ECONOMIC POLICIES

Economic Policy Views

Let me first set out (briefly) what I believe is the problem.

  • We are facing several significant global economic risks. A potential credit crisis, technology infrastructure spending bubble, and western countries sovereign debt levels. This, coupled with poor policy decisions by the current US administration and the weakness of the western democracies economies creates a strong possibility of a large global recession as well as a substantial risk of stagflation.

  • Even before the Iran/US war, many people in the western democracies (including Guernsey) have been struggling to survive pay check to pay check. Many people globally are noticing the decline in living standards and are having to seriously cut back on costs and this is causing political instability in many democracies. Many people, particularly those below the 50th percentile of income, have been struggling since 2008. This is due to several factors, not least currency debasement (loss of purchase power), stagnant wage growth (due to margin compression) and inflation cycles.

  • Guernsey has been privileged because of its position as a global capital facilitator, but is not immune. Guernsey has an entrenched cost of living crisis, over inflated dwelling costs (due to reliance on immigration to keep the economy going, government policy to support key workers, and low house building numbers) and near flat economic growth since 2008.

I will start out by saying the current States has set out some welcome traditional responses to these issues. The recent announcements, for example, on the housing plan, the review of key worker support policies and enforcement on non performing approved developments are all welcome news. But is it enough and fast enough? I don’t believe it is.

The problem that Guernsey, and all western democracies has had and, to a degree still has, is that the States has done is the same thing over and over and over again, expecting a different result. Cut spending (ineffectively and non-strategically), raise taxes (at the wrong times) and hope for economic growth without allocating sufficient resource to the challenge.

In the words of the popular proverb (it wasn’t Albert Einstein):

Insanity is doing the same thing over and over again and expecting different results.

Whilst I paint a gloomy picture of potential global economic outlook, it is possible I am wrong (I don’t believe I am, and, after speaking to a lot of voters, they dont believe I am). But, as Maya Angelou wisely said: “Hope for the best, prepare for the worst.”

Or, as my father would put it, remember the 6 P’s: Proper planning prevents piss poor performance.

So, here is my plan to do things differently in what remains of this States term.

Tax Reform

I have set out elsewhere my views on the forthcoming GST Plus vote (see here).

Here are my thoughts on other tax reforms.

  • My personal view is that a flat fee levied against non trading (i.e. no staff, no local trade) corporate entities may be a solution to increase corporation tax revenue, should GST Plus not be taken forward (GST Plus would essentially tax in the same way through the ISE provisions). This may be a lower risk, lower reward way to increase corporation tax without substantive administration cost and without impacting on the real economy.

  • See my section on growth for changes to the tax code relating to the tax caps in place. These changes do not, upon prima facie evidence, seem to disadvantage us from a competitive stand point and crystalise stated government policy in a concrete framework.

  • Whilst I understand the need for tax reform to continue to pay for government services at current levels and the cost challenges driven by the changes to demographics and increasing cost of delivery of service (due to heightened inflation and geopolitical changes), taxing more can only be politically tolerable once:

    1. Destruction of cost of living standards is halted.

    2. Government demonstrates it is in control of costs and able to allocate resources strategically and can maintain sustained cost discipline.

    3. The revenue service is ready for it operationally or we have outsourced operations to a service provider that can undertake the service.

     

     

Growth

  • I will only give my support to a GST Plus tax package propositions contingent on the adoption of  changes to Guernsey’s tax code regarding the tax caps for high net and ultra-high net worth residents.

    I would bring policy forward to make the benefit of the cap conditional on making investment into Guernsey start-up businesses, small businesses and medium sized businesses via the creation of a qualifying investment fund run by a Guernsey domiciled fund manager.

    I would also advocate for a change to the tax code to incentivize investments by Guernsey residents below the tax cap into a qualifying investment fund.

    I also want to see an industry led revamp of the Entrepreneur landscape to encourage more socially and ethically sound business development.cription

  • Guernsey’s stated aim in offering the tax caps is to attract high net worth residents to the island. The thesis is that these residents would provide inward investment into the economy. Some new residents do, some do not. At this time, there is no collatable data on the exact impact or efficacy of this.

    My proposition is to crystallize this policy objective by combining changes to the tax code with changes to the existing government platform for this type of investment, the Guernsey Enterprise Investment Scheme (the “GEIS”).

    I am currently working as part of a team on a proposition with the Guernsey Innovation Board, relevant government stakeholders, and local entrepreneurs on a proposal for the following:

    • A revamp of Guernsey’s Entrepreneur landscape, led by industry, to encourage much more of it.

    • A change to the tax codes to require any beneficiary of the various tax caps for wealthy residents to require that, to access the benefits of the tax cap, investment is made into a “qualifying investment” fund.

    • A qualifying investment would be an investment into a Guernsey domiciled investment fund, run by locally domiciled fund managers, that invests into local Guernsey start-ups, small and medium sized enterprises and social investment initiatives.

    • A change to the tax codes and specific fund structuring that give tax benefits and preferred return to those residents below the tax caps to invest in qualifying investments.

    • A revamp of the entrepreneur visa that links with the qualifying investment fund proposal.

    This would see investment made, by local investment professionals, into local businesses, using money from local residents. No money would flow through government, but government facilitates the flow of capital and sets the target sectors for investment by setting out what criteria a qualifying investment would have.

    This needs political momentum, changes to the GEIS, changes to the tax code and a small amount of government investment in time and legal effort (i.e. in the changes to the GEIS and tax code) but could make a huge difference to the real economy’s growth profile.

    I would also like to see Guernsey’s sovereign wealth fund and the Civil Service pension fund investing along side for larger projects such as housing but do not include this as a requirement, but rather as a stretch target as the decision for deployment is not within the gift of the States chamber.

  • The benefits are based on the current GEIS investment targeting strategy and stated government policy being enhanced. Benefits would change dependent on Economic Development Committee assessment of areas for investment. Under current GEIS terms, this would mean:

    1. Increased investment in construction sector, particularly small and medium enterprise to help scale house building efforts.

    2. Provision of opportunity for returning university graduates, funding a pathway for start ups for returning graduates.

    3. Increased investment in local technology and innovation businesses.

    4. Increased investment in social impact initiatives such as well being economy, blue economy and green energy.

    5. Increased investment in cultural business opportunities for our world class musicians, actors, artists and writers.

Safeguarding the Economy

  • I would make support for any potential new tax legislation being considered contingent on:

    • a financial health check conducted on samples of individuals and businesses, using price to earnings ratio reviews, 3 months prior to any new tax being introduced. No new tax can go live until both residents and businesses can afford a new tax.

    • Investigation of a de-peg from pound sterling, looking at the strengths, weaknesses, opportunities and threats of such an action.

  • One of the reasons your pay check doesn’t go as far as it did is not just because of the States of Guernsey policy decisions. It’s because of the UK and other major governments.

    £100 of goods or services in 2008 prices would cost £240 in today’s money, a 140% increase. But your wages have only gone up circa 70%. You can see the problem.

    This was caused by currency debasement i.e. money printing after 2008 and Covid. This has resulted in a divergence between cost increases (inflation) and real purchase power of wages. In business, this is called “negative JAWS” (when the costs increase faster than income). For households, its called shrinking disposable income or reduced living standards.

    There are currently significant inflationary pressures (due to cost increases) as well as risks of further money printing from western economies (the US has printed $120Bln in new money between November 2025 and March 2026 for example) to deal with the fall out of the Iran war.

    The Guernsey problem is primarily driven by  dwelling cost inflation due to immigration, house building and government support policy on key workers.

A new tax decision gateway

  • Any new tax solution proposed during this political term will have a gateway assessment built in to its go live process. Before any new tax could go live, an assessment must be done 1 quarter before any proposed go live date to establish if individuals or businesses have started to see a reversal of price to earnings ratio degradation before any new tax can be implemented.

    The assessment will look backwards at previous baseline purchase power and assess against current purchase power, expected inflation and wage growth levels to determine if individuals can absorb a new tax without it reducing living standards further.

    This is not about protecting one income grouping (lower income, the squeezed middle or upper income). All income groupings up to the top 5% of income earners have noticed a substantive decline in their real purchase power from 2008 to the current day. This is having an outsized impact on lower and middle income earners but is impacting all income groupings to a varying degree.

    Any assessment must be undertaken using an agreed model and it must be independently verified by third party accountants to establish trust in the process and in governments ability to recognise the impacts to the real economy of policy decisions.

  • This would ensure that no new tax could be implemented until Guernsey’s economic fortunes have actually changed (not just a falling inflation rate) as is being felt by its residents.

Currency changes and monetary policy revieW

  • As noted above, Guernsey residents have incurred the disbenefits of a debasement of the pound sterling due to money printing since the 2008 financial crisis. My proposal is to examine the strengths, weaknesses, opportunities and threats of Guernsey disconnecting from pound sterling.

    Guernsey has, to a large extent, also benefited from its relationship with pound sterling. From 1929 (when Guernsey moved away from its own currency to that of pound sterling) to 2008, there were significant trade benefits from the adoption. However, just because there has historically been a benefit, does not hold that the benefit will always exist.

    What might a benefit of moving away from pound sterling be?

    Guernsey, when it operated its own currency, was able to use monetary policy to drive economic growth. The Guernsey market building was paid for in just that way.

    Guernsey could investigate its own currency with an official peg or without, it could investigate adoption of a peg to the EURO (given France is our geographically closest trading partner and a partner the States is seeking to expand ties with), it could investigate a combined channel island currency with Jersey and/or the Isle of Man. There are multiple options that could be investigated.

  • Currency debasement leads to reduced purchase power and rising asset prices (mainly felt in the housing market). This leads to financial instability which in turn leads to political instability. All major western democratic currencies have suffered from currency debasement since the 2008 financial crisis to varying degrees. Given the risk probability of further debasement of pound sterling due to potential economic shocks from the Iran/US war (and other economic factors currently creating instability in global markets), Guernsey should be prepared to take control of its own monetary policy if the need arises.

Savings and Rebuilding Trust in Government SpendinG

  • I would make support for any potential new tax legislation being considered contingent on:

    • A commitment from all principal committees to revisit and review all services, deliverables, projects and initiatives. The review would categorize all such activity according to a criteria of “Critical”, “Important”, Important but could be restructured” and “nice to have”. The criteria would be driven by reference to (a) threat to life and wellbeing as measured against population and (b) the government strategic objectives. Strict rules on % of activity categorization would be set out with only 20% of activity being eligible for “Critical” and a minimum of 10% of activity must be categorized as “nice to have”. The only exception to this will be Health that can have up to 40% of its activity designated as critical with any allotment over 30% being peer reviewed by Scrutiny Management Committee for validation. Work stream to be completed before any new tax could be considered to go live.

    • A commitment from all principal committees to identify in this States term, achievable saving targets from the “nice to haves” (i.e. projects or services that do not fall within strategic aims) and the “important but could be restructured” activities, that could be implemented should tax cuts become necessary due to severe economic down turn and growth stimulus is not sufficient to balance the economy.  No new tax can go live until such exercise has been completed.

    • A commitment from the CEO of the Civil Service, on achievable operational savings within this states term through staff restructuring and operational restructuring. Such commitment is only to be made after planning and relevant budget approval for the cost to achieve has been documented.

  • I owe this policy idea to Horace Camp, although, he probably does not know it. I was struck by a post of his on Guernsey People Have Your Say on how new Deputies always seem keen on budget reductions but, once in the committee structure, never seem to deliver.

    After investigation (through discussion with several committee chairs old and new) it became clear that Committees do not have a view on what, out of all their obligations, is critical, important and nice to have. Civil servants and Deputies alike have all identified that committees view everything as “Critical”.

    As someone who has run large budgets for an international company, I know that not all activities are critical. There is always a risk grading that can be undertaken. Always trade offs that need to be made to achieve stated strategic objectives. It seems to me that this process is missing from Committee governance and needs to be enforced. If it isn’t, then government expenditure can only ever rise and can never be controlled.

  • Aside from the financial implication of ever rising costs that cant be controlled, there is also the political and social implications.

    For several election cycles the Guernsey people have been told by successive incoming Deputies that there would be a reckoning. That savings would, and could, be made. Manifesto pledges have been made and, when push came to shove, Deputies were elected, savings failed to materialize.

    In the last States Assembly, the previous P&R team reached out to the islands population to ask us all “How should we make savings?”. As a bit of PR this was an excellent move. It shows engagement. As a bit of policy making and a trust exercise in government it was a spectacular failure. If successive committees, who have all the data, cant make decisions on how to cut budgets, how would the public, who have no such data, be able to do so?

    The problem with all of this is that it breaks what is known as the “social contract”. This leads to advanced voter apathy (how many people don’t actually vote because it does not seem to make a difference?) which then leads to political instability.

  • Given recent disclosures regarding IT operational overspend (among other things), the Civil Service also needs to rebuild trust with the electorate. This is not fair on all those civil servants who day in, day out, do an excellent job. But, as someone who has worked in a service industry covering multiple sectors, you are only as good as the whole brand and, crucially, your last mistake.

    There are many ideas that could be investigated that could deliver improved services and outcomes. I would not want to be prescriptive in the ideas, simply allow the current CEO (with whom I have complete trust in his abilities) to do his job and to support him and to encourage support for his efforts. That said, here are some ideas that could be of benefit.

    1. Investigation of EURO OFFICE to replace Microsoft Office – this is a European open source initiative being fast tracked to provide a replacement to MS 365 solution to European governments and enterprise to remove dependency on US technology solutions. It is free at point of use and is actively being looked at by European governments and enterprise.

    2. Senior management restructure – Often issues in governance and strategic drift are driven by senior management positions being held for too long and skill set change requirements. A strategic review of required skills and leadership tone is often a first step to building a team to deliver.

    3. Inhouse business process development – Outsourcing of IT functions has its place. However, within large federated businesses, the current preferred  approach is to build out an internal team to build bespoke low code solutions that can be maintained internally without the need for expensive SaaS (software as a service) licensing and development.

  • To restore trust in government, the government must deliver a meaningful and demonstrable approach to cost control at both political and operational levels. My proposals seek to deliver a meaningful approach to committee spending control linked to identifiable risks and stated governmental strategic aims.

    Equally, should the global macro-economic environment become particularly challenging (for example, Stagflation), the government may have no option but to cut taxes to stimulate economic growth (I am not advocating or calling for these, just stating that they may be necessary).

    In those circumstances, it would be best to have targeted tax cuts (for example on TRP, document duty and construction build outs – all of which would help reduce dwelling cost) which will need to be paid for by service cuts in some way. It would be better to cut non critical services rather than have blanket untargeted cuts.

Protecting the little guy

  • I would make any support of new taxes, such as GST Plus, contingent on:

    • Concerns raised by Chamber of Commerce with regards to impacts to small local business being addressed.

    • Investigation of community business exemption criteria.

    • A level playing field for online and local retailers (i.e. the rates are the same for non-local online retailers as they are for local retailers).

  • The Chamber of Commerce has outlined concerns with regards to proposed changes to social security and the introduction of GST plus that could disadvantage small and medium sized businesses. These are currently being worked on through the consultation process. My position is that the G8 and Chamber’s concerns are not sufficiently addressed before implementation (as has happened in the past with implementation of things like company law changes).

    I also believe that there should be consideration given to what I will term as a community business exemption. Small, long standing businesses that may be above the threshold for revenue, but would benefit from total exemption from a GST Plus implementation. These small businesses would be examples of what make Guernsey what it is. To qualify the business would need to demonstrate that the cost of implementation would destroy their business model due to small margins and high costs (for example implementation of point of sale systems, accounting costs, fit out costs etc). They would need to demonstrate that they are part of the fabric of the community and have been for over 30 years. Any business that does this, could seek exemption.  This would create a safe haven for local businesses that operate on small margins, but have an outsized impact on the local community fabric.

    Finally, there must be a level playing field on application of tax  as GST Plus. If a local retailer must apply the tax, then an online retailer must also apply. There can be no preference for non-local online retailers. This is currently envisaged under the proposals and cannot be removed.

Revenue Service Reform

I would make any support of GST Plus contingent upon either:

    • An operational review undertaken by the new head of the revenue service with a report to the States setting out a management action plan on what would need to be done to go live. The report would need to set out any budget requirements, any risks, mitigation strategies, and go no go operational gateways.

    • A plan to outsource and oversee the collection of GST to an equivalent service provider such as the Jersey revenue service.

  • It is known by all islanders that the revenue service’s operational capacity is under significant strain. Resource levels, processing timelines and general efficiency are evidently below par. No new operational process can go live with a team still working through existing operational issues. Either, the existing operational functions need to be remediated and then a new process design and build needs to take place. Or the new service needs to be outsourced to a service provider (such as the Jersey revenue service, given the terms of GST will be very similar) with appropriate due diligence, oversight controls and contractual terms need to be in place.

    We cannot let any form of new tax, with complex administration requirements, go live, with an operational team not ready to process. The States cant just accept that the team will be ready, it will need to see evidence, it will need civil service confirmation on operational readiness. It will need to see operational accountability from the relevant civil service heads.

  • The revenue service collects the majority of States revenue. This should be the most efficient and operationally effective team in the States and should be resourced as such. This has benefits beyond simple collection. Better operations will produce better data. Better data, will help make better decisions.

Beating the Benefits Trap

Guernsey has, as many places in western democracies have, a benefits trap issue. Given the cost of dwellings on island, the level of capital required for renting or house purchase are simply out of reach for many people.

One of the main issues (I have been advised by those with lived experience) with benefits is that it disincentivizes economic activity past the benefits cap level. Essentially, those on benefits have to think really carefully about earning over the cap, because it could leave them worse off than before. So, earning more provides no economic incentive. This does not feel right.

I have spoken to multiple islanders on this issue with two solutions proposed that I believe could have merit.

    • Establish a PCC operated by a Guernsey domiciled trustee

    • Every adult on benefits has a Cell within the PCC and an attached bank account.

    • Any cash earned above the benefits cap, rather than being paid back to the States or avoid earning extra cash, the money is paid into the trustee run account.

    • The money is saved and invested by the trustee.

    • Release of money for either flat purchase or flat deposit terms agreed with each participant and will only be released once the participant is able to afford private market accommodation.

    • Should the participant not ever save enough, cash is released at time of retirement or to next of kin depending on circumstances.

    This would see a way for those on benefits save for the future and build a future out of the benefits trap.

  • Any cash earned over the benefits cap, a proportion of that cash is kept by the participant and a portion of it is paid back to the States. This give incentive to work past the cap, but gives immediate access to cash which may be more desirable than enforced saving.

Connectivity

  • As I did when involved in business lobbying, I would be pushing hard for a revamped air policy framework. The framework should balance air connectivity with providing growth from connection for industry.

    Major issues facing government in developing an air policy framework is balancing our government owned airline with ensuring the best market facing rates possible.

    Given the likely trend on fuel cost constraints for the next 5 years (driven by impact from geopolitical events outside our control), I would expect the air policy framework to take this into account.

  • The undeniable benefits of the Brittany Ferries agreement for Guernsey need to be maintained and the potential for the tourism industry on our island needs to be facilitated. Investment and efforts to grow French tourism should be explored with cultural and experience businesses targeted.

Forward Looking Strategic Investment Ideas

I would like to see more thought given to changing macro environment factors to see what opportunities could be exploited within the bailiwick by the appointment of a Future Strategy subcommittee to horizon scan future economic opportunities. Committee to be made up of 1 Economic Development Deputy and a number of non-political appointments from the community. The sub committee would be tasked with identifying future opportunities for the Bailiwick to present to the main committee to consider.  

The process should be under the auspices of the Economic Development committee and should be an ideas generator to take to local and international businesses to see if there are any investable ideas. Examples of what that might look like:

  • Currently the world is likely to enter into a commodities super cycle. This is driven by changing demand and changing global trade flows and monetary systems. With the increase in digital development, and the build out of digital enterprise in the EU to rival the US and Chinese dominance, it is likely there will be a sustained demand for certain minerals. The US and China, for example, have already categorized silver as a critical strategic mineral in the last 6 months and started to restrict exports.

    With the development of flotation frothing techniques in recent years, is there any benefit to be derived from the old silver mine in Sark. Are there veins still available in Fermain? The last metallurgic reports from the Sark mine suggest poor ore quality remains, but no poorer than  several European ethical and sustainable mines being brought online with new flotation technology. Could Sark or Guernsey reopen? Should it?

  • Is there a case for collective bargaining on construction staples import and storage to drive down cost price for construction companies? This would require discussions with construction staples suppliers (and should only be on staples, not entire ranges) but sustained supply and lower staple costs should help stabilize build costs to some degree, particularly in a volatile global market.

  • Something I have been thinking for some time and very much influenced by Ross Le Brun’s view that the States could provide access to small local firms to have storage, workshop areas, I believe this would help build out the construction sectors ability to grow and deliver more housing. Either through the use of States land (for a nominal fee) or through collective rental through a commercial agent. My preference would be to use States lands to incubate then transfer out to commercial collective rental in cohorts.

  • Again, something I have been thinking for some time. Are there crop types that would could grow that are being affected by changes to global supply changes and rising prices? Can we grow them ourselves? We have many non working (circa 4500) working age population that may enjoy time out in the garden. We could make farming part of community service. GROW Guernsey has been doing fantastic work in the last few years, can we build on that, connect people who want to be working out doors to benefit the community and help to grow food security?

  • Given Guernsey’s stated aim of sustainable environmentally sound progress and its history as a growing island, and its access to capital flows, is there a case for trying to incentivize growth in mycelium (essentially replacing computer chips with mushrooms) computing on island. This is a nascent technology development path but one that is gaining traction, particularly as the price of metals goes up. Is it something that Guernsey could take a lead on?