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Why S&P?

Why S&P?

Monday 16 January 2023

Why S&P?

Monday 16 January 2023

The States of Guernsey uses Standard and Poor to assess the island's credit rating but the latest ranking has come under criticism with some economists arguing the outlook is not as bad as the government's senior committee has suggested.

On Saturday, the latest S&P ratings were published with Guernsey sitting in the 'negative' category.

Policy and Resources financial lead, Deputy Mark Helyar said a warning was issued but not enough has been done so far to address Guernsey's growing financial deficit.

He also said the upcoming Tax Review debate will be crucial to shoring up the island's International credit rating in future.

"They changed the outlook to negative which is a pre-warning you're heading in the wrong direction and now we've been downgraded."

Deputy Helyar said this is as bad as it sounds for Guernsey's economic reputation and outlook, especially as our rating is now below Jersey's - one of our closest competitors in many ways.


Pictured: Deputy Mark Helyar has said that a negative credit rating is based on the view that Guernsey’s economy is faring well despite the external impacts of the pandemic and the war in Ukraine, but the forecast states "increasing pressure on health and care services is intensifying the squeeze on public finances, while the shrinking working age population also threatens tax collections".

"They examine public finances and the money we have coming in and the plans that we have for spending on infrastructure and other things and work out how likely we are to be able to meet those plans.

"They've reached the conclusion that the position we're in, unless we reform our tax position is unsustainable."

Deputy Helyar said it is unlikely this position will change quickly so Guernsey could be left with the negative rating for some time.

"Ratings don't generally tend to change upwards at short notice, they go downwards quickly if there's a problem so it's unlikely that we'll ge upgraded. They might change the outlook but it's unlikely that we'll be upgraded until this time next year.

With P&R stating that S&P holds a lot of influence in terms of how Guernsey is seen on the international stage, other politicians are less than convinced.  

As a former Treasury Minister and Chief Minister, Deputy St Pier has experience of dealing with the S&P researchers.

He said: "...having been involved in prior assessments, is the non-quantitive part of their assessment is subjective and so the tone and content of engagement will have an impact".

His sceptic view of the S&P report was echoed by the former Chief Executive Officer of Guernsey Finance, Dominic Wheatley.

Commenting on the Bailiwick Express Guernsey Facebook, Mr Wheatley said it was unlikely that downgrading Guernsey's outlook to negative would result in any loss of business to Jersey or elsewhere.

He said: "The importance of credit ratings is more complex than P&R would have you believe. This is a minor, temporary set-back at most. Very few business location decisions will be made on the basis of the very narrow difference of rating between Guernsey and Jersey. In most cases, a satisfactory rating is needed but once that is achieved there is very little additional value from a higher rating and other factors will be far more influential on location decisions. Jersey is not Guernsey's only competitor, and in some sectors, is not even a significant competitor.

"Rectification requires the establishment of sustainable bases of public finance but does not require GST, and does not prohibit other tax increases such as progressive income tax and / or corporation tax."

Deputy Heidi Soulsby - a chartered accountant by profession before turning to politics - said P&R have put "a lot of spin" on the S&P ratings.

She also pointed out that S&P "don't believe (P&R's) tax package is enough - presumably as savings needed not covered in policy letter - and secondly they question accelerating capital expenditure which makes a lot of sense."

Deputy Helyar acknowledged that Guernsey doesn't have to use S&P to be rated at all - but he told Express

"It's very common for governments and independent jurisdictions to have their own ratings. There are other agencies like Moodys and so on but Standards and Poor generally tends to do most of the country ratings."

A number of comparable jurisdictions - including Jersey - use S&P so Deputy Peter Ferbrache - P&R President - added that it is more beneficial to Guernsey to be rated by S&P than not.

"If we didn't have one, they would say 'why not?'

"So, in practical terms we have got no choice. We can choose between a, b, c, but we've got no real choice."


S&P downgrades Guernsey's credit rating

Guernsey dips below Jersey in international credit ratings

Fresh attempt to get Guernsey and Jersey collaborating

Guernsey increasingly losing out on new business to Jersey

S&P improves its assessment of outlook for Guernsey

Guernsey's S&P rating reaffirmed



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