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Statement by the President of the Policy & Resources Committee

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Wednesday 27 February 2019

Update on the Provisional 2018 Year End Financial Position

Mr Bailiff,

This time last year, I reported that the provisional results showed that 2017 had been an extraordinary fiscal year; and an encouraging indicator of renewed strength in our economy.

The updates which I gave during 2018 - in July and in the Budget Report published in September - have also included good news overall, which more than offset any shortfalls on certain revenue lines or possible overspends.

We now have the provisional financial results for 2018. I am pleased to be able to give further positive news. I must of course stress that the numbers I will quote are provisional and still subject to final adjustments and audit.

I do not intend to breakdown the numbers in great detail, but would like to highlight certain specifics:

Before I summarise the 2018 position, I must introduce a note of caution. With a matter of weeks until the UK is timetabled to leave the EU and with no agreement as yet as to the form of that exit, there is a substantial risk of economic disruption with a consequent knock-on impact on our public finances.

There are also expenditure pressures continuously arising, not least as a result of policy development. We seek to ensure that those cost pressures and developments requiring funding are incorporated into our budget when they are prioritised and help deliver on the outcomes set out in our Plan for Future Guernsey. But we must remember that we have finite resources. It is therefore vital that we continue to develop our approach to prioritising the work we undertake and the resources we apply to it.

That is why it is so important to plan for the medium to long term and the challenges we know lie ahead.

Fortunately, the results in 2018 are consistent with the trajectory set out in the Medium Term Financial Plan, which saw us returning to a balanced budget, before moving into a sustainable surplus. If we are to deliver a sustainable surplus then we must remain disciplined and continue to seek to deliver on the targets for revenues and expenditure we set.

We do not underestimate the challenge of raising further revenues from our economy. The Policy & Resources Committee has begun the task of researching the options, suffice to say that none of them would we categorise as 'easy'. In this regard, if we can satisfy ourselves that the trends in increased revenues seen in 2018 are systemic and not cyclical, then this may relieve (although not remove) the pressure on the requirement to raise new revenues in accordance with our agreed plan.

The need to deliver cost effective and efficient public services with a smaller number of posts will not and must not change as a result of an improved economic and fiscal position. It is incumbent on us all to challenge the status quo and ensure that opportunities to change the way public services are delivered are fully explored and implemented.

For example, later this year one of the major initiatives underpinning Public Service Reform, is the programme reviewing the entirety of our supporting technology known as Future Digital Services or FDS. This will move from concept to delivery stage and this Assembly will be asked to make a decision to allow that to happen. This programme will require investment in order to deliver on its three pillars of: 1) transforming business as usual IT, so that it 'just works'; 2) enabling and accelerating Public Service Reform; and 3) supporting the wider economy. This will be vital if we are to deliver on the ambitions of initiatives such as our agreed Partnership of Purpose for health and care services and the transformation of education, as well as radically improving a range of services we offer to the community, such as the Revenue Service of driver and vehicle licensing.

The Future Digital Services technology enablers will also be a vital element of the programme of organisational and service design which is intended to improve the services received by the community, whilst reducing the number of posts required to provide those services.

Members will recall that significant financial savings - estimated to be at least £10m per annum - should be realised through improving processes; becoming leaner through re-structuring to remove duplication; and integrating and digitalising services.

Sir, returning to 2018, we have recorded a surplus for the year approaching £10m - about £8.5m above our original budget for the year. The Policy & Resources Committee will now need to understand the short and medium term consequences of this improvement. Critically, we will need to understand the recurring, cyclical and one-off nature of the revenues before building these results into the planning for the 2020 Budget.

Members will recall that the Assembly agreed that the surplus achieved in 2017 be used to top-up the Future Guernsey Economic Fund; to set aside funding to manage the Brexit 'transition'; to establish an overseas aid and development impact investment fund; to establish a pilot fund for participatory budgeting; and to rebuild our reserves.

Within the context of the priorities set in the Future Guernsey plan, we are now in the fortunate position of being able to consider how the additional revenues from 2018 might best be allocated and applied to deliver maximum benefit to the community and our economy.

In summary, 2018 was a year in which our public finances clearly benefitted from growth in our economy: income tax receipts up; document duty receipts up and customs and excise duties up. It was also another year in which we enjoyed good control of expenditure. This is a good base on which we can plan to deliver our agreed priorities.

Guernsey can be proud of the decisions which have been taken in recent years to improve our public finances and eliminate deficit spending. It has not been easy, comfortable or pain-free. But islanders can be assured that the Policy & Resources Committee is determined that any underlying improvement in our tax receipts are not used to soften the need for restraint or to slacken the pace of transformation in public services;

But, if possible, should be used to reduce the need for new or increased taxes in 2020 and future years, recognising as we do, the substantial pressure there has been on taxpayers for the last 10 years.

Deputy Gavin St Pier

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