Guernsey Publishes 2011 Budget Report

by Jason Gorringe, Tax-News.com, London

15 November 2010

The Guernsey Treasury and Resources Department has published its 2011 Budget Report, presenting its recommendations for adoption in the forthcoming budget.

The Department's 2011 Budget Report recommends:

• A freeze in personal income tax allowances;
• A 4.6% increase in the rate of duty on tobacco – 14p on a pack of 20 cigarettes;
• A 3.5% increase in the rate of duty on alcohol – 1p on a pint of beer, 5p on a bottle of wine and 34p on a litre of spirits;
• Duty on Fuel to increase by 10.8% - 4p per litre of petrol / diesel;
• Tax on Real Property rates to increase by 20% for domestic property (GBP20-GBP25 per annum for a typical house) and 3.5% for commercial property and land;
• Total Cash Limits of GBP359.5m (The objective in the Fiscal and Economic Plan to provide for a “real terms freeze on aggregate States Revenue expenditure” is now interpreted as including formula-led expenditure);
• The transfer of GBP21.3million to the Capital Reserve; and,
• Transfers from the Contingency Reserve (Tax Strategy) of GBP10m for 2010 (compared to GBP40m anticipated in last year’s Budget Report) and GBP35m for 2011.

Commenting upon the publication of the report, the Minister with responsibility for the Department, Charles Parkinson, said: “This Budget shows that the States’ finances are in better shape than expected.  A combination of economic growth, modest rises in indirect taxes and continued expenditure restraint is  resulting in sustainable progress being made towards a balanced budget and lower than anticipated withdrawals required from the Contingency Reserve.”

“The current projection is that there will not be a requirement to introduce any new taxes in order to eliminate the deficit in the public sector finances,” Parkinson confirmed.

In its Report the Department has emphasized the importance of continued expenditure restraint as being a key component of the Budget proposals and in this respect it is noted that:

• The overall States expenditure is expected to be within budget in 2010;
• The overall recommended 2011 Cash Limits are not increasing in real terms with freezes in the majority of Departments allocations thereby enabling the Health and Social Services Department to receive a real-terms increase; and,
• The use of Unspent Balances is to cease.

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