The warning comes as the island's government prepares for a predicted �48m budget deficit when corporation tax is abolished in 2008.

The Treasury and Resources Minister says States departments are facing challenging revenue reductions.

However, Deputy Lyndon Trott claims these are being handled responsibly by civil servants and politicians.

Mr Trott told BBC News: "2005 really signalled a change in emphasis for the States from a period of unprecedented growth in public expenditures to one of curtailment ahead of 2008.

"I think the present States has behaved responsibly by and large throughout 2005, and I'm fairly confident that will be maintained next year."

More than 500 suggestions from islanders on how to tackle the �48m shortfall have been received by the Economic Steering Group and the matter is due to be debated by the States in the spring.