Finance reviewers: States' prudence is commendable

Monday 29 January 2018

The States of Guernsey has continued to exhibit tight controls of its budgets, the authors of the Annual Independent Fiscal Policy Review 2017 have said.

But while it was a good year for the island's economy, the authors said the changes to GDP methodology made it look better than it was.

While usually published between the publication and debate of the Budget, the 2017 review was delayed while the methodology for calculating the island's GDP was changed.

It was published on Friday 26 January, and was written by Dr Andrew McLaughlin and Prof Geoffrey Wood, and provides an independent assessment of the States of Guernsey's performance against its own financial rules, as laid out in the Fiscal Framework, and gives an overview and assessment of key risks.

"The States of Guernsey continues to exhibit tight control of its budgets, with outturn estimates for 2017 showing an overall underspend against the original budget. In particular there has been marked progress in controlling Health & Social Care spending in 2017; an area where there has often been spending in excess of budget in the past," Professor Wood said.

Prof Wood added the States weakest area was its capital spending, which it needed to improve. However, he did say the target was "high for similar jurisdictions" and was something that could be altered.

"The States have only come close to achieving their target on a year when the run way was extended and a school built at the same time - two very large projects for a place like Guernsey. I think they need to really look at the supply and demand and their target for this, and think about the way forwards."

Dr McLaughlin added: "The revision of GDP has significantly impacted on the Framework criteria.  For example, the total size of Government revenues (including the social security system) as measured against the revised data is significantly lower than previously thought at 21% of GDP, while the monetary value of the 28% of GDP limit placed on it has increased. Further the 3% of GDP target for capital spending, which the States have struggled to achieve since the Framework was introduced in 2009, is now even more challenging.

"It is evident that it will be necessary to review the criteria set out in the Framework in light of the revision of GDP and this is an opportunity for Guernsey to revisit the debate on the size of its government."