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The Guernsey Experiment

Page history last edited by Peter Verity 10 years, 3 months ago

(From the Guernsey Experiment by Olive & Jan Grubiak):

 

“At the beginning of the 19th Century, after the Napoleonic Wars, the Island of Guernsey was in dire straits. Apart from the natural beauty and pleasant climate, there was precious little else to attract visitors to the island, or indeed, to keep her inhabitants from removing to the mainland. The deep roads were mere cart-tracks, only 4ft. 6ins. wide, which in wet weather became muddy rivers between steep banks. The town was ill-paved and unattractive, and there was not a vehicle for hire of any kind on the island. There was no trade, nor hope of employment for the poor. Worst of all, the sea was fast encroaching on the land, and washing away large tracts of it, thanks to the sorry state of the dykes. The States Debt of £19,137 bore an annual interest charge of £2,390; the annual revenue was only £3000.

 

This meant that while vast sums of money were required to save the land from the sea, and make the island fit to live in, the net revenue from all sources was only £600 per annum. The dyke project alone was estimated at over £10,000.

 

In 1815 the need for improving the Public Market, which then provided neither cover nor shelter, became pressing, and a Committee was duly appointed to examine the matter. It was found that further taxation on the impoverished island was impossible. The alternative, that of borrowing money from the banks, would incur debt charges at a high interest rate, which they could not afford. It was abundantly clear that whatever they might borrow, although they paid interest charges for years, would never be repaid.

 

Finally, after grave deliberation, the Committee reported in 1816 with this historic recommendation - that property should be acquired and a covered market erected; the expenses to be met by the Issue of States Notes to the value of £6000.

 

The arguments put forward at this time in 'favour of a States' issue are interesting, as shown by this extract from the Committee's report: "The Committee recommends that the expense should be met by the issue of States Notes of £1 sterling to the value of £6000 ... and that these notes will be available not only for the payment of the new market, but also for Torteval Church, roads to construct, and other expenses of the States ... when one considers that the banks already have their notes in circulation for more than £50,000, whereas it is now proposed to restrict the States' issue to a mere £6000 .... " There was also the argument that the issue would provide a permanent revenue to the States, sufficient not only to provide for the 'erection of the market, but also to create an amortisement fund to extinguish the debt of the States.

These proposals, however, were not implemented until later in the same year when the first issue of States notes was authorised for a sum of £4000 for coast preservation works, Torteval Church, and Jerbourg Monument. These notes were issued subject to redemption in three stages, April 1817, October 1817, and April 1818, and not for re-issue. The Committee's report recommending the issue states: In this manner, without increasing the States' debt, it will be possible to finish these works, leaving sufficient money in the Exchequer for other needs."

 

It was not until 1820, after another abortive attempt in 1819, that the Committee were successful in their attempts to finance the building of a new market, and were at last given authority to issue States Notes for this purpose to the value of £4500, redeemable in 10 years out of import duties and the revenue from butchers' shops. This issue was quickly followed by others, and in 18l9 the number of notes in circulation was increased, on the Committee's recommendation, to £l0,000 , as being the most advantageous method of meeting debts, from the point of view both of the public and the States finances. Indeed, the public seemed to realise this fact, and, far from being averse to taking the notes, they sought them out eagerly. The new markets were finally opened in October, 1822.

 

In 1824, a further £5000 was authorised for the markets, and in 1826 the issue was increased up to a total of £20,000 to erect Elizabeth College and certain parochial schools. It was in this year, also, that the first States of Guernsey £5 notes appeared.

 

By 1829 the States' notes issue: in circulation exceeded £48,000 - by 1837 over £55,000 was the grand total. In the Billets d'Etat it was a frequent subject for congratulation; and it was stated over and over again by eminent men of those times that without the issue of States' notes, important public works, such as roads and buildings, could not possibly have been carried out. Yet by means of the States' issue, not only were these works accomplished, but the Island was not a penny the poorer in interest charges. Indeed, the improvements had stimulated the flow of visitors to the island, and with increased trade the island enjoyed its new-found prosperity.

Footnote:

In the 1830’s the first commercial banks moved in; after some years of persuasion, Guernsey left this interest-free source of funds for public works and switched to interest bearing debt from the banks.

 

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