A £24.9m surplus in public finances was recorded last year
The 2016 States of Guernsey Accounts detail the significant improvement on the originally predicted position - the indications in the early part of 2016 were that a combination of lower than anticipated revenues and higher expenditure were signalling a deficit.
The turnaround was as a result of improved underlying tax revenues in the second half of the year and a series of largely one-off measures, some of which were put in place specifically in order to improve the in-year position, or factors that cannot be relied on year-on-year, such as significant returns from our investment funds.
Revenue expenditure by committees was also £9m below budget, with underspends recorded in both pay and non-pay budgets. While this is encouraging and demonstrates financial control across the public sector, a significant part this underspend was also one-off in nature.
Deputy Gavin St Pier, President of the Policy & Resources Committee, commended all committees for the financial restraint displayed in 2016.
'While the end-year financial position is to be celebrated, as I have stated previously we are not out of the woods yet.
'The surplus position was only made possible at all by a reduction of £23.9m in the appropriation to the Capital Reserve. This reduction in the amount put aside for capital investment was an appropriate short-term response to balance the budget. However, the implications of this adjustment, if continued, would limit our ability to appropriately invest in the island's infrastructure.
'As such, there remains an underlying structural deficit if the one-off measures for 2016 and excellent investment returns are removed. As I have stated previously, we can neither simply cut nor tax our way into a sustainable financial position. This deficit will only be tackled through a combination of targeted revenue raising, largely from those best able to pay more, and a reduction in the cost of providing public services through public service reform.
'The Medium Term Financial Plan details the strategy to achieve and maintain a balanced budget before moving into a sustainable surplus over the next four years. This will enable reserves to be re-built and investment made in future public services to support the delivery of the outcomes set out in the Policy & Resource Plan.'
The Accounts also provide an updated position on the pension arrangements for States of Guernsey employees. This annual update uses accounting standard FRS102 and shows a deficit solely for accounting purposes of £1,161m.
Deputy St Pier said:
'The Policy & Resources Committee is increasingly concerned that the FRS102 calculations, which incur a cost to the taxpayer to produce, do not give a true representation of the funding level of Guernsey's Superannuation Fund. FRS102 prescribes an assumption of future investment return as the yield on high quality corporate bonds (0.8% below inflation for the 2016 calculation), whereas in reality the Superannuation Fund is actively invested with a target rate of return of 4% above inflation - and actual returns over the past five years have averaged 5.8% above inflation.
'FRS102, previously FRS17, is intended to allow for companies to be compared on a like-for-like basis in terms of their pension liabilities but this has little real relevance for a government.
'As progress is made in adopting the more appropriate International Public Sector Accounting Standards, consideration will need to be given to the appropriateness of full adoption of the relevant standard, given the rules, structure, funding arrangements and investment strategy for the States of Guernsey Public Sector Pension Scheme.
'In 2015, the States agreed revised pension arrangements. The new arrangements replace the final salary defined benefit scheme with defined benefits on a career average re-valued earnings (CARE). The changes remove a number of risks from the employer and place the scheme on a more sustainable footing long term.'
You can view the accounts via the 'useful pages' section on this page or via this link https://gov.gg/CHttpHandler.ashx?id=107940&p=0.