Food Costs Bonus (Jersey) Regulations 201-

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A decision made 18 April 2011:

Decision Reference: MD-S-2011-0027
Decision Summary Title :	DS - Food Costs Bonus (Jersey) Regulations 201-		Date of Decision Summary:	15 April 2011
Decision Summary Author:	Policy and Strategy Director		Decision Summary: Public or Exempt?	Public
Type of Report: Oral or Written?	Written		Person Giving Oral Report:	N/A
Written Report Title :	WR - Food Costs Bonus (Jersey) Regulations 201-		Date of Written Report:	15 April 2011
Written Report Author:	Policy and Strategy Director		Written Report : Public or Exempt?	Public
Subject: Food Costs Bonus (Jersey) Regulations 201-
Decision(s): The Minister decided to lodge ‘au Greffe’ the draft Food Costs Bonus (Jersey) Regulations 201-
Reason(s) for Decision: These regulations seek to replace the existing Food Costs Bonus Regulations which will expire on 23 July 2011. The value of the Bonus is reset to take account of the increase in food costs during 2010 and the increase in the rate of GST effective from June 2011. This decision replaces a previous decision (MD-S-2011-0019). Following the receipt of additional information from the Statistics Unit a revised calculation of the Food Costs Bonus for 2011 has been undertaken.
Resource Implications: The cost of the Bonus in 2011 is estimated at £386,000 which is allowed for in the departmental cash limit.
Action required: Policy and Strategy Director to request the Greffier of the States to lodge ‘au Greffe’ the draft legislation and to request a States debate on 7 June 2011.
Signature:		Position: Minister
Date Signed:		Date of Decision (If different from Date Signed):

Food Costs Bonus (Jersey) Regulations 201-

Report

Background

As part of the Fiscal Strategy, the States has agreed to increase the rate of GST from 3% to 5% on 1 June 2011. Section 11 of the report on the budget proposals for 2011 (P.157/2010) described the FSR proposals and included the following commitment:

“The aim of the Council of Ministers’ three part plan to address the deficit is to raise any additional tax revenue required in a fair way. For these reasons it is proposed to compensate the less well off for the impact of the rise in GST. This will be done by increasing income support for those that receive it and maintaining an adequate GST bonus for those on low incomes but not receiving income support.”

The Food Costs Bonus (Jersey) Regulations 2008 have now replaced the original GST Bonus Regulations. The value of the bonus includes the original compensation for the cost of GST on food as well as additional funding provided in 2009 in respect of food costs directly. The value of the bonus in 2010 was £153.60.

The regulations were set up in 2008 and will expire on 23 July 2011.

Renewal of Regulations

It is proposed to create a further set of triennial regulations incorporating the existing compensation for food costs and the cost of GST in respect of food. Applying the September 2010 annual increase of the Food group of the Jersey RPI increases the 2010 value of £153.60 to £158.36.

The value of the bonus in 2011 will also take into account the additional cost associated with the increase in the GST rate from 3% to 5% on 1 June as it applies to the cost of food. Recent evidence from the Statistics Unit suggests that the average cost of GST on food for a household in the second income quintile is approximately £90 per annum, at the current 3% GST rate. The increase in GST in respect of 7 months of 2011, equates to an additional cost of £35. The rate for 2011 will be adjusted for this additional amount and set at £193.36. The regulations allow the Minister to increase the bonus in 2012 and/or 2013 by ministerial order.

The penalties for offences under the regulations have been brought in line with the level of penalties set under the TV licence benefit and as proposed for the new Christmas bonus law. The penalty is imprisonment for a term of up to two years and a fine. Under the previous regulations the term of imprisonment was set at a maximum of seven years.

Financial and manpower implications

Based on a current uptake of approximately 2,000 claims per annum, the departmental cash limit includes an allocation of £386,000 for the food costs bonus in 2011.

Analysis of the recent Income Distribution Survey suggests that there may be a considerable number of households who are eligible to claim this benefit but are not currently doing so.

For example, an analysis of pensioner households indicates that there may be up to an additional 2,200 pensioner households who could be eligible for this bonus, but do not currently claim it.

The value of the benefit has increased substantially since its introduction in 2008 and it is likely that take-up will increase with this further increase in the rate of benefit.

Each additional 1,000 households claiming in 2011 would create an extra cost pressure of £193,000 which is not currently allowed for in the departmental cash limit.

A substantial increase in the number of claims would also have a significant impact on the volume of administration for the Department, creating pressures on existing manpower resources.