Guernsey States saving failure may hit taxpayers

Deputy Harwood said the £31m saving target could be exceeded

Taxpayers will have to make up the difference if the States of Guernsey fails to meet its £31m savings target, the government has said.

The latest Financial Transformation Programme report shows the States has cut £10.5m from its annual spending.

It means targets of cutting £10.6m in 2013 and a further £10.8m in 2014.

The Policy Council and the Treasury Department are both against extending the savings programme and see tax rises as the only viable move.

Since 2008 the island has lost about £100m in tax a year due to the introduction of the Zero-10 tax system, under which most corporations pay no tax, while others pay 10% and a small number pay 20%.

It has been in deficit since then and the States agreed a five-year savings plan to fill the "financial black hole".

The Financial Transformation Programme (FTP) aims to cut £31m from the States annual spending by 2014.

The work is being carried out with the assistance of a consultant company, which if the £31m target is met will be paid £3.8m.

In 2011 the annual deficit was £24m. The tax strategy contingency reserve is forecast to drop to £66m by the end of 2013 as almost £86m will have withdrawn since 2009 to balance the shortfall.

The Policy Council said in its report on the FTP that it could not be extended as it is as further savings would be required in future.

It said the need for the programme was as strong as when it was launched as the deficit persists and the "public sector remains unable to uniformly and consistently prove value for money in the delivery of services".

'Only realistic alternative'

Chief Minister Peter Harwood said: "There's a willingness [to meet the targets], the departments themselves have come up with a number of proposals which have got to be explored in greater detail.

"We could achieve the £20m plus actually."

"We have to fund the deficit, the hope is we can fund the deficit through savings and through efficiencies, but if we can't, if it proves impossible, then the only fallback is increasing taxation."

The Treasury and Resources Department said: "If the Financial Transformation Programme benefits are not delivered then the States will need to identify other measures to achieve the same effect.

"Increases in taxation are the only realistic alternative."

The States is due to the debate the progress and future of the FTP in January.