Guernsey Press

Not real winners in this rating

WHATEVER we may think of the importance of the annual credit rating update from Standard & Poors, the one inevitable is that someone will look to turn it to a political advantage.

Published

With its references and relevance to taxation, economic performance and capital expenditure, its release is timely for all with a stake in the Tax Review.

Policy & Resources was quick to warn that the downgrading of the island’s S&P rating needed to be taken seriously. A reputational issue? Possibly, though arguably no more so than the action or lack of it demonstrated by the States.

On the other hand, though…

S&P accepts the Tax Review proposals are ‘naturally controversial’ but warns that the measures proposed ‘would not be adequate or timely enough to reverse the significant erosion of Guernsey’s asset buffer’.

It reinforces the role of States spending on capital expenditure in driving economic growth, but notes that increased spending in this area will contribute to fiscal deficits, and is an area where the most significant rival plan to P&R intends to cut back. However S&P also looks at the government’s track record in this area, and is sceptical about how much of this spending will actually go ahead.

The context is that a downgrading may be described as ‘unfortunate’ – but ultimately Guernsey has the tools to take the action it needs to fix itself, irrespective of a A+/A-1 rating.