Wednesday 09 October 2013
Guernsey's Treasury & Resources Minister, Deputy St Pier, and the Treasury & Resources Board has set out a Budget built on the principles of "prudence, responsibility and stability" for 2014. The Budget report can be found at the bottom of this page.
Deputy St Pier commented:
"The Board has decided unanimously that it is important to propose a Budget to the States that puts prudence, responsibility and stability first. The 2014 Budget's aims are consistent with last year's: the elimination of the budget deficit as soon as possible, but in a measured and sustainable way; and maintaining Guernsey's competitive business environment to nurture economic growth.
"By taking this consistent approach, we are continuing to strive to ensure fairness and certainty for hard-working families and businesses in Guernsey. We have focused on nurturing growth; balancing the books to reduce the deficit; and making relatively minor changes to taxation to support those objectives."
The Budget has three clear themes:
- Nurturing growth
- Balancing the books through measured deficit reduction
- Fair and equitable personal taxation
The global economic environment remains challenging, but the Treasury & Resources Board is encouraged by the early signs of recovery in Guernsey's economy. This Budget is intended to nurture this emerging growth.
Deputy St Pier said:
"To facilitate further growth, we are proposing that document duty thresholds are permanently increased and document duty rates are temporarily reduced for lower value properties in order to stimulate the property market which should lead to wider economic benefits. In addition, a substantial increase in the appropriation to the Capital Reserve is recommended which will mean that nearly £80million of funds will be available to commence work on the 2014-2017 States Capital Investment Portfolio."
Balancing the books - measured deficit reduction
The Treasury & Resources Board remains committed to eliminating the budget deficit as soon as practicable, and ensuring that public services remain adequately funded and efficient.
The Contingency Reserve is budgeted to total £200million at the end of 2014, which in cash terms approximates to the balance in the Reserve prior to the implementation of the Economic and Taxation Strategy. The Tax Strategy element of the Contingency Reserve is estimated to be £52million at the end of 2014 as, although the States financial position has not returned to balance within the anticipated timescale, withdrawals in order to fund the budget deficit have been lower than originally forecast. This is largely due to the effect of the Financial Transformation Programme, which is on course to deliver at least the minimum benefit of a £31million ongoing reduction in the States baseline budget - providing that the current commitment and momentum is maintained.
Overall, the forecast deficit for 2013 is now estimated to be £27million, which is £10million more than originally predicted due to a reduction in income.
Deputy St Pier said:
"The Board is disappointed to be reporting a forecast deficit of this level. However, these shortfalls should be temporary and the 2014 deficit is expected to reduce significantly to £14million despite a £10million increase in the appropriation to the Capital Reserve.
"The Financial Transformation Programme is also targeted to deliver a further real terms ongoing reduction of £12.5million contributing to an overall real terms reduction in budgeted States expenditure of 2.6% in 2014.
"States income for 2013 is lower than planned for a variety of reasons, which are primarily cyclical. This is due to factors such as income tax from the expansion of the 10% band being £7 million less than anticipated due to timing issues; document duty income down by £4 million against budget, because of subdued property market activity; and ETI not performing as well as estimated, despite increasing against 2012 receipts.
"The lower than anticipated income emphasises the need for good housekeeping, for ensuring that the books are balanced, and for renewed restraint in spending. Total cash limits of £363.2 million are proposed for 2014 - the figure for 2013 was £360.7 million. As acknowledged in the capital prioritisation States Report, there will be an increased transfer to the capital reserve, which will increase to £35.4 million, which will enable the planned infrastructure investment."
"Next year will see the conclusion of our five-year financial transformation programme. The programme has not just helped to unlock recurring savings through efficiencies and shared services, it has also ensured greater rigour in bringing our spending in line with our income. The challenge of keeping spending under control will not end next year, and this Budget will help ensure that we are fitter for purpose in meeting that challenge in the years ahead."
Fairness in personal taxation
In advance of the conclusions and resulting recommendations of the Review of Personal Tax, Benefits and Pensions, the Board does not consider it would be appropriate to propose any significant long-term structural changes to the personal taxation regime.
Deputy St Pier said:
"As a short-term measure, it is recommended that personal income tax allowances are raised by 2.1%, which is the same increase as is being recommended for all Social Security Department benefit rates, with the exception of family allowances.
"To support the achievement of the aim of eliminating the budget deficit in a measured way, modest real-terms increases in indirect taxes are recommended. For example we will be proposing a 1.7% real terms increase on most duties and TRP across the board.
"I said last year that the Board's aim was to build a fair, equitable and long-term sustainable tax system. These steps will prepare the ground for formulating the recommendations of the Review of Personal Tax, Benefits and Pensions, with that aim remaining at the forefront of our thinking."