This Is Guernsey

By Simon Tostevin

GUERNSEY will avoid a recession, says Chief Minister Mike Torode. Bank of England governor Mervyn King said that the UK economy could grind to a halt later this year because of stagnating growth and rising food and energy prices.

He also warned families to expect a decline in their standard of living and that household finances would come under severe strain.

But Deputy Torode is supremely confident that will not be the case locally - and he says the likelihood of a goods and services tax was as far away as ever.

‘We don’t have a national debt for a start and we don’t have a lot of the expenses they have like support of the armed forces,’ said Deputy Torode.

‘We are also quite tight on the public money we spend. The old days where we spent huge amounts without thinking of the consequences are long gone.’

He said Guernsey would be only moderately affected by rising inflation in the UK and the fall-out from global economic turmoil.

‘The problem we have here is that interest rates are imposed by the UK and affect the Channel Islands without us being able to do anything about it,’ said Deputy Torode.

‘But we have built up a very good financial background in Guernsey. It is prosperous and there is very little real poverty in Guernsey.

‘The majority enjoy a higher standard of living than most places in the Western world. Our public services are second to none. And I would like to think that the blip in the UK economy will not be felt too hard in Guernsey.’

Deputy Torode said it was important for people not to confuse the problems in the UK with the changes in Guernsey’s taxation system.

‘Doing nothing was not an option. European requirements meant our taxation arrangements had to cease. It was not just us, Jersey and the Isle of Man had to do so as well, and we all came individually to the same decision that to stay competitive we had to introduce a zero package.’

Without having done so, Deputy Torode estimates that Guernsey would have lost 50% of its financial services business within five years.

‘Losing as much of the finance industry as that would have brought massive unemployment, not just in that industry but in areas indirectly and directly linked to it, whether that be hotel staff, taxi drivers or window cleaners.

‘The trickle-down effect through the economy is huge and I don’t know how many people appreciate that.’

Deputy Torode added that enabling legislation for a GST had been put into place in the event that it was necessary, but he believes the island has done enough to avoid it.

‘If Guernsey carries on in the line it is going at the moment, I think zero-10 will bring us enough income to avoid bringing in a GST.’