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Gavin St Pier – The Year Ahead

Speech to the Chamber of Commerce 21st January 2019

 

A Busy and Important Year Ahead For Guernsey

 

 

We are at the beginning of a new year. And of course it is the last full year of this States. So it is only natural that we should look ahead.
But before to I do that, I want to just to reflect on where we are: growth has returned to our economy; inflation remains low; unemployment remains low; the population is growing gently; the open market has had its best year for a decade or more; the era of drawing down on our reserves to fund public spending deficits is behind us; and we continue to offer a safe haven of stability in an era of global instability and uncertainty.

In short, we are in very good shape. But, just as in business, you can never stand still and we cannot be complacent: the growth phase in the global economic cycle is drawing to a close; we are not immune to the physical and economic disruption that may arise from the ongoing Brexit debacle; our community continues to face the challenge of adapting to the change in our demographic make-up; and our businesses will similarly need to adapt to ongoing external threats and the impact of artificial intelligence on their business models.

Whilst the challenges our government faces can be put into some perspective when compared to those faced by many other jurisdictions, nonetheless, they remain challenges to be addressed. So we still need to implement the new model for secondary education, we need to ensure our digital and transport connectivity is fit for purpose in the 2020’s and we need to introduce a new voting system for the next general election. And I am also acutely aware that we must recognise and if possible address the fact that many in our community have felt remorsely squeezed over the last 10 years since the global financial crisis.
So let’s look at some key policy areas.

International taxation

In late 2017, Guernsey was one of the 90 or so jurisdictions that was ‘invited,’ to put it generously, by the European Commission to be screened in relation to profit shifting, fair taxation and economic substance.

Working together with industry, the other Crown Dependencies, the UK, the EU and its member states, we were reaffirmed as a co-operative jurisdiction.

Does that matter? Yes.

In a post-Brexit future, with no UK to represent us around the EU table, we will have to stand on our own two feet. We will be judged on what we do and on what we don’t do – we will not have any UK political leverage to fall back on.

If we are black-listed, we will have no equivalence with the EU in the major trade areas our finance sector in particular needs. So let me say it again. In 2018 the EU reaffirmed Guernsey as a co-operative jurisdiction. The importance of that cannot be under-stated.

We have fought our corner politically and got the right outcome. That reaffirmation of our co-operative, white-list status enables us to stay competitive.

Government in partnership with industry has worked extremely hard in 2018 to deliver on our political commitment to the EU to introduce an economic substance test from 1st January into our domestic legal regime. I am confident we have done everything to date we could reasonably do to ensure that the decision of the Council of Finance Ministers in the next couple of months should be favourable. I will be in Brussels again later this week continuing to work to ensure that outcome.

Our relationship with the UK is of course of critical importance to our economy. Later this week CityUK’s Chief Executive will be part of the Guernsey Finance annual update which many of you may be attending.

Brexit

The UK is, as we know, going through the agonies of a turbulent Brexit progress – and that will, in turn, impact on their economy. And the saga continues today and this week.

What can we do? In short, plan as far as we can, for any eventuality.
So was 2018 a good or bad year on Brexit for us? What did we achieve?
We have secured Guernsey’s presence in the common travel area. We have secured a customs arrangement with the UK to ensure the free flow of goods post-Brexit.

We are taking steps to ensure our immigration regime is fit for our needs when the UK revises its own regime.

We have made clear a set of economic red and green lines that have been accepted by the UK and are being factored into their ongoing trade work.
We have made progress on membership of the World Trade Organisation.
We have a contingency plan in place in the event of a no-deal Brexit and we have been desktop testing it.

We are compliant with GDPR and our data protection regime has third country adequacy status – which of course the UK does not yet have for itself.

In short we are as prepared as we can be. We have done and are continuing to do everything we can possibly do.

We speak regularly to UK Ministers – and I will be in London again next week for further meetings – to ensure our interests are understood and properly represented; our officials and UK officials are speaking and meeting regularly.

We are engaged with Member States’ representations in Brussels, and when there this week, I will be meeting the German, Dutch, Danish and Luxembourg Permanent Representations as well as the UK Representation. (As an aside, we will also of course be lobbying on the ridiculous decision taken at Christmas by the Dutch to place us on their national tax blacklist. It is absurd given it cuts across the work undertaken at EU level.)

Guernsey Finance, working with the States, has set out a clear promotion strategy for the finance sector – the engine of our economy – that builds on the post-Brexit opportunities.

What does all this mean for our economy?

It means that we continue to offer stability, security and certainty in a time of global turbulence. It means that our tax competitiveness remains undiminished: no capital taxes and a corporate tax system that is internationally compliant.

Transport connectivity

I want to turn to transport connectivity on which I know Chamber has views.

Here is one perspective.

As a jurisdiction we have certainty. We have an airline that owns London slots, and was recently voted by Which? Magazine as the world’s favourite short-haul airline. We have six rotations a day to London. We have invested in a new fleet for that airline. Moreover that airline surpasses its agreed performance indicators. It provides the requisite number of cheaper flights, and is punctual as well as frequent. When drones ground our business and community in London, it pulls out all the stops to get everyone to their destination, going beyond the call of duty – and is rightly praised by the community for doing so.

But we also have opportunity.

In September the States moved to open skies at the recommendation of Economic Development.

Aside from our two lifeline routes, Guernsey is now completely open to new commercial operators – though we have not yet seen the purported benefit of this materialise.

We have money to invest in route development. The airport is now taking a commercial approach to landing fees for new routes.

So what does that mean in relation to the airport runway?
In the next few weeks a policy letter on the air and sea links infrastructure review will be published by the Policy & Resources Committee. As an appendix to that policy letter, we will be publishing, in full, the report undertaken by PwC.

The PwC report says that the only real game changer for Guernsey would be a runway of 1700m or longer. To deliver that, we would need a planning inquiry that could take years.

The view of the Policy & Resources Committee is that the States would not, at the end of the day, support a runway extension. Our political judgement is that a runway of over 1700m is undeliverable – politically, socially and environmentally.

So for that reason, why would we spend another half a million of taxpayers’ money looking at it in even greater detail?

PwC’s excellent work sets out the arguments. P&R’s political judgement is that, having looked at the arguments, a 1700m- plus runway is undeliverable.

You elect us to make decisions. P&R has done that. However, if the States thinks that we are wrong when we debate our policy letter they will have the opportunity with the propositions we table to direct that more work be undertaken, with your money. Chamber’s view is clear – that we should do more work. If you think States Members should do that, tell them.
A constructive approach, then, would be to wait to see the policy letter and the PwC report when published, and then write to all States Members with your views, on behalf of business, in relation to the debate.
One thing that I certainly have not heard from Chamber on is its views in relation to sea links. Whilst Condor is privately owned, it is still part of our critical national infrastructure. 98% of the island’s freight arrives by sea. Condor are a valued partner to the community providing freight and passenger movements that are critical to us all. That criticality makes it appropriate for government to engage regularly and constructively with them and also of course to ensure appropriate contingency plans are in place. So we would also welcome your views once the policy letter is published.

Population management
As if Brexit, Brussels and transport connectivity does not give us enough to think about, further challenges come in relation to our population management regime.

Over the past year, in addition to some pragmatic changes already implemented by the Committee for Home Affairs, Policy & Resources has co-ordinated a review of the new regime. It is clear that the establishment of clear policy for many jobs has been widely welcomed by business, and has helped to streamline the application process in a positive way. We have created, right across the economy and the public service, a presumption of ‘yes’ for critical roles.

We will need to ensure that the population management regime is supportive of our post-Brexit strategy, integrates with our immigration regime and our commitment to economic substance. I hope businesses here today will be reassured that not only are we thinking about that, but will do this in a way that keeps complexity to a minimum. I also hope the States will adopt a new overarching population policy that enables us to achieve the island’s strategic objectives.
Economic development

We know that at this time of global uncertainty we there to be no ambiguity that we are open for business.

For that reason, the Committee for Economic Development is taking forward work to build ever greater confidence in the Open Market. Promoting the Open Market is one of the objectives of Locate Guernsey. It is a part of the States’ Economic Development Strategy. It is an important part of our economic well-being.

So too, of course, is investing in our economy.

In 2018, the Policy & Resources Committee established the Guernsey Investment Fund. It is focused on investing in businesses that the Fund’s Board and their Investment Manager believe will increase in value – and which may also have the potential to positively impact on the Bailiwick’s economy, improve employment opportunities and attract investments into the Bailiwick.

It is yet another reason for businesses to consider relocating or launching in Guernsey. The Technology & Innovation Cell was the first to launch; but we are actively working on what I hope will be the imminent launch of both a property cell and an infrastructure cell. This is a major development for investing in Guernsey’s economy – a new approach for Guernsey, a positive one, and an approach which uses private sector expertise.

In addition, in 2018 the Policy & Resources Committee gave increased funds to the Future Guernsey Economic Fund, to support the implementation of the States’ Economic Development Strategy.

The Fund supported further investment in Locate Guernsey, the Digital Greenhouse and the work of Visit Guernsey.

We are using funding from the capital reserve to invest in the seafront enhancement area and I remain confident that we will see progress on this in 2019. The level of engagement in generating ideas at the end of last year was fantastic.

In short we have invested in our economy, and continue to invest in our economy, to build confidence and opportunity.

Public sector reform

We have balanced this by setting tough but achievable targets for savings in government expenditure. We are using the Transformation and Transition Fund to provide for investment in public service reform.
With the Chief Executive and his team, the Policy & Resources Committee is working to reduce the size of government. The Chief Executive has streamlined his leadership team. The leadership team will work to reorganise the public service, to reduce the size of the civil service by 200 roles – about one in eight. The outcome will be a smaller, more joined-up government – more effective and less expensive. More services will be delivered online. More services will be joined up – such as the Revenue Service, launched in autumn. This, then, is the new and most ambitious phase of the reform of public service delivery in Guernsey.

Social reform

Reform has been the watchword of the Policy & Resources Committee during 2018. We are modernising the marriage and divorce laws in order to bring them into the 21st century. We are modernising the probate function, so that it is part of the government rather than part of the church.
Government is committed to supporting the development of the third sector, and to that end there are two important initiatives that we are progressing – initiatives that will help build a strong partnership.
The first is the development and establishment of the social investment commission. During 2018, work progressed on putting this in place. The social investment commission will ensure that the States can distribute more funding to more community partners with less bureaucracy. We will be pooling funding from different budgets, including dormant bank accounts, the seized assets fund and general revenue.

It will be easier to access – a single, simple funding bid to one part of the States, rather than lots of different conversations with different parts of the States. Clear KPIs and service level agreements will be agreed – so everyone knows what has been agreed, and how we work together. In short – we will ensure more money gets to those organisations delivering our community’s priorities.

The second initiative is the establishment of Guernsey’s first participatory budget. A participatory budget, as many of you may know, is a fund where the government provides the money but the community decides how it is spent. It’s as simple as that. Government will provide £1 million, and establish a simple mechanism for distributing it. This will be distributed in the way that the community decides – supporting projects and services that it chooses. And this will be done through partnership with the community – including finding a community partner or organisation to be in charge of the funding process.

Jersey

I want to touch on closer working with Jersey. In 2018 the Chief Executive and I established, with our Jersey counterparts, the Channel Islands Public Service Board. Over the course of 2018 we have initiated work in areas such as joint procurement, contract management, digital services, health services, criminal justice – areas that build efficiency and effectiveness, and will reduce costs. We are working with Jersey on Brexit, on substance, on energy and on the environment. Business has told us that joint working is important. We are doing it.

Political reform

Before I finish, I want to say a few words about political reform following the decision in the island wide voting referendum.

Like the Brexit referendum, the final vote was split 52:48; what does island wide voting mean? Well, like Brexit, of course, island wide voting means island wide voting – and only now do we have to work out how to implement it; and like Brexit, we have an immoveable deadline to work to – June 2020. We must ensure that in implementing the decision, we do not imperil one of our strengths that I referred to earlier, our stability.
That implementation will require many technical decisions around election material, hustings, expenditure limits and so on. But, we cannot get away from the fact that the risk of voter fatigue or confusion is high when each has 38 votes and perhaps 100 or so candidates from which to choose. If we are to mitigate the risk of instability following the election, in my view, helping electors navigate the choices available to them will be essential.

A year ago, to this same audience, I said:
“For a number of years, as many of you will know, I have felt that our democracy needs to move to the next stage of its political maturity and development. I think coalitions between individuals, based on shared values and ethics – and some core policy positions – is the next logical step in our political development. To be clear, I am not talking about the formation of political parties, and so what I am talking about is not as big a step as some may think. Informal coalitions already effectively exist between some groups of politicians. The difference

is, these tend to form after an election, rather than before it.
“I believe this development would improve the transparency of choice for the electorate at the time of an election; and I believe it would improve the coherency and effectiveness of government after an election.
“I hold these views now. But I will hold them even more strongly if we move to an electoral system which contains any elements of island wide voting.”

My thinking has evolved in the intervening year. Having taken some soundings and tested the temperature, I am not convinced that our community has a great appetite to organise itself into competing tribes of politicians. I can’t detect a grass roots groundswell to organise in this way. Indeed, perhaps the contrary – even without parties, the nascent tribalism we have seen emerge during this States’ term, does not appear to have been warmly embraced by the public. And whilst island wide voting might encourage the formation of parties, our committee system of government is not a highly compatible bedfellow. Even if an imaginary party, won a majority of seats in the Assembly, it would not control all of the committee seats. This could result in a state of near permanent gridlock or conflict within the committees.

Indeed, I think the evidence outside the island points rather the other way. Whether it is the UK, Germany, the US or France, the traditional political parties appear to be losing their grip on their national politics. Whether this is one of the consequences of the global financial crisis or as a result of the rise of social media will no doubt provide the source of comment for countless political scientists’ theses in the years to come.

But I wonder whether the time for our political system is now. In only the last week, we have seen calls for the UK’s political parties to work collaboratively and find consensus to solve the Rubik’s cube that is Brexit. Yet our system is far better geared than Westminster to deliver consensus. Whilst building consensus can be time consuming – and that can be frustrating to all involved and all observing – it can produce more stable decisions at the end of the day.

In this environment, the attributes of individuals – their principles, their ethics, their behaviours and their demonstrable willingness and ability to work together – may be more important than political ideology or policy position. People don’t have to agree on every policy to make this system work; but they do have to respect each other; and they have to argue the policy rather than criticise the personality – in other words, they have to play the ball, not the player.

So in the brave new world of island wide voting and having 38 votes, I think many voters may welcome a slate of individuals who do not agree on everything but have pledged to work together. I think this is a development to look out for rather than the emergence of political parties or more associations.

Summary

What we have put in place during 2018 gives us great preparedness for the challenges of 2019 and beyond.

Let me reiterate. Brexit preparedness.

A stronger, enhanced reputation as a co-operative jurisdiction.
A sensible, realistic, pragmatic approach to connectivity.
Making the population management regime open for business.
Investment in the economy. Investment in the community.
Investment in government services and targets for smaller more efficient government.

Social reform.
Working with Jersey.
Guernsey is confident, assured and prepared for the future.
Let’s now all work together to back Guernsey, promote Guernsey and champion our economy and our island.
Deputy Gavin St. Pier
President, Policy & Resources Committee

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