Social Security Scheme: amendments.

STATES OF JERSEY

SOCIAL SECURITY SCHEME: AMENDMENTS

Lodged au Greffe on 20th August 2010 by Senator A. Breckon

STATES GREFFE

2010   Price code: C  P.117

PROPOSITION

THE STATES are asked to decide whether they are of opinion

1. in order to provide for long-term care –

1. to establish  a  Long-Term  Care  Insurance  Fund  broadly based on the system in operation in Guernsey since 2002, (attached at Appendix 1) but extended in Jersey to provide for home care;
2. to fund the Long Term Care Insurance Fund by increasing Social Security Contributions by 1% from both the employer and the employee in January 2012 and annually thereafter;
3. that  money  raised  in paragraph (1)(b)  above  should  be hypothecated (ring-fenced) for the provision of a Long-Term Care Insurance Fund;
4. that those in retirement, above an agreed financial threshold, shall contribute on a regular basis to the Long-Term Care Insurance Fund on a basis to be proposed by the Minister for Social Security;
5. that the States will pay the contributions of those of limited means or below an agreed income and means threshold;
6. that  no  benefits  will  be  paid  from  the  Long-Term  Care Insurance Fund until July 2012 in order to build a reserve equivalent to 6 months contributions;

2. (a)  to agree to increase funding for the Health Insurance Fund by  increasing  Social  Security  Contributions  by  0.5%  from both the employer and the employee in January 2013 and by 0.5% from the employer only in January 2014 and to maintain these levels of contributions annually thereafter;

(b)  to expand that the scope of the Health Insurance Fund to include more financial support for the elderly, children, and those of limited means for –

1. visits to the doctor;
2. a new benefit to provide financial assistance towards the cost of dental, optical and foot care;

3. to agree to increase funding for the Social Security Fund for pension purposes by increasing Social Security Contributions by 0.5% from both the employer and the employee in January 2013 and by 0.5% from the employer only in January 2014 and to maintain these levels of contributions annually thereafter;

4. that  proposals  contained  in  paragraphs  (1)  to (3)  above  be  given immediate priority in the Legislation Programme;
5. that prescription charges shall be re-introduced, from January 2011, at a level of £3 per item, excepting those residents in receipt of the Jersey Old Age Pension, children under the age of 16 years and those in receipt of Income Support;
6. to request  the  Minister for  Social  Security  to bring  forward  draft legislation  for  debate  so  as  to enable  the  above  proposals  to be implemented within the timescales proposed.

SENATOR A. BRECKON

REPORT

Currently a number of methods of raising more in taxes are under discussion and a variety of mostly unacceptable choices are out to public consultation.

The general public do NOT appear to have any appetite to pay more in taxes and charges, however, evidence shows that they would look more favourably on new and increased  payments  that  WILL  provide  defined  benefits  and  give  them  some protection in future years.

Examples are –

• protecting their Old Age Pension
• a dedicated Elderly Care Scheme
• affordable access to doctors, dentists and opticians

(see  Appendix 2  which  contains  an  extract  from  the  2009  Jersey  Annual  Social Survey).

Guernsey have had a Long-Term Care system in place for nearly 10 years and for information I have attached at Appendix 1 a copy of "The Long-Term Care Insurance (Guernsey) Law – 2002", which was approved by the States of Guernsey on 1st March 2001 – so we, in Jersey, appear to be about 10 years behind Guernsey in putting in place a method of funding for long-term care (LTC) – which is no mean feat!

Guernsey's fund, as I believe Jersey's should, provides care funding for anyone over 15 years of age – this would cover tragic cases where someone who has not reached retirement age requires care, for example – they could be the victim of a motoring accident or have a serious medical condition.

One of my principal reasons for bringing this proposition as an individual Member is to give focus to the unsatisfactory present situation and suggest a way forward in the medium term that recognises the problems but begins to structure in future funding mechanisms. Whilst recognising that the Social Security system has to have an eye on the future, it also needs to achieve something today.

Elderly care

On average, about every 3 weeks someone contacts me about the availability and cost of elderly care. Many people are not aware of the system and how it operates until it affects their family members. Without exception, all those who have contacted me would be willing, even in retirement, to contribute to an insurance-based scheme – that is why I believe we should get on and do it without further delay.

How long-term and elderly care is to be provided and funded is an issue that is exercising minds across the world. Statistics show that, for a number of reasons, people are living longer; and also that the workforce to maintain and support them is getting smaller – hence the need to identify the issues now, and plan properly for the next 50 years.

For example, I am not convinced that either Planning or Housing are being very pro- active for the future provision of purpose-built or adapted housing for lifetime' homes and living. Jersey's provision tends to be developer-led, with an imaginary line drawn at the age of 55, for what reason I have no idea. So although there are stated aims that it would be beneficial to enable people to live in their homes as long as possible – there are no joined-up policies to support this.

Many  surveys  and  reports  have  been  conducted  across  the  UK  about  existing provisions  and  future  demand  for  elderly  care;  by  local  authorities,  central Government, as well as a cross-section of those with knowledge, direct experience and concern – the general agreement is that something MUST be done – the question is what exactly this will be, and when? In this respect Jersey is no different. It is a case of what, when and who will pay and also co-ordinate the whole system to make elderly care a well-provided and funded service.

Raising taxes and charges

With current proposals doing the rounds about raising money from a variety of taxes and charges, I believe it is appropriate to intervene with a number of measures that will mean people paying more;  however, it will ensure that their money is for a specific purpose only and safeguarded so that their contributions are ring-fenced and politicians will not get the opportunity to use the proceeds to tarmac the Island's roads, however necessary someone may judge that to be!

Jersey is NOT a more expensive place to do business

During many recent discussions and debates, the "Comfy Club" at the Jersey Chamber of  Commerce  have  claimed  that,  for  example,  charging  VAT-inclusive  prices  is acceptable because Jersey is a more expensive place to do business – indeed in Social Security terms the opposite is true, which the table below demonstrates.

This table was included in the recent consultation document on personal taxation and demonstrates quite clearly that employees and in particular employers are paying considerably less than Guernsey, the Isle of Man and the United Kingdom; therefore I believe there is scope for increasing contributions, with a direct and identified social benefit, but ring-fenced for specific purposes that benefit the contributors and not giving discretionary funding to spend at will (tarmacking roads for example).

COMPARABLE SOCIAL SECURITY CONTRIBUTIONS

The extracts below are taken from the Social Security Department's Consultation document, "Long term care in Jersey How should we pay?"

"How can the States raise more money to pay for long-term care?

• Income Tax – increasing the rate of personal Income Tax by 1p
• GST –  increasing  GST  by  one  percentage  point  raises £14 million a year.
• Social Security contributions from people aged under 65 – increasing  Social  Security  contributions by  one  percentage point raises about £14 million a year.
• Social Security contributions from people aged under 65 and over  65 –  increasing  Social  Security  contributions  by  one percentage point for people under 65 and introducing a rate of 1% for people aged over 65 raises just under £16 million a year. (People aged 65 and above do not pay Social Security contributions  at  the  moment  in  Jersey,  but  elsewhere – including Guernsey – older people pay towards their long- term care in this way.)
• One-off payment from people on their 65th birthday – the UK government has suggested that everyone should pay a lump sum (about £20,000 in England) when they reach 65 towards the cost of their long-term care (although this would not cover their everyday housing/living costs if they need care in a care home). The figure for Jersey will need to be calculated.

What is long-term care?

People who require long-term care need help with the ordinary activities of everyday life – washing, dressing, organising their day. People of all ages can need long-term care. Although most are elderly, some younger people may also require this kind of help.

This paper focuses on adults whose long-term care needs mean that they would be eligible for a place in a residential or nursing care home. It also includes people with such needs who remain in their own home.

How long do people need long-term care for?

Most older people may need care for a year or so; for some it will be longer. For people with a disability, the care could be required for their lifetime. What kind of long-term care is available in Jersey?

There are more than 1,000 people aged 65 or over living in local care homes. These  homes  are  run  by  the  States,  parishes,  charities  and  commercial organisations. There are also four homes for younger people and some much

smaller units where people with learning disabilities and other special needs live. Some people receive care in their own homes.

How much does it cost?

Living in a care home can cost between £500 and £1,400 a week. The cost is made up of everyday housing/living costs and the cost of providing care. In this paper we have taken the everyday housing /living costs to be £267 a week. This is just an estimate at this stage, based on UK calculations. A local cost will need to be calculated.

The total amount spent on long-term care in Jersey at the moment is around £55 million a year. The States spends £30 million providing care services and helping Islanders with the cost of care fees. It is estimated that individuals spend another £25 million paying for care themselves.

Why is long-term care funding an issue at the moment?

People are living longer. The number of people aged over 80 in Jersey will double between 2006 and 2026 and will continue to rise for another 20 years. Long-term care is expensive and we need to decide how this extra cost will be met for all islanders in the future.

The States is already paying £30 million a year towards the cost of long-term care and this amount is going up each year. This will put pressure on States budgets.

The total cost of providing care is likely, at the very least to double by 2026 to about  £110 million  a  year  (at  2009  prices)  and  continue  to  rise  to  about £155 million by 2036.

Making changes to the way we pay for long-term care is likely to need a new law which will take two or three years to implement.

Are there any other reasons for changing the system now?

Most of the money spent by the States at the moment is to help people who cannot afford to pay for all their care themselves. Some people who own their own homes feel that the value of their homes should not be used to pay towards the cost of their care. They would like to see some help for everyone who needs long-term care, not just those who are less well-off.

The current system of funding long-term care has grown up over the years. There are different ways to get help from the States with the cost of long-term care. Most people don't understand how the system works and only find out about it when they need to help a relative move into care. The States needs to have a simple, fair, yet affordable system so that people can get help quickly and easily when they need it."

So in my opinion the warnings are there –

• more people will need care as we are living longer,
• the costs are predicted to double and more in the next 15 years or so,
• fewer people will be in work to pay for those who are not.

Paragraph 2 – Health Insurance Funding

When  the  fund  was  set-up  many  years  ago,  it  was  envisaged  that  more  varied healthcare support would be required over the years. So, although prescription charges were abolished, in my opinion this was a mistake and should not have happened – instead benefits could have been extended to include some assistance with doctors, optical, dental and foot-care costs especially for the young and old.

Paragraph 2(b) of my Proposition seeks to do this, but it is deliberately not specific and does not go into too much detail. This is because where funding is targeted it needs to be flexible.

Paragraph 2(b)  of  my  Proposition  is  linked  to  paragraphs 2(a)  and  (5) –  the  re- introduction of prescription charges which will provide some money for other primary healthcare funding.

I believe prescription charges should be re-introduced, with exceptions for residents in receipt of the Jersey Old Age Pension, children under 16 years of age and those in receipt of Income Support.

I  do  not  have  the  numbers  involved  or  the  sums  of  money,  however,  the  re- introduction of charges will bring money into the fund.

Jersey Annual Social Survey (2009)

I have attached an extract from the survey at Appendix 2 which clearly shows that many people of all age-groups are not seeking some primary care services because of the cost.

The content of this Proposition seeks to remedy some of this by providing some assistance to make it more affordable.

Law Drafting

I  believe  this  issue  is  of  significant  importance  and  therefore  should  be  given IMMEDIATE Law Drafting time.

Financial and manpower implications

Under paragraph 1(b) my proposals (if adopted) would raise at least £30 million per annum for a Long-Term  Care Insurance Fund – this would reduce present States expenditure as a Long-Term Care Insurance Fund, similar to the one in operation in Guernsey since 2002, will change the dynamics of the present funding mechanisms and mean that the Fund, if and when established, will meet some of the costs currently

met from a variety of States funding mechanisms and departmental budgets including Health and Social Services and Social Security.

Under paragraph 1(f) of my proposals (if adopted) would establish a reserve of at least £15 million in the first half of 2012.

Paragraph 2

Under paragraph 2(a) of my proposals (if adopted) at least £14 million would be added in 2013 to the Health Insurance Fund, increasing to £21 million in 2014 and subsequent years towards primary healthcare needs.

However, paragraph 2(b) (if adopted) would make demands on this Fund: at the time of writing the amounts are not quantifiable.

Under paragraph 3 of my proposals (if adopted) at least £14 million would be added in  2013  and  £21 million  added  from  2014  onwards  to  the  Social  Security  Fund specifically for Old Age Pension provision.

I believe all of the above will lead to reductions in current States expenditure in most, if not all, of the above areas.

The States as an employer will pay more in Social Security contributions under my proposals (if adopted) – how much will depend on future salaries of staff and their Social Security status.

To give some indication, the Financial Report and Accounts for 2009 show that the States paid £14.6 million in Social Security Contributions during that year.