Tuesday 09 October 2018
The Policy & Resources Committee has been able to produce a fully balanced Budget for the second year in a row and is saying the island's solid fiscal position and economic stability will be the envy of jurisdictions throughout the world.
Published today, the 2019 Budget demonstrates the benefits of multi-year financial discipline and planning that the States of Guernsey has delivered - these actions turned the island's finances around after nearly a decade of structural deficits.
Deputy Gavin St Pier, President of the Policy & Resources Committee, said:
'Financial discipline and planning: both are absolutely essential for a government and whilst unlikely to capture popular imagination, neither can be taken for granted. Let's not pretend it has been easy. Imposing both on government has been met with both resistance and scepticism. But now we can reap the rewards and be proud that our public finances have stabilised and improved whilst other jurisdictions continue to struggle. That stability is vital as it allows the States to deliver the vital services on which we all rely.'
The strength of the financial position, in terms of future forecasts and being able to allocate the £23m surplus from 2017, has allowed the Policy & Resources Committee to recommend a number of positive measures aimed at easing the burden on islanders, replenishing the island's reserves and community investment.
These measures include:
- Another £500 increase in personal tax allowances (up to £11,000 per person); benefitting low and middle income families the most
- Further investment in the island's economy, with an additional £1.5m provided to the Future Guernsey Economic Fund
- Rebuilding the core investment reserve with a £12.9m transfer
- The creation of a Participatory Budgeting Fund; £1m to be allocated to promote community engagement to decide where to spend part of the public budget. The States will seek to partner with a third-sector organisation to undertake the process of seeking and receiving ideas from the community
- An Overseas Aid & Development Impact Investment Fund; invest £1m to support an innovative approach, which will result in a more lasting impact in the world's least developed countries with sustainable objectives in mind
Deputy St Pier said:
'The Committee was pleased to be in a position to recommend measures that will directly benefit our community and residents. We have increased personal income tax allowances above inflation for the third year in a row - over this period, cutting annual income tax bills by £600 per couple/£300 per individual. The launch of the Participatory Budgeting Fund is also an exciting development. The Fund will release £1m to be invested in projects that the community values.'
Deputy St Pier acknowledged that the Budget contained the normal annual changes to Tax on Real Property and excise duty.
'While I fully appreciate it comes with the territory for the Committee, and me as its President, to receive public criticism for these yearly changes, the reality is that our influence on them is limited. For example, to stabilise our tax base, in 2015 the States of Deliberation resolved that over 10 years the real value of the contribution of domestic TRP needed to double by 2025. To achieve this, requires above inflation annual increases until then. Likewise with fuel duty increases, which I know are deeply unpopular with motorists but are unfortunately a necessity until the States agrees an alternative mechanism for fairly generating the same level of income to fund essential public services via other means.'
The Medium Term Financial Plan, agreed by the States last year, outlined that the burden of returning to a sustainable financial position would be shared between a reduction in government's cost base (65%) and increases in revenue (35%) targeted at those most able to pay. The Budget confirms that the States remains on track to meet the targets set for the duration of the plan.
Deputy St Pier added:
'The Budget notes that the speed and capacity of the States to reform public services has picked up. This will result in a reduction in the payroll of more than 200 by the end of 2020 saving taxpayers at least £10m a year. I have no doubt that, once again, there will be sceptics out there who say this cannot or will not be done. But it can and it will. We now have a demonstrable track record of delivering on what we said we'd do - that is the purpose of being disciplined and planning ahead.'
Deputy Lyndon Trott, Vice-President of the Policy & Resources Committee, said:
'There is nothing more pleasing to a politician involved in setting the Budget than it containing no financial shocks for the average taxpayer. It means the economy is strong and performing, and it means that we can cut income tax for most people. There are a number of progressive measures in the 2019 Budget, such as the increase in commercial TRP for accountancy firms and the third phase of the withdrawal of personal allowances for higher earners, which all ensure that those who can afford to pay more do so.
'We cannot be complacent. There are external threats, including Brexit, that need to be managed. So we need to maintain our discipline and continue to plan. But Guernsey's public finances are in a good state and the envy of the world. Frankly it is time for us all to be proud of what has been achieved and much more positive than some like to be.'
