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Statement by President of the States' Trading Supervisory Board

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Wednesday 22 May 2019

General Update

Last year it fell to my predecessor Deputy Parkinson to update the Assembly on the early work of the States Trading Supervisory Board. Since then we have seen a change in political membership, with myself and Deputy Kuttelwascher joining the Board midway through 2018, following Deputy Parkinson's move to Economic Development.

While the membership may have changed, the Board remains fully behind the vision that was agreed when the STSB was first formed in late 2016. That vision is for the States-owned trading assets to be a consistently well-managed, efficient group of companies that deliver a return in the long-term best interest of islanders. This is in keeping with the intention of the States in bringing together what is a very diverse portfolio within a single trading group.

To enable this, appropriate governance arrangements have been established for each of our trading assets, to ensure they have both the freedom to operate commercially, and the encouragement to do so.

Guernsey Post, Guernsey Electricity, Jamesco and Aurigny all have their own Board of Directors, responsible for delivering the strategic objectives set for each of these businesses. We continue to provide oversight through quarterly meetings between representatives of STSB, and the Chairman and senior directors of each company. A dedicated shareholder executive function within the trading assets management team also provides considerable ongoing support and guidance, wherever necessary.

Similarly, most of our other trading assets are now working to long-term business plans, setting out their strategic direction with clear key performance indicators. The delivery of these business plans continues to be overseen by the individual company boards for each asset, who report regularly to the STSB.

And we are now seeing the benefits of these arrangements reflected in a more commercial mindset throughout the organisation, with greater focus on value, service, efficiency, and customers.

Of course acting commercially does not always mean delivering maximum financial return. Our trading assets' primary purpose is the essential services that they deliver to islanders. It is very clearly not all about maximising profits for the shareholder.

In fact I will go further. The STSB is unanimously of the view that in the long term, the unincorporated and incorporated trading assets should operate on a not-for-dividend basis. Any returns generated through their commercial activities should instead be reinvested into the individual businesses, in the best interest of their customers. That will provide social benefits, through minimising the cost to islanders of these everyday essential services, as well as supporting the economy, by helping to control, as best we can, the cost of doing business in Guernsey.

So to reflect now on some of the achievements over the past year.

One important area within our mandate that is easily overlooked is Guernsey Coastguards, which falls within the operational remit of Guernsey Ports. The peer review last year by the UK's Maritime and Coastguard Agency provided a very positive report, and its capability was subsequently tested to the full with the very tragic incident that led to the loss of life of footballer Emiliano Sala and his pilot, David Ibbotson.

The way in which that that incident was handled, in the full gaze of the world's media, was a great credit to this island. It was a great credit to our emergency responders; to the volunteers of Channel Island Air Search and the RNLI; to the staff of the Joint Emergency Services Control Centre; and to Guernsey Harbours who, under the expert leadership of our Harbour Master, Captain David Barker, co-ordinated a major search and rescue effort in the most difficult of conditions.

That incident is a good example of co-operation between different agencies, which is a common theme across much of STSB's work. Not being one of the principal committees, we could be thought of as a policy taker, rather than a policy maker; but that would be a misconception. We are in fact helping to inform, shape, and implement policy across a wide range of committee mandates.

A good example has been our work with the Committee for the Environment & Infrastructure on implementing the island's waste strategy. That has been a considerable undertaking for Guernsey Waste over the past 12 months, as well as for States Works, which played a key role in delivering the new infrastructure at Longue Hougue - a major construction project, delivered on time and on budget.

New collections were rolled out successfully to every household in the second half of 2018, with waste export from the new transfer station commencing in December last year, followed by the introduction of the new charging arrangements in February. All this was achieved by a small team, as a result of whose efforts we have seen considerable progress.

More than 8 out of 10 households are now regularly using the food waste and recycling collections. As a result we have seen a very significant increase in material being recycled, and a very significant reduction on general rubbish. The introduction of the new services and facilities has been very effective and islanders are getting on well with the new system.

Guernsey Waste has also worked closely with all with the parishes, as they continue to have a key role in this, and we continue to support them in that.

We are now working with E&I on the future proposals for managing inert waste, which Members will be well acquainted with, as well as with other committees. For example, assisting Health & Social Care with its review into problem gambling, and working with the States of Alderney on the refurbishment of the runways at Alderney Airport. Another important construction project, and a much needed investment in a key element of Bailiwick's infrastructure.

In addition, we have commissioned jointly with the Scrutiny Management Committee the efficiency review of Aurigny, and also look forward to working with Scrutiny on its forthcoming review into funding for States capital projects.

So yes, we are not just policy receivers - we are helping committees across the States to shape and deliver policy. At the same time, we are also reliant on other committees to deliver on their policy commitments.

For example, the business plan for Guernsey Ports has set challenging targets for Guernsey Airport to grow passenger numbers. To support that aim, landing charges were frozen for 2019, which it is hoped will help attract new operators and encourage development of new routes. We are now reliant on the Committee for Economic Development being able to deliver in its tourism strategy, if the airport is going to meet its passenger growth targets.

Other policy areas that impact significantly on a number of our trading assets include energy, infrastructure and regulation of utilities. Again, we are relying on other committees to provide the clarity and direction that we require in these areas.

I spoke earlier of the greater commercial mindset within the trading assets, and Guernsey Airport provides another good example of this. As well as looking to grow passenger numbers, the airport is focussing now on increasing non-aeronautical income.

Hence the recent expansion of the duty free shop, to allow the concession holder to offer a considerably wider range of products. Duty free shopping is an established element of the airport experience, and an important source of revenue to airport operators, so any increase in the share of spend by travellers to or from the island benefits both Guernsey Airport and the local economy. The enlargement of the security screening area at the same time should reduce waiting times for passengers at peak times.

So while we regret the disruption to travellers while the works were carried out, it should deliver significant benefits going forward.

As I said earlier, encouraging the trading assets to operate more commercially does not mean maximising profits, but there will inevitably be occasions when prices have to rise. Guernsey Electricity is a very relevant example, as it is now having to raise tariffs as a result of external events entirely outside of its control, following seven years with no price increases. That sort of action is sometimes unavoidable.

Equally though, there is a focus throughout the trading assets on efficiency and containing costs. That has, for instance, enabled Guernsey Water to freeze bills this year. At the same time it adjusted the respective charges for water and wastewater, to better reflect the cost and investment in delivering these services, to be fairer to all customers.

As I have outlined already, the STSB provides strategic direction for all the trading assets, and oversight in the delivery of their respective business plans, but responsibility for their efficient management and operation lies with their individual company boards and management. While we do not get involved in the day to day running of the businesses, the Board is nevertheless very much involved in the critical decision-making.

Aurigny's acquisition of new ATR aircraft and Guernsey Electricity replacement of the cable connection to France are two prime examples. In both these instances, the STSB has been very heavily involved in examining and challenging the business case for these major investments, which in the case of Aurigny included a full review of the airline's fleet requirements. States Members can be reassured that the Board, supported by the executive team within the trading assets, is ensuring that all such projects are subject to rigorous examination and scrutiny. Likewise the various different business cases that were involved in the implementation of the waste strategy.

I would like to acknowledge the contribution of the two non-States Members of STSB - Stuart Falla and John Hollis - since the very inception of the board. They have brought a wealth of experience gained from long and successful careers in business.

Along with the Trading Assets executive team, they have provided stability to the board, and bring a great deal of knowledge, clarity, and direction that has been invaluable to all our various operations.

This is in keeping with the long tradition of islanders from outside the States serving on key States committees. We have always been fortunate to have individuals willing to provide their expertise, often in a voluntary capacity, to give back to the community. That is something that we value, and something that we are looking to develop further, to add private sector expertise to the individual company boards.

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