Chief Pleas agrees loan to buy Sark Electricity

Sark's government has agreed to borrow up to £1.5m from Guernsey's States to buy the island's only power company.

Policy and Finance (P&F) member Carol Cragoe welcomed the move and said she hoped the purchase could be completed this year.

Sark Electricity Limited's managing director Alan Witney-Price said the loan would not be enough to buy the utility.

Part of the terms of the loan from Guernsey include Sark's government reviewing its tax arrangements, with P&F's preferred route being the introduction of a tax on worldwide wealth.

Chief Pleas said the electricity price would pay for the loan moving forward.

Steve Lord, who works in cybersecurity and used to serve in Chief Pleas, moved to the island in 2022 but has now left Sark, said the idea of a wealth tax had come out of the blue.

"This was a completely new idea unrelated to anything that had happened previously, as far as I was aware," he said.

The BBC revealed earlier this year that P&F's preferred option for tax reform was a worldwide tax on wealth.

P&F has said this is not a new concept but rather an extension of the current personal tax regime.

Previously Chief Pleas had said it was considering a number of options for tax reform, including a tax on derelict buildings.

Chief Pleas also agreed to create a new company which would run the island's power grid and that it would be operated by the former managing director of Alderney Electricity James Lancaster.

When questioned by Conseiller Frank Makepeace about Lancaster being chosen for the role without an interview, Conseiller Cragoe said with his experience upgrading the grid in Alderney he was "the only man for the job".

At Chief Pleas, P&F Chair John Guille said this decision "would secure the island's energy future" and once the purchase was complete work would start on fixing the most out-of-date equipment in the grid.

He said his committee had considered a community bond to fund the purchase of the company's assets, but had decided a government to government loan offered the best terms.

In his opening speech on the debate he said the power struggle over the ownership of the power grid had burdened the island for too long.

"This will end a dispute which has dominated this island for too long."

Lord warned the plans for a tax on worldwide wealth would lead to the most economically active on the island leaving.

"When those people leave, the island will lose the tax revenue, and what you're left with is going to fall on the shoulders of the poorer people on the island," he said.

Sark's government, Chief Pleas, currently does not levy any income tax on residents.

Property sales attract a 7.5% transfer tax, while personal capital tax applies only to net assets above £150,000, charged at 0.44%, with a maximum annual liability of £10,973 in 2024.

P&F says in an effort to broaden the tax base, all residents aged 18 and over would be subject to the new tax, based on their worldwide net wealth, with a banded tax structure.

Part of the agreement between Guernsey's States and Chief Pleas on this loan was that Sark's government would undertake a comprehensive review of its taxation regime to ensure it can acquire sufficient reserves to support the loan.

It also meant the island had to sign up to the Bailiwick Commission, a project looking at the relationship between the islands.

The final requirement was that impôt payments, which are the tax on alcohol, fuel and tobacco, which is collected by the States on behalf of Chief Pleas, be used as a security guarantee to repay that loan to Guernsey in the event of non-payment by Sark.

Sark resident of five years Christopher Kennedy-Barnard believes a wealth tax would not be good for Sark.

He said there needed to be more of a focus on economic growth from the island's government. He also criticised the decision to approve the loan.

"I worry about Sark falling into debt and the things that could happen to it if that debt becomes quickly unsustainable. There's an argument as to whether that's sustainable right now.

"I am worried about the future of Sark because it appears to be spiralling into a deep decline.

"I think if Sark gets things badly wrong they won't be able to turn it around. It will depopulate and it will be an island of a sheep and nature."

On the review of the island's tax system Guille defended P&F's prefered option: "I'm not scared that adjustments to our tax system will scare people away, Sark will still be a very attractive place tax wise.

"It's also a very attractive place natural beauty wise, but we think we need to tweak the system and start sensibly covering the infrastructure investment we need now and in the future."

Following Chief Pleas' decision, the seneschal - the island's senior legal official - will set a date for a hearing to provide direction to the independent valuers Begbies Traynor around the basis and methodology of its valuation of the utilities assets.

Begbies Traynor will then value the company, with the timescale for that process not yet known.

The valuers will then provide that valuation and if neither party appeals the valuation, an agreement to buy Sark Electricity would be effective 56 days after the date of notice of the valuation.

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