Guernsey credit score downgrade a wake-up call, deputy says

Mr Helyar said the island's government "cannot underestimate what is at stake"

The downgrading of Guernsey's credit rating should be taken "very seriously", a politician has warned.

Standard and Poor's (S&P), which publishes credit ratings as a measure of economic performance, has downgraded the island's rating from a "very strong" AA-/A-1+ to a "strong" A+/A-1.

Deputy Mark Helyar said the downgrade should be taken as a "wake-up call".

He said it had "a real impact on our reputation as a stable, reliable, well-run jurisdiction".

S&P's assessment recognised that Guernsey's economy was faring well despite the external impacts of the Covid-19 pandemic and the war in Ukraine.

It estimated that the local economy rebounded by 5.6% in 2021 and predicted growth of 1.8% in 2022.

However, it highlighted "increasing pressure on health and care services intensifying the squeeze on public finances, while the shrinking working age population also threatens tax collection".

It also warned of further "negative rating action... if the government failed to implement tax reforms that stabilise its funding needs".

'Unattractive'

The fall in credit rating comes ahead of a debate due this month over proposals to implement a 5% goods and services tax as well as changes to social security and income tax.

The tax is being considered amid a predicted £85m shortfall in funding for services.

Mr Helyar, who is the vice-president of the policy and resources committee, said a "downgrading in our credit rating is something we need to take very seriously".

"We cannot underestimate what is at stake, and if we become unattractive to business and our economy suffers, our financial problems will get even worse," he said.

"There's a real impact on our reputation as a stable, reliable, well-run jurisdiction and to the competitiveness of our local industry."

Jersey's rating remains unchanged at a "very strong" AA-/A-1+.

Analysis - John Fernandez, Political Reporter

This is not the news Policy and Resources will have been wanting on the eve of debate on tax reform.

Standard and Poors say the reforms on the table alongside other factors aren't enough to get Guernsey's current investments to where they want to see them.

There's also an acceptance that while plans for spending on capital are ambitious, they'll likely not all be delivered.

With Jersey having a similar review and it's rating remaining stable, the island's top politicians will now be even more steadfast that reform to tax policy is urgently needed.

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