The figures for the Social Security contribution rates on pension provision regarding the Imagine Jersey 2035 event

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WRITTEN QUESTION TO THE CHIEF MINISTER BY DEPUTY G.P. SOUTHERN OF ST. HELIER

ANSWER TO BE TABLED ON TUESDAY 29th JANUARY 2008

Question

1. Will the Chief Minister explain to members why no meaningful figures for the Social Security contribution rates required to break even on pension provision to 2035 were given to participants who attended the "Imagine Jersey 2035" event on 19th January?

Answer

1. B re ak even contribution rates are a theoretical indicator of the condition of a strict "pay as you go" pension systemandcanbe used to demonstrate the effect of different scenariosonthe system in question. They arebasedon a seriesof assumptions describedbytheGovernmentActuaryas"technical" that would need to beexplained in somedetail and wouldhavetaken a disproportionate amountof the limited time available. However, I must inform Members that in a pension system like Jersey'sSocialSecurity Scheme, increases in the working population, through inward migrationor increased fertility, actually reduces thebreak even contribution rate. Rather than confusing participants with a theoretical indicator, participants were given sufficient information on the impact of the ageing population on the Social Security system.

Question

2. Will he agree to release the figures produced in the Actuarial Reporton the conditionof the Social Security FundofDecember2000 updated for current projections tomembers and thereby to the public so that they can bemore fully informed aboutsome of the options for coping with demographic change?

Answer

2. T h e 2000 Actuarial Review is outof date and hasbeensupercededby the 2003 ActuarialReview.This latest review was presented to the States asR.55/2005andpublished through thenormalchannels. The Social Security system contains a statutory provisionforanActuarialRevieweverythree years. Thenext review for the three yearsending 2006 is duetobe presented totheStatesintheautumnof this year.

Question

3. Does the Chief Minister accept that the inclusion of non-mutuallyexclusiveoptionsin Section 6 of the "Imagine Jersey 2035" on-line survey undermines the validity ofany results produced?

Answer

3 N o , I do not. The survey provided a means to explore the initial views and values of the Island's residents

in the face of the challenges posed by an ageing population.

T h e survey represented a valuable and constructive preliminary step in the development of conceptual

understanding and the opening of a dialogue between policy-makers and Islanders. In this context, the results of the survey provide considerable, useful insight into the initial thoughts and perceptions of Island residents on the issues facing Jersey over the coming decades.

T h e survey represents one of a number of ways in which people can express their views as part of this

consultation process.

Question

4. Does he further accept that the inclusion of 2 factors (housing the elderly and housing immigrants) in Section 7 ofthesurvey calls any results into serious doubt?

Answer

4. N o , I do not. Section 7 of the Imagine Jersey survey wasdesigned to explore the strength ofpublic opinion towards four possible means ofproviding housing for Island residents.

T h e i ntroductory text to the set of attitudinal questions was included to provide an illustration as to why

more housing units may be needed in future.

T h e point of the section was to explore initial strength of opinion on possible strategies for

accommodating Island residents in future. The results considered in this context provide a valuable insight.

Question

5. Furthermore,does the Chief Minister accept that thechange in formulation between questionsduring the conduct of the 2035 consultation on19th January from "should people(in general)worklonger?" to "how much additional tax would youpay?" to fund the elderly skewed the results andrendered them invalid for comparison purposes?

Answer

5. T  h e objectives oftheImagine Jersey event held on 19th January 2008were, in essence,tobuild an understanding of potential future trade-offs, to enable policy-development to be informed by public preferences and to encourage increased public ownership over future decisions. The questionsasked during the event itself weredrawnupto facilitate these objectives.

A s a former educationalist, the Deputy should be well aware that a pragmatic approach is fundamental to

the process of cognitive understanding and ownership of knowledge. It was in this light that the questions were indeed modified in real-time at the event, in response to spontaneous feedback from participants. A small number of questions were asked in terms of, firstly the general, and then the specific. This was done purely to enable deeper understanding of the issues involved and to provide further insight into the strength of attitudes towards these issues.

R a t h er than rendering the questions invalid, the demonstrated flexibility was important in developing

further understanding of issues and opinions, that is in meeting the objectives of the event.

Question

6. Will the Chief Minister inform members how much the "Imagine Jersey 2035" consultation cost and how muchwas paid to the "Involve" organisation fortheir contribution to the consultation process,and what elements they wereresponsiblefor / contributed to? In the lightof the basic survey design flaws indicated above,does the Chief Minister consider that valueformoneywasachieved from "Involve"?

Answer

6. T h e budget for the whole consultation process,including production of the consultation documentation, translation, event planning, advertising and delivery, the survey and associated costs such as printing, venueandtechnicalsupport is £59,000.Within this budget,the cost of Involve will be£34,500,plus expenses.

T h e w ork Involve has undertaken includes:

• Providing advice and guidance on the consultation process and documentation

• Setting up and operating the on-line survey, including reporting the outcome

• Planning, management and delivery of the event

• Producing a final report on the outcome of the consultation process

In addition, included within the above figure are the costs of delivering two one-day training sessions to States of Jersey officers to develop and improve consultation and facilitation skills across the States of Jersey. This element of the work goes beyond Imagine Jersey 2035 and will benefit future consultation exercises.

Whilst Involve have been responsible for providing expertise with regard to the above items, close collaboration with officers of the States of Jersey with knowledge of the subject matter has been a key part of the approach. Involve have therefore worked together with officers to develop key deliverables, including the consultation document, the survey and the event on the 19th January 2008.

As stated above, I do not accept that the survey has design flaws. In my view the engagement of Involve, a well respected not-for-profit organisation committed to improving decision-making through public participation, has been value for money. Not only have they added considerable value to what is an important consultation process; I believe their work with officers, including the training sessions, will lead to real improvements in the way that consultation with the public is approached in the future.

Question

7. Can the Chief Minister confirm that the scenarios ofnetannualinwardmigrationlevels325and650 headsofhouseholds (700 and 1400 persons) in the 2035 consultation weresetby economic growth targets of 1% and 2% respectively? Is it not the case that the current economicgrowth target is 2% and ifso, does he accept that this mayresult in population growthofup to 1400?

Answer

7. N o , I donot believe that the current economicgrowth target of2% will lead to population growthofupto 1,400. The two scenarios of325 and 650(headsofhousehold)were chosen becausethese were the approximate levels of inward migration that would berequired to deliver 1% and 2%realgrowthon their own. That is, if there were no productivity improvements in the economy. In reality, productivity growth has takenplaceinJerseyin the past and is likely to occurin the future which means that the2% economic growth targetis achievable with significantly lower levels of inward migration. Ofcourse, population growth is a functionof both inwardmigrationand natural growth (births exceeding deaths) andis affected by a whole host of factors, economicgrowthbeing only one of them.

Question

8. Does the Chief Minister accept that economicgrowthof7%and the associated rise in immigration of 700 in2006 is unsustainable? What information doesthe Chief Minister have onwhether this trend will continue into 2007? What targets will heset for managingor controlling growthin 2008?

Answer

8. W e know that the Jersey economiccycleincludesphasesof strong growthand ones ofweaker growth, as a direct resultof the economy and our prosperity being linked closely to the performance of the financial services industry. The economy in 2006 and in first half of2007wasclearlygoingthrough a phaseof very strong growthanditwasnever anticipated that this phase would last forever. Indeed, the recent trends intheglobaleconomy and financial marketsshow that there is already a degree of uncertainty around the strength of growth inthesecond half of 2007 and into 2008.

O u r t argets for managing or controlling growth in 2008 remain those agreed by the States in the Strategic

Plan and will remain so unless otherwise agreed by the States.

Question

9. Would the Chief Minister explain how using population growthto solve thedemographic problem of the ageing society can be effective in the long term, given that the increased population will itself age and eventually cost more? Is hepreparedtoaccept that the most sustainable solution is to acceptlower economic growthand higher tax/contributions atsome stage?

Answer

9. T h e scenarios in the Imagine Jersey 2035 consultation focuson different levels of inward migration, which is not the same as populationgrowth. The statistical population model takes into account long term trends and ageing. It has been used to produce forecasts to 2065inorder that any second order effects are considered. That analysis shows that different levels ofinwardmigration have different impactson the total population and dependency ratios. One of those scenarios for example – the +250 heads of household – means that the population never rises above99,000,theworkingpopulation does not fall and the dependency ratio falls after 2035 and then stabilises. In contrast, the scenarios with higherinward migration show continuedgrowthin population and the dependency ratios stabilise at lower levels.

I certainly do not accept that the most sustainable solution is to accept lower economic growth and higher tax/contributions'. Such a solution with no net inward migration would lead to a falling total population and numbers of working age. This combination of factors would bring a significant risk that the Island could get sucked into a cycle of economic decline because key businesses and people leave the Island, accelerating the population decline and deterioration in government finances. Those Islanders who remained in the Island would suffer the consequences in terms of fewer and lower quality employment opportunities and a significant deterioration in the quality of public services (despite higher taxes/contributions). There are in fact a range of sustainable solutions to the challenge of our ageing society and Imagine Jersey 2035 is designed to gauge Islander's preferences as to which set of policies are right for Jersey.

Question

10. Will the Chief Minister release to members the results of the questions posed to the public during the Imagine Jersey 2035 consultation day, whichwere already in his possession on the following day, andif not whynot?

Answer

10. Y  es. The results of the questions posed on the day were published on the 25th January 2008 andwere circulated to Members the sameday.

It sh o uld be noted that the responses to questions were only one aspect of the conference and two other

features, namely:

1. the concluding exercisewhere participants were asked toconsider the main trade-offsandmake choices; and
2. the commentsandsuggestionsmadeby participants and recordedby facilitators

will be collated and will form part of the final consultation report, which will be produced by the end of February 2008.

Question

11. Will the Chief Minister outline for members the extentof the involvement, ifany,oftheCorporate Management Board in the researchand planning of the Imagine Jersey2035 consultation process, and will herelease to membersanynotesorminutesof such involvement?

Answer

11. T he Corporate Management Board (CMB) has not been involved in the research and planning of the Imagine Jersey 2035 consultation. The work underpinning the consultation was undertaken by a group of officers working to the Chief Executive to the Council of Ministers. Their reports have been considered by the Council of Ministers and have been made available to Scrutiny. Their work has been published in the form of technical papers.