P&R’s tax plans challenged as States ‘£18m. ahead of budget’
FRESH doubt has been cast on Policy & Resources’ tax plans after it emerged that the States is expected to end this year about £18m. ahead of budget.
The news is partly because of better-than-expected individual income tax from employment, with the increase in out-turn a result of both median earnings rising faster than anticipated, and employment levels increasing.
The improvement in ETI income alone is likely to mean an additional £10m. against the budgeted position.
Other categories of income tax are also doing better than previously expected, with interest rate rises positively impacting banking profits, where tax is paid at 10%.
Document duty is likely to finish the year £7m. below budget figure, due to a slowdown in the housing market following buoyant years since Covid.
Other areas of income are largely in line with budget expectations.
Deputy Heidi Soulsby, a former vice-president of Policy & Resources, and a leading critic of P&R’s plans to introduce a goods and services tax, said she was not surprised by the budget announcement, adding that it would now be harder for P&R to claim that the financial situation was as bad as it had previously made out.
‘I had anticipated that the surplus might have been even more,’ she said.
‘I think it just shows the volatility of the situation right now because of things like Covid, Brexit and the war in Ukraine.
‘P&R have now got to look beyond what the figures were in 2022, this news makes their desire to bring in more taxes look even more debatable.’
With regard to expenditure, the States’ costs, excluding pay, have been heavily impacted by inflation, with the cost of most goods and services rising.
This is leading to several committees forecasting small overspends.
Pay costs are likely to be in line with the budget overall, however Health & Social Care is set for an overspend of £2.4m. on staffing.
Recruitment remains a significant challenge in this area, and agency staff have been required to ensure essential services can continue to be delivered, though the overspend is offset this year by vacancies in other areas.
The projected surplus for 2023 is now about £24m., however this is a revenue surplus position only and does not reflect either returns on investment, or the cost of required spend on Guernsey infrastructure.
After taking account of investment returns and capital expenditure in line with the States’ target of 2% of GDP, the forecast position for 2023 would still be a deficit, albeit a reduced one of £20m.
P&R vice-president and treasury lead Mark Helyar said the committee was asked for an update on this year’s financial performance at the recent States debate.
‘I am happy to provide it, as it is timely, and helps to keep our community informed about how the States and the economy are performing.’