Cash limits for departments are being reduced by �6m on previous estimates, while spending on capital projects is being slashed by �11m.

With total capital expenditure expected to total �51m the States are still expected to run a �39m deficit in 2006.

Islanders will also pay more in taxes with alcohol and tobacco both going up.

A pint of beer will go up by a penny, a bottle of wine by 11p and duty on tobacco will go up by 3% above inflation.

However, there is no change on petrol duty to protect drivers already affected by high oil prices.

Personal allowances on income tax will be frozen between 2007 and 2008, meaning islanders will be taxed on a higher proportion of their salary.