P&R rules out tax rises and spending cuts ahead of election

It was under pressure from some deputies to revisit income and expenditure for 2025 after the States agreed a partially unfunded budget in the final weeks of last year.

But the senior committee has carried through on its pre-Christmas warnings and instead proposed extending the timeline for major capital projects, which it admitted would leave the next States hundreds of millions of pounds short on infrastructure investment.

‘The Budget takes months to compile, involving research, consultation and dialogue, and it is now too late to make changes to taxes without potential negative consequences,’ said P&R president Lyndon Trott.

‘Changes now could have a negative impact on affordability of planned expenditure and put further pressure on the cost of living.

‘In terms of expenditure, a rigorous process was applied in agreeing [committees’] budgets. Plans have now been made based on agreed budgets and any in-year changes to committees’ cash limits may have consequences not yet thought through.’

P&R’s approach was set out in a policy letter published late yesterday which it claimed contained no firm propositions and was lodged under a rule which prevents other deputies from proposing amendments.

That is likely to frustrate States members who had urged the senior committee to revisit options to raise more revenue and suggested they might lay amendments to that effect.

‘There are all sorts of implications at the lack of funds for capital projects,’ said Deputy Peter Roffey immediately after P&R’s policy letter came out.

‘If we don’t want to see decline, we need to look at other ways of raising funds. If that means new taxes or things like paid parking, we need to talk about that, which P&R doesn’t seem to want to do.’

P&R’s policy letter also forecast a total general revenue deficit of £21m. across 2024 and 2025 and an underlying annual structural deficit of £57.5m.

Other deputies had suggested more borrowing to plug funding gaps. The States currently has £330m. of borrowing and has agreed another tranche of debt to fund its current capital programme.

But P&R has now told the States that it cannot recommend further borrowing until public finances improve.

‘While the revised estimates for Pillar 2 [company] tax revenues and the recent decisions of the States on tax reform can give some reassurance over the already-agreed borrowing, until such time as the successor States has implemented the proposed tax reform it would not be fiscally responsible to suggest taking out new borrowing in addition to the £155m. already agreed,’ said Deputy Trott.

P&R has, however, announced that it would launch the Bailiwick’s first wholesale review of the size of government in more than a decade.

The senior committee admitted that there was little public confidence among taxpayers that they were getting value for money.

It ruled out gradual belt-tightening as insufficient to generate savings of the magnitude required.

‘The committee considers that a fundamental services review would help define which are the core services that must be delivered by government, resulting in an agreed universal entitlement, which services might better be commissioned by others, which services should become “user pays”, and which services should be stopped altogether,’ said Deputy Trott.

P&R said it would work with other committees and deputies before the end of the States term before presenting the Assembly with detailed proposals about how the fundamental services review would operate.