Ernst & Young partner Graham Parrott takes a look at the Budget and the bits that we might have missed LAST week saw publication of the Budget for 2008.

Most of us are aware of the headline items, particularly if we smoke, drink or drive a car, but what else is there that might have received less attention?

In all, the report runs for 80 pages. It includes a summary of the island’s financial position, with the actual figures for the three years to 2006, and estimates for the next two years. There are no forecasts for future years.

There is no expectation of using the contingency reserve in 2008. We will have to wait and see what the future holds, but £120m. has been set aside for that.

And clearly there can be surprises. Just over a page is devoted to the ports holding account, intended to be used to fund major projects.

At the beginning of 2003 it had £24.4m., expected to be reduced to £4.1m. by the end of next year. The overspends on three capital projects identified – the airport and projects in St Sampson’s and St Peter Port – amount to £34m., the last being the one that sticks out most, with contractors’ claims totalling a mind-boggling £27.3m. against an original estimate of £3.3m.

While the final figures are expected to be significantly less, with an expected surplus on the port next year of £1m., the original 1960s idea may need to be revisited.

It also provides ample evidence that budgeting is not an exact science and that it is not possible to predict the future with any degree of certainty.

The Budget looks at States revenue and expenditure and there is a lot in this report dealing with public expenditure. Each department will now have an allowance for routine capital expenditure, with a note that Treasury and Resources does not wish to micro-manage other departments.

At the same time there is a welcome recognition that there must be room for further savings in public expenditure and so there is a commitment to fundamental spending reviews, examining what departments are doing and should be doing and what they are spending their money on. Here, the focus should be on waste.

Realistically but perhaps sadly, it is acknowledged that these cannot be forced on the spending departments. Some would ask, why not?

The accounts for our airline are included, but give actual figures only to August. While this makes comparison difficult, it seems to be a good year and one heading for a surplus. Two more planes are being bought, costing $37m., but as noted in the Budget, the States will not be providing the funds but guarantees.

Given the decision to limit population, Treasury and Resources is rightly looking at ways to increase the economically active number among those of us who are here. This has to be a good thing and non-economically active people will be asked their views. The thoughts of the economically active should not, however, be ignored.

Reference is made in the report to the States staff number limitation policy. In 2007 there are 4,463 people employed by the States, an increase of five on the previous year. This year’s wage bill is £153.8m., increasing to £163.3m. next year, an increase of 6.2%. Interestingly, Health, the largest States’ employer, is expecting its wage bill to rise by only four per cent.

Payments to States members for next year are, give or take, steady at £1.85m.

Turning to tax matters, you will already be aware of the indirect increases.

Personal allowances are frozen, but note that this relates to allowances for 2009.

Next year’s were frozen in last year’s Budget.

As anticipated, tax relief for life insurance policies is going, but there will be some benefit if a policy is taken out before the end of the year, so if you are thinking about it do so in December rather than January.

The proposal to increase company car charges has already been given some publicity. However, this is expected to raise only £100,000 per annum. Hopefully the effort involved in this change is worthwhile.

A working party is being established to carry out a review of document duty and comparing it with TRP. Interestingly, it will also examine the possibility of a charge on share transfers, which will raise some revenue on the sale of higher value properties and address the current anomaly that this represents.

The possibility of allowing income tax relief for non-covenanted charitable donations is being examined, but only for Guernsey-registered charities. It really would then be the case that charity begins, and possibly ends, at home.

So, some interesting detail away from the headline measures and there is a lot more there. Anyone wanting to read the Budget can find it on the Treasury website.