2024 – a challenging economic climate

Headline results

The States ran an operating deficit on general revenue of more than £9m. in 2024. This compares to a surplus of £10.2m. in 2023 and a loss of £5.1m. in 2022.

Trading entities lost another £6m., and after adjusting for depreciation, the cost of non-capital project expenditure, interest and appreciation in the value of investments, the over general revenue deficit is nearly £31m.

Income

States income in 2024 produced ‘a mixed result’ in revenue income lines, Deputy Trott said. The overall picture is £21m. down against the budget.

He once again blamed an exceptional £29m. tax adjustment relating to one bank, for having an impact on the results. This was later queried by two political colleagues. ‘While there are other variances, this is by far the largest and the single factor driving a revenue deficit,’ he said.

Total revenue income was just short of £601m., level with 2023 in nominal terms, and £21m. less than budgeted. The 2023 figure had been £18m. ahead of budget.

Taxes

ETI receipts, which Deputy Trott said were the ‘best real-time indicator of economic performance’, were short of our budget by almost £5m. (just under 2%). He attributed this to a ‘modest lag’ in median earnings, falling behind inflation, but this was offset slightly by a rise in the number of people working in the island ‘which is great news for future revenue’.

Housing market

Document duty ended the year with receipts of £23m. (which was 28% ahead of the budget), ‘helped by a handful of very notable transactions’. The fourth quarter was the strongest in the open market since 2022, with 23 transactions going through at a median price of £1.75m. – up 20% on the same quarter in 2023.

Other duties

Customs duties ended the year £3m. (7%) behind budget, driven by alcohol duty receipts staying flat on 2023 in real terms, despite the 2% real terms increase in rates, and tobacco duties being £3.9m. adverse to budget, and significantly down on 2023, partially driven by the timing of imports.

Expenditure

The majority of committees spent within the cash limit allocated by the States and all but two were within £0.5m. above or below their allocated limit. Health & Social Care, to nobody’s surprise, exceeded its budget by £6.4m., just less than 3%, due to a combination on general increased demand and a specific issue of off-island intensive care demands late in the year.

The other area outside of the budget was Corporate Services, which recorded an underspend of £1.3m. or 1.5%, largely driven by difficulties in recruiting to vacant posts.

Recruitment

Deputy Trott said that recruitment remained ‘challenging’ in some services and professions. Pay costs for the year totalled £336m. just over 1% less than budgeted, but there were nearly 400 vacancies on average across the year, equating to 7% of the public sector workforce.

Some of these roles had to be covered through overtime or agency staff, at a higher cost than full-time employees, which meant that the average hourly cost spread across all employees was 6% higher than budgeted.

All committees had vacancies through the year, with Home Affairs (114 FTE; 17% of its headcount) and Corporate Services (96 FTE; 13%) having the most significant challenges.

Compared to 2023, the total workforce increased by 123 to 5,162, the increase being mostly in health and care services, as approved by the States through increases in budget allocation.

This is a similar picture to the increase in 2023 which was 142 full-time equivalents – about half of which were professionals in health and social care.

Other expenditure

Pressures on the budget reserve during the year, particularly in relation to sea link contingency planning, meant that it was exhausted, but a ‘significant underspend’ on Government Work Plan initiatives over the year helped mitigate these short-term cost pressures.

‘But members should be mindful that in many cases, this underspending simply slows the realisation of our Government Work Plan objectives,’ said Deputy Trott.

Overall, there was a marginal overspend when all committees and central reserves were taken together, amounting to just £0.7m., 0.1% of the budget.

Investments

Investment appreciation over the year is an unrealised gain based on market valuations on 31 December. Deputy Trott said that performance during the year was strong and substantially above budget estimates, and returns attributable to general revenue in the year totalled £41m.

Overall position

The combination of the shortfall on revenue income and the expenditure pressures resulted in a net revenue deficit of £9m. a shortfall of some £21m. against the budget. The £6m. losses from the unincorporated trading entities also need to be factored in. Capital related cash and non-cash costs of depreciation, disposal proceeds, and revenue expensed major projects totalled £57m., some £20m. higher than budgeted.

This was mainly due to a higher proportion of the major portfolio spend been expensed than expected, a matter of timing to impact the in-year position, but with no impact on cash flow, as the spending is already planned and accounted for.

After these adjustments, the result was a general revenue deficit of £72m. Taking investment returns into account, the overall picture is a £31m. deficit.

‘While this is the result for the year and we should not shy away from this, it is worth reminding members of the £23m. of previous year adjustment, without which we would have been much more in line with the Budget overall, with a general revenue deficit of under £10m.,’ said Deputy Trott.

The audited accounts are due to be published in June, and will be fully compliant with International Public Sector Accounting Standards for the first time.