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Statement by the President of Policy & Resources Committee

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Wednesday 29 March 2023

General Update

Madam,

I am grateful that you are permitting me the opportunity to make a longer statement to the Assembly so as to provide a summary of the Committee's work since the Tax Review debate concluded as well as on the wider Committee business of the Policy & Resources Committee.

We spent, as an Assembly, over two sessions, probably five and a half days discussing the various proposals so I do not intend, as there is little point, in revisiting the arguments put, save for just a few comments which I believe set out the actualities, realities and challenges we face.

Irrespective of how we voted in that debate the reality is that as an Assembly we need to accept that it is the job of all of us to take the steps we must take, and they are undoubtedly difficult, to secure the Island's finances both now and as much into the future as we realistically can.  This must not be a lame duck Assembly.  It still has over two years to run. We cannot breathe a sigh of relief that we have put off the difficult decisions we failed to make and continue with beneficent largesse dispensing public funds in the belief that decision day will never come, well at least not on our watch.

Before substantively moving on I just want to give Members a quote or two from articles I have recently read. These relate to another jurisdiction but could equally apply to us.

The first was by Matthew Syed who wrote 'We are in favour of cheaper housing but against the reform of planning restrictions necessary to achieve it. Or take the polls that say we want better health care but not the higher taxes or reform that would make it possible'.

He also wrote - and I smiled inwardly when I read it - as oh so true and let us see what happens at our April debate.

'It was the self-same people who wanted both better healthcare and lower taxes without noticing the contradiction between the two'.

Madam, the second quote sums up where we are and the very real challenge we face.  Again in an editorial comment relating to another jurisdiction but also largely applies here. 'Incomes have stagnated against a weakening economic backdrop.   People born in the 1940s and 1950s roughly doubled their earnings in real terms between their late twenties and early fifties. Those born in the 1960s enjoyed a rise of about half.  On present trends people born in the

1970s will get less than a quarter extra over these twenty five years. This decline in the power of income growth has coincided with a boom in the value of assets, helped by more than a decade of rock bottom interest rates and quantitative easing. Wealth inequality has yawned as housing equity has swollen.   There are many more people who own their own home outright than there are paying a mortgage. Most of the former are over 65.

Difficulty in getting onto the property ladder is the most immediate indicator of the intergenerational divide".

Those. Sir. are challenges we need to address. We must all understand the financial position facing the Island - the numbers are clear.  I am certain that with positive action we can turn this around. It will take time, energy and political courage. It means refocusing the priorities of government.  Being clear on what we can and cannot deliver and providing support and opportunity for growth across the economy.  My Committee is up for the challenge.  I fail to believe that anyone with the privilege of serving in public office in this Assembly could or should shrink from seeking to meet the challenges to be faced. So with that in mind what are we doing? We are addressing squarely the resolutions passed by the States in the Tax Review debate.

We have set up a cost reduction subgroup and I am pleased to confirm that under the leadership of Deputy Mahoney it will include Deputies Meerveld, Vermeulen, Kazantseva-Miller and Mr Dave Beausire.   They will meet soon and will work with the Principal Committees as well as our community to understand the 'now' and what we can do differently in the future. I believe this group will not be focused on achieving savings through 'salami slicing' of services or tinkering around the edges but intend looking more fundamentally at what we do and how we do it.  A key element will be considering how we can work closely with the expertise existing throughout the Island.   We as a Government cannot do it all.

We have asked that this group concludes its work by this time next year, earlier than set out in the Resolution. However, the group's work will not be able to report in time to inform the

2024 Budget setting process. Therefore, the Committee has spent time considering the approach to cost cutting to be adopted for the 2024 Budget which Principal Committees will need to start to turn their attention to shortly. It is therefore important that we are clear on the reality of the situation. As discussed with the Committee Presidents last week, and will be confirmed in writing imminently, the 2024 budget will be developed on the basis that there will be no overall real-terms growth in government expenditure. Given unavoidable cost pressures within HSC and elsewhere and some new service developments which we cannot avoid funding, this will lead to Committees needing to deliver real-terms savings of between 2.5 and 3%. We do not pretend this will be easy, but this is the reality of what is needed.

Separately, we have set up a subgroup to progress work regarding taxation.  This will take advantage of, and build on, the work already undertaken and the views expressed in the Tax Review. It will be led by Deputy Helyar and supported by Deputies Moakes and Trott. Again, they will meet shortly and consider the group's wider membership and will focus, in the first instance, on progressing proposals centred on corporate tax for consideration before the end of the year.

Further, initial work by officers to assess all schemes in the current Capital Portfolio is due to be presented to the Committee in the coming weeks.  This will provide the core information needed to allow engagement with Principal Committees during April. Some are saying we are progressing with undue haste. I disagree. We have no time to waste.

The Island's infrastructure is one of the greatest legacies left to future generations. It is thanks to the foresight of our predecessors that we have facilities such as our harbours and hospital. Time does not stand still, and we must act as responsible custodians both for our Island's finances and our physical resources.

A number of funding decisions around infrastructure were paused in the months leading up to the Tax Review debate, and some more are expected soon. We cannot in good faith - save for emergencies - consider anything other than small funding requests for critical work until such time as the States have agreed their revised priorities nor though can we allow the current uncertainty to continue for any longer than is necessary That is why the review of the Capital Portfolio is seen as a leading priority and why we aim to report back to the Assembly in July.

In doing so we will work with Committees to, where possible, reduce, rephase and rationalise the current portfolio projects to become more realistic and manageable.

This will be underpinned by three key considerations.

-     Firstly, strategic fit, that is, does it provide what the community needs? Is it what we need to be doing or is what we would like to do?

-     Secondly, affordability can we manage it in the current financial context?  Can we afford the ongoing revenue costs?   Can we afford it having regard to the increasing costs of construction?

-     Thirdly, deliverability - do we have the resources to deliver it?

Funding is a significant limitation but also, we have to be realistic about the availability of resources generally.  We do not have in the Island sufficient resources to progress lots of programmes of considerable complexity.  We have, when addressing 1, 2 and 3 just referred to, to be realistic.

We intend, and should intend, only to commit to projects which we have the capacity to see through to conclusion.  That said, we recognise the importance of our construction industry. We want to ensure that we give it reassurance that there will be a consistent pipeline of future projects that will enable it to survive and prosper.

We need more housing.  This is one of our most serious, if not the most serious of our goals and needs.  The States Strategic Housing Indicator policy letter to be debated shortly will provide opportunity to discuss the additional accommodation requirements in order to meet housing needs.  From a Policy & Resources Committee perspective we continue to support cross committee activity to increase our housing stock.  My view recently expressed is that we need to be radical.   Seeking to operate within existing structures and rules is now inadequate.

I spoke before about the need to reframe and rephase the work under the Capital Portfolio. The same is true of the Government Work Plan.  It is clear now that the GWP as it stands is not deliverable in this term.  The financial and human resources required to service its many workstreams cannot fully be met. Complex workstreams are difficult to deliver quickly in our government structure.  So we have to do only those that are achievable.

Deputy Murray and I wrote to all Committees in January asking them to consider their responsibilities and assessing where work was truly critical or when it could be paused or rescoped to reduce resource requirements.   Every Committee responded and I am grateful. What is clear is that there are no easy answers and further engagement is planned shortly with Committees as final proposals for the GWP are developed ahead of the debate in just a few months.

While the theme of this statement may have been doing less in order to do better, it is important not to lose sight of all the great work that is already happening.  We continue to work towards the MoneyVal Inspection and I am grateful for the continued  cross committee work to ensure we are best prepared as we can be.  It is vitally important for our economic wellbeing that such resources as are needed are provided so that we can be as best prepared as reasonably possible.

The Reciprocal Health Agreement with the UK came into effect in January.

We work closely with the Committees forHome Affairs and Economic Development on complex and fast paced negotiations for International Trade arrangements.   Lots of work is being done in, and with, London and elsewhere to ensure our Bailiwick interests are understood and respected.

Also, Deputy Le Tocq and the External Relations team have supported Economic Development in extensive discussions with the EU, France and the UK to achieve as full implementation as possible of the fisheries provisions of the UK/EU Trade and Co-Operation Agreement - helping the Bailiwick to fulfil its obligations in post Brexit Europe and enabling co-operation on other matters.

Our team has negotiated the Bailiwick's participation in the UK-France Maritime Security Treaty which will provide further security for passenger vessels crossing the Channel.  The Committee forHome Affairs and the UK agreed how the Treaty will operate within our waters and the Treaty will come into force in May.

During the last six months the Island has formally reported to the UK and International bodies about how the Bailiwick achieves required standards for certain treaties in which we already participate.   This allows us to demonstrate our commitment to international standards and in some cases open doors to future economic relationships.

Finally, I am very pleased to be able to say that we have recently been advised that nurses and other health professionals have now accepted the pay award.  It was encouraging that the results of further ballots showed a high level of support for accepting it, as the employer firmly believes that the offer is extremely fair, balancing as it does the need to recognise the contributions of those across the public sector whilst having regard to our financial situation.  It is somewhat frustrating for all parties involved that it has taken so long - almost a year - to reach a resolution, but the Committee is pleased that the ongoing uncertainty for healthcare staff is now at an end, allowing them to focus on providing critical services and also, in many instances, receive substantial sums by way of back pay. Whilst all will be different, of course, depending on grade, hours worked and other factors, by way of illustration an experienced qualified nurse can expect to receive a lump sum of approximately £4,000 in back pay, further indication perhaps that this is a good deal.

This development also means that only teachers and lecturers are yet to accept the pay offer and, although disappointing that they alone among our many staff groups have failed to recognise the clear merits of the offer, we look forward to this being resolved soon via an Industrial Tribunal.

In closing, I would like to reiterate my final sentence in my recent letter to the Guernsey Press and ask all States Members to think the same.

I am a States Member because of what Guernsey has done for me and, what I want it to do for so many in the future.

This is a great place to live and work.  We are not immune to the challenges facing countries elsewhere but it is within our gift to make Guernsey a place of opportunity for all.

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