[ISL] "The fall of Jersey: how a tax haven goes bust"
Oliver Bullough's long-form article at The Guardian examines the awkward and threatening position of Jersey, largest of the Channel Islands and one of the first jurisdictions to build an economy on offshore finance, exploiting its unusual autonomy. The problem comes when this autonomy is no longer possible. What will be left? Implications for larger economies, like the United Kingdom, are obvious.
[T]he offices of those big players form a wall of glass along the seafront of Jersey’s capital, St Helier: Credit Suisse, Citi, HSBC, Société Générale, PWC. And they oversee a vast amount of money. By 2007, Jersey - home to just 100,000 people - held almost £220bn of deposits, and administered another £221bn of funds, as well as hundreds of billions in trusts. The finance sector’s profits that year were more than £1bn, unemployment was barely 1%, and gross national income per person was significantly higher than in Britain or the US.
From the waterfront, the money spreads inland. St Helier is a prosperous resort with cafes, theatres and covered markets. It is cleaner, busier, neater, brighter than almost any seaside town you will find on the British mainland. Appearances are deceptive, however. Jersey looks rich - but it is heading towards bankruptcy.
In April, officials announced that the budget would be short £125m a year by 2019. “What went wrong?” asked the Jersey Evening Post. And that was just the start of it. By June, the annual deficit - now known on the island as the “black hole” - had been revised upwards to £145m, more than £1 in every five that the government spends. “The black hole is so big,” according to Connect, a Jersey business magazine, that “filling it will take the equivalent of shutting down every school in the island, laying off every teacher, letting the parks turn into overgrown jungles and having our roads literally fall apart.”
That is quite a hole, and the question is, how can Jersey fill it? The solutions are not pretty: voluntary redundancies, compulsory redundancies, new taxes, fewer public services.
Jersey bet its future on finance, allowing its other industries to shrivel, in the belief that it could live well in perpetuity from moving other people’s money around. If that belief was false, then does its fate await another island off the coast of France - one that has also pledged its future to finance? In short, is Jersey’s worrying present Britain’s bleak future?
[T]he offices of those big players form a wall of glass along the seafront of Jersey’s capital, St Helier: Credit Suisse, Citi, HSBC, Société Générale, PWC. And they oversee a vast amount of money. By 2007, Jersey - home to just 100,000 people - held almost £220bn of deposits, and administered another £221bn of funds, as well as hundreds of billions in trusts. The finance sector’s profits that year were more than £1bn, unemployment was barely 1%, and gross national income per person was significantly higher than in Britain or the US.
From the waterfront, the money spreads inland. St Helier is a prosperous resort with cafes, theatres and covered markets. It is cleaner, busier, neater, brighter than almost any seaside town you will find on the British mainland. Appearances are deceptive, however. Jersey looks rich - but it is heading towards bankruptcy.
In April, officials announced that the budget would be short £125m a year by 2019. “What went wrong?” asked the Jersey Evening Post. And that was just the start of it. By June, the annual deficit - now known on the island as the “black hole” - had been revised upwards to £145m, more than £1 in every five that the government spends. “The black hole is so big,” according to Connect, a Jersey business magazine, that “filling it will take the equivalent of shutting down every school in the island, laying off every teacher, letting the parks turn into overgrown jungles and having our roads literally fall apart.”
That is quite a hole, and the question is, how can Jersey fill it? The solutions are not pretty: voluntary redundancies, compulsory redundancies, new taxes, fewer public services.
Jersey bet its future on finance, allowing its other industries to shrivel, in the belief that it could live well in perpetuity from moving other people’s money around. If that belief was false, then does its fate await another island off the coast of France - one that has also pledged its future to finance? In short, is Jersey’s worrying present Britain’s bleak future?