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Reinvigorating Government for a Successful Economy – The Speech

John Hollis

John Hollis Guest Speaker at the April 2016 Chamber of Commerce Lunch  – Speech in Full.

What a subject……. just a week before the general election, and after some of the more vocal Guernsey public have admitted they were daft enough collectively – yet again – to vote in “the worst States ever!”

Will the voters PLEASE get it right this time when they go to the polls next week?!

Good afternoon. I am neither a politician nor a civil servant, but I have been the Non-States Member on the Treasury & Resources Board for the past 3 years.

I am here today simply because Chamber’s Barry Cash invited me.

I don’t t have all the answers, but I hope I can trigger thinking and progress.

In 20 minutes, I will skim through:

  • The broad global and local context
  • My resulting priorities for the new States.
  • My summary points for Reinvigorating Government for a Successful Economy

 

A – Broad Global and Local Context

A recent book on “Fourth Generation Government” shows some interesting trends.

Over the past 100 years, Western government spending as a percentage of GDP has risen steadily on average from 10-15% to 40-60% of GDP.

Yet government respect and popularity has dropped steadily in the opposite direction.

So, increased government spending has not bought sustained popularity, respect and happiness.

Guernsey government spending is roughly 25% of GDP. The Personal Tax, Pensions and Benefits Review was novel in setting a tax and spending cap of 28% of GDP, with that 3% potential margin simply reflecting the pensions and healthcare implications of Guernsey’s ageing population, not any other proposed increase in government spending.

Looking at French government spending over 50% of GDP, or the UK government spending now falling towards 40% of GDP, 25% is a relatively gentle level of taxation. So, the cost of living is high in Guernsey due to other factors, not due to elative tax takes and government spending.

But it is too simplistic just to look at government spending and popularity. After all, Russia and North Korea apparently have highly popular governments, based on ‘internal measures.’

The key question is whether there is a government structure and style, which best maximises an island’s chance of a successful economy and general well-being, however measured.

If there isn’t, we may have to invent one.

Looking around the world, who achieves that?

Perhaps Singapore has done more than most islands to improve the living standards, health and education of their population over the past 50 years?

But we don’t have to invent the comparative analysis – it has already been done by BWCI’s Island Global Research unit. It shows Guernsey at relative risk from:

  1. A lack of employment growth and economic diversity, with the dominant Financial Services industry under threat from global regulation and other developments in the East and West.
  2. Vulnerable transport links, both air and sea, constraining business and visitor travel.
  3. Relatively low investment in net new infrastructure.
  4. Changing demographics, with a worse future ageing profile than most other islands.
  5. Income risk, with an abnormally low diversification of the tax base and an over-dependency on income tax.
  6. Labour, skills and land constraints, which drive up the cost of doing business.

So, from a personal perspective, I want a style of government which best addresses those factors and facilitates a better future for us all.

And as the pop group Queen sang “I want it all, and I want it now.”

But let us remember – government should simply be the economic enabler for industry. It is entrepreneurs who then need to deliver competitive success. That’s you.

 

B – Priorities for the Incoming States of Guernsey

Let us turn to specifics and perhaps 6 priorities.

By reinventing or reinvigorating aspects of government  and participation, can we perhaps grow the size of our collective cake, rather than squabble over who shares which piece of a diminishing cake?

I will touch on:

  1. Public Service Reform
  2. The States Trading Supervisory Board
  3. Transport Links
  4. Net Investment in Infrastructure
  5. Economic Diversity & Real Business Employment Growth
  6. Community Skills, Education, Health & Wellbeing

 

1 – Public Service Reform

We are fortunate that the new States Chief Executive, Paul Whitfield, is pushing his public service reform agenda very hard, with the support of the current States. Like many things this should have been done years ago in previous States, but it is now well underway.

This aims to:

  1. Inject a greater customer service focus,
  2. Make better use of people and skills within the public sector (including working better with the private or third sectors),
  3. Make better use of public assets, and
  4. Use technology to help implement modern, efficient processes.

The end result should be a more responsive and effective public sector, with fewer disparate pockets of isolated skills locked within rigid departmental boundaries.

It will take time, but is critical for the island due to key demographic changes.

If nothing were done, the profile of Guernsey’s ageing population would see the working age population fall by 2040 from roughly 67% of the total population to 57% of the total. A 10% drop might not sound a lot, but a drop of 10 from 67 is actually 15% of 67.

If the size of employment in the public sector – already our second highest employing sector after Financial Services – does not also fall by 15% over that period, then we would be diverting external income-earning skills from the private sector to the public sector, to our funding detriment.

That implies substantial change. It does not necessarily imply redundancies, because a large percentage of the public sector workforce is due to retire over that period anyway.

Does it imply everyone in the public sector having to work 15% harder? No, it implies them working smarter with better tools and with better interaction with the private and third sectors, deploying better the competences residing across them.

In some cases, outsourcing or multi-sourcing will be appropriate. In many cases it won’t.

After the election, we will have 38 deputies, roughly 5,500 public sector employees and 64,000 islanders. If we were investing in these separate groups to help them work, say, 10% smarter for us, our outcome or “brainpower return on investment” would be roughly 3.8 extra deputies, or 550 extra public employees, or some 6,400 extra competent, contributing members of the community.

Therefore, I would seek to invest in engagement of the community for the greater good.

Is there any evidence that the community would engage? Two examples suggest there is:

  1. The work of the Guernsey Disability Alliance (driven by Shelaine Green and colleagues) in helping to formulate policy, and
  2. The efforts of the Legacy Team (driven by Pat Johnson) to reinstate La Valette and the bathing pools areas of St Peter Port.

Therefore, for some priority areas, I suggest we establish what I call “Island Competence Councils”, comprising some 4 to 8 highly competent individuals, to help the States and civil service drive both policy development and the implementation of those policies.

I know those skills exist outside the States in individuals both capable and willing to help. They are the “golden nuggets” in our community. If either the civil service or deputies cannot engage constructively with such skilled and competent individuals, then we have the wrong civil servants or deputies in place. In such circumstances, it is even more important that such “Island Competence Councils” are established.

How would they ‘fit in’ with the new government structure?

First, democratically, the various States Committees would develop policy objectives and priorities.

Second, the Committee for Policy & Resources would confirm, resource and fund priorities in the resulting ‘Government Service Plan’, including how it will be delivered. That also includes stopping things not a priority and having clear, open reporting of progress.

Finally, the Committee for Policy & Resources dictates in the Government Service Plan which Island Competence Councils should be established, to leverage strong local competence and accelerate results.

The alternative is to stick with disparate lobby groups, whose level of engagement can be too detached, too little or too late to be of greatest value to the community.

A final statistic and question:

Jersey and Guernsey combined spend roughly £1bn p.a. in their public sectors to run services for 150,000 islanders some 25 miles apart, with similar communities and constitutions. Does that make sense economically for the future, or should there be a greater degree of ‘shared services’?

 

2 – States Trading Supervisory Board

Dubbed “the Secret Committee” in Chamber’s Contact magazine last month, this new Board has evolved  from something trialled in the current States – the little-known Supervisory Subcommittee of T&R, which covers:

Aurigny, Guernsey Post, Guernsey Electricity, and JamesCo tank ships for oil fuel imports.

In the coming States, the remit will also include:  the airport, the ports, States Property, States Works, Guernsey Water, the Dairy, Waste Processing, The Lottery, and other areas.

The Supervisory Subcommittee this term comprised two deputies within T&R, Gavin St Pier and Roger Perrot, plus 3 unpaid residents with significant commercial experience – Sir John Collins former chairman of Shell and director of other relevant leading businesses, Steve Le Page, former managing partner of PWC in the Channel Islands, and me. We established objectives and memoranda of understanding with each of the 4 T&R trading entities, against which they would be judged at a strategic, operational efficiency and customer service level.

We felt it important that each trading entity has as strong a board as possible, and that the Supervisory Subcommittee should not be an “interfering shadow political board” by being drawn unduly into operational matters.

Three observations about the STSB:

  1. This is a positive development in trying to ensure better commercial practices are pursued in the interest of all islanders.
  2. The breadth of future challenge is sufficient to warrant the input of at least one “Island Competence Council.”
  3. Chamber and other groups clearly contain individuals with the competences to engage further.

 

3 – Transport Links

 Our economy depends on good transport links.

Our runway is too short to take efficiently the two most popular jets operated by all the major airlines, the A320 and the Boeing 737. Without a 200 metre longer runway, the concept of an open skies policy or wider service by any major airlines is a pipe dream. Guernsey has the shortest runway of all significant island economies. If we do nothing, we will simply become a feeder airport to Jersey and we will find that business and leisure visitors will question why they should take the extra leg to come to Guernsey. Is that already happening?

It may make less sense to fund the losses of a gradual, piecemeal expansion of Aurigny’s network, than to invest to extend the runway and create wider possibilities involving further carriers.

 

4 – Infrastructure

 A strong island infrastructure is critical for both business and our wider well-being. But our investment in NET new infrastructure has been minimal in recent years. There are demands relating to sea defences, information technology, the airport runway, a possible deep water port, Town, undersea electricity cables to France, on-island electricity and water networks and more…..

For some reason, funded works on sea defences deemed urgent have not been started, despite the local construction industry being on its knees for new work over the past two years.

Infrastructure is clearly an area warranting additional competence deployed via an Island Competence Council, providing input to remove the blockages and accelerate informed progress.

 

5 – Economic Diversity & Real Business Employment Growth

May the Financial sector, which has paid for so much of the Islands health, education and social services in recent decades, continue to flourish with active government support.

What matters for funding our island are not measures such as the monetary value of funds managed, but well-paid employees paying income tax, and new or expanding businesses. Employment in Financial Services has been falling in recent years. We need to reverse that AND make much more effort in government to attract more diversified, growing businesses. Again, I don’t see government having all the necessary skills here.

The Visitor economy offers significant potential, but we have neglected it for too long.

We have promoted the islands with some interesting TV adverts, but key elements of the underlying Visitor product are not competitively good enough.

Take the Little Chapel. With some 55,000 annual visitors, this is the second highest attraction on the island. Yet, it is falling down, there is no adequate parking, there is no sound maintenance programme, no one visiting it helps to pay for its upkeep, and the government is detached from it.

Pat Johnson and others, of La Valette fame, are already pushing to address this and more.

Again, an Island Competence Council could kick-start this and other visitor areas.

 

6 – Community Skills, Education, Health and Wellbeing

Education performance has improved, but educational outcomes are driven primarily by the quality of teaching. The Lead Educationalist of the 2015 Nicholls Review said tellingly: “Given the amount of money per capita that Guernsey spends on education, you should be winning awards for educational excellence, rather than awards for architectural excellence.”

We need to spend our money wisely, with a clear focus on educational outcomes. We must not overlook the College of Further Education and its potential to build competence and maximise well-paid employment in our community.

Health & Wellbeing is key both to islanders and for attracting incomers to grow our employment and serve the community. The new HSSD Board and leadership teams have recently defined a major Health Transformation programme for better integrated health and social care.

 

Summary

Like other jurisdictions, Guernsey faces a range of major challenges. Collectively, we have the skills and resources to meet every challenge and succeed. But we need to act more quickly and efficiently as one team, not as a bunch of disparate ‘single-issue lobby groups’ or passive voyeurs, who prefer to just moan, while lacking even superficial knowledge of the issues.

Despite the backlog it inherited, this States has been a ‘Reforming States.’ It has pursued Reform in many areas while holding real terms public spending growth at zero.

It has actioned things which prior States failed to action: Public Service Reform; Reorganisation of Government; Personal Tax, Pensions & Benefits; Education Reform; Population Management; the beginning of Health Transformation; Disability and Equality legislation; Sunday Trading; Recycling and kerbside Waste trials, Financial Transformation and spending restraint, better use of Technology……

Tough groundwork has been laid, but we now need to deploy our best competences wisely as an island-wide effort, not just a States or civil service issue.

Island Competence Councils could help.

Will Chamber and others – with such strong competences to offer – step up to the challenge to help reinvent and reinvigorate government, as part of our island performing to its true potential? If so, with your added competence, our collective future is that much brighter.

 

Thank you.

John Hollis 18 April 2016 Speaking at the Guernsey Chamber of Commerce Lunch

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