Guernsey’s public finances did return to a surplus in 2025 – but we’re warned the island is still facing a long-term annual shortfall of about £50million.
The latest annual accounts show the “core” States funds – covering day‑to‑day public services – recorded a £45m operating surplus – a significant turnaround from 2024’s deficit of £44m.
However, the headline figure is largely driven by one-off income and accounting gains, with Deputies warning the underlying position remains in deficit.
Deputy Lindsay de Sausmarez, Policy and Resources President, said: “It feels a bit paradoxical that there’s a funding gap… when the 2025 Accounts show a surplus, but that’s because they’re two different things.”
She explained that the annual accounts captured a single year – including temporary “windfalls” and market movements – whereas the funding gap reflected longer-term pressures such as infrastructure investment.
One-offs drive improvement
One of the biggest factors behind the improved result was £34m in one-off tax receipts from the banking sector, linked to adjustments from previous years.
The accounts were also boosted by £119m made from gains in the States’ investment portfolio.
However, this reflected profits on paper, rather than cash income, the States said.
Together, those factors helped push the overall “core” surplus, including investment gains, to £113m.
‘Two different things’
Despite the surplus, the States estimates it still faces an ongoing £50m funding gap – the difference between sustainable income and the long-term cost of running and maintaining services.
The latest figures also highlight continuing pressure on spending.
Total expenditure increased by around £70m, driven by rising public sector pay, operational spending, and benefit payments.
The States spent nearly £20m more last year on civil service and public sector pay, while the number of roles rose by 144 full‑time equivalents.
Benefit payments increased by about £17m.
Tax boost – but not guaranteed
Tax receipts increased significantly in 2025, including revenue from the new OECD Pillar 2 corporate tax and higher corporate tax income.
But officials warned that some of this income – particularly one-off adjustments – could not be relied on in future years.
Deputy Charles Parkinson, Treasury Lead, said it would take several years to confirm the final value of Pillar 2 receipts, adding that the current year may represent a “high‑water mark”.
Company profits
Across the wider States Group – which includes organisations such as Aurigny, Guernsey Electricity and Guernsey Ports – the overall surplus was £106m.
However, this does not affect the underlying funding gap as this money doesn’t directly fund core public services.
Long-term focus
The funding gap has gone down slightly from £58m in 2024 to around £50m, but remains a central challenge for the States’ finances, the P&R President reiterated.
Deputy de Sausmarez said the accounts showed that “two things can be true at the same time” – a positive year on paper, but a continuing need to address the structural deficit.
Further detail on how the States plans to close that gap is expected to be set out in its upcoming tax reform proposals.