Finance President Senator Terry le Sueur confirmed a target of 2.5% as the allowable increase in revenue and capital expenditure over five years.

Also in the budget, duties will rise by 29p on a litre of spirits, 3p on a bottle of wine, 1p on a pint of beer, and 11p on a packet of 20 cigarettes.

Duty on all types of road fuel is rising by 1p a litre.

Spending priorities

Local distillers and producers of cider will benefit from a 50% cut in duty as a business incentive.

Vehicle Registration Duty remains the same, although a new discounted rate will be introduced for second-hand vehicles.

The 2006 budget forecasts an increase in total States net expenditure of 2.7% to �480m.

The extra spending will be partly financed by a reduction in the capital programme from �43m in 2005 to �39m in 2006.

But an extra �6.5m has been targeted at priority areas of health, education, social services, prison and benefits.

There will be no allocation to the island's General Reserve for Unforeseen Contingencies. Committees and ministries will have no choice but to manage their affairs within cash limits, Senator le Sueur said.

A number of high-priority capital projects will go ahead, including the urgent remedial work needed at St Catherine's breakwater and improvement works at the airport.

Other projects to be allowed to start include the first phase of the �80m Solid Waste Strategy, as well as work at Hautlieu, Mont A L'abbe and Grainville schools.

A new MRI medical scanner is to be bought for the island, and further investment will be made in the island's sewer and sea defence infrastructures.

There will also be a year's delay to the introduction of the "20% means 20%" withdrawal of tax allowances.