Keyboard worrier

Sunday, March 25, 2012

Why the UK should join the EC immediately (look at St Kitts)


By EC I mean not Europe, but the Eastern Caribbean, and here's why I wish we could join them.

St Kitts defaulted on a public bond on 25 November 2011, and has this week concluded a deal with some of its creditors whereby debt outstanding to them is halved and the remainder to be paid back over 20 years. Others have agreed to accept a switch to "New Par Bonds", which have a term of 45 years. That should certainly buy some breathing space.

St Kitts and Nevis was (before this renegotiation) reportedly one of the most indebted nations in the world, with a debt-to-GDP ratio of some 200%. It is only the fourth country in recent times to use a "collective action clause" to force agreement to a debt restructure - the other three being the Seychelles, Belize and Greece.

Yet it's very far from being the basket case that these facts and figures would suggest.

The public debt was the equivalent of some 1.086 billion US dollars, which given a population of 50,314 (est.) averages out at $21,347 per head. But it's worse in the UK, where public debt per capita is $24,893. Yes, we Brits have a larger GDP per person, thanks to a more developed economy, but really our national credit rating should be, not "AAA with a negative outlook", but more like BBB ("Buggered By Banks"). This is reflected in our enormous private indebtness which (with other factors) boosts our total national liabilities to 492% of GDP, as Robert Peston reported last November. Personal debt including mortgages runs at something like £23,307 per capita in the UK; I really don't think the moneylenders will have got their claws that deep into our Caribbean friends.

If only we could write off massive amounts of debt and join the Eastern Caribbean Currency Union, like St Kitts and Nevis. Their dollar is currently pegged to US currency at a rate of 2.67 EC to 1 USD. What a shot in the arm for our exports that would be.

Of course, we'd have to reconsider our social benefit and immigration policies. The British Labour Party may have been keen to buy votes with dole money and bring in cheap foreign labour to rub the Right's noses in diversity, but St Kitts has shown a preference for importing the wealthy instead. Under its Economic Citizenship Program (effective since 1984) a couple could acquire SK&N passports instantly for as little as c. £250,000 - mostly in the form of property investment but with a dollop of money towards the island's ongoing costs. That's a lot less than the £350k median price of a house in London. Admittedly, a one-bedroom flat in Charlestown goes for more like £285,000 - but it's still affordable for many not-really-that-wealthy people.

And for that, you could be domiciled in a country with zero personal income tax, a policy which the islands' PM Denzil Douglas (a Labour Party man, by the way) has stressed isn't going to change anytime soon. Instead, over there there's an annual tax on land and property, an old idea now receiving growing interest on the Internet among UK bloggers. At 0.2% (less, if it's your primary residence), that one-bedroom property I mentioned would incur a charge of £570 a year - which compares well with the English average of £1,196.

Sympathy for poor, beleaguered St Kitts? Save it for St Brits.

4 comments:

James Higham said...

That's brilliant. That goes straight into my sidebar.

Mark Wadsworth said...

Ta for the link. Yes it is an old idea, it's the oldest type of system for raising revenue to cover common expenses, it is mentioned often enough in the Bible and so on.

kittitianhill said...

St. Kitts and Nevis is one of the few places in the world to offer a government run Citizenship by Investment Program.

St. Kitts Citizenship-By-Investment

kittitianhill said...

St Kitts and Nevis is an English speaking independent state that is situated in the northern parts of the Caribbean. There are two islands in this Federation, namely St Kitts and Nevis. The Federation is a former British colony and is currently a member of the UN and the Commonwealth of Nations.


St. Kitts citizenship