Island fear at tax ‘haven’ threat

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There is a piece with the above title on the Radio 5 live website. It says:

[W]ith the economies of places like Jersey and Guernsey so dependent on banking and insurance, there is concern any tightening of regulatory rules could see both jobs and income vanish elsewhere.

Some experts say up to two thirds of Guernsey's economy is now dependent (either directly or indirectly) on banking and insurance.

Paul Medea, of the Guernsey Business Association, says losing Guernsey's special status would also cost the UK dearly and would "devastate" the island. He said: "We would become a drain on the UK, people would have to emigrate and it would be a shadow of its former self. I fear that tourism wouldn't plug the gap."

Without a shadow of a doubt Paul Medea is right: tourism cannot fill the gap that will be left by the financial services industry when it does, inevitably, leave Guernsey.

Let’s talk basic facts. According to the CIA Factbook GDP per head in Guernsey was $44,600 in 2005. In the UK it was $37,400 in 2008 according to the same source. Inevitably the UK figure should be deflated to 2005, and then it is clear that Guernsey has a GDP per head at least 25% higher than the UK.

Let’s be clear: there is no economic justification for that. The excess was stolen from other countries just as it is now readily accepted that the financial services industry creamed off an excess from all ordinary people through the opacity of the products it supplied and the activities that it undertook.

The financial services sector is going to be subject to radical reform, whether Guernsey likes it or not. In the process opacity is going to be massively reduced. Guernsey's primary product has been opacity. Let us have no pretence that there is any real financial services acumen in the place that has not been imported to take advantage of that opacity.

In that case Jersey's income will fall. I have no doubt at all that is GDP per head of population will be lower than that of the UK as a whole by the time the process is complete. That is true of most British seaside towns and that is exactly what Guernsey can compare itself with. But until a benchmark equivalent to, say, Hastings has been reached then Guernsey will not need aid. There are plenty of others ahead of it in the queue for that.

As for those who emigrate, the vast majority work inside of the financial services industry, and will be temporary immigrants. They claim that they are the masters of the universe. Let them prove it.

I have enormous sympathy with the claims of some havens, and will argue that they need support. Antigua is one such place right now. But let us not cry for Jersey or Guernsey. At least, not yet.


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