IT IS a sign of the current economic times that a Budget that freezes personal income tax allowances, hits drinks and smokes, puts nearly 11% on fuel duty and 20% on property rates can be regarded as ‘good’.

Yet compared to other jurisdictions and even Jersey and the Isle of Man, Guernsey’s proposed financial package for 2011 is positively benign. Yes, it will have an impact on nearly everyone but that will be modest and as nothing compared to the grief being experienced by, say, Ireland, Greece and the UK.

But… For all that the Budget can be welcomed in the circumstances, there is a sense of unreality about it. The freeze on personal income tax allowances is the one that this Treasury team removed in 2008 at the same time as it was increasing department spending and sending out the message that the period of restraint imposed by the previous Treasury minister was over.

Similarly, T&R’s statement that it is pleased to be able to report that all departments have begun to accept the imperative to restrain States expenditure does not seem to square with what islanders see and with previously published data.

The hardest part to swallow, however, is Treasury’s assertion that with a bit of care on costs, a dash of economic uplift and a couple of quid from the contingency fund, Guernsey’s books should balance nicely by 2015 without the need for any new taxes like a GST.

That would be the restraint and growth policy approved by the States ahead of zero-10 and which this T&R tore down. How much different would the financial picture be today had it not acted so capriciously?

The good news is that this package is possible because of the incredible resilience of the island’s economy, particularly a diverse financial services sector, and that is cause for celebration.

Looking ahead, however, it is less clear how the island will fare.

States departments have only just started to experience significant budget constraints and it is how they react to that over the next two years that will be critical.

If Guernsey is to avoid new taxes, deputies will need to be self controlled to a degree not seen for at least 20 years.