Tax hikes or major cuts on the way after deficit grows to around £130 million

Wednesday 01 April 2015

Ministers seem to be holding back news that the deficit in States finances is worse than first thought – meaning major tax rises or spending cuts could be on the way.

During last week’s debate on extra funding for the child abuse inquiry, Transport Minister Eddie Noel let slip that the financial position was worse than anyone was admitting.

One source who has seen the most recent data has told Bailiwick Express that a new potential deficit range of anything up to £130 million - depending on States' spending growth - has been forecast by around 2019.

Dealing with a deficit of that size would mean major changes for the States – to put it in perspective in terms of tax, it would be the equivalent of raising GST to 10% and doubling the rates of stamp duty and fuel tax. In terms of spending, it would be the equivalent of shutting down the Education and Transport departments entirely.

In previous comments, Treasury Minister Alan Maclean has promised that no tax increases will be considered until efficiencies, restructuring and savings have been thoroughly pursued.

The deficit in public finances has kept shooting up over the last three years – back in 2012 ministers were confidently predicting a £25 million surplus in 2014 and 2015, but months before the last election it emerged that the most recent figure was a deficit of £67 million.

Now it appears it is getting significantly worse.

In a slip that appears to have been mostly missed in the States last week, Deputy Noel said that the deficit was up to £100 million, and hinted that the latest updates that have yet to be made public were even more serious.

In his speech, he said: “Previously projections, which are in the public domain, indicate that we were looking at savings of circa £80 million to £100 million in order to balance our finances by 2019, together with a cash flow requirement in excess of £250 million to get us there to bridge that possible gap between our expenditure and our income.

“After that update, I cannot say much more at this time, but those figures have not improved.”

The last few Council of Ministers meetings have seen updates on the States financial position included on the agendas, but the items are on the secret part of the discussion paper that is circulated. The Chief Minister has refused to give a public update on what the most recent figures look like.