(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 ban
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