Predicted £33m. deficit turns into £13m. surplus
GUERNSEY’S economy has bounced back faster than expected from Covid, as the States earned more and spent less in 2021 than had been predicted.
But Covid business support through the second lockdown cost more than expected.
The provisional assessment of the States’ financial position in 2021, published yesterday afternoon, shows an improvement against budget of £46m.
This resulted in a budgeted deficit of £33m. becoming a surplus of £13m.
This has been further improved by the income earned on States reserves in what was a good year for investments.
Policy & Resources treasury lead Mark Helyar said that thanks to Guernsey’s response to Covid, 2021 was much better than expected.
‘But we should not expect this very exceptional time to continue and become the norm and we need to be really careful not to be lulled into a false sense of security,’ he said.
‘It’s really positive to have had this good performance, and it puts us in a good position for moving forward, but overall, when you include the Bailiwick’s capital spending needs, we remain in a deficit.’
The surplus figure is calculated before capital spending commitments, in the region of £60m., are taken into account, leaving the States in a deficit position.
Revenue income was up £52m. against budget, with income tax the largest driver with a gain of £28m.
Tax paid through workers’ wages accounted for 65% of the total, and was £12.5m. ahead of forecast, showing growth of 7% on 2020 and 6% up on the pre-Covid period of 2019.
Policy & Resources, which is back at Beau Sejour on its tax review consultation exercise this morning, said this showed the strength and resilience of the Guernsey economy, which, it said, had bounced back faster than could have been expected.
Guernsey’s buoyant property market also had a positive impact on States finances, as document duty raised £32m. against a budget of £20m., and £10m. up on 2020’s strong performance.
Customs duties also contributed, outperforming the budget by £6m.
Despite volatility in global markets, an investment return of 9.7% was achieved – well ahead of the budgeted return of 3.8%. This helps offset the deficit position.
However it was not all good news.
The second lockdown resulted in significantly more cost for the States through the business support schemes. The full-year cost paid to businesses was £22m. against a budget of £5m.
P&R justified the spend as supporting the overall strong economic performance, with jobs secured and a low number of business failures despite the lockdowns.
Aggregate committee expenditure was £11m. below budget. This is despite committees having to pick up additional spend on the various measures to respond to Covid challenges.
Covid costs, staff pay rises and the capacity to implement service developments were all much lower than expected, which translated into a total of £18m. being unspent at the end of the year.
Other adverse factors that have been absorbed in the finances included writing off £9m. from the Guernsey Ports overdraft and an Aurigny loss, with an early estimate of £16m.
Policy & Resources president Deputy Peter Ferbrache said Guernsey was still facing challenges, including changing demographics.
‘Financially, we have recovered from the impacts of the pandemic much faster than expected, but we cannot realistically expect that rapid pace to continue indefinitely,’ he said.
‘That said, further growth in our economy long-term is absolutely something we need to see, and we’re relying on it to avoid our annual shortfall being even worse than the £85m. currently forecast.’
