Andy Sloan: ‘This is what a rich death looks like’

IT TURNS out the Bank of England is an equal-opportunity wrecking ball when it comes to politicians. First, Liz Truss took the fall for the Bank’s LDI supervisory scandal. Now, Rachel Reeves is feeling the heat, thanks to an appallingly timed QT programme. Just to catch everyone up, QT – quantitative tightening – is the Bank’s effort to unwind a decade of QE by selling bonds back to the market. The result? Increasing supply that depresses prices, hikes yields, and makes borrowing more expensive – just as the UK government needs to borrow more. Really unhelpful stuff. Seems Sir Andrew Bailey just can’t resist stoking those ‘higher for longer’ flames. And this after a year when UK rates just didn’t come down like many hoped. I recall suggesting that Bailey’s tenure at the Bank of England was turning into a bit of a mess. That was back in 2022. It’s not been a great few years for the Bank, but it’s been worse for politicians bearing the brunt of its mistakes.

Big shout-out to Richard Murphy for bringing that one to my attention. I remember when I joined Guernsey Finance, I was told that tax haven critic Richard Murphy wasn’t very influential because he only had a few hundred YouTube subscribers. Clearly they didn’t have a scooby-do who Richard Murphy was. In those days, he was pretty niche, but today, he has around 110,000 subscribers – not quite the 13.4 million of Flamingo, the kids’ entertainer, but enough to suggest he’s going mainstream. I’ve kept abreast of his musings, as it’s useful to know what the other side is saying. It’s why I’m an avid reader of Thomas Piketty, whom I regularly refer to in these pages. I recommend a visit to Murphy’s channel. It’s not all hogwash – if you had been a regular visitor, you’d have been aware of the criticism of the Bank of England’s quantitative tightening programme weeks before readers of The Times, The Telegraph, or even The Financial Times.

US interest rate expectations have similarly been rising, albeit for other reasons, mainly on the back of Trump’s re-election and his expansionist economic agenda. Inflation, meanwhile, isn’t quite licked on either side of the Atlantic. Food inflation in the UK is ticking up and core inflation in the US remains stubbornly elevated. Combine those factors, and the macroeconomic outlook is a bit inauspicious.

Speaking of inauspicious – Trump’s second term, ahem. Where to start? US politics remains unfathomable. Forget his musings about invading Greenland or Panama – his real economic impact is closer to home. Tariffs on Canadian and Mexican goods pose a genuine threat to global trade. Watching Trump’s first week of his second presidency unfold, many outside the US are asking the obvious question – how on earth did he win again? Yet, by the time he was re-elected last November, it barely felt surprising. We’d wearily accepted the outcome. Now, though, his economic and foreign policy missteps are a stark reminder that American exceptionalism isn’t limited to its economics. Laugh-out-loud YouTube material it might be, but the real-world consequences – including for Guernsey – are no joke. Elections matter.

So welcome to 2025: a world where the US announces plans to pour half a trillion into AI, and markets tumble moments later when China unveils a comparable platform developed in a fraction of the time and a fraction of the cost. Meanwhile, back in Guernsey, our government struggles to get even the basics of tech right. Headlines of incompetence and overspends dominate the local news.

It was nice to see P&R roll out Whispering Bob Murray to front their reaction to Scrutiny’s latest report. Of course, the glaring absence of any of the three P&R members who signed off on the original contract didn’t go unnoticed. Obviously, Bob wasn’t suggesting anyone should be held accountable or responsible for the carnage. That’s not the done thing. Locally, 2025 has started where 2024 left off. If we’re not careful, plus ca change risks becoming this year’s theme – which we simply can’t afford.

Believe it or not, there are months when I sit down to write this column and worry there won’t be enough material. Not this month. The problem is fitting it all in. Another recurring worry is coming across as supercilious. As you’ve just seen, I have a Freudian tendency to slip into ‘I told you so’ mode. It might feel especially pronounced because local politicians and policymakers often seem hell-bent on ignoring anything I write.

I mention this little piece of self-awareness because last week, something I’ve been saying for donkeys – that our economy is stagnating – made front-page news. I’m not the only one who’s been making the point ad nauseum. At times, myself, Richard, and Horace have gone a bit ‘three tenors’ on the subject in these pages. I actually published a report in 2023 ahead of the tax debate. It was crystal clear – public sector spending growth has been outpacing the private sector for years as private sector growth had gone AWOL, and the finance sector was no larger than it was after the global financial crisis. But some at the time still denied the evidence.

And just to flog that horse a bit more – despite the positivity being doled out at yesterday's Guernsey Finance update, there’s no getting around the fact that employment in the regulated finance sector has fallen by 15% since December 2015. Ouch. Like I said last year, the sector is shrinking, though policymakers clearly refuse to discuss it publicly. And losing RBC and UBS to Jersey is going to hurt. And bless their cotton socks, despite their wonderful self-promotion, the online fx and money broker Deputy Inder referenced publicly last week (we all know who he meant) – even if they get a banking licence – won’t come remotely close to offsetting the loss of employment in this sector.

Nothing in the IoD’s analysis last week surprised me, though some of its points were off the mark. That lack of precision can be unhelpful, as it gives some in certain quarters an excuse to dismiss the central premise. In November, I laid it out plainly – our productivity is falling because the finance sector’s share of the economy is shrinking while compliance and consultancy costs balloon. These aren’t just numbers; they’re the threads of a narrative we’ve been avoiding for far too long. Yet the denial persists.

I hate being right, but recession was one of my ‘Four for 24’ predictions this time last year. Growing the economy was one of this caretaker P&R’s four key priorities, but to be fair, it was always unlikely they’d be able to do much in the short run. But sadly, there’s no indication they’ve managed any long-term thinking either.

There is hope, though. Growing groups of people just outside political circles recognise that something must be done. But what’s needed isn’t just a plan but also new political leadership. Yet, in our broken system, that’s far from guaranteed. Consensus won’t form itself, and action requires courage. And that’s precisely where we’re falling short.

But let’s not leave this on a wholly bleak note. History has shown that moments of crisis can catalyse change – if the right people step forward. Guernsey needs boldness, vision, and a willingness to take calculated risks.

The island has weathered storms before, but its economic success was never a given. It was built on hard work, innovation, and leadership – qualities we need to rediscover if we’re to thrive in the 21st century.

The real headline last week wasn’t that our economy is stagnating – it’s that those who continue to deny it are endangering our future.

I’ve long flippantly described the situation in Guernsey as ‘this is what a rich death looks like’. I don’t want that to be true, but turning things around will take vision, boldness, and risk-taking. Let’s hope this summer brings more than just sunshine, because we can ill afford to waste the second half of the 2020s like we’ve squandered the first.