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Guernsey tax payers have had a stark warning: "We can no longer avoid taking important decisions".
Deputy Lyndon Trott yesterday said that the 2025 budget - due out in a couple of weeks - will include proposals for addressing the island's current financial position.
It's strongly suspected by many that this will include proposed tax rises - including a potential increase in the income tax rate which is currently 20%.
During last year's debate on taxation, Deputy Trott suggested putting income tax up to 21%, 22%, or 23% to raise more money for public services.
That proposals was defeated - as were proposals for introducing GST and other revenue raising measures.
Deputy Trott has now warned that "we can no longer avoid taking important decisions" and with the 2025 budget looming that has been interpreted to mean tax rises are coming.
Pictured: Deputy Lyndon Trott will be bringing the 2025 Budget to the States shortly, as President of Policy and Resources.
"The current financial situation means we can no longer avoid taking important decisions," he said yesterday.
"P&R will be publishing its budget in less than two weeks' time. In it we will be putting forward proposals that seek to address the position we are in and which we believe will make a positive difference.
"Time is rapidly running out and now is the time for this States to make the changes we need."
Deputy Trott was speaking to the States in his role as President of Policy and Resources.
He shared the "unwelcome news" that a bank had made an error in its tax submissions and was claiming £15million back from the States of Guernsey.
Deputy Trott said that, and other factors, mean the island is now facing a financial deficit of nearly £50m as we head into 2025.
This is being driven by demands on social security funds, the performance of States owned utilities and infrastructure coupled with various other factors, including a downturn in income tax take.
"Given our economy is small and much of the activity is concentrated in a small number of larger companies, this kind of volatility is not uncommon even if it is disappointing," explained Deputy Trott.
"There were downward contributions from several sectors, but the largest reduction came from banking activity. This follows an unusually strong performance in 2022 as a result of a number of factors, including changing interest rates.
"It is most certainly not all bad news with growth in other sectors including investment, insurance and accounting, private sector health and entertainment. With falling inflation rates in 2024, some of the pressure on real growth rates will have receded but realistic prospects for real terms growth this year remain limited."
Deputy Trott told his political colleagues that his metaphorical glass is being drained and that the island now has to make some "tough decisions" to address the financial challenges.
"...all Members of this Assembly know that my glass is generally full if not overflowing. Unfortunately, 2024 has seen some of this drained - 2024 has highlighted the frailty of the States' financial position. It's shown how little resilience we have. And the GDP numbers have underlined the need to have a sharp focus on our economy and its growth.
"All of this, along with the exhaustive work we have been doing to prepare the budget, has shown P&R that it's time to make some tough decisions.
"We need to address this lack of resilience; we need to stabilise our base to be able to invest for the future - for our infrastructure and for growth. But, while our challenges remain, we shouldn't forget that we're in a strong position to make these decisions."
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