Covid shrouds true picture of States finances

The £83.9m. hole which Covid-19 has torn in this government’s pocket is of course the headline figure of news coverage this week, but arguably helps to cover up the real financial picture.

More than £50m. paid in Covid support packages, £28m. to cover losses from Aurigny, and a £5m. overdraft for Guernsey Ports all adds up, though it actually reveals a financial position £15m. better than originally forecasted.

In all States finances have seen an about-turn from a £105.6m. annual surplus to a £63.8m. annual loss, but a deeper examination of the figures shows that revenue income, despite a crash in income tax receipts (more than 5% down from individuals) did better than the probable outturn drafted post-Lockdown I, and performed close to the original budget estimate of £477.1m.

So it seems that while the local economy battled through Covid and broadly continued to perform – and there is further evidence of that robust recovery in company annual reports being published around now – the other side of the coin is that the States continues to spend ahead of inflation day after day. Net revenue spending increased £17.2m. (4.2%) in nominal terms, 2.6% in real terms.

This has been attributed to £4m. for IT partners Agilisys to drive digital transformation, £2.9m. in prioritised service developments, £2.5m. on health services, heavily loaded by the impact of 10% pay awards under the Agenda for Change banner in 2019, and £2.8m. for services provided by the Committee for Employment & Social Security.

Committees did manage to save £4.1m. during the year – but failed to realise £5.3m. of further targets.

Total expenditure on States pay was up just 0.8% in real terms, though the effect of 2020 pay awards was £6.3m. and the number of full-time equivalent posts within government rose by 36 to 4,720.

Covid shrouds the state of the States accounts – but the course of fiscal medicine which Policy & Resources is intending to embark upon clearly remains necessary.