2020 Budget: How does it affect you?

Tuesday 08 October 2019

We might be getting a 5.2% increase in personal tax allowances next year, but Guernsey's financial position is weakening, which means in the long term, the States will be looking at new ways to take more tax from us.

Guernsey's budget for 2020 is balanced, and sees investment being made in a number of progressive areas, however looking past next year, people could start to be asked to pay out more to cover the ever-increasing cost of public services.

While this time there is room in the budget to increase people's personal allowances for 2020, by £575 to £11,575 a year, alcohol and tobacco duty prices have risen again with 2pence added to a pint, 10p to a bottle of wine and 37p to a pack of cigarettes.

Fuel duty is also increasing by 1.1p a litre, with a further 1.1p being added in January, as was announced earlier in the Summer. 

Pictured: The excise duty on a packet of twenty cigarettes will be increased from £5.36 to £5.73. 

On a larger scale, businesses are once again going to be expected to contribute more, with commercial TRP being increased by 5%. 

All of this new revenue, and other savings from measures like reducing the amount the States have put into its capital reserves, will go towards a number of new initiatives. They include more investment into the Future Guernsey Economic Fund, plans to develop a government-wide framework for all aspects of air route operations, legislation for equity release mortgages, a secondary pension scheme and the introduction of more NICE approved drugs. 

In January, the States will have a debate on a revised 'Review of the Fiscal Policy Framework' to try and come up with long term solutions to heightening costs. This will 'formally kick off a review of options for restructuring the tax system and raising additional revenues'. 

None of this addresses what the States are viewing as the island's major challenge though - the cost of running our public services. Funding of £15.5m has been allocated to underpin immediate cost pressures in that sector, alongside the usual costs. In future budgets, people can expect to start being asked to contribute more though. 

Deputy Gavin St Pier echoed the warning that things are going to get challenging. 

"In recent years, we have steadied the ship, delivering budget surpluses and savings with the backdrop of a growing economy and substantial reserves. We are in as good a place as we could hope to be as these challenges become real.

"We have increased the contributions from companies and created a more progressive tax system which tasks those most able to contribute to take on a bigger burden in funding public services. We will take those measures further in this year's Budget, but we have to be realistic and recognise that we are running out of room to raise more revenue in this way." 

Pictured: Deputy Trott, centre, who said "we must all be prepared to contribute a little more on an annual basis, or we will face even greater challenges". 

Deputy Lyndon Trott added that people would need to be realistic in how much they are going to prepared to contribute going forward: "Across the course of their lives islanders benefit from a huge range of public services. In most cases the total value of these services is greater than the amount they might pay in taxes and contributions. That is to be expected.

"While part of this cost is sustained by other sources of revenue, such as tax on property, as the population ages and demand for services grows, this position is becoming unsustainable."

If the 2020 Budget is approved next month, it includes a plan for the States to spend time coming up with these new revenue raising measures, which could, theoretically, include new measures like GST, or small increases to the 20% rate of income tax. 

Deputy St Pier said this would be debated by the States in January if the Budget is approved, but before then, he wants the public to be involved in the discussion.

"Getting this right is crucial to our future and it cannot wait any longer," he said. 

Pictured top: Deputy Gavin St Pier, who led the compilation of the 2020 Budget as President of Policy & Resources.