The Tax Review will help ensure we can invest in what matters to you, for generations to come.

On 28th November 2022, the Policy & Resources Committee announced its recommendations for how to secure funding for essential services such as a health, care and pensions for the future. Here, you can learn about how changes in our population are putting those services at risk, and how the recommendations propose to protect them.

The shape of our population is changing. We’re living longer and having fewer children, and that means fewer people working and paying taxes and more people using public services, especially pensions, health and care services in our later years pushing the cost of public services up a lot.

The funding shortfall is forecast to rise to as much as £100m a year.

For future generations, this shortfall will impact the services that we rely on, unless we take action now.

Changes to the make-up in our population

Graph showing the number of women and men in 1971, 2020 and a projection for 2050

What services are paid for by our taxes?

The States are responsible for ensuring that every islander gets good access to essential services, support and opportunities, such as education, healthcare, pensions and much, much more. But these services need to be funded, and for some the cost will rise significantly as the shape of our population changes.

Explore more on what services are publicly funded and how those costs are expected to change.

Health and Care Services

Health and care services are the most widely accessed services the States provide and one that people need to rely on more and more as they get older.

Guernsey’s care services include not only the hospital and its related services, but also include a subsidy on accessing your GP or practice nurse; mental health services; support for those struggling with addiction; social workers who protect the young, the old and the vulnerable from harm; social care services which provide people with care in their own home; substantial grants which will meet the majority of the cost of a nursing or residential care placement and much more.

In 2021 we spent £204m of health and social care services and a further £23m on the long-term care scheme – a total of £227m. We expect this to rise to £237m in 2023.

These costs will keep rising as more of our population reach an age at which they are likely need more of these services. We expect our health and social care services to cost at least another £45m a year more in 2040 than they do now, and long-term care costs are expected to increase by more than £17m over the same period. There are some reserves available to help support some of the cost of the long-term care scheme and at the moment more money is being paid into this scheme than is being paid out but this will change as costs increase further, which means the reserve will run out unless more money is provided to support the scheme or we reduce either the amount of support with care costs people are entitled to or restrict who is eligible for support.

Forecasting other health and care costs is more difficult but this could increase by more than £60m a year by 2040.


The States’ public pension scheme forms an important source of income for the majority of pensioners in Guernsey and it is the largest single item of expenditure in the overall budget.

Because the population is getting older, and people are living longer into retirement the number of people the pension scheme supports is increasing. Since 2010 the number of pensioners has increased by more than 25% and is set to increase by a further 18% by 2040.

In 2023 the States’ pension scheme is expected cost £157m, and it is estimated that it might cost more than £190m a year by 2040.

The States have built up reserves which are available to help pay for pensions and help mitigate some of the cost increase. However, more is being paid out in pensions each year than is being received in contributions, which means the reserve will run out if more money is not provided to support the scheme.


Even in a small community like ours, the States-maintained education system is broad and diverse, covering early years, primary, secondary, post-16, special needs and adult learning, as well as a number of support services across numerous sites. Throughout our education system lies the common purpose of ensuring the best possible outcomes for all learners, to make tangible differences to their lives and the community as a whole.

In 2023 the States expect to spend £83m on education, sport, and culture.

Public Transport and Roads

Traffic & Highway Services maintains and improves the condition of the island’s public highways and looks to enable options for Islanders when it comes to getting around the island through contracting a public bus service, expanding walking and cycling infrastructure and improving road safety. It is also a facilitator of works needed within the road so that businesses can ensure essential services, such as utilities, are continuously provided to residents and other businesses. Driver & Vehicle Licensing also sits within this service area and processes all enquiries involving vehicle licences, ownership and permits, as well as providing practical and theory driving tests.

In 2023 the States expect to spend £2m on road resurfacing and reconstruction and £8m on other highway services and public transport.


The need for urgent action on climate change is widely recognised and Guernsey is alive to the pressing need to take action. Multiple service areas work to deliver emissions reduction, climate change mitigation and adaptation and the long-term management to preserve and enhance nature in Guernsey. At the same time, maintaining and facilitating public access and engagement with the natural environment aims to increase community awareness of nature, its overall importance and its health and wellbeing benefits. Through these services, Guernsey will ensure it is sustainable and resilient to possible future climate change impacts.

We know that in the long term we are going to need to make capital investment to deal with some of the consequences of climate change and to ensure that we have the appropriate infrastructure to deal with things like the move to electric vehicles.

Law and Order

Bailiwick Law Enforcement provides policing services throughout the Bailiwick; with officers permanently based on the islands of Guernsey and Alderney. With a comparatively low crime rate, Guernsey Police Force and the Guernsey Border Agency strive to maintain security and protect the community from harm by working in partnership with both statutory and voluntary organisations. By proactively preventing and detecting crime and disorder, Bailiwick Law Enforcement aims to reduce the negative impact on the quality of life of Bailiwick residents and visitors alike. These are supported by the court, prison and probation services which are also integral to our justice system.

Law enforcement, and the court, prison and probation services that support is expected to cost £30m in 2023. The fire and rescue service cost a further £4m and £1m a year is spent on the Joint Emergency Services Control Centre.

How do we raise enough revenue to secure essential services?

Our proposals mean that most people will take home more money than they do under the current tax system, so while GST will result in the cost of goods and services increasing, most lower and middle income households will be better off overall.

A graph showing the percentage change of the new proposals on household income according to household income percentile

The package being proposed contains these key elements:

  • A new 15% Income Tax band on everyone’s income up to £30,000. For someone on median earnings (about £37,000 a year) this will reduce their tax bill by about £900 a year.
  • An increase in the personal income tax allowance of £600 which will reduce people’s bill by £120 a year.
  • A broad-based GST at 5% with relief for a limited number of things like rents and mortgages. This is expected to increase household costs by about 3.4%, which would be about £1,100 for someone on median earnings.
  • A restructure of Social Security contributions to give everyone an allowance. This makes the system more progressive and would mean an employed individual on median earnings gaining about £600 a year.
  • Pre-emptive increases to pensions and benefits to anticipate the impact of inflation.
  • A scheme to provide financial support to certain low- income households outside of the benefits system.

Those reforms to the tax system will raise some of the revenue needed, but they won’t be enough on their own.

We will also need to at least maintain the size of the workforce, through increased migration and enabling more people to be economically active. The States approved a new population policy in September 2022 to address this. But increased migration does mean a bigger population and more investment in housing and infrastructure would be needed.

We will aim to raise more from businesses and an independent review has found that up to £20m could be generated this way, but it must be done through liaison with industry and the other Crown Dependencies. 

We will also propose much tighter restrictions on States spending, limiting budgets for Committees in 2024 and 2025 to control expenditure.

Statistics & Data

In 2010 we spent £158m on health and care services, in 2020, this cost was £207m. This cost will continue to rise.

The average taxpayer pays £7,000 in tax. Which covers just 2 days in neonatal care.

The tax paid in a year by the average taxpayer covers a nursing care placement for just 7.5 weeks.

It costs £11,000 per person per year to run public services and we’re using those services more. The average taxpayer pays just £7,000 per year.

Between 2009 and 2019 the number of working age Islanders fell by 1,500. That’s a significant drop in tax revenues.

In the last 10 years the number of over-65s has risen by 2,500. By 2040 it will rise by another 5,500.

The cost of one year of secondary education per student is about £9,000.

The cost of the prison service per prisoner is about £45,000 per year.

The cost of one complex knee or hip operation is about £20,000.

How much will this raise?

All together it is possible that limiting spending, reviewing corporate tax and a range of other measures could close the gap by up to £40m over time, but that still leaves a deficit of £50m-£55m a year needed to deliver the essential services the community needs.

The proposed package would raise this amount. £19m of this would come from households contributing through GST.  £27m would come from businesses contributing through GST, and £6m would come from business visitors and tourists contributing through GST.

How could this affect me?

Case studies

These tables give examples of how different sorts of households would be affected by the proposed changes to the tax system.  Each household’s tax contribution depends on a range of factors including their income, their housing situation, how many children they have, whether they receive pensions or benefits and how they spend their money.  The following does not cover every household but aims to give a mix of different examples (equivalised income):

One adult (65 and over) case study

Two adults (65 and over) case study

One adult (16-64) with child(ren) case study

Two adults (16-64) with child(ren) case study

One adult (16-64) case study

Two adults (16-64) case study

Two adults (16-64) with child(ren)

Two adults (16-64) case study

What alternatives have we explored?

Income Tax

Increasing taxes on income is one way in which more revenues could be raised, either by increasing the amount of income tax people pay or increasing social security contributions or applying an income-based ‘health tax’.

Many people may think this is fairer, but we already get about two thirds of revenues this way. Most of these types of taxes are paid by people who are working, and we know that this group will make up a smaller portion of our community in the future.

Relying on these taxes to raise all the additional revenue we need only increases the reliance on our island’s workers. Each 1% of additional income tax would raise roughly £13m but if the pool of people in work shrinks, you would need to raise it by more to generate the same amount of revenue.

Unlike income tax, a GST would raise 25% of the necessary revenues from businesses and visitors who would be expected to contribute £27m and £6m per year respectively. 

A GST also means a more flexible tax system, which allows for increases in allowances and support for lower earners which is how the overall proposals ensure the majority of households would be better off compared to now.

The Policy & Resources Committee and the Tax Review Steering Group believe this would be the wrong option because of its over-reliance on the working population and because it would mean our income tax rates are higher than jurisdictions we compete with for business and could damage our economy.

Taxing businesses

Corporate income taxes make up approximately 10% of our current revenues. The existing tax regime already taxes regulated financial services businesses at 10%. Large retailers and companies renting or developing Guernsey land and property are taxed at 20%. These businesses also contribute considerably to the economy through the high commercial rates of TRP, and employer social security contributions they pay.

An exercise was undertaken to identify what further options might be available to raise more from corporates in a way that remains internationally acceptable and competitive. This identified the potential to raise up to £20m a year, which is not sufficient to meet the funding gap.

One of the options under consideration is a fixed annual fee payable by companies that benefit from Guernsey’s regulatory and judicial regimes. We are also developing proposals for an alternative corporate vehicle which would be subject to tax at 15%.

As international tax standards are evolving, the corporate tax environment is changing. As this is an economically sensitive area, there is a need to move carefully. The process of engaging with industry on the options identified has started, however more extensive work needs to be done. There is also political engagement with Jersey and the Isle of Man to ensure the best way forward is found.

Other taxes

The States’ apply a range of smaller taxes and we have looked at the potential for these to raise revenue. Between them document duty, TRP and excise duties raise only about 12% of the revenues we collect now so we would have to make really large increase in these to raise a large amount of money. We have included some analysis on these taxes as an appendix to the policy letter (which can be downloaded from this page).

The States has looked at the role some of these taxes might pay in specifically changing the way people behave and these were included in the 2023 budget. For example, we plan to put higher TRP charges on derelict properties and properties with planning permissions which have not been developed. We also plan to apply lower rates of document duty to people moving into smaller properties, to support people looking to downsize freeing up larger homes for families. These steps raise very little money, but they should help a little with making sure we are using our housing stock efficiently at a time when the cost of housing is a bit issue.

The States is also still looking into how we might tax motoring in the future now that people are moving to electric vehicles.

We have also looked at some taxes we don’t already apply, like online taxes or capital taxes. However, what we found is that these don’t raise enough revenue to be worth the potential risk they bring.  

Spending cuts

The Committee has considered what impact there would be if the funding gap were closed entirely by reducing spending, but this is likely to mean drastic services cuts, limiting access to some services and introducing charges.  The extent of these would be so severe the Committee believes it would have a severe impact on the community.  However it has sought to illustrate what that impact might look like in its Tax Review policy letter but including details of an exercise carried out by all of the States Principal Committees earlier this year.

The Committees were requested to complete a framework document outlining what measures they feel they would need to consider if they were asked to reduce their Committee budget by 5%, 10% or 15%. Should there be a desire to close the structural deficit by cuts in expenditure/services alone, then budgets would need to be reduced by circa 13%.

It was stressed that the aim is to establish the consequences of a significant reduction in spending on existing services for illustration purposes only and that the results of this exercise would be used to inform our continuing discussion on taxation and spending. At this stage these potential “savings” are entirely hypothetical. Significantly more work would be needed to assess both their feasibility and understand the overall consequences.

The examples listed below cover some of the items identified if they were to reduce expenditure by up to 15%.

  • The Committee for Economic Development identified a range of measures including;
    • A reduction in the Committee’s core policy and operational areas which would reduce the Committee’s ability to support the finance sector and to support business innovation and growth;
    • A reduction in the budget for Grant & Support Schemes which would reduce the ability of third-party organisations funded by the Committee to deliver their core activities;
    • A reduction in the Marketing & Tourism budget which would reduce the reach of marketing campaigns and lead to fewer visitors to the Islands.

However, the Committee advised that “a budget reduction of 10% and 15% respectively would have a severely detrimental impact on the Committee’s ability to deliver on key work streams identified within the Government Work Plan” and that “We urge Members to consider the core remit of the Committee for Economic Development, which is to facilitate economic development and growth within the Bailiwick, to generate incremental employment and tax take for the benefit of the local community. It is this Committee’s opinion, therefore, that any further budget reductions over and above 5% would be to the detriment of GDP, employment and subsequent tax take and therefore, a false economy.”


  • The Committee for Education, Sport & Culture identified measures which could reduce expenditure by £12.2million predominantly through reductions in or restrictions to access of public services. Achieving this kind of reduction in expenditure would require measures such as:
    • Removal/reduction of grant funding (e.g. Grant-Aided Colleges; Guernsey Sports Commission, Youth Commission)
    • A change in eligibility criteria to reduce Higher Education expenditure;
    • Ceasing funding for Guille Alles library;
    • Removal/reduction of non-mandatory services (e.g. Museums Service, Schools Music Service)
    • The closure of a Primary School;

The committee would wish to stress that substantially more work is required to understand the implications of cuts of this magnitude on the community, the third sector and wider committee mandates. The Committee further note that some measures might be counterproductive given the important role of education and enrichment in supporting skills and development which are integral to supporting the earnings capacity of the future working population, particularly among those who might not be able to access these services without government support.


  • The Committee for Employment & Social Security identified a range of measures which it advises could deliver significant reductions in expenditure but would involve:
    • A complete removal of family allowance;
    • A reduction in all benefit rates noting that a 5% budget cut would require a 5.2% reduction in rates ranging to a 23.5% reduction in order to achieve 15%;
    • A restriction of access to benefits (including an affluence cap for the State pension);
    • Removal or means-testing of some benefits (including death grant, industrial injury, parental, bereavement, unemployment, winter fuel allowance for energy efficient households, Severe Disability and Carers Allowance, school uniform grants); and
    • Change in long-term care provision including reduced rates or means testing and equity release scheme.

In its response the Committee for Employment & Social Security note that restrictions in benefit levels would be hugely unpalatable, and in particular highlighted the role of income support “to avoid intolerable poverty”. It noted that while the indicative reductions in income support to achieve the hypothetical savings have been provided as part of this exercise, the Committee would consider this completely unacceptable in practice.


  • The Committee for the Environment & Infrastructure advises that its preferred option would be revenue-raising instead of expenditure reductions and has identified a range of measures for increased prices / introduction of new charges that would generate additional income which would negate the need for a wider range of spending cuts including:
    • Charging for roadworks and parking suspensions; and
    • introducing charges for corporate and commuter parking in some locations.
    • charging for school bus services;

Should it be required to deliver expenditure reductions, the Committee has identified measures such as:

    • stopping beach cleaning, cutting the south coast cliffs and works in winter to maintain steps;
    • stop maintaining / dispose of Candie Gardens and coastal and town plantations; and
    • a reduction in off-peak bus services.

The Committee notes that “cutting services in these areas… would negatively impact both tourism and visitor experience and also the local community.”


  • The Committee for Health & Social Care advised that measures totalling £29.85m have been identified although £4.5m are categorised as cost avoidance (i.e. not saving money from existing budget but avoiding the need for an increased budget in the future).

The large majority of these reductions would come from service restrictions and reductions or a remodelling of existing services. In view of the large spread of services which HSC provides, there are a number of initiatives which could reduce revenue expenditure but would result in lesser service provision and may be counter-productive in the long-term. These might include:

    • Reviewing the progression of the funding of NICE TAs;
    • Reviewing the model of service provision for adult community services;
    • Increasing emergency department charges for adults; and
    • Consideration of moving to a partial user-pays model for secondary care.

The Committee notes that these suggestions, including asking the community to contribute financially to a wider range of health care services, would represent a shift in the current model for funding for health and care and would require further detailed consideration and analysis to examine the consequences of such a change.


  • The Committee for Home Affairs has not provided any new initiatives to the £300,000 of potential savings opportunities it identified at the end of 2021. The Committee has advised that “the Committee already operates exceptionally lean services, and believes strongly that further budget reductions risks damaging the infrastructure that ensures the safety and security of the Bailiwick” and “the Committee would describe any cost cutting exercise that would see budgets reduced by 5% as unachievable and potentially dangerous for the community.”

Opportunities previously identified included:

    • Tagging as an alternative to custodial sentences;
    • Modernisation fixed penalty notices;
    • Adoption of the National ‘Single Online Home’ web-based platform for digital; contact and crime reporting; and
    • Outsourcing of ‘Court Group’ prison officers.


  • Reductions in the core budget provided to the Policy & Resources Committee of up to £2.75m were identified which would involve measures such as:
    • restricting the service levels on the Alderney PSO contract;
    • Reducing the size of all Revenue Service teams with the consequential impact for service delivery and meeting international commitments; and
    • withdrawing from the Bureau des Iles Anglo-Normandes and the Channel Island Brussels Office.


In respect of Corporate Services, measures that would need to be considered include:

    • reducing the size of all enabling service teams with the consequential impact for service area support;
    • cessation of various IT contracts;
    • reducing insurance coverage in order to lower premiums (increasing the level of risk and self-insurance); and
    • restrictions/closures of public conveniences.

The Policy & Resources Committee appreciates the significant work undertaken by Principal Committees in compiling the possible cost cutting measures but also that these are theoretical only. Should the States not have an appetite to raise the revenues required to continue to fund the level of public services currently offered, further detailed work would be required by all Committees to further understand the options and implications of such drastic expenditure reductions.

Public presentation - Monday 28th November

Below is a recording of the Tax Review - Public Presentation that was broadcast live to the States of Guernsey Facebook page on Monday 28th November 2022.

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