Exactly five weeks ago, the States voted to introduce a controversial tax reform package which included GST at 3%.
As part of that deal, Policy and Resources (P&R) had promised to make what it called 1% ‘savings’ – though in reality this meant increasing the budget by less than it otherwise might have done, rather than making actual cuts.
Today, in a startling display of fiscal flip-flopping, all five members of P&R voted to whack an extra £15.7m onto the budget – along with 18 of their fellow States Members.
P&R had outlined two possible budgets – one (Option A) which stuck to the 1% ‘savings’ commitment and another (Option B) which increased spending above inflation and pushed the States into an £11.5m deficit.
Politicians are, of course, entitled to change their minds when new information becomes available, but questions will inevitably be raised about what’s changed in the last five weeks.
One of the main arguments for GST has always been that Guernsey has a structural deficit of about £50m, which the new increased budget must make more acute.
The decision takes committee spending to £716.1m, up from the £700.4m proposed under Option A.
P&R has not abandoned its savings ambitions entirely.
Instead, deputies have backed a commitment to find £20m in recurring annual savings by 2029, using 2026 as the baseline.
That leaves the States spending more now, while promising to find savings over the next three years.
What else was agreed?
Alongside the extra spending, deputies backed 14 amendments changing tax, duty and government policy.
Fuel and alcohol duty
Fuel duty rates will be frozen at their existing levels, reversing proposed increases.
Several alcohol duty rates will be cut, with future increases limited to inflation for 2027 and 2028, or until the States introduces a Minimum Unit Price or another public health policy on alcohol.
Mortgage and property taxes
The existing £3,500 tax relief on mortgage interest for people’s main homes has been retained, reversing plans to phase it out.
P&R must also investigate increasing document duty on property transactions over £2.5m, including a possible new band for properties worth more than £10m.
Support for businesses and the economy
The production threshold for independent small distilleries has been raised from 20,000 to 30,000, while the States will develop new tiered thresholds for small producers.
Deputies also agreed tighter rules for the economic growth fund, requiring projects to demonstrate measurable benefits and value for money.
The Island’s economic competitiveness must now be considered when future tax and spending decisions are made.
Other changes
Action for Children will receive an extra £57,000.
Downsizing tax relief will end after 2027, while the States will review the Open Market tax cap.
Excess revenue from the global minimum tax regime, known as Pillar 2, will be directed into the Core Investment Reserve.
A review of government borrowing, debt and reserves will also consider how public money could be used to fund local investment.
Finally, committees will have greater control over senior public sector recruitment, with approval required for appointments and regrading at senior officer level or above.
What was voted out?
Fourteen other amendments were rejected, including proposals for:
- Cost-of-living payments: £210 for single people and £353 for couples on low incomes who do not receive income support.
- Off-Island healthcare: An extra £3.1m for Health & Social Care, alongside £3m for the Budget Reserve.
- Home Affairs: £4m additional funding for frontline services, vulnerable people and protecting Guernsey’s international reputation.
- States housing: An extra £795,000 for repairs and maintenance.
- Education: An additional £1.605m for Education, Sport & Culture.
- Alderney air links: Extra funding for the island’s air services.
- Charities: A new £350,000 annual fund for charitable and community services.
- Parents: A new Child Responsibility Tax Allowance for dependent children.
- Tax allowances: Raising the £85,000 income threshold at which tax allowances start to be withdrawn to £88,650.
Deputies also rejected further cuts to overseas aid and an alternative spending plan, known as Option C, which would have increased committee budgets to £708.25m while requiring £20m in annual recurring savings by 2029.
