Guardian’s ‘Loophole Islands’ article ‘is wholly misleading’
Saturday 30th June 2012, 2:00PM BST.
A comment piece in The Guardian calls the Crown Dependencies ‘the Loophole Islands’, claiming Jersey, Guernsey, Alderney and Sark’s economies rely on ‘exploiting the gaps in international law’.
THE GUARDIAN has launched another attack on the Channel Islands but this time in a comment piece calling the Crown Dependencies ‘the Loophole Islands’.
It has claimed that Jersey, Guernsey, Alderney and Sark’s economies rely on ‘exploiting the gaps in international law’.
The latest criticism came after a series of damning articles on the Channel Islands – the most recent on Guernsey’s move to adopt European standards on mail order supplements. The national newspaper claimed the £100m. industry had just sprung up in the island.
However, in yesterday’s editorial The Guardian claimed the islands ran the risk of becoming ‘company towns’ that would be unable to provide decent careers and lives for their residents.
The Policy Council described the comment article as wholly misleading and said it would continue to address the misconceptions.
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i agree with this report. alot of young and not so young are finding it very hard to find homes and jobs . when most rents are over £1000 amonth and to buy a home is £300000 .not every one is cut out to work in a office . more and more local people are being pushed out to make room for others to move in . its not fair on local people . facebook just did a page on guernsey days gone by . and if you read it most local people of there were very unhappy how things have turned out for them .greed will one day get the better of guernsey if not alreadie has
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I also agree with the article.If there was in fact no “Loop Hole”. then by definition ,there would be no use for offshore banking..
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I agree with Nigel Simon specifically with regards to the comment, “the islands ran the risk of becoming ‘company towns’ that would be unable to provide decent careers and lives for their residents.” Many would agree with me that we are already there. Local people and indeed local couples working today in Guernsey with two permanent full time careers are simply not able to get onto the property ladder without help from family and / or extended family. £300,000 + all of the fees of course, represents a substantial mortgage and taking this on at a time when we are witnessing the potential collapse of the Euro would be nothing less than foolhardy and not to be recommended. Unless the island addresses this ‘company town’ issue in the coming months and years ahead, we will see some of our most skilled local people, not through choice, packing up and leaving these shores forever. Lets hope Guernsey isn’t remembered for being the place that lined the pockets of so few people at the expense of so many other local people.
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it`s the estate agents that keep the charges up,by charging a percentage off the price a house is sold for.
if as in france a set price was charged for selling a property and convayence fees the price would be different.
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The Notaire’s fees are actually on a sliding scale according to Lost in France:
By a Decree of 8 March 1978 (modified in 1981, 1985 and 1986). They are calculated according to the following scale (VAT in addition):
From 0 to 3.049 euros: 5 %
From 3.049 to 6.098 euros: 3,30 %
From 6.098 to 16.769,40 euros: 1,65 %
Above 16.769,40 euros: 0,825 %
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Godfrey
Not surprisingly, as is the case all over the world, property prices in locations which are highly desirable to live in are very expensive. It’s strong demand versus limited supply, compounded by Guernsey’s tiny land mass. Compare it with somewhere in the UK like Middlesbrough, a now desperate place where many under the age of 35 today may NEVER work.
Lots of people moan about the high cost of houses to buy, but I’d like to throw a few discussion points into the ring.
1. Wages and salaries here are also very high, not just housing. This enables a decent standard of living, in relative terms, to those who are not burdened by a mortgage.
2. The UK, which we follow in many respects, has a far higher expectation level than the European continent when it comes to buying rather than renting. Most countries in Europe have a very high percentage of their populations who rent property well into their late 30s. Many only decide to buy once they inherit from elderly parents and grandparents. So why are we so intent on buying rather than renting here in Guernsey? Very simple really – the rental market is of very poor quality and there’s not enough of it. Is this something that Guernsey should look to change?
3. Why don’t we explore a “Crown leasehold” system of home ownership which would massively help lower earning residents? The States of Guernsey could create an entirely new housing sector where the States would own the freeholds of new build properties. On the basis that something like two-thirds of the value of a £400k Guernsey property is derived from the pure land value, the other one-third would be attributed to the property value. So the leasehold interest of a £400k house might be only (say) £135k. That’s what the buyer would take a mortgage against. The States could borrow by way of a bond issue to raise the capital cost of buying the freehold interest. Let’s say that they borrowed in today’s market at a very long term interest rate of 3%, and the interest was paid tax-free to investors. The ground rent payable by the leaseholder could then also be set at 3%, so the leaseholder would be paying around £8,000 a year on top of servicing a £135k mortgage, which is far more affordable to a young working couple. More importantly, the young couple would not need to save up a big deposit to be able to buy the freehold, as opposed to needing to find around £60,000 today (20%) to buy a £300k house. All they would need would be to be able to finance the lower mortgage and ground rent.
The States would be assisting, at no net financial cost to the taxpayer, while the buyer of the leasehold interest would own their own home in exactly the same way as thousands of flat owners in the UK, building equity in the process.
Worth exploring ?
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I dont mean to sound simple, but isnt that already basically done by the Guernsey Housing Association? I know its slightly different, as with the GHA you own a part of the house (40%-80%)its the same sort of principle really isnt it?
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Interesting discussion. I’m a carpenter, I don’t work in the finance industry. However I make an extremely good living working for those that do. The finance industry hasn’t disadvantaged me, it’s paid me well and, at times of recession elsewhere in the world, it’s kept this island going and therefore kept me in work.
The day the finance industry goes I’ll pack up my tools and head to where the work is because there won’t be any for me in Guernsey.
I’d rather the Guardian didn’t print this stuff but to be fair there is a ‘loop-hole’ and Guernsey should be thankful that there is!
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Good contribution Outraged. A lot of locals think that ditching the finance industry is the panacea for all the islands ills. Simply kick the banks out and hey presto, all those bloney foreigners will leave and we’ll return to the good ol’ days.
Your post illustrates nicely that such a view is ridiculously naive.
A lot of people don’t like the finance industry (I must confess I’m delighted to be out of it) but there’s no doubt its economic influence and benefits spread much further than the ivory towers in town.
I’m not saying Guernsey will die if finance leaves, but there’s no doubt it will make a lot of people a lot worse off and affect everything from education and healthcare to the livelihoods of people like yourself.
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If the finance industry collapsed here, i firmly believe that our population would literally be quartered, if not more.
There are other industries that provide work etc, however the influence of the finance industry into other areas as highlighed by Outraged means a very simple thing. If the industry goes, so will ALL of the overinflated wages. this will have the knockon effect of preventing most businesses from trading, and eventually causing most local businesses to fold (it wont affect non-local businesses anywhere near as much).
The reliance on the industry and the huge variety of ways that it impacts local society is massively underrated.
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The reliance on the industry and the huge variety of ways that it impacts the local economy is not underrated at all. Indeed everybody recognises the fact that are in a very vulnerable position because we have all of our eggs in one basket. There has and continues to be an over reliance on finance and we need to diversify / evolve as an island.
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Diversify? Ahahahahahahahahahha!
The island’s natural resources are either fully exploited, non-existent, or uncompetitive due to freight costs. Manufacturing is uncompetitive due to freight costs. Knowledge-based ‘service’ economy is uncompetitive due to high wages or lack of knowledge/reputation. Finance is claimed to be here these days due to our expertise and no longer due ot our taxes – if that’s the case, then why did we need the ‘zero’ part of ‘zero-ten’? The island will be on a downward spiral for some time until it returns to sensible levels of population, employment, and salaries. The best thing the government can do is to manage the decline.
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Good evening,
Jacob, I think your first point regarding salaries, (with the utmost respect), is a little off as it obviously depends on what one does for a living. That said, regarding your points 2 & 3 – very interesting and food for thought.
Outraged Of The Vale, I’m not sure that having such a ‘loop-hole’ when considering our future generations is such a blessing. We will inevitably, eventually have to tow the line. We will have to readjust our thinking and our strategy for sustainable growth and in all honesty I’m not entirely sure, this time, that Guernsey will emerge sunny side up.
Essentially this is all about evolving with the times. Whether Guernsey will be able to evolve in time and find the next industry to support the local community, post-finance, is something that remains to be seen.
Godfrey
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Outraged – good to hear an honest viewpoint from someone not directly employed in the financed industry. Makes a change from the usual ‘what have they ever done for us’ arguments.
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What surely you dont mean, never let the truth get in the way of a good story?!?!
The same premise that most worldwide reporting aims to achieve?!
Funny that…..
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guernsey is just not big anoth to suport so many people. if a town in the uk or any where else grows thay have the room to grow.if the house prices go to high you can move to the next village . in guersey you can only stay and pay over the odds price to buy or be ripped of on very high rents. local people should be better looked after. local market house should mean that and open market should be that but some how it as not saved the local people .
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Nigel
If more people want to live here than want to leave, then demand exceeds supply and prices go up. Unless we reclaim land (and many places around the world have just done that), then the only way to create more supply is to build on green land, or to build upwards. Those are our realistic options.
If more people want to leave than want to live here, then it will almost certainly be because the economy will have already gone pear-shaped. High house price situation solved in one foul swoop, but no jobs left!
Its one heck of a conundrum and there are very few solutions. As Deputy Jones rightly points out, there are tens of thousands of locally-qualified Guerns who could return to the island immediately if they so wished. Nothing we can do about that. We therefore have to look at alternatives.
We should seriously study land reclaimation options, and also look at the leasehold/freehold idea which I mooted earlier in this thread. Otherwise, we have to accept overcrowding, sky-high house prices, high-rise buildings or no green spaces.
Just think logically – the site at La Ramee alone could probably cater for around 2,000 new homes. Its a massive area of green land which is completely inaccessible to islanders. If its not going to be a golf course, then why not housing? There are numerous other sites on the island which could create another 1,000 homes. That would take the heat out of housing prices for the next decade at least. The island is NOT overcrowded. It just isn’t using its available land resources in an optimum manner.
Maybe the States should buy La Ramee and use part of it for the sort of split freehold/leashold housing scheme that I suggested. I’m not suggesting that a huge green area is concreted over – just used better. 500 new homes, a new large country hotel, sports fields, retirement homes etc. -one could create almost an entire new “village” on that site alone without losing an excessive amount of green land.
There will be those who say that we should keen the island as green as possible and yes, they have a point (to a degree). But its all a question of balance and compromise – that’s simply unavoidable in Guernsey going forward.
Even redesignating some derelict vinery sites for split freehold/leasehold housing schemes would help massively.
There are solutions out there if we think laterally and “out of the box”. Let’s face it, nobody has come up with anything better using traditional thinking.
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I love debates about finance and the ‘want them gone’ camp versus the ‘want them to stay’ camp’s arguments almost as much as the toys out the pram ‘we should go independent’ lobbyists, who are sick of being ‘dictated to’ by the UK.
The one commonality all those with such views share is they honestly think they – we – can CHOOSE to do what suits them (us)…
which we can, as long as we accept that the countries whose residents/businesses have been enjoying our gravy train can do likewise, and will quite probably, in the not too distant future, make it so difficult for them to get on board, that many simply won’t be able to do it anymore…
and a train devoid of gravy is about as much use to the CI’s – with/without banks, trusts etc, independent or no –
as a chocolate fireguard.
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Pull offshore finance out of Guernsey and watch the island implode as money flows out and the economy goes to the wall. Really, it is lovely being nostalgic.
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Ed,
We don’t need to pull offshore finance out of Guernsey – bigger and better places will(and are already)doing it for us.
Nostalgia might be all we have left in a few years.
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The Guardian article is totally one sided and offers a simplistic view of a very complex industry.
But without rehashing all the reasons why I think that is the case, we do need to accept that public perception in the UK and elsewhere is strongly against us (even if they don’t understand what we actually do here). Just like estate agents in the 1990′s or bankers in the last decade, we are now regarded as little more than parasites by the British Joe Public.
This is unlikely to improve for the foreseeable future. Governments can make cheap political points by attacking what they call offshore “tax havens”. In my view this is unlikely to save them a single penny in lost tax revenue – but that is another argument.
The fact is that the EU, UK and USA have all made significant attempts stifle our ability to do business. I think we can expect more of this and I think we will be wasting our time trying to argue our case – moral crusades such as that being pursued by the Guardian are based on emotional rhetoric rather that fact.
I think we do have to expect more and more attacks on our businesses and it is going to get harder and harder for the finance industry to survive. Sooner or later big banks are likely to up sticks rather than be percieved as willing participants in the maligned world of offshore finance.
So where does that leave us?
We absolutely have to look for ways of diversifying our economy as a matter of urgency. Easier said that done of course – there is only so much you can do on an over-populated 25 square mile rock in the ocean.
Large scale tidal power generation is the only realsitic option I can think of, but it is going to require a huge investment.
Are we prepared to take that risk?
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Retirement and nursing homes are the logical answer, if finance goes under.
Turn the whole island into a giant retirement village. Plenty of older people would come (nice climate, English spoken, no death duties), and there would be no worries about them “having children here and taking over”.
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James
I like it – I think “this has legs.”
They also won’t need schools, or be driving too many cars, and they would help to subsidise our own health service. Visits by relatives in the UK to come and see them would also assist with tourism and help our airlines throughout the year. It would greatly assist to make our bus service viable as well.
5,000 retirees coming in, each paying say a minimum of £5,000 per annum in income tax for the privilege, would generate £25m per annum in direct tax revenues alone, let alone the tax on profits from running the retirement homes plus whatever the retirees spend locally in the economy.
Maybe we could in the process become a leading centre of medical excellence in geriatric health care, hip replacements, cataracts etc.
Definitely worth exploring further. It ticks loads of boxes with no obvious negatives, other than the utilisation of land to build retirement homes but the demographic timebomb already faced by Guernsey is going to force that anyway in the coming years.
Deputy Jones – any thoughts? There would obviously be Housing issues but I assume they would all be Open Market designated, so maybe not too much of an issue?
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Realist
Tidal energy is a “no brainer”.
What really worries me is the misguided belief that we in Guernsey would be taking all the financial capital risk. We wouldn’t. This is far too big for us. We need to partner with multinational energy companies, as well as with the EU, for them to provide the infrastructure and we simply take the royalties, with guaranteed minimum sums for selling the exploitation rights for contractual periods. Its the only way, as the sheer scale of the capital investment required would prevent us from ever doing it ourselves.
I quite like the idea of providing the EU (via France) with something that they actually want and need. It may help our relationship with them. The CI’s tidal waters are absolutely ideal for tidal energy and for as long as the moon stays up there, it will be in endless supply.
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“I quite like the idea of providing the EU (via France) with something that they actually want and need. It may help our relationship with them. ”
You have hit the nail on the head. The more we defend and deny our ‘Tax Haven’ status the more they will be after us.
We (the States) need to wake up and actively do something to move away from reliance finance for as sure as eggs is eggs there will be more attacks.
We ‘Mr & Mrs Average’ are already paying more to fill the ‘Black Hole’ and its going to get worse.
Come on Deputies do something for us for a change.
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Turning Guernsey into a great big ‘Granny Farm’ has merits.
However it would only bring in significant income from residential care home fees. The carers and nurses working in that sector tend to be on very low wages (which most locals will not work for) – so not much income tax there. Also this would mean higher levels of immigration.
Profits from ancillary medical care would only be relevant if all the retirees were on private medical insurance – otherwise this would mean a big drain on public health resources.
Just like anything else there are pros and cons. One thing is for sure, this would bring in a lot less revenue that the finance industry currently does.
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Realist
I should have expanded further on the idea.
We would have to create a new category of open market resident, requiring every new retiree living in designated retirement accommodation to pay a minimum tax (or “fee”) which would be direct tax revenue. I was suggesting £5,000 per annum. I agree with you that without that revenue, its nowhere near as attractive. The whole concept clearly has to “add value” to Guernsey’s economy. What we really need are the wealthier elements of the retirement community – i.e. those who would be attracted by only paying 20% income tax rather than higher rate UK income tax and CGT on their savings.
Retirees would need the benefit of some form of reciprocal agreement with the UK (or private cover, which I suspect would be prohibitely expensive).
Nothing on its own is ever likely to replace the finance industry in terms of tax revenue. What we need is multiple pillars of diversified elements to the economy.
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Jacob
This fee idea might also work in the case of the ‘white van man’who undercuts our local building trade and pays no tax
The Border Agency could collect say £500 from the driver every time a white van man drives off the boat .. the proof being on the driver to show that he is not intending to carry out work on the island
Not sure if white van men working on States projects should receive immunity though
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Ray
Great idea. Very dissapointed to see the short sighted views given in the GP Editors column today. The Building industry contributes hugely to the economy. As well as paying taxes we also employ large amounts of school leavers on the Excellent States Apprenticeship Scheme which is the envy of many. White Van Man does not pay either Tax or take on school leavers. They also leave a lot of problems behind when they leave!
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