Friday 12 February 2016
Speech by the Minister of Treasury & Resources to the Institute of Directors, Guernsey Branch
**note to editors - check against delivery**
I have a goal for Guernsey - and I want to share it with you and the people of Guernsey.
To do this, is going to take a little time; and it's going to be a very different speech to normal.
It's a simple goal, which is what - I think - makes it so compelling. And it's an achievable one - as it is one that many people already share. That goal is for Guernsey to be the healthiest and happiest community in the world by 2026. A community where no-one gets left behind.
Can you imagine such a place? A place where people aspire to live, prosper and raise their families; where people want to start a business and contribute to their community; where young islanders with bright ideas have access to support for new businesses or community initiatives; where graduates want to return after university and have a flourishing career.
We are that place for many people already - but not for all, by any means. So what would this goal mean in practice? For me, it would mean every child is wanted, nurtured and reaches their potential. It would mean every individual with a disability is treated with respect and can contribute to the full breadth of their ambition. It would mean fewer lives are blighted by domestic abuse. It would mean that as we grow older, we will live independently for so long as we would wish - albeit perhaps with a little more help from formal or well supported family carers. It would mean that mental illness loses its stigma. It would mean that no-one's prospects of success and happiness at work, in the family or in wider society, are marred because of gender, sexuality, age, race, colour or creed. It would mean more people consciously choosing healthier lifestyles - and more people living for the greatest part of their lives in the best possible health for their age.
It would not mean that all social problems would be solved but it would mean that no-one gets forgotten; no-one gets left behind.
Some may ask: 'isn't this just platitudinous, woolly-headed, bobble-hatted, open-toed sandaled utopia?' Or, as Deputy Dave Jones would put it, 'is this the dream of some cabbage eating, soya milk drinking, woolly hatted, sandal wearing Guardian reader?' No, it is not. It's simple. It's ambitious. And it is eminently achievable. I want to explain how we can get there.
Our media and our public expect our politicians to have an opinion on - and react to - every issue of the moment - from, at one end of the spectrum, the future of education or long-term elderly care - to, at the other, the crossing on the front, Condor Liberation, or a pothole at the end of a parishioner's road. There's a view that, because politicians are paid by the community, they should be able to resolve every issue of concern to any member of the community - for example, St. Sampson's deputies recently received an email from a constituent, asking us to advise on the cost of a practical driving test. With such unrealistic expectations of our role, we're destined to disappoint; and to give an impression that we're either not empowered or are ineffective. Anyone succumbing to this environment will find that there is little time or scope to think much beyond the next States' meeting, let alone beyond the end of a States' term. Manifestos become shopping lists of individual issues of the moment; and masterpieces of populist, motherhood and apple pie, such as:
'I believe in living within our means; having good education and health systems; looking after the elderly; smaller government; better and lower cost transport links; a fairer tax system; more affordable housing; and a more diversified economy.'
We would all agree with all of that. Those who seek to cut public services will fail to get elected. And those who seek more public services will fail to get elected - unless, of course, they say they're going to fund them by cutting a bloated civil service. As a result, the challenges of reconciling potentially conflicting issues - such as, how to fund better and lower cost transport links, whilst driving towards smaller government - are lost, or glossed over.
Before I go further, I wish to be very clear. It's been said that there's a group whose plans for the island are to build on every square inch, increase the population by 10,000 and introduce GST (Goods and Services Tax) in 2019. If there is such a group, it is not a group of which I am a part; and those are not plans which I would endorse. Yes, I proposed GST as part of the reform of our tax base but that was rejected by a large majority in the States - and I accept that decision.
This speech is really the second part of one I gave to the Chamber of Commerce on 16th November last year. That looked forward; it was focused on the future state of our economy and public finances over the next 4 years; it spelt out that it will be essential for government to constantly prioritise and re-prioritise; it spelt out how we have to deliver on the public service and health sector reforms which we've now begun; it spelt out how we would need to further develop our asset management reforms, to ensure we receive appropriate returns on our financial, trading and property assets; finally, it spelt out how we needed to be - and to be seen to be - open for business.
The role of economic growth
In today's speech, I want to look even further ahead - to 2026.
Across the centuries and across the globe, it's indisputable that economic growth has lifted billions of people out of poverty; but in a prosperous and well developed economy such as ours, we need to recognise that poverty in Guernsey is not just about economic poverty, as it is in many other economies. Because we're a prosperous society as a whole, some don't believe we have any poverty in Guernsey at all; but in our case, economic poverty is normally an indicator of other social problems, often deriving from the poverty of opportunity and aspiration and the poverty of hope - which is something one of the issues that Deputy Lester Queripel often refers to. Measurements of absolute poverty or relative poverty serve simply to reinforce the emphasis on economic poverty. And so I am pleased that the States last month agreed to develop an additional measure, which takes into account social, health and environmental issues too.
If we're going to address the issues that matter most to people in our community and if we are going to build the Guernsey that will offer the same quality of life that we have today, for our children and our children's children, we must now look beyond economic growth and consider social development. Social policy is not about social problems that impact other people; social policy is about all of us and what kind of community we want to live in. And why does social policy matter to business: because, for example, with an aging demographic, we need to maximise the effectiveness and ability of everyone in our population to contribute.
It's not enough for any government to be focused exclusively on, or to be defined by, the economy and the health of its public finances. This was put very well by one of your past Chairmen, Tony Gallienne, in his 2007 book 'Guernsey in the 21st Century,' when he wrote:
"We have to consider whether pursuing ever higher levels of economic growth and consumption has diminishing returns...We need perhaps sometimes to remind ourselves that economic growth is only a means to an end, and therefore to be clear what the end is, which, I would suggest, is a better quality of life in social, environmental and economic terms..."
Absolutely critical though the economy and public finances are, our community's interests, aspirations and fears - both individually and collectively - are much broader than that; it is, of course, vital that we work within the fiscal framework - and its concept of 'long-run permanent balance' - in other words, not running a deficit - but equally we must recognise that the fiscal framework is not a vision that can define us; it is not a vision that is aspirational; and it is not a vision that can bring the community together behind a common goal.
This States' term
This States has, like its predecessor, been predictably described as 'the worst States ever;' but also as the 'States of good intentions' or the 'States of inaction.'
For those of us in government, this is frustrating, because the facts are these: it is this States which remedied woefully inadequate internal controls - despite several warnings from internal audit and the Public Accounts Committee - which resulted in the Lagan fraud of £2.3m of public money within 8 weeks of the beginning of this term; it is this States which has taken a more proactive role as a shareholder and set objectives for the companies it owns, committing to sweat our assets - your assets as taxpayers; it is this States which extended the corporate tax base on 3 separate occasions, to bring in an additional £15m of revenue every year, so ensuring that we capture as much revenue from the corporate sector now, as we did before zero-ten; it is this States which secured lower borrowing costs for our trading entities through the issue of the bond; it is this States which finally has given certainty to the open market after years of uncertainty created by the spectre of its abolition; it is this States which getting to grips with the operational and financial challenges in our largest spending department, Health and Social Services - and after lots of prior reports and discussion, has finally begun the process of health service reform; it is this States which has delivered a 3% cut in real terms' government expenditure; it is this States which has delivered £29m of savings every year under the Financial Transformation Programme, after such slow progress in its first 2 years - and it is this States which kicked off its successor and much broader, public service reform; it is this States which started to tackle the long-term demographic challenges which the islands face - and delivered the personal tax, pensions and benefits review - and so has begun the process of reform of each of tax, pensions and benefits to ensure the long-term sustainability of our public finances, including the reform of the disjointed benefits and rent rebate system; it is this States that reformed itself and cut its own numbers; and, it is this States which finally delivered reform of the public sector pension scheme, after years of prevarication.
So, it is patently both inaccurate and unfair to describe this as the 'States of inaction.' Yet we do need to understand why that characterisation is used and has resonance. I suggest that the reason is this: all the things I have listed are incredibly important - but they are reactive. They're seen as being what government should be doing anyway. They are seen as being the dry, dull, financial issues that the Treasury Minister should be worrying about, but they're of much less interest to most people. Most importantly, they don't really touch people's lives today or help them realise their aims and aspirations or allay their fears and concerns. Government needs to be more than managerial; it needs also to provide aspirational leadership.
This States has made huge strides in social policy development. These are the things that really will change people's lives and help them realise their aims and aspirations; but, I have to admit, have had little real impact in terms of outcome - so far. They have been conceived, but we are all still sitting in the delivery room waiting to meet the babies that we have wanted for so long. Population management, the Mental Health and Well Being Strategy, the Disability and Inclusion Strategy, same-sex marriage, the Children and Young People's Plan, the Supported Living and Ageing Well Strategy - large and significant pieces of social policy - all fall into this category.
I can see some truth in the observation made to me, that this States has done all the pile driving and work on the foundations, but nobody can see - or even imagine - the shape of the house that is going to be built. The public have commissioned the building but we, the architects, haven't told them what it is going to look like. Our challenge now is to inspire with the grandest of Grand Designs - and then build that project on time, on budget and to a standard which doesn't require us to go back in 5 years' time to fix a leaky roof. So, whilst this is not the 'States of inaction,' it seems to be regarded as the 'States which is unable to articulate a vision.' In that, of course, it's probably no different to its predecessors. That may, perhaps, partly have been due to the perceived absence of a need for vision in periods of sustained economic growth and fiscal surpluses; or, at that time, an incapacity for change. It may also partly be a product of our political system, entirely comprising independents; or the fact that our system of government allows no natural points of leadership. That must change.
Defining a vision
Let me ask you a simple question - and bear with me if this seems trite. Think about your own and your family's lives, and consider which of these three essential needs is most important to you. Is it your happiness? Or your wealth? Or your health? Given one choice, you might be asking yourself questions such as, 'how important is wealth to my happiness?' or 'can I be happy, if I haven't got good health?' and so on. Now, if I ask you to rank them in order of importance, the permutations get a little larger, but again I will give you just 3: is it, health, happiness and then wealth? Or is it wealth, happiness and then health? Or is it health, wealth and then happiness?
Our perspective needs to change: we need to see our community through the same prism that we use to assess our own and our families' wellbeing - that is, to recognise that it is not just a question of income or bank balance. When we ask a friend or relative, 'how are you?' or 'are you well?' - we mean just that - not, 'how wealthy are you feeling today?'
We all know in our personal and family life that it's not all about the money. And it's the same - or I suggest - it should be the same at a community level. So my vision for the island and our community is the same as the vision for my family - and it's probably the same vision as for the majority of the islanders in their lives; it is this, as I said at the beginning, that we are the healthiest and happiest and most fulfilled that we are capable of being.
A vision, an ambition, a goal
I want to turn this simple vision into an ambition, a goal that we actively aim to be the healthiest and happiest community in the world; with a sustainable environment and a secure, successful and stable economy. And I think we can - and should - achieve this within the next ten years.
After all, it's only 20 years ago in 1996, the New York Times named Guernsey as the happiest place on earth. We can be so again. It's also eminently measurable. There are rafts of indices and key performance indicators that can track our progress to our goal. There's the Demos-PwC Good Growth Index; there's GPI, the Genuine Progress Indicator; there's ISEW, the Index of Sustainable Economic Welfare; there's SPI, the Social Progress Index; and there's the OECD's Better Life Index, to name a few.
Where is the logical, hard-nosed, rigorous financial focus you may have come to expect from me? Well, of course, this vision, this goal is not incompatible with fiscal prudency. On the contrary, if we can deliver this goal, it will assist our long-term budget management. Remember that the 2002 Townsend survey of living standards told us that "...those with the lowest incomes were over four times as likely to report poor health than those in the highest income groups." But we all know - if sometimes, as we enjoy private affluence, we choose to forget - that there is a moral and social obligation to try and address those differences in outcomes - challenging and difficult though those seemingly intractable problems are. But there's also a fiscal and economic imperative to do so too.
For example, a society where all are enabled to work, irrespective of any disabilities, will not only be a happier and more inclusive one, but also a more productive one; a society which encourages healthy lifestyles and successfully tackles obesity, will not only be a healthier and happier one, but also be one which has a lower health bill from the costs of dealing with the consequences of obesity.
To achieve this goal, we will need to invest smartly in public services and community infrastructure; and in education, training and skills. As Harvard's Professor Ed Glaeser recently identified when he visited the island, we require an education system which is capable of preparing our young people to be citizens and contributors; and to retool us all as we progress through life.
The need for continued economic success and economic growth remains. A thriving economy will remain the bedrock which provides us - individually and collectively - with financial security - and finances our public services. This means that we will still need an efficient, productive, profitable business sector, capable of competing in the global economy. And it's essential that government actively removes barriers to business and continues to play its part in providing a stable platform for business, including, of course, a stable corporate tax platform. (For the avoidance of doubt, on this point, let me repeat what I have said several times before: in response to the determination by the EU that our previous corporate tax regime was 'harmful,' zero/ten was the least worst option available to us at the time.
Zero/ten, as now extended, remains the least worst option for the time being - albeit that I would expect ongoing evolution, if only because of BEPS (OECD anti-'Base Erosion and Profit Shifting') and other international initiatives. Pending those developments, rewriting or reviewing our corporate tax code at this point, would - as I am told frequently by Guernsey businesses and clients of Guernsey businesses - simply produce instability and would be reckless and foolhardy.)
The subtle shift in the ranking of our priorities - with health and happiness heading the list and recognising that our wealth is a means to an end and not an end in itself - will result in a much better relationship between the different economic sectors. Instead of the finance sector being viewed - as it is now - on the one hand by some as the saviour of the island and by others as the parasitic cuckoo-in-the-nest, funding a bloated public service, leeching private wealth creation, the mutually supportive roles of the sectors on delivering the common goal, will become much clearer.
The high value added finance sector is considerably strengthened by a vibrant and successful - albeit lower value added - hospitality industry to transport and host all their clients; neither can function well without the support of the service industries or local, self-employed tradesmen; and all sectors are dependent on the public sector to provide the services on which we all rely.
In recent years - perhaps because of the corporate tax debate here and globally - we have excessively focused on corporate tax contribution, failing to give adequate recognition to total tax contribution and economic contribution; and giving no real recognition at all of the social contribution made by many businesses. With a clear goal for the island, businesses will compete for and be judged not just on their economic contribution, but on their contribution to social progress and helping the community deliver its goal.
Business' track record in enabling good work-life balance, their civic engagement and role in the community, will all have a recognisable value; their experience in employing those with disabilities, or supporting employees through new parenthood, or as carers for members of their family, or through periods of mental ill health, will become more relevant to meeting the island's goal; as their employees' and their business' needs change, their record in providing good quality training and enabling employees to re-skill, will earn recognition. The island will become a magnet for businesses which recognise the importance for their own success of being located in an environment with Guernsey's quality of life.
We should not forget that we begin our journey from a very good starting point.
Guernsey has a demonstrably strong track record of flexibility and adaptability in its economy over the centuries. Our predecessors' prudence has served us well. We have an unparalleled, strong sense of community which we see week in and week out - from the energy and unity of purpose harnessed behind the bathing pools project, to the support and enthusiasm given to innumerable charitable feats and causes, be that a 48 hour treadmill run or 30 bays in 30 days. As Deputy O'Hara often says, we have a rich history, heritage, architecture and culture that a majority of the community are rightly proud of and keen to preserve.
In what feels like an increasingly insecure world, we are a safe haven: our geographic isolation and water around us, still offers us some physical security, which we shouldn't forget, is second in Maslow's hierarchy of needs; our relatively low crime rate provides our community with peace of mind - both of these attributes are ones I hope that Locate Guernsey and Visit Guernsey will fully exploit; in the achievement of our goal, our size is an advantage - we are effectively a 'walled garden', by which I mean, we are small enough for problems to be defined - and it enables us to know - and reach - all those who need assistance in whatever form (Tim Harford referred to this in the IoD debate last year, as a small "pretty City"); we live in an environment that is special and idyllic to many of us; our democracy, stable government and the rule of law are valued by those who do not enjoy that environment in their own jurisdictions; our economic success puts us in the top decile globally; and our strong public finances, offer us relative financial security compared to the debt ridden economies around us.
By 2026, the 'tax haven' misnomer will be a distant memory; our economy will be thriving on our reputation as a 'safe haven'- with the finance sector being able to offer a tax transparent, secure, well regulated environment for the world's financial assets, thriving in a post-BEPS world, with increased economic substance on the island. We will be a leader in FinTech, financial technology. By 2026, Guernsey could, for example, become the world centre for ethical finance and impact investing - we could be the experts on investment vehicles that have clear ethical outcomes - whether it is investment into health, education and agriculture in Africa. In short, Guernsey will be recognised as helping to provide solutions to the world's problems. Our IT sector will be seen as a secure repository for the world's data, especially if we have embraced cyber security, as part of our national infrastructure. Exploiting our status as a 'walled garden', we are an ideal test bed for all sorts of technologies. We will have a reputation as an agile jurisdiction where nothing is insurmountable. Our visitor economy will be experiencing a significant renaissance as, in an unstable world, the safety and tranquillity we offer, makes us an increasingly attractive holiday destination, which we will have showcased by hosting the 2021 Island Games.
So what is required to get us to our goal as the healthiest and happiest community in the world? Firstly, this is not just about somehow finding and throwing more resources at various social problems. We could add another 5p to Income Tax and spend the sums raised, just as ineffectively as we did when we were running multi-million pound surpluses. Value for money does not mean 'cheapest'; it means getting the best outcomes from the expenditure put in. We need nimble, collaborative government which marshals resources (public, private and third sector) differently - and breaks down the silos within government and the silos between government and non-government sectors; as the lines between the 3 sectors blur, we may develop structures to accommodate a '4th sector' - one that blends the pursuit of social and environmental aims with the use of business methods. We are seeing these sorts of ideas emerge from the Dandelion Project. And so we will need to use resources differently, for example, by pooling budgets or using social finance models that reward the delivery of successful social outcomes, such as improved educational attainment, fewer children in care, or a reduction in unemployment. These are things which have already been recognised in the Children and Young People's Plan, to be debated by the States next week: pooled funding for the MASH (multi-agency support hub) or the social finance model for the 'strengthening families' programme are examples. And of course we've had the useful report on social finance published only yesterday by the Community Foundation.
Secondly - and this is important - as Walt Disney's nephew Roy said, "when your values are clear to you, making decisions is easier." So this visionary goal must sit at the heart of the next States Strategic Plan. But more than this - so much more than this - it must be a goal not just for government but for the whole island. It must be clearly understood and widely communicated. And it must be committed to with enthusiasm not only by government, but by business and individuals. There is already so much energy and enthusiasm out there - just look at what was showcased at the Awards for Achievement; there's the Dandelion Project of course and the I believe in Guernsey Facebook page; there is TEDx St Peter Port whose event begins next Friday; TEDxYouth which is new this year or the Youth Forum who will be holding their first debate in the States chamber on 29th February. These groups will be talking on topics such as autism, mental health and, topically this week, Islamaphobia. We just need to harness and direct that energy behind a common goal.
Thirdly, we must constantly focus on effectiveness and outcomes; so the goal becomes the yardstick against which all strategies, plans and policies would be measured - do they move us closer to or further away from our goal? Do we get there faster or slower? Who is the most effective agent to deliver the outcome? It could be the public sector. But it could be more effective in delivering particular outcomes, to commission services from the private sector or non-profit sector. It may even be that the family or individual, with support, could deliver the most effective outcome - for example, early childhood intervention, isn't all about the government stepping in and taking over from parents - although at times that will be required - but it is about supporting and equipping families with the right knowledge and skills. Having a clear goal and then understanding what this means in practice, what it means in terms of the real, visible benefits we'd like to see for Guernsey, will give us a framework - which we currently lack - in which we can start to effectively prioritise - and make those difficult decisions on how to allocate the finite pool of available resources. (Up to now, those decisions have been 'ad hoc,' for example, the recent decision to provide additional funding for domestic abuse.) By having a clear goal, each strategy or policy or plan that comes before the States - whether that's disability and inclusion, equal rights, family friendly or mental health policies - each of them will be viewed through a different lens - and their relevance to delivering our community's goal will become more obvious to all.
Fourthly, we will require unequivocal leadership. This leadership must come from the new Policy and Resources Committee - the apex of our political system from May 1st. Policy and Resources will not and should not be same beast as Treasury and Resources - it will have a different role; the two should not look and feel the same. This must be a team which is capable of working together and with the rest of government collaboratively and without the dysfunctionality so endemic in our current system. This leadership must have a bias for action and a bias for impatience; it must create a culture of 'can do' optimism and achievement that attracts from peers, the media and the community positive, constructive contribution based on fact - not harping, negative criticism based on emotion. This leadership must be capable of commanding the confidence of you, the business community to invest and reinvest in our economy; and it must talk to the people, rather than at the people. This leadership will need to maintain course through the events on and off the island that over the next 10 years will inevitably impact us. For example, in the short term, our public finances remain under pressure. That, seemingly, could impede the delivery of our goal. This is why - as I said in my November speech to the Chamber of Commerce - we will need to relentlessly focus on prioritisation and reform - albeit that in the next States' term we must pick up the pace. It will also require a credible fiscal plan. (And as an aside, in the last meeting of this States I will outline the financial outturn for 2015 and my Department will be preparing before the end of this term, fiscal plans for the period up to 2020, by way of legacy recommendations to our successors on the new Policy and Resources Committee. Suffice to say at this point, that in order to deliver a credible fiscal plan I don't envisage the need for either the introduction of GST or the scrapping of zero/ten.)
We are at a tipping point in Guernsey's political, economic and social development. We have great strengths and there are great opportunities; but we have weaknesses (such as our transport links) and threats which we need to overcome. With the right leadership and the right decisions, we can secure a fantastic future for our community. In preparing this speech, I have consulted with members of the political, business and third sectors. But I hope that there are more in this room, in the wider community and in the next States' Assembly - if I am fortunate enough to be re-elected - who share this vision and ambition, who share this goal and passion, to make Guernsey the healthiest and happiest community in the world; with a sustainable environment and a secure, successful and stable economy. I hope that we will work together to make that goal a reality.