THE pressure that faces UK Chancellor George Osborne to come up with a Plan B approach to the UK economy provides a counterpoint to the situation this island finds itself in.

As the chief minister said on his return from a successful lobbying trip to Washington, ‘Guernsey’s short, medium and long term fiscal position is strong, sustainable and sound and quite probably the envy of most locations in the world.’

With a Triple A sovereign credit rating and no external debts, the island is indeed better placed than many jurisdictions, including the other two Crown Dependencies.

While the resilience of the economy and the diversity of the financial services sector have played their part, the States, too, have been instrumental in what can be seen as a success story.

When zero-10 was adopted, the plan was always that public sector restraint plus growth and some short term use of the contingency fund would be enough to pull the island through the ‘black hole’ of the tax losses.

And as the Treasury minister said in presenting the annual accounts a few weeks ago, he is measuredly optimistic that a balanced budget can be achieved without the introduction of new taxes.

In other words, despite the worst economic conditions since the 1930s, the zero-10 package adopted by the States has very nearly paid off.

Had departments economised when they were supposed to, public finances would be in even better shape. Had Treasury and Resources not reversed the freeze on personal income tax allowances when the new board took over in 2004, there would be no deficit now.

And, rather like George Osborne yesterday hailing a 0.3% fall in the British economy as positive, T&R views a £900,000 increase in public sector payroll costs as equally positive.

The message in all this is that what the States spends is critical to the economic success of the island but  departments – unlike islanders – have felt very little pain in the zero-10 process.

There is barely 1% fewer staff employed by the States and more costs transferred on to taxpayers so there is a long way to go before T&R can claim to have spending under control.