The Guernsey Policy and Economic Group has warned that the States of Guernsey’s 2026 Budget fails to confront the island’s deepening financial challenges and misses the opportunity to identify substantial cost savings.
In its latest analysis, The Guernsey Policy and Economic Group (GPEG) said both increased taxation and reduced public spending are required, together amounting to ‘of the order of £200 million per annum’. The group believes the new government ‘has completely missed the opportunity to make a start on identifying the serious cost savings that the Island needs’, adding that the Budget represents ‘more of the same’.
The commentary highlights a forecast General Revenue deficit of £48 million for 2026, alongside an overall cash outflow of £115 million. These figures assume only limited capital expenditure, even though the previous States identified a build-up of capital projects ‘totalling over £1 billion with only £150 million of funding available over the next four years’.
GPEG said the Budget process continues to focus on incremental increases rather than full reviews of existing spending. A cost savings target of £4 million has been set, of which £2.5 million is already incorporated into the Budget. The group described this as ‘seriously concerning’, noting that Committees have used a formula-based approach instead of zero-based budgeting, which it described as ‘unfortunate’ and ‘easier’.
The Fiscal Policy Framework is under review and due to be debated by the States in December 2025. The Budget notes that total States debt should not exceed 15 percent of GDP, or £522 million. GPEG calculated that total debt at the end of 2024 stood at £399 million, leaving only £123 million of borrowing headroom, which it said ‘assumes no adverse cashflow in 2025 – and there will be’.
The report also lists several risks, including uncertainty over revenues from the OECD’s Pillar II corporate tax regime, continued overspends in health and social care, and pressures at Guernsey Ports, Guernsey Waste and the Dairy.
GPEG concluded that ‘the Island has been spending beyond its means for many years’, noting that investments have been sold at a rate of about £100 million a year to fund expenditure. It said, ‘Everything has been put on hold’, urging the States to reassess both operating and capital spending rather than waiting for the next tax review to find solutions.
