The States of Guernsey are having a tough time not just managing the financial position of the island\u2019s government, but even measuring it.<\/p>\n\n\n\n
The 2025 budget was set for a \u00a316m loss after capital expenditure. This week, the Guernsey Press reported that 2025 would be published with a headline surplus of somewhere between \u00a3105m and \u00a3106m. Given the total income in the original 2025 budget was \u00a3687m, this swing of around 17% of projected revenue is substantial \u2014 and it deserves unpicking, because not all of it is what it first appears.<\/p>\n\n\n\n
So what has actually happened?<\/p>\n\n\n\n
There are two distinct income surprises at work here, and they need to be treated separately.<\/p>\n\n\n\n
The first emerged back in February, when Deputy Gavin St Pier updated the States on the provisional 2025 figures. General revenue came in \u00a357m above budget. The headline driver was banking income tax, which beat expectations by \u00a337m. But St Pier was careful to flag that \u00a323m of that \u00a337m was exceptional – \u00a311m came from a voluntary disclosure by a single bank that had calculated a seven-year underpayment, and another \u00a312m was 2023 tax assessed and paid late. \u201cIt cannot be built into our baseline and relied on in future years,\u201d he said. At that point the provisional surplus was around \u00a336m, and the full-year audited result is due in June.<\/p>\n\n\n\n
The second surprise, announced more recently and not yet in the audited accounts, is an estimated \u00a339m of accruals from Pillar II, the new OECD global minimum tax.<\/p>\n\n\n\n
These are different in character, and it matters that we treat them as such.<\/p>\n\n\n\n
Pillar II is the OECD\u2019s global agreement to ensure large multinational companies pay a minimum effective tax rate of 15% wherever they operate. Guernsey implemented it from January 2025, applying to multinational groups with annual revenues of \u20ac750m or more. Because Guernsey\u2019s standard corporate tax rate is 0% for most companies, most in-scope entities would previously have paid nothing here. Pillar II captures the difference between what they paid and the 15% minimum.<\/p>\n\n\n\n
Originally, Guernsey expected Pillar II to raise around \u00a310m a year. By the time the 2026 Budget was set in October 2025, that estimate had been revised sharply upward to \u00a340\u201345m. The \u00a339m accrual in the 2025 accounts reflects that revised expectation.<\/p>\n\n\n\n
But here\u2019s the critical note: an accrual is not a cash receipt. The 2026 Budget documents confirm that Pillar II cash will not arrive until 2027. The States is booking income in its 2025 accounts based on a best estimate of what multinationals owe \u2014 income that hasn\u2019t yet been collected, from companies that are, almost by definition, highly mobile. Tax expert Mike Williams made exactly this point at the recent public presentation, warning that without Pillar II income the island\u2019s structural deficit would be over \u00a3100m rather than the estimated \u00a377m.<\/p>\n\n\n\n
So the honest description of the \u00a3105m figure is roughly: \u00a336m of actual surplus (itself partly built on one-off banking windfalls), plus \u00a339m of accrued but uncollected Pillar II receipts, plus investment returns and other items. The audited accounts due in June will give us the precise final breakdown.<\/p>\n\n\n\n
The more important number is one that the surplus headline obscures entirely: Guernsey still has a structural deficit estimated at \u00a377m.<\/p>\n\n\n\n
That figure represents the gap between what the States routinely spends and what it routinely earns, once you strip out the one-offs \u2014 the banking windfalls that won\u2019t repeat, the Pillar II accruals that may or may not materialise in full, the investment returns that were strong in 2025 but lost \u00a3140m in 2022. The 2026 Budget, approved last November, projects a deficit of \u00a348m before investment returns even with the new Pillar II receipts baked in.<\/p>\n\n\n\n
Deputy St Pier put it plainly: \u201cHaving such a high dependency on whether banks have a good or bad year is neither sensible nor sustainable.\u201d With only 21 licensed banks in Guernsey, a handful of individual institutions can move the States\u2019 income by tens of millions in either direction, year to year. That\u2019s not a tax system – it\u2019s a lottery.<\/p>\n\n\n\n
Buried in the provisional figures is a number that deserves more attention than it gets: pay costs for 2025 totalled \u00a3351m.<\/p>\n\n\n\n
That\u2019s up from \u00a3318m in 2024, a 10.4% increase in a single year, in a year when Guernsey RPI was running at around 3.4%. The States\u2019 own presentation noted that over 300 vacancies existed on average throughout the year, around 6% of the total workforce, most of which were covered by overtime or agency staff, both of which cost more than permanent employees.<\/p>\n\n\n\n
Health and Social Care overspent its budget again, by \u00a33.3m. Corporate Services overspent by \u00a32.6m, largely from costs associated with the exit from the Agilisys IT contract. The same two areas, the same story, as in 2023 and 2024.<\/p>\n\n\n\n
The pay bill has now grown from approximately \u00a3130m in 2006 to \u00a3351m in 2025 \u2014 a 170% increase over nineteen years, against cumulative inflation of roughly 85% over the same period. The workforce has grown by approximately 1,400 people.<\/p>\n\n\n\n
That\u2019s the honest assessment. 2025 will be reported as a surplus, and there\u2019s genuine good news in there \u2014 document duty receipts were strong at \u00a327m versus a \u00a316m budget, driven by a 27% rise in local market property transactions. Employment tax receipts beat budget by around \u00a37m. These are real signals of economic activity.<\/p>\n\n\n\n
But the swing from a budgeted \u00a316m deficit to a reported \u00a3100m+ surplus is almost entirely explained by factors the States cannot control or reliably repeat: a banking sector that had an exceptional year, a single bank paying seven years of underpaid tax at once, and an accounting accrual for new international tax revenue that won\u2019t arrive as cash for another two years.<\/p>\n\n\n\n
The 2026 Budget acknowledged this directly, noting that the States continues to operate a structural deficit that will not be resolved until tax reforms are implemented. Those reforms, whether GST-plus, corporate tax changes, or some combination, remain undecided, with a States debate expected in July.<\/p>\n\n\n\n
A one-year surplus built on windfalls is not the same as a sustainable public finance position. The States knows this. The question is whether the rest of us understand it too.<\/p>\n\n\n\n
Jon Bond is a non-executive director of the Channel Islands Co-operative Society and a director of Sark Shipping. He runs Evans Bond, an accounting and advisory firm based in Guernsey and is principal of Melius Consulting Limited. He writes at jonbond.biz<\/em>. Sources: States of Guernsey Budget 2025; Guernsey Press, 20 May 2026; The Quarry, 25 February 2026; BBC Guernsey; States of Guernsey Budget 2026; gov.gg\/pillar-two; P&R Committee update, June 2025. Audited 2025 accounts due 2 June 2026.<\/em><\/p>\n\n\n\n <\/p>\n","protected":false},"excerpt":{"rendered":" The States of Guernsey are having a tough time not just managing the financial position of the island\u2019s government, but even measuring it. The 2025 budget was set for a \u00a316m loss after capital expenditure. This week, the Guernsey Press reported that 2025 would be published with a headline surplus of somewhere between \u00a3105m and […]<\/p>\n","protected":false},"author":1,"featured_media":76,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_feature_clip_id":0,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_post_was_ever_published":false},"categories":[6,4,5],"tags":[15,10,14,12],"class_list":["post-73","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-community","category-economy","category-governance","tag-government","tag-guernsey","tag-public-services","tag-tax-base"],"jetpack_featured_media_url":"https:\/\/jonbond.biz\/wp-content\/uploads\/2026\/05\/IMG_0044.png","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/jonbond.biz\/index.php\/wp-json\/wp\/v2\/posts\/73","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/jonbond.biz\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/jonbond.biz\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/jonbond.biz\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/jonbond.biz\/index.php\/wp-json\/wp\/v2\/comments?post=73"}],"version-history":[{"count":2,"href":"https:\/\/jonbond.biz\/index.php\/wp-json\/wp\/v2\/posts\/73\/revisions"}],"predecessor-version":[{"id":75,"href":"https:\/\/jonbond.biz\/index.php\/wp-json\/wp\/v2\/posts\/73\/revisions\/75"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/jonbond.biz\/index.php\/wp-json\/wp\/v2\/media\/76"}],"wp:attachment":[{"href":"https:\/\/jonbond.biz\/index.php\/wp-json\/wp\/v2\/media?parent=73"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/jonbond.biz\/index.php\/wp-json\/wp\/v2\/categories?post=73"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/jonbond.biz\/index.php\/wp-json\/wp\/v2\/tags?post=73"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
The views expressed here are his own.<\/em><\/p>\n\n\n\n