and Social Security for those very clear and concise comments about what supplementation does and the difficulties of trying to forecast the impossible because, as Members have hopefully become aware, for instance, trying to forecast these things is an impossibility. I think it was Deputy Breckon who asked when would we know for 2009 what the figure will be. Well, as Senator Le Sueur has said, we will not know that until 2010. We will not know what that bill will be. That is the difficulty that is faced by forecasting these amounts and we have met with the Comptroller and Auditor General in recent months to find a way forward for the States to be able to put in a figure within the budget which can be stuck to and he has come forward with a suggestion which will enable us to perhaps put a 3-year block vote in and settle it for 3 years and then we would have to re-adjust it for another 3 years, but it would give more certainty for the States to enable them to plan for the future. I have to say there were a number of speakers who I was very concerned about who were wanting to do away with the social contracts we have with the public of the Island. We have a duty to support people in their need, for their pension with the ageing population. You know, we help them with their pensions. It is a contract we have with them and we must not back away from that. I just do not think that is an appropriate thing to be doing. The increase in supplementation is caused by very, very many things and obviously there has been criticism about we have just let the economy grow and all the rest of it. The fact of the matter is we have planned to have the economy grow. We know it has exceeded expectations and which some people do not think is a bad thing. Well, the reality of it is that increase in the income and income tax needs to be reflected in an increase in the supplementation. People worry about the ceiling level for supplementation. There are many people in this room who receive supplementation, even at this level, and the earning ceiling is the contribution to an insurance premium which will give you the benefits when they are due. It is a set contribution level. I understand there are people that want us to look at, in the future, raising that ceiling. It then, as we all know, just changes that into a payroll tax and moves it away from the pure Social Security insurance contribution. I believe personally that we should not move away from that principle because Social Security should be sacrosanct; because if you start using Social Security for raising money for other things, you then get tempted at a later stage to perhaps dig in to the Social Security pot to pay for other issues which other governments have done. We must protect it and have it sacrosanct and not touch it for anything else. The forecasting, as a lot of people have criticised, is an impossibility. We do not know from one month to the next how many people are working. We do not know how much they are being paid. We do not know what bonuses they are getting. We do not know lots and lots of combinations of things like that which create a problem for supplementation and for forecasting it. So I urge Members to maintain our support for the pension scheme, maintain our support for benefits that are paid out of the pot and I ask Members to

support the amendment.

Deputy G.P. Southern :

Sir, may I ask for a point of clarification, please? Two points, Sir. He described the Social Security fund as a pure insurance fund. Is it not the case that contributions today go out today to pay other people's pensions, that is what largely happens? Also, he said if we change the fund in any way people will use it for doing other things and that should not happen. Can he just confirm that nobody today has said using the pot to do other things?

Senator P.F. Routier:

The Deputy is right that a proportion of the money that comes into the fund now does pay for current pensions but it also does obviously increase the fund and we are still putting money into the fund. We currently have around £600 million in the pot and that will be gradually drawn down, probably in about 10 years' time, and it will gradually start filtering into the system. The comment I made about people wanting to use the fund for other things, nobody has mentioned that earlier but that is the likelihood and the thinking that goes into using a Social Security fund for raising taxes. Other jurisdictions have done that and that is what they do. They use the Social Security mechanism to raise money and then they start spending it on other issues and I do not believe that is an appropriate thing to do.