Covid uncertainty set a challenge for Treasury

The last-remaining Covid support scheme for the visitor economy was stopped at the end of March, with the States having allocated £2m. to be paid this calendar year.

Covid made revenue and expenditure forecasting for the 2021 and 2022 budgets more complex than usual, the Policy & Resources Committee said.

‘Trying to forecast against a backdrop of a global pandemic and our own fast-changing response, including two lockdowns, multiple business support schemes, travel restrictions and the roll-out of vaccines has been incredibly challenging,’ said a treasury spokesman.

‘The recovery of the economy and revenues to pre-Covid levels has also been far more rapid than expected and that has resulted in our revenues outperforming the forecasts over the last two years.

‘While forecasting is always subject to some uncertainty, clearly the last two years are not in any way comparable to other earlier years.’

The States has revealed that a predicted annual deficit of £13m. for 2021 became an expected £33m. surplus once finances were reassessed this year.

The spokesman said that the States ‘does have a tendency to err on the side of caution in budgeting and to underestimate revenues’.

‘In more normal circumstances the underestimates have generally been quite small as a percentage of the total budget, and a small underestimate is usually more prudent than overestimating.’

Forecasts for income tax, particularly ‘pay as you go’ ETI contributions, and tax on real property, were usually fairly accurate. But estimates for document duty and the self-employed were more volatile and harder to predict.