Madam,
The Committee sought the Presiding Officer’s permission to make this statement in relation to the financial position of the States in 2025.
However, before I talk about that and what it will mean for the 2026 Budget, I would like to provide an update on the Revenue Service.
Members will be aware that I am leading on Resources for the Committee and as such have a keen interest across all aspects of that brief, including of course, how we collect our revenues.
Everybody in the community will be aware that the Revenue Service has been through significant change in recent years – partly to bring together the administration of social security contributions and income tax; and partly to replace woefully outdated IT systems.
The work of the Revenue Service impacts every Member in the States of Deliberation and every member of our community in one shape or form. Therefore, when things don’t go well, we all notice and feel it - and we are certainly feeling it now.
The issue which is currently at the front of our minds is the processing of repayments. While over 30,000 assessments were issued between April and July 2025, these generated over 6,000 credit balances which may result in repayments, and which are currently having to be manually reviewed before cheques can be raised.
Despite the repayment process being the highest priority, this manual process is taking officers a great deal longer than would have been the case with the old system, as they are having to familiarise themselves with the way the new systems present the data they need, in order to check and then manually create each repayment. To date, the Revenue Service has issued 1084 repayments.
Without wishing to detract from the hard work of those Revenue Service officers, the current rate of issuing repayments is not an acceptable level of service to the public. I want to assure Members that the Policy & Resources Committee has familiarised itself with the problems and the planned solutions, and has provided challenge to deliver more. Meaningful improvement in service levels will be one of the objectives currently being set for the next 12 months for the Chief Executive & Head of the Public Service. This is and will remain a top priority for the Chief Executive, his leadership team and the Committee. With the permission of the Presiding Officer, I would like to give a further update on progress before the end of the year.
Turning to finances.
This is the first time I have been able to update the States on the latest financial position and I commit to doing so on a regular basis. The new Policy & Resources Committee will shortly be publishing its first budget and the first for this Assembly. Ahead of that look forward into 2026, I thank you Madam for allowing me this time to reflect on performance to date in 2025, which sets the scene for the year ahead.
The results I am sharing are based on income and expenditure to the end of August and forecasts to the end of the year. At the summary level, I’m pleased to report that the forecast to the year end is in an improved position compared to the budget. However, although the expected outturn would be an improvement against budget of about £24m, it would still result in a general revenue operating deficit of some £2m.
I will now talk through the drivers of that overall position, starting with income.
As Members will know, ETI is our largest single revenue income line. It is the best indicator of real time economic performance. Against a budget of £293m, we are now forecasting revenues of £291m which, although slightly below, is largely in line with the budget. The same trend is recorded in contribution income.
Despite this small shortfall, total income tax revenues are estimated to end the year ahead of budget by approximately £9m, or just under 2%. This is entirely due to the reforecasting of likely revenues from Pillar 2 based on the latest information available to the Revenue Service. I should stress though that not a penny of this tax has been banked to date and will not be until 2027. Until that time, we can only estimate based on the historical data available and information from impacted entities in Guernsey. There is therefore much more uncertainty around these estimates than around many others, including ETI.
The other good news in terms of revenues in the year to date is document duty. By the end of August, receipts were £5m ahead of the budget. Local market transactions in 2025 are up 31% on the same period last year and 5% ahead of 2023. If current trends continue, we should end the year some £8m ahead of the budget estimate. Of its nature, document duty is inherently unpredictable and quite lumpy.
All other revenues are largely in line with the budgeted estimates.
Turning to expenditure, although the current forecast is that we will end the year broadly in line with budget, there are a few risks to which I must draw Members’ attention.
Firstly, the Committee for Health & Social Care is once again facing financial challenges stemming from staffing difficulties and the need to cover vacancies through overtime and agency staff. This has been particularly evident across adult services and acute hospital services. The other pressure is coming from the cost and volume of off-island acute treatments. In totality the forecast overspend in this area is currently £2.8m or just over 1%. The Policy & Resources Committee has been working hard with HSC to ensure that the budget for 2026 is both realistic and deliverable.
The other area forecasting an overspend at year end is Corporate Services with an estimate of £1.6m being driven from two areas.
The first is insurance where the States’ policies have suffered above inflation increases to the cost of insuring States’ assets and service delivery . We have initiated a fresh look at our insurance provision and whether there are better solutions available.
The second is centred on digital & technology services which have seen substantial change during the year, initiated by our predecessors, with the States transition to a new, multi-vendor IT and digital model on 1 August.
For what I hope Members will regard as understandable commercial reasons, while we are currently limited in what we can share publicly, we are committed to providing greater transparency at the appropriate time. This will include details on the rationale behind the decision — made by the former Policy & Resources Committee — as well as the approach to transition and its associated costs.
This transition wasn’t change for the sake of change but a necessary operational response to performance issues with the previous contract. It is hoped that a multi-vendor model will be more flexible than one with a sole-provider and will help to better ensure the security and resilience of the States’ IT estate.
A transformation of this scale represents a significant undertaking for any organisation.
However, thus far, we are encouraged by the new model’s initial performance, including in our more complex service areas such as schools and healthcare settings. An important factor in its success to date has been the diligence and hard work both of the States’ Digital & Technology team and our vendors, whom I would like to take this opportunity to thank.
It is, however, necessary to stress that there remain underlying challenges. Addressing these will require yet more investment and we will continue to review service performance to ensure our IT services are resilient, cost-effective and fit for purpose.
Last week, the President of the Committee advised Members that we have appointed Deputy Marc Laine as our Digital Transformation Adviser. The role will provide the Committee with strategic oversight, expert guidance, and informed challenge on issues relating to digital transformation, technology policy, risk appetite and IT service governance. This advisory role is intended to strengthen political visibility in the IT sphere and support the Committee in maintaining alignment between the States’ digital initiatives and broader government priorities. This is an important role and we are grateful to Deputy Laine for taking it on. As any role should be thinking about succession, the terms of reference include making recommendations to the Committee for the establishment of an IT Advisory Board - first recommended by the Scrutiny Management Committee in the last term. This will be populated with both IT industry and business expertise, primarily to assist political decision making and also provide support to the Chief Digital and Information Officer in setting the correct IT strategy moving forward.
The level of IT change has resulted in an overspend in the year to date. However, the current forecast is that the expenditure by the end of the year will be in line with budget.
The improvements needed as part of the transition have resulted in more or new cost in some areas which are mitigated by savings elsewhere. However, there will be a net increase in cost for the 2026 budget.
As a counterbalance to the 2025 cost pressures within health and care, and corporate services, other Committees, Authorities and Departments have collectively underspent by approximately £5m in the year to date and although some cost pressures are foreseen in the final months of the year, the outturn on expenditure is currently anticipated to be managed within the overall 2025 budget envelope.
The other elements contributing to our operating deficit are the general revenue subsidy to support trading entity losses and the cost of non-capitalised projects. The value of the subsidy to the trading entities is forecast to be an improvement on that budgeted, due to small improvements in both income and expenditure across those entities. The impact of expensing project costs is now forecast to be almost £12m less than budgeted – but this is largely due to the timing of project delivery rather than real savings.
Once these are taken into account, as I said earlier, we are currently estimating an operating deficit for 2025 of roughly £2m. While this is certainly an improvement on the budgeted position, it still confirms that we are spending more than we generate on a day-to-day basis before allowing for investments in assets and infrastructure. This is a challenging starting point to putting together a budget for 2026.
We are now most of the way through that process – we have examined all routes to additional revenue raising and confirmed to Committees the cash limits we’ll be recommending for next year. It is probably no surprise that no-one is getting everything they asked for. We are now finalising the Budget Report which will be published on 7th October.
Before I go further, having made a family commitment prior to the election, I should apologise to all Members for my absence on the 2026 Budget’s publication – but I must particularly apologise to the President of the Committee who is taking up the slack in my absence, for which I am most grateful.
I have no doubt that nobody will be happy with everything that’s included. We must raise revenues where we can find scope – and, frankly, the scope is extremely limited. We have no choice but to fund essential public services and some of the pressures I have spoken about today are already being spent, so cannot be avoided, meaning we have no option but to budget for them next year. However, Members and the public should also be assured that there will be initiatives to deliver savings in 2026 as well as a fresh, but much needed look, at our whole expenditure budget .
While I don’t expect Members to be overjoyed by what they read in the Budget Report, I hope they will appreciate the need to balance the books - and the difficult decisions that entails for everybody in the States of Deliberation.
Looking further out than 2026, this Policy & Resources Committee is committed to addressing the lack of resilience in public finances. This simply must be the political term that ensures long-term fiscal sustainability for the future of our economy, our infrastructure, our public services and our community.