This Is Guernsey

By Simon Tostevin

GUERNSEY’S crucial economic gamble with zero-10 starts tomorrow. The island’s new corporate tax regime has faced criticism, challenges and attempted last-minute delays. But after more than five years in the making, a strategy that aims to maintain the island’s economic prosperity, attractiveness to business and quality of life finally takes effect.

If it fails, the island faces plundering up to half of its contingency reserve to offset the loss in income and raising further cash by introducing an unpopular goods and services tax - the same option Jersey has chosen and one that saw a petition raised against it there with more than 19,000 signatures.

In addition, one of the key components of the zero-10 strategy of ‘promoting economic growth’ is at odds with a decision by the States to cap population at its present level, which means companies looking to invest in Guernsey and expand their business believe they have their hands tied when it comes to recruiting essential staff.

That appears to be confirmed by a new survey suggesting a shortfall of more than 1,000 people already exists within financial and legal circles alone.

Even Treasury and Resources minister Lyndon Trott, who has headed the change and in October announced that the predicted annual ‘black hole’ of £100m. will have reduced to £25m. at the end of 2009 and turned ‘grey’ as a result, admits that what the future holds is uncertain.

But he insists zero-10 is the best and least risky course of action, particularly in light of recent global economic turbulence.

‘International credit markets have had a torrid time in recent months. Many believe that growth in the world economy will slow significantly as a result of the lack of investment capital, or more accurately the lack of appetite for lending that capital. I doubt the Bailiwick of Guernsey will be immune from these global influences, but the policies we have in place will certainly help offset many of the negatives the credit crunch has brought.’

Deputy Trott said failure to change would have been far more risky and far more unpredictable. ‘We opted for the safer option and for that I make no apology. The key to our future success is maintaining sustainable levels of employment, controlling public expenditure and remaining a good place to do business.’

Deputy Rhoderick Matthews caused controversy last month when he attempted to defer zero-10 by a year to coincide with Jersey’s tax strategy start point. He put the lost revenues next year as a result of scrapping corporation tax at £100m.

But on the eve of Guernsey’s new fiscal dawn, Jersey’s Treasury minister, Terry Le Sueur, has admitted its rival may have snatched an advantage by getting itself in order a year earlier.

Public Services minister Bill Bell is certainly of that view.

He said Guernsey was already benefiting from its early start because a record 2,000 companies had been formed in the island up to November.

‘All the evidence, and there is an abundance of it, is that zero-10 is working. Listen to the professionals in the various finance industries which make up the finance sector and they say they are being flooded out with business.’