Policy and Resources (P&R) has presented two competing budget proposals for 2027, prompting sharp criticism from deputies who argue the approach signals a breakdown in fiscal restraint and fails to adequately support ordinary islanders.
Multiple deputies have voiced concern that the dual-budget strategy represents an abandonment of spending discipline. Deputy Haley Camp stated that the presentation of two options demonstrated P&R had given up on controlling expenditure, warning that the island risks a pattern of unchecked spending with consequences deferred to future administrations.
The underlying tension stems from a directive issued to P&R last year to achieve real-terms spending reductions of 1% annually across 2027, 2028 and 2029. However, deputies rejected a proposal to limit spending increases to inflation by 15 votes to 22, effectively leaving that original direction in place despite the failed attempt to soften it.
Can the budget meet fiscal targets?
P&R Treasury Lead Charles Parkinson has stated he never believed the 1% real-terms reduction target was achievable. He cautioned that presenting a budget containing the full spending cuts would trigger
a flood of amendments, and emphasised that under the Option B budget, P&R is proposing only half of what States committees have requested.
We're not spending like a drunken sailor, he said in defence of the proposals.
Deputy Adrian Gabriel expressed disappointment with the budget's approach to tax policy, stating he would have preferred to see maximum tax liability caps increase more substantially than currently proposed.
Camp disagreed with Parkinson's position on feasibility, arguing
It is clear we're only moving in one trajectory which is let's just keep on spending money with abandon and at some point down the road someone else can fix it.
What tax and duty changes are proposed?
The budget includes an inflationary increase in income tax allowances and proposes lower taxes on alcoholic beverages served in public houses. The budget proposes a 4.3% inflation-linked fuel-duty rise from 1 January 2027, taking the rate to 94.4p per litre, with alcohol duties rising by 2% from the same date.
Deputy Lee Van Katwyk announced he would bring a proposal alongside Deputy Rob Curgenven to freeze fuel duty in order to
support struggling families. This move reflects concern that the proposed fuel-duty increase could place additional pressure on households already facing cost pressures.
The budget also introduces a new £15m fund designed to encourage economic growth and allocates £6m for initiatives aimed at promoting States savings. However, it proposes the abolition of mortgage interest relief, a move that has drawn particular opposition.
How will the mortgage relief change affect homeowners?
The abolition of mortgage interest relief represents a significant shift in housing policy. Deputy Aidan Matthews, who has consistently defended mortgage interest relief through previous budget cycles, indicated he would seek to reverse this decision by 2029.
I think that really the best thing that we should be doing is encouraging people to be able to afford to buy their own homes.
In November 2025, deputies had agreed to keep mortgage-interest relief for principal private residences at £3,500 and asked P&R and the Housing Committee to report recommendations on alternatives by the 2027 Budget Report. P&R and the Committee for Housing have stated they are developing initiatives to support first-time buyers as part of their response to housing affordability concerns.
Does the budget support entrepreneurship?
P&R proposes introducing an entrepreneurs' tax cap designed to attract new business to the island. However, this initiative has drawn criticism from Deputy Jennifer Strachan, former head of Start Up Guernsey, who questioned whether a tax incentive alone addresses the underlying needs of the entrepreneurial ecosystem.
I think they're doing an easy thing, which is to say - here's a tax cap, come live here. I think the hard work is actually developing the ecosystem for entrepreneurs to thrive.
The criticism gains weight given the States' recent decision to close the Digital Greenhouse, a centre dedicated to supporting digital and creative start-ups. Strachan's concerns suggest that tax policy alone cannot compensate for the loss of physical infrastructure and support services that entrepreneurs require.
Deputy Rob Curgenven echoed this concern, noting that recent tax-reform decisions have created conditions for increased government spending.
We've got the windfall in for pillar two and obviously GST has been agreed in principle. It just feels now that the cap is off and the spending spree is ready for Christmas.
What revenue sources will fund the budget?
The budget relies on multiple revenue streams to support spending plans. P&R estimates 2027 Pillar Two revenue at about £79m, discounted by 15% to account for uncertainty. The States' recent tax-reform decision included a 3% GST, with provision for it to rise to 4% in 2031 and 5% in 2033, providing additional revenue sources beyond traditional income and duty taxation.
When will the States debate the budget?
The States is scheduled to debate the 2027 annual budget at a special meeting beginning 3 November 2026. This timeline will allow deputies to scrutinise both budget options and propose amendments before a final decision is reached.
Key Facts:
- P&R has presented two budget options for 2027 amid disagreement over spending discipline and the feasibility of achieving 1% real-terms spending reductions
- The budget proposes fuel-duty increases of 4.3% and alcohol-duty rises of 2% from 1 January 2027, though some deputies plan to propose a fuel-duty freeze
- Mortgage interest relief is proposed for abolition, reversing a November 2025 decision to retain it at £3,500
- A new £15m economic growth fund and £6m in States savings initiatives are included alongside an entrepreneurs' tax cap
- Budget debate is scheduled for 3 November 2026
