2026 Budget “fails to move the States to financial stability”
- A projected cash outflow of £115 million for 2026 among concerns raised by States’ political watchdog.
- Total pay costs are forecast to reach £360 million, marking a "significant" increase.
- The SMC also criticises the lack of analysis for increased Health & Social Care expenditure.
- “No clear policy basis” for States to approve Budget
The Scrutiny Management Committee has outlined significant concerns about the financial sustainability of the States of Guernsey.
“The 2026 Budget fails to move the States towards financial sustainability,” its letters of comments on the 2026 Budget signed by its President Deputy Andy Sloan said.
“It lacks context, transparency, and fiscal discipline. The difficult decisions required to restore balance have once again been deferred.”
Top of the issues highlighted by the SMC is the anticipated cash outflow of £115 million for the coming year.
The report suggests that the States intends to finance this expenditure through the liquidation of reserves or further borrowing, both of which the SMC deems unsustainable and detrimental to fiscal resilience.
The Budget forecasts a revenue increase of 3.4%, yet expenditure is set to rise by 4.4%.
The SMC warns that this pattern is incompatible with achieving long-term fiscal balance, indicating a worsening structural deficit projected to increase from £66 million to £77 million by 2026.
The committee reiterates the need for effective management of workforce size and costs, noting that pay costs are projected at £360 million—an increase of 6.8% from the 2025 Budget.
The SMC calls for more transparency, accountability, and discipline regarding workforce planning and productivity.
Health and Social Care expenditure has notably increased, but the SMC criticises the budget for lacking sufficient analysis concerning the demographic and service pressures influencing this rise.
The absence of detailed explanations about measures for cost control and efficiency is also a primary concern. The SMC asserts that there should be thorough justifications for the considerable hikes in spending.
Another point of contention is the inclusion of approximately £40 million in revenue from Pillar 2 receipts within the budget, before collections have started.
The committee regards this as a risky move, as these estimates come from "secondary data sources" and cautions against overstating the fiscal position based on uncertain revenue.
Corporate Services expenditure also continues to grow, with an increase of 9.4% projected. The SMC expresses concern over whether the centralisation intended to deliver efficiencies is effectively realised.
The report additionally highlights the lack of information regarding proposed capital spending for 2026, which obscures the understanding of the overall financial position and priorities of the States.
The absence of economic context or comparative analysis within the Budget Report hinders the ability of both Members and the public to assess the realism of the presented fiscal figures.
Most concerning to the SMC is the delay in completing a promised review of the Fiscal Policy Framework, which means Members must approve the budget without a clear policy basis.
The continued structural deficit is deemed incompatible with the long-term goal of maintaining a permanent fiscal balance.
Finally, due to the timetable of the upcoming General Election, the Budget has become a mere holding exercise, depriving newly elected Members of the opportunity for meaningful input during its preparation.
The SMC believes this situation undermines political accountability and effective governance of public finances.
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