Lessons from history… post-war generation rightly suspicious of 'borrow to spend'

First, it posed – mercifully with more reason than hot air – some pertinent questions about the setting up of Guernsey's sovereign bond, questions which I suspect are in the minds of many islanders whose instincts are to save before spending. In doing so, the letter elicited a reply from the Treasury and Resources minister, Deputy St Pier, which provided a clear and helpful insight into our present government's approach to the funding of future capital spending on infrastructure and to the provision of protection against unforeseen adverse shocks to the island's economy. I am no better placed than the next man or woman to judge the wisdom of the sovereign bond option as compared with any alternative, but at least the issue has on this occasion been thoughtfully aired in public between your correspondent and the responsible minister.

Your correspondent's letter was valuable in a second way. In taking us back to the time of Guernsey's revival after five years of Occupation and specifically to the island's hard-won post-war recovery from an economy and infrastructure left in ruins, the letter provided a helpful reminder from the post-Occupation generation to our current political leaders that Guernsey's aversion to debt is well founded in relatively recent history and is not easily dismissed either as a myth or as a credo out of its time. This lesson deserves further explanation.

Your correspondent is correct to praise '...the generation now sadly and mostly passed on' whose efforts brought about Guernsey's post-Occupation recovery. Looking back on their achievements in climbing the steep face of a huge mountain of obstacles, we may now wonder with due cause why, two generations on, we make such heavy weather of comparatively gentle slopes. Interestingly, your correspondent writes that in the post-Occupation era 'There was no interest to be paid on debt, because we did not have debt'.

That was far from the case in May 1945. According to William Bell in his book Guernsey Occupied But Never Conquered, the Occupation left Guernsey with a debt of around

£7m. (more than £200m. in today's money) of which around £4.25m. was owed to banks.

Bell tells us that Guernsey's estimated income for 1945 was around £876,000 against anticipated expenditure of £2.25m.

That Guernsey overcame such enormous indebtedness is a tribute to our forebears, but they did not do it all alone. From his arrival in Guernsey in August 1945, Guernsey's first post-war Lt-Governor, Lt-General Sir Philip Neame VC, badgered the UK Treasury to '...be sympathetic to this comparatively small community who were faced with the heaviest burden of hostile enemy occupation in the whole of Europe in proportion to their numbers'.

William Bell records that the outcome of Neame's pleas for a fair financial settlement of Guernsey's predicament was a UK government grant of £3.3m. towards the island's £4.25m. debt to the banks and a low-interest loan to cover the balance of its overall indebtedness. Furthermore, the British government agreed to write off the cost – around £1m. – of the evacuation and subsequent maintenance of Guernsey's evacuees.

Does history offer a lesson which is still relevant all these years later? Indeed it does. The post-war generation of islanders never forgot the hardship of huge indebtedness. They never forgot the sacrifices which were necessary to emerge from it, nor the distinctly uncomfortable awareness that they depended in part on the generosity of others to help them on their way. 'Never again' they would have said. They never forgot, and they urged their successors not to forget, either.

Now that that second post-Occupation generation is itself on the way out and has handed the responsibilities of government to a third, your correspondent's letter is all the more timely in its reminder that those who cling to the notion that Guernsey should save before spending do not do so out of misguided nostalgia for the days when we might be considered to have managed things better; rather, they simply retain the belief, rightly or wrongly, that 'save to spend' is evidentially wise and 'borrow to spend' is evidentially dodgy. Nothing they have seen in their lifetime tells them they are wrong whereas much – most recently the 2008 credit crunch – tells them they are right.

They will take some convincing, between now and next year's general election and beyond, that their distrust of 'borrow to spend' is misplaced; hence the usefulness of your correspondent's letter and the Treasury minister's reasoned response to it. A careful reading of both suggests that their views are not mutually exclusive, leaving me optimistic that a sensible and constructive debate lies ahead of us.

RICHARD GRAHAM,

Veue du Guet,

Rue de la Lande,

Castel, GY5 7EH