Andy Sloan: A cultural shift

What were you doing in 1998? Specifically, May of that year. A year after the Labour landslide ended 18 years of Tory rule, and when the house classic Feel It by Italian duo The Tamperer topped the charts. Can’t remember? Let me remind you – it was a time of dot.com optimism, Bill Clinton and Monica Lewinsky, many people still hadn’t even heard of the internet, and the LTCM collapse was a few months away.

I mention it because that was the last time UK borrowing costs were as high as they reached on the third of this month – an event that had the UK’s right-wing press foaming at the mouth over Labour’s supposed loss of control of the public finances.

Despite my Pavlovian instinct to blame the government, I don’t think it’s entirely their fault. The Bank of England looks more than a little culpable. Having cut short-term rates by one per cent in the last year, it has allowed inflation to rise to nearly twice its target. So while everyone bangs on about the UK’s loss of fiscal credibility, its monetary credibility is looking pretty frayed too. No surprise then that the yield on 30-year gilts has climbed one per cent in the past year. Combine that with the flooding of the bond market under its continued quantitative-tightening programme, and you see why the Chancellor has been left in the lurch – UK finances all over the place.

I do feel a little for Rachel Reeves. She was boxed in by Labour’s election promises on tax and its capitulation to the unions’ wage demands. She did try to slip some structural supply-side measures into her first budget. And though many won’t see it this way, higher labour taxes – aka national insurance – may yet encourage firms to substitute capital for labour, improving investment and reducing the UK’s appetite for low-skilled migrant labour.

So is the 50,000 job losses in recent weeks a sign of economic stagnation or a sign of success? Time will tell eh?

Here in Guernsey, the debate isn’t whether we should reduce our reliance on migrant labour, but whether we even could. Depending on which Guernsey Press columnist you pick, we either don’t have enough immigration (Richard Digard arguing our workforce is stagnant and we need more people to support an ageing population) or too much (Horace Camp warning incomers are pricing locals out of housing and the States is complicit with its rent allowance policies).

See how neatly a discussion of UK fiscal policy segues into our own population debate? Ahem.

During the general election earlier this year, immigration and housing eclipsed tax as the number one issue on the doorstep. The heat feels like it’s cooled a little since, but I promised myself to weigh in at some point.

I write as a newcomer – 17 years on the island, two Guernsey-born children – and for what it’s worth, I think both Horace and Richard are right. Typical economist’s response. We’ve had too much immigration, but we’ll still need more to keep afloat. But it’s important that the needs of those living here come first. Without that, government legitimacy is lost – just as in the UK, where resentment towards asylum seekers is fuelled by a sense of unfairness.

The real problem in my view has been the recent speed of immigration, not necessarily the scale. Pre-Covid, our population was stagnant, and house prices flat. Then came the surge. Infrastructure, especially housing, couldn’t keep up. The result was visible strain – not only in housing but in physical and cultural terms.

And culture is where rapid immigration bites hardest. Small inflows can be absorbed; newcomers adapt to local norms. But when it’s sudden and large, the incoming culture can overwhelm. Take something as trivial as litter. Seventeen years ago, you never saw it. Now, it’s noticeably worse – a small example of standards slipping. Over time, local culture typically reasserts itself. But there’s also a risk – too much or too rapid, settler culture can dominate.

And in some areas, I think it has. I’m thinking of the public sector – the employer of so many ‘English’, as I used to be called to my face with more than a hint of disdain when I first moved here. When I moved from Hull in 2008, Guernsey’s light-touch bureaucracy was a breath of fresh air. I joke regularly that nowadays I’m sure it’d feel like a breath of fresh air going back. Life here used to be refreshingly free of the bureaucratic clutter I’d known in the UK. Decisions could be made without endless strategy documents and management-speak. People used to invoke ‘the Guernsey Way’. Not so much any more.

At times one can spot the importation of UK thinking a mile off. Recall the States’ ‘Director of People’ and ‘Director of Place’ malarkey? Pure Whitehall, Department of Communities and Local Government thinking circa 2005. I remember it; I was there. Or there’s HSC’s ‘Partnership of Purpose’ – straight out of the UK Health manual where health and social care provision is split between central and local government bodies.

And it’s not just historical. This week the States is debating proposals to extend the Health and Safety Executive’s licensing powers into activities that have never required them. Yes, the same body that tried to do away with the diving board earlier this year.

It may seem a long way from UK gilt yields, but it’s the same story – of culture and common sense eroding over time. I can’t do anything about UK interest rates. But I can push back here – to save ‘the Guernsey Way’ from the clipboard brigade. So I’ll be voting against the ordinance this week, and may well have already done so by the time you read this.

But fighting off unnecessary red tape is only half the battle. The bigger challenge is how we actually generate growth. During the election, I said growth was the number one priority. Which brings me back to finance and something that has been set in motion this week – the commissioning of Oliver Wyman to draft a new financial services development strategy for the island. Hats off to my colleagues on Economic Development. On paper, this is a good thing. A small jurisdiction like ours can’t afford to drift, and it’s sensible to take a hard look at where the sector is heading and how Guernsey can compete.

We need also to be asking what’s changed across the years. The blunt truth is that our culture around finance has shifted too – and not necessarily for the better. Over the last decade, the number of people employed by the regulator and in compliance has risen while the number working in the regulated finance sector itself has fallen. That says something about where the balance of risk and reward has ended up. We’ve built more process, more oversight, more rules – but we haven’t built the growth to match.

And culture matters. A development strategy can recommend all sorts of sensible things – better marketing, sharper product development, plugging skills gaps – but if the underlying culture is one of risk aversion, of defaulting to the bureaucratic rather than the entrepreneurial, then no consultant’s report will change the trajectory.

This is where Guernsey needs to take a hard look in the mirror. Finance thrived here because we did things differently – nimble, pragmatic, with a dash of common sense. But if we simply copy the playbook of larger jurisdictions, importing their rules, processes and their attitudes, then we shouldn’t be surprised when the dynamism fades. We’ve seen the same cultural shift in government – finance isn’t immune.

So yes, Oliver Wyman will no doubt deliver a polished strategy. The question is whether we’re still the sort of place that can act on it. Because if the Guernsey Way is being eroded in finance as well, then our challenge isn’t just technical or strategic – it’s cultural. And that, more than anything, will decide whether the sector grows or stagnates over the next decade.