Cold weather payments: amendment to income support.

STATES OF JERSEY

COLD WEATHER PAYMENTS: AMENDMENT TO INCOME SUPPORT

Lodged au Greffe on 19th January 2011 by Senator F. du H. Le Gresley

STATES GREFFE

2011   Price code: B  P.4

PROPOSITION

THE STATES are asked to decide whether they are of opinion

1. to request  the  Minister  for  Social  Security  to bring  forward  for approval by the States an Amendment to the Income Support (Special Payments) (Cold Weather Payments) (Jersey) Regulations 2008 in order  that  pensioners,  aged  65 years  and  over,  who  meet  the qualifying criteria for the GST Food Costs Bonus, but who are not in receipt of income support benefit, are also entitled to receive cold weather payments;
2. to request the Chief Minister to make provision in the 2012 Annual Business Plan for an increase in the funding of income support benefit sufficient  to cover  the  proposed  widening  of  the  cold  weather payments  scheme  as  outlined  in paragraph (a),  to be  funded  by reducing the budget for the Economic Development Department.

SENATOR F. DU H. LE GRESLEY

REPORT

PART 1

I am sure Members will have been shocked to read in the media before Christmas that a pensioner in his 80s was found by paramedics collapsed in front of the open oven door of his gas cooker as he tried to keep himself warm because he could not afford to heat the rest of his home. Whilst this may just be an isolated incident, there is evidence to suggest that more pensioner households in Jersey are struggling with the ever- increasing cost of winter fuel bills.

The Statistics Unit have confirmed that the overall increases in gas and electricity prices in Jersey from March 2003 to March 2009 were 44% and 79% respectively. According to the Comparison of Consumer Price s – June 2010, published by the Statistics  Unit,  over  the  5 years  to  June  2010,  domestic  energy  prices,  including heating oil, rose by almost two-thirds (62%) in Jersey and in the UK by 65%.

A household is said to be in fuel poverty if it needs to spend more than 10% of its income,  before  housing  costs,  on  fuel  to  maintain  a  satisfactory  heating  regime (usually 21 degrees for the main living area and 18 degrees for other occupied rooms). The  fuel  poverty  ratio  is  therefore  defined  as:  Fuel  poverty  ratio =  fuel  costs (usage x price)  divided  by  income.  In  addition  to  space  heating,  the  fuel  costs component  also  includes  modelled  spending  on  energy  for  water-heating,  lights, appliances and cooking, but excludes expenditure on motor fuel.

The Statistics Unit does not currently keep fuel poverty statistics, but some relevant data can be extracted from the 2009/2010 Household Expenditure and Income Survey. Preliminary findings are that – 22% of pensioners who live alone, 12% of couples (one pensioner), and 10% of couples (both pensioners) spend more than 10% of their income, before housing costs, on fuel. The 2009/2010 Household Expenditure and Income Survey also reveals that 31% of pensioner households, which are not in receipt of income support and do not pay income tax, are in fuel poverty.

Currently, only pensioner households in receipt of income support benefit qualify for cold weather payments. The Social Security Department has advised me that the total of  cold  weather  payments  paid  to  a  single  eligible  household  in  the  winter  of 2009/2010 was £225.29. In the Regulations, a month is a "cold weather month" if the aggregate of the amount by which the average daily temperature of each day in that month falls below the 15.5 degrees Celsius exceeds 90. The special payments are designed  to  defray  the  expenses  of  heating  a  dwelling  for  any  month  from  and including October to April.

The most effective way to help more low income pensioner households escape fuel poverty is to widen the qualifying criteria for cold weather payments. Therefore, I am proposing  that  the  Income  Support  (Special  Payments) (Cold Weather  Payments) (Jersey) Regulations 2008 are amended to include single pensioner or married couple pensioner households who meet the qualifying conditions for the food costs bonus as set  out  in  Article 3  of  the  Food  Costs  Bonus  (Jersey)  Regulations  2008  (see Appendix). Essentially this will include pensioners who have not paid any income tax for the 2 years preceding an application for cold weather payments.

Income tax exemption limits for 2011 are £14,270 for a single pensioner, aged 63+ and £23,480 for a married couple, aged 63+. All single pensioners and almost all

pensioner couples with before housing costs income below the respective income tax thresholds  are,  according  to  the  2009/2010  Household  Expenditure  and  Income Survey, in the lowest, equivalised, annual, income quintile (up to £15,939) for which the fuel poverty proportion is 31%.

The  Social  Security  Department  has  advised  me  that  there  are  approximately 1,400 claims for the GST Food Costs Bonus each year by people aged 65 and above, consequently  the  budget  for  income  support  (special  payments)  will  need  to  be increased by approximately £315,000 (£225 x 1,400) if we wish to widen the cold weather payments scheme to include the above claimants.

Members  will  recall  that   Deputy  Green's  Amendment  to  the  2011  Budget (P.157/2010 Amd.(3)) was intended to remove GST on domestic energy. According to AgeUK, an average household fuel bill in 2009 in England was £1,239, inclusive of VAT at 5%. In Jersey this figure is likely to be closer to £1,400, inclusive of 3% GST, because overall energy prices increased in the 12 month period to June 2010 by 10%, whereas in the UK they fell by 2%. Cold weather payments of £225 would cover the GST  element  of  domestic  fuel  for  pensioner  households  that  qualify  under  this proposal, leaving approximately £150 to help pay the winter bills. In a more severe winter, the total amounts of cold weather payments would of course be higher than £225.

PART 2

I anticipate strong resistance from the Minister for Treasury and Resources to this Proposition unless I can show how the widening of qualification for the cold weather payments scheme can be funded. I am therefore proposing that the budget for 2012 for the Economic Development Department is reduced by an appropriate figure to be decided by the relevant Ministers.

I  would  suggest  that  savings  of  approximately  £315,000  could  be  made  in  the Economic Development Department by outsourcing most of the work of the Business Advisory  Service  to  the  Jersey  Business  Venture  (£134,000);  ceasing  the  Jersey Enterprise Awards (£75,000); and reducing the funding of the Rural Initiative Scheme (£100,000) so that the maximum contribution from government for each category of grant is 30%, not 50%. There may be other options, such as reducing the funding of Jersey Finance Limited, but this is a matter best left to the Ministers and their Officers to decide.

Financial and manpower implications

There will be costs in drafting the relevant Amendment to legislation and costs in administering  the  additional  cold  weather  payments.  The  estimated  budget  of £315,000  can  be  recovered  from  a  reduction  in  the  budget  for  the  Economic Development Department.

There will be Law Draftsman's Office drafting time and some additional workload for the staff at the Social Security Department, but I do not foresee the need for any increase in establishment.

APPENDIX

Food Costs Bonus (Jersey) Regulations 2008

3  Qualifying conditions

1. A  household  qualifies  for  a  bonus  in a  year  if  it meets  all  of  the conditions in paragraphs (2) to (4) in relation to that year.
2. The first  condition  is that  no  person  has  received  on  behalf  of  the household any payment which –

1. relates  to  any  of  the  7 days  preceding  the  day  on  which  the application is made for the bonus;
2. is made under the 2007 Law; and
3. is not an exempt payment under paragraph (5).

3. The second condition is that, subject to paragraph (3A) –

1. where  an  application  for  a  bonus  is made  on  behalf  of  the household before 1st October in the year to which it relates, no member of the household was served with a notice of assessment under Article 25 of the Income Tax (Jersey) Law 1961 showing a liability to income tax for the year of assessment falling 2 years before the year to which the application relates;
2. where  an  application  for  a  bonus  is made  on  behalf  of  the household on or after 1st October in the year to which it relates, no member of the household was served with a notice of assessment under Article 25 of the Income Tax (Jersey) Law 1961 showing a liability to income tax for the year of assessment preceding the year to which the application relates.

(3A)  Subject to paragraph (3B), where a household has qualified for a bonus in

a  year  by  meeting  the  second  condition  in  the  case  described  in paragraph (3)(b),  the  household  cannot  qualify  for  a  bonus  in  the following year by meeting the second condition in the case described in paragraph (3)(a) and, accordingly, any application made on behalf of the household for the following year, if made before 1st October, shall be deemed to have been made on or after that date.

(3B)  Paragraph (3A) shall not prevent an application for a bonus in 2009 being

determined by reference to the members of the household's liability to income tax for the year of assessment 2007.

4. The third condition is that at least one member of the household –

1. is an adult on the date on which the application for the bonus is made; and
2. subject to paragraphs (6) to (8), has been ordinarily resident in Jersey for a continuous period of 5 years immediately preceding the date on which the application for the bonus is made.

5. A payment is exempt if it is made on behalf of a household that does not fall  within  Article 7  of  the  Income  Support  (Transitional  Provisions) (Jersey) Order 2008, and –

1. it is, or it includes, a protected payment under that Order; or

2. itis a special payment under the 2007 Law.

6. A person resident outside Jersey is nevertheless to be treated as being ordinarily  resident  in Jersey  for  any  part  of  the  period  specified  in paragraph (4)(b) in which that person's principal residence isin Jersey.
7. A  person  detained  by  virtue  of  a  sentence  of  imprisonment,  youth detention or similar punishment (whether in Jersey or elsewhere) is not to be treated as ordinarily resident in Jersey for the period during which the person is so detained.
8. However, the period during which a person was ordinarily resident in Jersey  immediately  prior  to such  detention  is to be  treated  as  if it immediately preceded the person's release from that detention.