Draft Social Security (Amendment of Law No.6) (Jersey) Regulations and Long-Term Care Scheme: Ministerial Comment on Amendments

Information about the publication of Ministerial Decisions

A formal published “Ministerial Decision” is required as a record of the decision of a Minister (or an Assistant Minister where they have delegated authority) as they exercise their responsibilities and powers.

Ministers are elected by the States Assembly and have legal responsibilities and powers as “corporation sole” under the States of Jersey Law 2005 by virtue of their office and in their areas of responsibility, including entering into agreements, and under any legislation conferring on them powers.

An accurate record of “Ministerial Decisions” is vital to effective governance, including:

demonstrating that good governance, and clear lines of accountability and authority, are in place around decisions-making – including the reasons and basis on which a decision is made, and the action required to implement a decision
providing a record of decisions and actions that will be available for examination by States Members, and Panels and Committees of the States Assembly; the public, organisations, and the media; and as a historical record and point of reference for the conduct of public affairs

Ministers are individually accountable to the States Assembly, including for the actions of the departments and agencies which discharge their responsibilities.

The Freedom of Information Law (Jersey) Law 2011 is used as a guide when determining what information is be published. While there is a presumption toward publication to support of transparency and accountability, detailed information may not be published if, for example, it would constitute a breach of data protection, or disclosure would prejudice commercial interest.

A decision made on 4 December 2013:

Decision Reference: MD-S-2013-0127
Decision Summary Title :	DS - Comment on amendment to P.138/2013 (Amd) & P.99/2013 (Amd)(3)		Date of Decision Summary:	04 December 2013
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 - Comment on amendment to P.138/2013 (Amd) & P.99/2013 (Amd)(3)		Date of Written Report:	04 December 2013
Written Report Author:	Policy and Strategy Director		Written Report : Public or Exempt?	Public
Subject: States comment on amendment to P.138/2013 (Amd) – Draft Social Security (Amendment of Law No. 6) (Jersey) Regulations 201- & P.99/2013 (Amd)(3) – Long-Term Care Scheme
Decision(s): The Minister decided to present a comment to the States with regard to Deputy Tadier’s amendment to P.138/2013 (Amd) – Draft Social Security (Amendment of Law No. 6) (Jersey) Regulations 201- & P.99/2013(Amd)(3) – Long-Term Care Scheme
Reason(s) for Decision: P.99/2013 and P.138/2013 propose a Long-Term Care (LTC) contribution liability capped at the upper earnings limit of the Social Security scheme (£152,232 per annum in 2013). This would be equivalent to a maximum individual liability in 2013 for LTC contributions of £1,522 per annum at a 1% LTC contribution rate. Deputy Tadier’s amendment seeks to remove the cap of the contribution amount leaving liability uncapped and due against total taxable income. The attached Comment contains the Social Security Minister’s response to the amendment.
Resource Implications: None
Action required: Policy and Strategy Director to request the Greffier of the States to arrange for the comment to be presented to the States as soon as practicable.
Signature:		Position: Minister
Date Signed:		Date of Decision (If different from Date Signed):

Draft Social Security (Amendment of Law No.6) (Jersey) Regulations and Long-Term Care Scheme: Ministerial Comment on Amendments

SUMMARY

The proposed LTC contribution liability is capped at the upper earnings limit of the Social Security scheme (£152,232 pa in 2013)
This would be equivalent to a maximum individual liability in 2013 for LTC contributions of £1,522 pa at a 1% LTC contribution rate.
Deputy Tadier’s amendment seeks to remove the cap of the contribution amount, leaving liability uncapped and due against total taxable income.
All existing contributions levied under the Social Security Law are capped and are associated with entitlements to a fixed range of benefits.
The LTC contribution and LTC benefits have been designed in the same way and there is no justification for an unlimited liability to be introduced in this single area.

Members are urged to reject this amendment

LTC Contributions

The LTC contribution is a contribution raised under the Social Security Law.

As with all other social security contributions, there is a maximum contribution above which no additional payment is required. The proposed changes to the Social Security Law link the maximum LTC contribution to the upper earnings limit, which is currently set at £152,232 pa.

The upper earnings limit was introduced in 2012 as part of the Fiscal Policy Review. The initial proposal was to levy a new 2% Social Security charge up to the upper earnings limit on both working age employees and their employers. After review, it was agreed that the charge in respect of employees would not be introduced in 2012. This decision was influenced in part by the knowledge that a new LTC charge was in the pipeline for employees. The current proposal is that the LTC liability in respect of individuals will be limited to the same upper earnings limit that is already in place for employers paying Social Security contributions.

The proposal to base the LTC liability on all income has created a more progressive charge compared to the original (2011) proposal. At that time the proposal was to base liability on earnings for working age individuals and taxable income for those aged over state pension age. The decision, confirmed in June 2013, to set the LTC contribution liability in line with income tax liability has created a broadly progressive contribution system. By contrast, the original suggestion in 2011 was for a flat rate contribution rate for all working age adults, which would have collected proportionately more contribution income from lower paid workers and proportionately less contribution income from higher paid workers.

Effective rates

Deputy Tadier’s report confuses the concept of effective rate and marginal rate. An individual’s liability for LTC contributions will depend on their effective rate, which will gradually increase from zero, if their income is below the tax threshold, up to the full LTC rate(e.g. 1% in 2016) as their taxable income increases up to the upper earnings limit (UEL).

This diagram indicates the proportion of tax payers who will be subject to LTC effective rates at different levels. For example, based on 2011 tax data, over 40% of all tax payers would have an effective LTC rate of less than 0.6%, if the main LTC rate is 1%.

As Deputy Tadier notes in his report (page 11), 2% of taxpayers earn over £150,000 pa, and, at the proposed maximum contribution capped at the upper earnings limit, they will contribute approximately 15% of all the LTC contribution income collected.

Conclusion

The proposed LTC contribution will collect contributions against all income up to an upper earnings limit of £152,232 per annum. This is in line with other contributions collected through the Social Security Law.

The current proposals provide a much more progressive contribution liability compared to the original 2011 proposals. There is no justification for increasing this liability beyond the upper earnings limit.

Deputy Tadier’s support for the concept of a long-term care scheme is welcomed but members are urged to reject this amendment.