Tuesday 26 September 2023
Based on performance in the first seven months of the year and forecasts to the end of the year, it is now expected that the States will end the year around £18m ahead of budget.
This is partly because of better than expected ETI (individual income tax from employment). This increase in outturn is a result of both median earnings rising faster than anticipated and employment levels increasing. The improvement in ETI income alone is likely to mean an additional £10m against the budgeted position. Other categories of income tax are also doing better than previously expected, with interest rate rises positively impacting banking profits.
Document duty is likely to finish the year £7m below the budgeted figure, due to a slow down in the housing market following extremely buoyant years since COVID.
Other areas of income are largely in line with budget expectations.
With regard to expenditure, the States' costs, excluding pay, have been heavily impacted by inflation, with the cost of most goods and services rising. This is leading to several Committees forecasting small overspends.
Pay costs are likely to be in line with the budget overall, but attention should be drawn to the situation at Health & Social Care which faces an overspend of £2.4m on staffing. Recruitment remains a significant challenge in this area, and agency staff are needed to ensure essential services can continue to be safely delivered. This overspend is offset this year by vacancies in other areas which have been difficult to fill in the current market.
The overall improved position means the projected surplus for 2023 is now around £24m after allowing for proceeds from the sale of property and allowing for the loss at Guernsey Ports. However, as reflected in the 2023 Budget, this is a revenue surplus position only and does not reflect either returns on investment or the cost of required spend on Guernsey infrastructure. After taking account of investment returns and capital expenditure in line with the States' target (2% of GDP), the forecast position for 2023 would still be a deficit, albeit a reduced one of £20m.
The Funding & Investment Plan, which looks at the funding of capital projects and public services over the coming decade, has been informed by forecasts compiled earlier in the year. However, while there are some differences between income and expenditure, the net 2023 position used as the basis for the projections is in line with this latest 2023 forecast.
Deputy Mark Helyar, Vice-President and Treasury lead for the Policy & Resources Committee said
"At the recent States debate, we were asked for an update on this year's financial performance and I am happy to provide it, as it is timely, and helps to keep our community informed about how the States and the economy are performing."