I am very pleased that the Guernsey States have approved the Government Business Plan and the Strategic Economic Plan. Well done to those members of our States who supported this important initiative and congratulations to its authors.
The eight key themes of the Corporate Agenda included in the Government Business Plan 2007 follow on with fourteen States Priorities (fifteen now approved).
Priority two is “Plan for sustainable business growth”. The Level 1 approach states that we need “to develop, adopt and promote policies which maintain a vibrant and sustainable economy which generates corporate profits, offers well-paid job opportunities and makes a positive contribution to the continued prosperity of the island”.
Further reference to economic growth is included in Priority 3 “Contain public finances and maintain economic growth” and the remaining Priorities largely rely upon this economic growth being achieved in order to finance and contribute to their own success.
The business community is therefore fully aware of the pressure and responsibility on their members to work for growth in order to avoid additional taxes which will negatively impact their businesses and individuals in the community as well as support the social infrastructure that taxes finance.
This business growth will of course become more difficult as the States have voted for zero population growth. Using the States own Strategic Population and Migration Policy Document the effect of a reducing birth rate and the States decision will mean that the next 15 years will see our working population forecast to reduce by 6.3%, our youngsters coming through, to hopefully take their places as the future working population, is forecast to reduce by nearly 14% while our over 65 age group which we have to assume will be not working will rise by 42%. While ETI on the working population will be the major tax contributor these demographics are frightening.
The Strategic Economic Plan (SEP) is the basis of sound business management similarly operated by successful entities and although I feel that there are areas which could be enhanced further, these can be refined over time as such a plan should be dynamic in nature and react to changing conditions over say a five to ten year period.
I also believe that the SEP really provides a strategic plan that should help prevent departments from following their own agendas without consideration of how this fits in with the overall Government Business Plan (GBP). So often in the past some States Department heads feel them unaccountable for their actions which have a negative influence on the aims and objectives of other departments. We do not want department heads to just ignore the Plans and carry on working in isolation. We want to see the States act as a team with a collective responsibility to work to achieving the aims and aspirations of the GBP as well as the SEP. If we are to work hard to achieve joint goals all parties have a responsibility and this also means business leaders need to work to fulfil their obligations to justify the support from the States for the various sectors. This particularly means that the finance community which has been very well supported in the zero 10 proposals needs to justify this confidence with further expansion and success. All of us believe or at least hope this will happen.
We all realise and appreciate that in business, in order to remain successful, we have to look for new opportunities in expanding our present business. We also need to continually re-evaluate the needs of our customers and constantly review and enhance the level of service we provide. This means that customers need to see regular improvement. In doing this we need to lower the cost of providing this enhanced service with increased efficiencies or we will go out of business. This does not mean less service or cutting services, it is about providing better services to our customers at less cost.
Every £1 we generate in revenue we need to ensure that the proportional cost of generating that £1 reduces from year to year. All good business leaders realise this.
Reducing or curtailing costs does not have to be about reducing front line services.
However this is not what some of our elected representatives believe and some statements have been alarming and show a lack of stomach for making tough decisions or participating in the process of looking for efficiencies.
Substitute elector to customer as electors we are the paying customers for all of the services the States Departments provide. As customers who live in the real world we demand better service for lower cost. This is what we want from our States.
This means a thorough review of spending is required in all States Departments from the point of view as to where are these opportunities for efficiency. There is always a potential for savings in all organisations and any States member who cannot take this on board is frankly not up to the job of fulfilling his part of the GBP.
Rather than this letter look as not giving some constructive ideas for progress let me start the ball rolling and give a few of my own of where we can do better.
1) Benchmark against other successful jurisdictions to establish best practice
There is no mention of bench marking against successful practises operated in other jurisdictions in the GBP or SEP. I am sure that there is much we can learn from Jersey, the Isle of Man and successful UK councils and local authorities. We should not be arrogant and assume that we have nothing to learn from our competitors. They are facing similar problems and they may be able to learn something from us. If we do not become a learning organisation we will continue doing the same things over again and again. Let us become more aware of good practice elsewhere and be prepared to emulate it.
2) Close the Pension Black Hole so our children are not left paying for our bad financial management
How long is the Guernsey tax payer going to fund the States Employees pension fund to such a degree? This superannuation fund is a defined benefit scheme. This means that pensions are guaranteed at a set figure usually a proportion of final salary levels. This is an extremely generous basis probably to compensate for some less than market value salary levels in our civil service however it is still high risk as the final obligations of the States are open ended and unquantifiable.
Due to the reductions worldwide in the value of equities and pension funds over the last 10 – 15 years the majority of successful companies have altered their schemes from being defined benefit to defined contribution schemes. One recent company that did this was Unilever.
Changing the pension basis avoids unforeseen and uncontrollable liabilities. The sooner the States of Guernsey close the potential of this massive loss by renegotiating the present superannuation obligations and changing the benefit basis on new contributions to defined contribution basis the better it will be for the Guernsey economy. We need to encourage Guernsey Limited to operate similar good accounting practice and controls as are adopted by the most successful companies who have reviewed their pension arrangements. It may be said that Guernsey follows UK government practice. Unfortunately this may be the case but it is not prudent practice.
Why am I concerned? As at the 31st December 2006 the present value of the scheme’s liabilities exceeded the market value of the investments by a massive £160m. This figure has remained largely static over the previous three years however it does reflect a major potential hit on the Government accounts. This figure represents the amount of under funding that the States have made on the Superannuation Fund at that date. The level of this liability can increase or decrease but some time in the future we have to pay for this – how much I do not know but based on latest figures in the 2006 States Accounts this potential shortfall is over 50% of the budgeted revenue for a year. If we made provision for this now, which would be wise, we would not be able to use some of our reserves to support 0 – 10.
It gives me a great deal of concern. Urgent negotiations are required with the civil service unions to close this. We also need to appreciate the extent of this potential liability and consider how we aim to fund it. Some States of Deliberation in the future will have to consider this.
3) Coordinate the Information Technology Budget through one department – Treasury and Resources so expenditure is planned, coordinated and made more efficient
What are the Information Technology strategies operated by the States? Well it is very apparent that each department has its own strategy and there is no coordinated strategy to bring efficiencies through automation. IT provides one of the major opportunities for increasing efficiencies and reduced costs. My understanding is that there have been attempts to do this but individual departments are very keen to resist any potential interference in what they consider ‘their’ fiefdom.
Treasury and Resources should be coordinating the IT policies of the States and ensuring that Departments are operating under these policies to avoid the continuation of fragmented and disjointed investment.
4) Sort out the Planning Process Bottle Neck in Environment Department.
The SEP excuses the Environment Department, somewhat politely I think, for its inefficient management stating that it is under staff number constraints. This department has a very important role in both safeguarding our environment and it is also very important for stimulating investment in the form of personal and business investment in the island’s infrastructure. However it is a constant bottleneck in this process so that even the most basic of applications cannot be dealt with in a prompt way. Many of our members claim that the lack of sympathetic approach, a lack of guidance and transparency in the decision making process added to slow planning decisions is a major impediment to their growth. It is time to stop making excuses and get this department in order and get them to raise their game. This means a reduction of bureaucracy so there is more flexibility on easing some restrictions and possibly using local parishes to handle routine smaller applications so that there is more concentration on avoiding some of our carbuncle developments which seem to be processed on a nod and wink basis. Some draft guidelines are in circulation for comment and they may make the process more transparent but they do not define how quicker. If say 6 weeks rather than 20 weeks for planning response are required it needs to be investigated as to what changes in the processes are required to reach this target with minimal additional cost? Therefore the SEP recommendation of “streamlining the processes to match the resources available without undermining of democratic processes and environment considerations” needs to be investigated and implemented without delay. Consideration should also be made for charging for planning applications in order to reduce speculative multiple applications which cause more work for Environment.
The business community looks forward to hearing what improvements are being planned in the processes and is more than willing to meet with Environment to advise and assist in whatever way possible.
5) Urgently review the Housing Licence system.
The system of Housing Licences is presently a game where the players are not informed of the rules of engagement. There should be more clarity in the process and the licence decision making should be made in a states department where the value added economic benefits to the island can be more readily measured.
There is presently no format for providing any applicant with a guideline of objective and subjective questions to justify the request for a housing licence. This is very clear from the half page to ten page applications regularly received by Housing Department. Their task in making a sound decision is very difficult. I am pleased that the SEP addressees this in some way but this has been under discussion with business leaders for some time so let us get on with it and treat this process review as a major priority.
Quite frankly why we have a Housing Department made up of politicians and civil servants with limited business and economic experience, trying to appreciate the economic justification or benefit for granting a licence to enable someone to work when it is not within their level of knowledge or competency is strange to me. Surely this is a job for Commerce and Employment operating under States guidelines and policies supported by representatives from industry. I believe Housing’s main responsibility should be the provision of social housing to those who need it. Certainly Housing themselves in the Appendix to the GBP do not even mention in “what we do” that they have any Housing Licence responsibility apart from administration.
Let us make the process far more transparent by having a clear application and submission format stressing the criteria that is valued for the granting of a licence and further more give the responsibility within States mandates to the right people who I believe is Commerce and Employment and not Housing. Once again the business community is more than willing to meet with Housing and Commerce and Employment to listen, advise and assist in whatever way we can as it is in all our interests to streamline and improve on the processes.
6) Encourage the positive approach of “we can make this happen if we work as a team”
Lastly we need to promote a ‘can do’ culture in our States and our island. Successful companies are made up of individuals who can make things happen. So often in our States we hear the reasons for why budgets cannot be met and why proposals or plans will not work without hearing concrete alternatives. We need to understand with the right attitude, committed people working as a team that anything is possible. Constantly trying to block progress cannot sustain either the Guernsey that was or the Guernsey that is or the Guernsey we wish. The Guernsey resident realises that nearing election time some members wish to be heard more than usual however some thoughtless comments can have a very negative impact on the confidence of potential investors and affect our island.
Let us face reality horticulture and agriculture are now a fraction of original numbers in employees and contribution to the economy and the fishing industry is facing its biggest crisis ever with the loss of the 12 mile limit. This does not mean that we do not support these areas. I really believe we must do our best to continue to do so and support all of our contributors to our finely balanced economy. However there are industries out there such as the finance and non finance sector (who are supporting the local finance and non finance industry as well as providing much needed export revenue) that need to be supported far more effectively than previously so we can fill the black hole. The days of tomato picking in the morning followed by pulling our crab pots in the afternoon has long gone whether we like it or not.
I believe Government understands that it is there to promote the opportunity culture whereby its role is to support in providing the best facilities and playing field. This means that our Deputies need to act as a team aiming for the same goals and not as individual players each with a different agenda. The Corporate Agenda is now set – whether we like it or not. Democratic government has dictated this agenda. Now it is the responsibility of each Deputy, business leader, and Guernsey resident to support the agenda in doing their part.
Our members in the CGi are prepared to do our best to meet these challenges and look forward to each Deputy supporting the business community, on which the burden of achievement is very worrying but abundantly clear.
Philip Duquemin
Chairman
Confederation of Guernsey Industry