We can argue endlessly about taxation, public expenditure and how best to balance the books, but without growth we are simply arguing about how to divide an increasingly inadequate cake.
Raising taxes may help balance the States’ accounts, but it does nothing in itself to increase the wealth from which those taxes are collected.
Looking back over our history, this little island has demonstrated a remarkable ability to create wealth. Our seafarers traded across the oceans, our shipbuilders constructed vessels that sailed around the world, our quarries supplied granite to Britain, and our farmers developed cattle whose reputation extended far beyond our shores.
Then came horticulture, transforming the landscape with glasshouses producing tomatoes and flowers for markets hundreds of miles away. Tourism brought visitors in their thousands, filling our hotels, restaurants and shops and providing employment for a great many islanders.
As some of those industries declined, others took their place. Financial services grew into an internationally respected industry, attracting capital, creating skilled employment and generating much of the wealth that supports the standard of living we enjoy today.
We achieved all this without abundant natural resources or a large domestic market. Indeed, we had very little going for us beyond our location, our people and their willingness to recognise an opportunity.
Generation after generation, Guernsey found ways not merely to compete in a much larger world, but to punch well above its weight.
Which brings me to Monday’s Guernsey Press and the interview with the president of our Economic Development Committee, Deputy Sasha Kazantseva-Miller.
Apparently, the single most important economic development initiative introduced this year is the agreement with British Airways to operate a service between Guernsey and Heathrow.
One flight a day, supported by taxpayer-funded incentives at a cost the States have chosen to keep secret.
Is that really the pinnacle of our economic ambition in 2026?
I have nothing against better air connections. Heathrow is an important international hub, and access to it is particularly valuable for an island whose principal industry conducts business around the world. But surely an air service is something which helps an economy function rather than an economic achievement in its own right?
Consider the relative importance of our industries. Guernsey’s economy generates around £3.5bn annually. Financial services alone account for approximately 37% of that, rising to around 44% when the associated legal and accounting professions are included.
Now compare that with tourism. Last year visitors spent an estimated £151m. in Guernsey. That is important money for our hotels, restaurants, retailers and the many small businesses which depend upon visitors. But it is a relatively modest sum compared with the size of our economy, equivalent to a little over 4% of GDP, although visitor expenditure and GDP are not quite the same thing.
Even doubling visitor expenditure, a remarkable achievement by any measure, would not transform our economy. And nobody is seriously suggesting that one additional flight a day is going to double the number of people coming here.
We have been told that visitors travelling on British Airways spent some £7m. during the first few months of the service. That sounds encouraging until we ask how many of them would otherwise have arrived through Gatwick, London City or another airport.
Moving passengers from one route to another may make their journeys more convenient, but it does not necessarily generate additional economic activity.
To increase our GDP by just 1% requires approximately £35m. of additional annual economic output. That is the scale of the problem Deputy Parkinson was identifying.
And then there is Aurigny.
Our publicly-owned airline is forecasting a loss approaching £10m. this year. Not all of that can be attributed to British Airways, of course. Aurigny has other problems, including higher fuel costs and the consequences of taking over routes following the collapse of Blue Islands. Nevertheless, competition from the Heathrow service has been identified as a significant contributor to its financial difficulties.
So we have one part of the States providing financial incentives to attract a competitor to an airline owned by another part of the States, with the taxpayer ultimately standing behind both.
Perhaps the overall economic benefits justify this arrangement. Better connections and lower fares have value, and Aurigny’s losses cannot simply be treated as an equivalent loss to the island’s economy. But where is the assessment of the overall benefit, taking account of the cost of the incentives, the additional visitors genuinely attracted and the financial consequences for Aurigny?
We cannot even establish the full cost of the agreement because the financial arrangements remain confidential.
Yet this is apparently our most important economic development initiative of the year.
I find that rather depressing.
Not because the Heathrow service is undesirable, but because it seems such a modest achievement when compared with what previous generations managed to accomplish.
Deputy Kazantseva-Miller also argues that the States must get out of the way of development. On that point I suspect we agree. But getting out of the
way requires rather more than encouraging words.
We need to examine whether our planning system, regulation, housing policies and the increasing cost of doing business are encouraging enterprise or making it more difficult. We should also question whether our constant search for additional tax revenue is itself becoming an obstacle to the growth we so desperately need.
There is also a tendency to confuse economic growth with population growth. Certainly, bringing more people to Guernsey can increase GDP, but those people need somewhere to live, roads to travel on, schools for their children and public services to support them. A larger economy does not necessarily mean greater prosperity for the people already living here.
What matters is how much wealth we generate from the resources we have, and particularly how productive we are.
Our history demonstrates that we are capable of achieving extraordinary things from a very small base. I doubt that the States could have planned the development of our horticultural industry, our international shipping interests or our financial services industry. Those opportunities were recognised and developed by people prepared to take risks and invest their own money.
The States’ responsibility is to create an environment in which that can happen again.
Deputy Parkinson is right that we need growth. But if we are serious about achieving it, surely our ambitions must extend considerably further than persuading an airline, with financial assistance from the taxpayer, to operate one flight a day.
Our predecessors built industries which competed successfully around the world and transformed the prosperity of this island.
Have we really reached the point where one subsidised daily flight represents the height of our economic ambition?
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