Welcome

Hi there. I’m Heidi Soulsby and I was elected as a Deputy for SE District in Guernsey’s general election in April 2012. I am Chairman of the Public Accounts Committee,  member of the Scrutiny Committee, Constitutional Investigation Committee and other cross-departmental working groups.

Welcome to my website. Here you can hear about my life in the States and other matters, as well as sending me feedback and your ideas.

 

Financial Transformation Programme

The Progress towards thte Financial Transformation Programme was debated at the February 2014 States meeting. I spoke on behalf of the PAC on various aspects of the FTP and announced that we would be reviewing the tendering process and business case for outsourcing Beau Sejour and Footes Lane, the voluntary severance programme and payments made to Capita, amongst other things.

Sir,

On behalf of the Public Accounts Committee…

 

The Committee would like to emphasise that it believes that the core principle for the FTP remains sound.

 

Running a fiscal deficit, albeit as a consequence of funding our capital requirements, is not sustainable and we must seek to return to a balanced budget. The FTP is a significant tool in the quest to achieving this aim.

 

Members may recall that in the January 2013 Assembly, it was resolved that the Policy Council, not only provide the Assembly with a specific Annual Report, but also that the Public Accounts Committee be provided with a report of quarterly progress.

 

We are pleased to be able to confirm that 4 such reports have been received by the Committee which have enabled it to effectively monitor progress through 2013. Senior Officers of the FTP Office have also attended meetings of the Committee in order that Members could seek clarification on a number of matters. There has also been extensive communication at officer level seeking further information arising out of the quarterly reports and those meetings.

 

We would like to thank the Minister of Treasury & Resources and his Senior Officers for responding to the requests for additional information in a professional and timely manner.

 

Indeed I would like to thank my Officers for the work that they have done with the FTP Office to help develop these reports and those for the Policy Council.

 

 

It now appears from our latest report that the £23m savings forecasted in the Billet have been surpassed. Almost all Departments have exceeded their individual targets with some £6.5m having been claimed in the last quarter of the year. The Committee acknowledges the hard work that has gone into achieving these savings, for which Departments should be congratulated.

 

However, it is evident that the balances remaining for 2014 remain a challenge and the Committee believes that some Departments will not be able to reach their targets for 2014 and therefore conclude that achieving the total FTP target of £31 Million would require some departments to realise savings beyond their original targets.

 

It should be noted that the reports received by the PAC are retrospective in nature and do not provide detailed information on the future projects within the programme, nor does the report before us. As such the Committee is not able to determine whether the savings plan for 2014 is robust and would welcome further details from the FTP Office.

 

We also note that a significant portion of the savings for 2014 – some £4m – are scheduled to be ‘banked’ in the latter part of this year. Clearly there is an inherent risk that the momentum gained in 2013 is not sustained throughout the forthcoming year and we call upon Ministers, members of Boards and Senior Officers, to continue their strong leadership whilst striving towards the end goal.

 

 

The Financial Transformation Programme is a major initiative, with over 200 individual savings lines. As such, it would not be possible for the Committee to undertake a full and comprehensive review of every aspect of the Programme.

 

However, as I mentioned earlier, the Committee has sought clarification on a number of matters throughout the last year. Without wishing to get too technical, one area on which we are seeking to obtain more information is in relation to the apportionment of savings to departments and allocation of costs for various cross-cutting projects, such as SAP. At this stage, whilst we understand what has been done, we do not agree with some of the approaches taken.

 

In addition, the Committee also feels it is essential that the voluntary severance programme, which was an FTP project, is given proper financial scrutiny. The Committee will therefore consider the merits of further analysis of this individual project.

 

Scrutiny of the four reports we have received to date has shown that some of the benefits claimed have been reduced due to double-counting or deemed to no longer be recurring savings. This, perhaps ironically, increases the confidence of the Committee in respect of the validity of the reporting.

 

However, in light of the scale of the FTP Project and its importance in reflecting a fundamental change in the culture of fiscal discipline within the States, the Committee believes that there is enough evidence to call upon the Minister of Treasury & Resources to acknowledge the need for an independent audit of the claimed benefits up to the end of 2013 to assure PAC and the Assembly that these savings are valid and sustainable.

 

In this regard, I must stress that it is the mandated role of the Committee to provide a level of financial scrutiny rather than be responsible for the assurance of the validity of all the claimed benefits; though the Committee would be willing to work with the Minister and his Senior Officers in the scoping of any such audit.

 

 

With regard to the future, the Committee will continue to focus on further aspects of the Programme where it believes it can add value, within the bounds of PAC’s limited resources.

 

With that in mind I will set out the areas of work on which the Committee will be concentrating over the next few months; over and above the scrutiny of the quarterly reports that it will continue to undertake.

 

I can announce that the Committee has begun a review relating to the proposed outsourcing of Beau Sejour Leisure Centre and Footes Lane facilities. Unlike other major projects within the FTP, where the benefits will take time to be realised, this project has been completed. The review will evaluate the business case and the tendering procedure, with a clear focus on establishing whether these processes culminated in the best value for money option being pursued.

 

The Committee will continue to have a keen interest in the costs of the Project, particularly the remuneration arrangements between the States and Capita (and its predecessor, Tribal). It has already undertaken preliminary work in reviewing the contract. However, it is also clearly essential that the process by which remuneration is paid to Capita is verified appropriately and this is one of the areas that PAC will be considering further.

 

We would also call upon the Minister of Treasury & Resources to ensure that there is a comprehensive closure process to the FTP beyond the end of the implementation phase of the programme; this aligned with best practice within programme management. The management of the savings and lessons learnt are critical if we are to fully reap the benefits of the significant investment into this programme.

 

It is acknowledged within the Billet that there are major projects in motion whose benefits will be realised beyond 2014 and it is necessary to ensure that these are completed in a systematic and timely manner. The Committee will take a keen interest in monitoring the developments within this area.

 

 

We believe that it is still not apparent from the information that we have that the ‘non-financial benefits’ of the FTP have been fully realised. The ‘T’ for transformation is an area that also requires further analysis and would welcome full details in the final annual report.

 

As such, we note with interest the sections within the Billet related to an ‘integrated transformation programme’ – this being alluded to within the original report from Tribal in 2009. The management of change & performance within the whole organisation is going to be increasingly important if cost savings are to be maintained on an ongoing basis.

 

The work of the States Review Committee is referenced and we would encourage any proposal to have sufficient degree of flexibility to embrace any change in the future organisational structure.

 

Finally, the Committee has witnessed through the meetings it has had with Senior Officers of the FTP Office, the way in which the programme has matured and developed over time. We would therefore call upon the Minister of Treasury and Resources to ensure that the lessons learnt from the years of work within the FTP – from the fundamental Spending Review through to today – are acknowledged and embedded within the chosen future direction.

 

 

 

It will be important for the whole organisation to commit to building on the strengths of the current programme and to work together to fix any shortcomings as, regardless of the fact that the 5 year term of the FTP comes to an end this year, changing the way the States thinks and acts is a continuous process, as this Assembly noted last year.

 

The Public Accounts Committee endorses this principle and looks forward to receiving the report from the Policy Council setting out its proposals for the future.

 

The next 5 years are going to be as important, if not more important, to get right than the last 5, if the States really is to achieve true and lasting transformation that serves the people of Guernsey effectively for the coming years.

 

59th CPA Conference Johannesburg

I have finally managed to do a write up on the conference that I attended August/September last year. It is pretty lengthy so has been added as a pdf file here. However, it was a pretty full on week and there was some very useful information.

Also attached are a couple of pictures of Deputy Sandra James and myself in full flow during the conference.

59th Commonwealth Parliamentary Conference 2013

SAJ-CPA HJRS-CPA

Waste Strategy

I spoke in the adjourned January 2014 States meeting on the proposed waste strategy.  I also managed to get the States to agree not to debate an amendment that would have caused extra work for the Public Services Department and voted against a Sursis to look again at landfill. Whilst I have reservations with regard to the costs as set out in the report, I do believe that the basic principles of the strategy still hold good and that we should support the Department’s proposals at this time.

Sir, I would like to speak firstly on behalf of the PAC and then from a personal perspective.

 

The Committee has reviewed the report from the Public Services Department and has a few observations regarding the content in so far as it concerns financial management and value for money.

Firstly, the Committee welcomes the creation of a Solid Waste Trading Account that brings together the financial reporting for all waste trading management activities. If appropriately implemented, this should increase transparency as well as assisting in maintaining effective financial control.  We would expect these benefits to outweigh the incremental costs, in terms of both administration and the additional work required by the States auditors.

Secondly, whilst the cost of delivering the strategy to 2016 now appears clearer, it is disappointing that, despite the fact it has been 2 years since the then States passed the resolution to have PSD report back with full costings to, and I quote; ’ give maximum effect to waste prevention and minimisation measures’,  several significant costs are still estimates. Indeed, whilst, the Department seeks to assure Members that it is confident costs will not exceed £29.5m the Committee  is concerned that the estimates contain so many contingencies that the actual figures do not reflect realistic and achievable costings from a value for money perspective.

Thirdly, the Committee considers that the adoption of a charging mechanism to pay for ongoing costs, which incorporates both fixed and variable elements, will act as an incentive to ongoing waste reduction,  prevent opting out and provide some certainty of income. However, getting the balance right will not be an easy task and the Committee will be interested in reviewing the States report on this aspect when it is published.

Finally, it is evident to the Committee that the entire strategy has many complex aspects to it. Aside from the construction of waste management facilities, a whole new set of processes needs to be implemented.  There are therefore significant risks in undertaking this strategy, which need to be managed effectively. Effective project management is therefore critical for successful delivery of the strategy, which, apart from ensuring those with the necessary technical expertise are employed, means effective political oversight throughout the project life both from PSD and T&R.

 

 

 

Now,

Speaking personally, I think all the talk of how we deal with our waste is a distraction. Whether we should or should not have had an energy from waste plant, whether we should or should not export our waste, whether or not we should stick it all in a hole. That debate should finish. The biggest waste in all this is the waste of time and money from prolonged debate. We can’t afford that any longer.

We need to focus on the most important part of this strategy, the part of the strategy that will really save money and  is something that we all are responsible for  - and that is waste minimisation. Each and every one of us has a responsibility to minimise household waste.  This is not something we can delegate to government.

I think it is therefore important to have some focus on this aspect today.

Worldwide about one-third of all food produced – equivalent to 1.3 billion tonnes – gets lost or wasted in the food production and consumption systems, according to data released by Food and Agriculture Organsiation of the United Nations and It is estimated that locally we needlessly throw away 2,500 tonnes of food a year. This is at a time when others worldwide living in extreme poverty are starving and back home some in our community are struggling to put food on the table, with food banks witnessing more demand than ever before. This is an appalling state of affairs.  It has been calculated that Wasting this food costs the average household in the UK £470 a year, rising to £700 for a family with children. Given the higher average cost of groceries in Guernsey, evidenced in CICRA’s recent report and it is likely to be even worse here.

 

Best before dates on everything have a lot to answer for. On a recent radio 4 programme a  representative from Lee & Perrins said that, if stored properly, a bottle of their world famous Worcestershire Sauce would never spoil and the only reason for a sell by date on it was because it was legally required. This was of some relief to me when I looked at the bottle that was sitting in my cupboard the other day and found it had a best before date of 2010.

I would be delighted if we banned the printing of best before dates here, but appreciate this would not be practical for the supermarkets. We therefore need to educate people about what they mean –  to understand food.

We need to increase awareness about the cost of food waste and educate people on how they can minimise what they throw away. I support the LoveFoodHate Waste campaign brought over from the UK, complemented by local initiatives that bring it home to people here how it directly affects them.

 

On an associate point, I fully understand the reasons behind not wanting to impose charges or legislative requirements on businesses. However, it does concern me that under these proposals, households will have to pay more for unnecessary packaging and, in particular black plastic, which can’t be recycled. As a member of the Commerce and Employment Board I therefore look forward to working with PSD and the commercial sector, to develop workable voluntary initiatives. I would like to see the end of Buy One Get One Free and similar multi-buy offers on perishable goods here. Tesco have stopped this in the UK to tackle food waste and I would like to see pressure put on the local supermarkets to do likewise here.

 

Whilst I have focussed on waste minimisation I would just like to comment on a few matters relating to recycling.

I fully endorse recommendations 19 and 20 that require event organisers to provide where practicable, recycling facilities, as well as the phasing in of the requirement for States entities, when contracting with event organisers, to ensure that recyclable or compostable food and drink containers are used at events on States-owned land. Already there are events organisers who do take the impact on the environment seriously, including the Vale Earth Fair and other charitable organisations in particular. I should in fact declare an interest as my  business has been selling recyclable and compostable tableware for such events for several years. However, there is a long way to go and I believe it is right that government leads by example in this area.

 

As someone whose garage can end up looking like a full bring bank site at the end of the month, kerbside recycling can’t come soon enough for me. I look forward to the trial starting in St Martin in March and hope it goes well.  I am also pleased to see that small businesses will be allowed to participate in the scheme, however, I think the amount of recycling may become an issue for the collectors as, just because a business is small, it does not necessarily translate into small amounts of recycling. I will be interested to see the outcome.

There is still much to do but I support the department in progressing the strategy as set out in this report and encourage other members to support its proposals.

Constitutional Investigation Committee

I was delighted to be appointed to the Constitutional Investigation Committee at the January 2014 States meeting.

The CIC is mandated to;

1. Review Guernsey’s relationships with the government of the United Kingdom. As part of its review it will consider;

a.      The method of granting Royal Sanction of primary legislation,
b.      The method of extension of Acts of UK Parliament to the Island,
c.       The extension of the United Kingdom’s ratification of treaties,
d.      The Island’s own treaty making ability;

2.      Make recommendations in respect of other relationships with the government of the United Kingdom as identified by the Committee;

3.      Liaise directly with the States of Alderney, the Chief Pleas of Sark, the States of Jersey and the Government of the Isle of Man;

4.      Bring forward to the States of Deliberation the results of the investigation as to whether or not greater autonomy in legislative affairs and international representation should be sought and if so what proposals they would recommend for the States of Deliberation to consider;

5.      Review the constitutional, administrative and resource implications of proposed changes in legislative process or international representation;

6.      Take into consideration how any proposals might impact the current machinery of government or any proposals from the States Review Committee;

7.      Review any other relationship that is identified by the Panel and make recommendations to the States.

Furthermore, following an amendment agreed by the States in January 2014, the CIC is directed to look into  whether it would be appropriate to consider, in particular, the case of legislation which extends television licensing arrangements to the Island and report back with its recommendations to the States,  including setting out the feasibility, advantages and disadvantages of repealing such legislation.
 

Bowel Cancer Screening

The New Year kicked off with a Motion of No Confidence being put forward by Deputy Mike Hadley against the health and Social Services Department. I spoke on behalf of the Public Accounts Committee.  The purpose was not to comment for or against the motion, but to inform Members of the facts from a financial scrutiny point of view.

Sir, I will be speaking on behalf of the Public Accounts Committee.

However, let me make it very clear from the start that, whilst individual members of the Committee may have their own views on the motion of no confidence the Public Accounts Committee has no opinion on the matter.

The Committee considered it necessary, given the context in which the motion of no confidence was proposed, that we comment in relation to the figures provided in relation to bowel cancer screening and the findings from our recent report into HSSD’s financial management in so far as it relates to the Motion.

I will firstly focus on the financial information recently provided by HSSD in relation to bowel cancer screening.  The Committee welcomes the publication of the internal report on this topic and notes the Department’s acknowledgement that there was an underspend on this budget of £87k in 2012 and £156k in 2013.

Whilst we have had limited time to analyse the information, it is evident to the Committee, that there are questions surrounding both the level of the original budget and actual expenditure.

In October 2011 the States approved, as part of the SSP, a budget of £294k for the first year and then £328k on an on-going basis.  This was based on the business case produced by HSSD. It would be logical to assume that a budget request would be based on the additional costs that would be required to undertake that service.

However, it is clear that not all these costs have been incurred as some elements of the work have been absorbed by existing staff. Whilst it would appear that this has not prevented the service from running, we note the comment that it may have had an effect on workload elsewhere.

However, we do question whether the original budget needed to include the level of pathology costs indicated given that this is a tiny fraction of the annual workload undertaken by the laboratory.

Therefore, we agree with the statement made in the internal evaluation report undertaken by HSSD that the budget allocation included a higher allocation than was actually required, although we don’t necessarily agree that this is because of the reduced cohort. The underspend therefore should be seen in this context.

The Committee noted that the initial business case allocated £45k for an IT system from capital expenditure, but that at present it appears that a system to support this screening requirement has not been implemented and this is causing major difficulties for the staff. There appears to be no reason given in the report why this system has yet to be implemented when it would clearly allow staff to make more effective use of their time. It may also reduce the need for additional staff time should numbers screened increase.

In the initial proposal document it states that there would be a tendering process for the full programme to obtain best value for money and that costs obtained from local tenders would be benchmarked against those available from UK providers to ensure value for money is achieved prior to any contract award. It would appear that such a process was not undertaken. It cannot therefore be assumed that we are getting value for money until that review is undertaken.

The Bowel Cancer Screening service is minor in cost terms when compared to the overall HSSD budget, around 0.3% in fact. But, the issues identified merely serve to confirm the Committee’s findings in its recent report that financial management in the period reviewed had been weak.

However, the Committee found that financial management was improving.  Indeed, one of our recommendations is that T&R should provide an oversight role with a clear focus on enhanced communication. It is therefore encouraging to see that T&R have assisted HSSD in terms of verifying figures, albeit that it has come with certain caveats.

The PAC report into financial management within HSSD made it clear that matters have not been helped by frequent Board changes and, as such we have recommended that during the transition of Board membership, there is a need to focus on knowledge transfer, specifically with regard to financial matters. The Committee is also of the view that more generally there should be financial expertise on all Boards and such a requirement is imperative for a Department responsible for over £100m of annual expenditure.

This particular issue just emphasises the fact that the States of Guernsey needs to determine and prioritise the services it wishes to provide and decide how these will be delivered in the most sustainable manner for the future. Until we do that we cannot be assured that we are getting value for money from our expenditure on health and social services provision.

PAC Review into HSSD’s Financial Management

The Public Accounts Committee published its report into the financial management at HSSD in January 2014. Media release below. Report can be found Review of HSSD Financial Management

 

The Public Accounts Committee is releasing its review of HSSD Financial Management. The purpose of the Review was to consider HSSD management of its financial affairs in 2012 and specifically, the circumstances which led to the Minister’s statement in the November 2012 States Assembly with regard to HSSD’s envisaged £2.5million revenue overspend.

The review examined the management of the allocated revenue budget, the quality of the financial management information produced and the level of financial oversight provided by the Treasury & Resources Department.

It should be noted that a full review of the HSSD financial function has not been undertaken.

The Committee has provided an independent, evidence-based account of circumstances leading to the Minister’s statement, taking a considered view of the issues that had been identified.

The Review Panel comprised Deputy Heidi Soulsby (Chair), Deputy Peter Sherbourne and Mrs Gill Morris.

Deputy Soulsby said:

“The Committee has made a number of recommendations that focus on providing an environment where there is a more rigorous financial management function to improve the quality of HSSD’s decision making process. The recommendations made by the PAC and a number of complementary reports examining the HSSD Financial function need to be implemented promptly to enable more effective management of HSSD resources.

However, in the current economic climate this won’t be enough. Irrespective of the financial management in place, the States of Guernsey needs to determine what services it should be providing and how these will be provided in the most sustainable manner for the future. Until such time, there can be no assurance that we are getting value for money from our health and social services provision”.

Guernsey Finance Funding

At the December 2013 States meeting, Commerce & Employment presented a report requesting additional funding to Guernsey Finance from the Strategic Development Fund. I am delighted that it received unanimous support and topped off a successful couple of weeks for the Department. My speech is below.

Sir, A few months ago we gave the go ahead in this Assembly for approximately quarter of a billion’s worth of pipeline capital projects. That was the easy bit. The hard bit is finding the money to pay for it. Yes we can look at taxing more but that can only go so far. If we want to spend money on new schools, deep water berths and maintain and improve our health and education services, we need to be proactive and bring more money into the island.

 

While we do need to focus on developing new industries, and it will be giving nothing away to say that this is a key part of the Economic Development Strategy that will be made public early in the new year, such initiatives are not going to result in immediate changes to our economic structure. Neither can we expect them to completely replace our finance industry. An industry we should be proud of by the way.

 

So what do we mean by the finance industry? Well its not one amorphous lump. Just as we talk about retail as being one sector but in actuality covers a huge variety of different business types, so too the finance industry is incredibly varied and probably more so in Guernsey than anywhere else in the world. The depth and breadth of Guernsey’s offering is an extremely big selling point and explains why the  multiplier effect of new business in this sector is so great.

 

This goes beyond the 4 main sectors of banking, funds, insurance and fiduciary. Just a quick review of the Guernsey Finance website provides a clear understanding of what we can offer. These include cleantech, family offices, captive insurance, intellectual property, investment management, custody services, foundations, private equity, commercial insurance, managed trusts, limited partnerships and a recent addition, image rights.

It is this breadth and depth that has probably protected the Island during the recession better than many other jurisdictions.

And the entrepreneurism and innovation continues to evolve.

On Monday I attended the launch of the new Channel Islands Aircraft Registry, an initiative that has the very real potential of delivering positive benefits to our finance industry. However, it’s all very well having a great new product, but we have to tell the world about it and demonstrate that Guernsey can provide a full suite of support services for the high net worth individual and others on the back of it.

 

We need to get our message out there. What we have on our side is the years of expertise, local talent and innovative approach but we have to actively demonstrate it’s worthwhile coming to Guernsey versus all our competitors across the globe. We can’t expect to have business beating on our door anymore.

Life is very different from a decade ago. There is more competition for a start and sources of new business have shifted. We need to be constantly ensuring we adapt and are not left behind.

And the value of Guernsey Finance is showing a joined up approach. It is all very well businesses going out there individually, which many do and will need to continue to do,  but what Guernsey Finance can do is show Guernsey is open for business – demonstrate stability in the jurisdiction and a welcoming attitude to those that provide business opportunities that will benefit us.

 

The present funding levels might be ok if nothing had changed but it has. We have to seek out new markets whilst at the same time maintaining our existing relationships. If we are going to fund Guernsey Finance we need to ensure it is funded properly for today’s reality. Otherwise we end up with an unsatisfactory compromise when our competitors are pouring money into their equivalent organisations. These include Luxembourg, Dublin and Malta. Closest to home of course is Jersey Finance, which earlier this year was granted £4m and we are told it can expect more.

To me paragraph 47 in this report says it all. The application of resource at the right time is a key factor in success that is widely recognised. GF’s assessment is that delays in initiating work  to raise awareness and establish networks in target jurisdictions is placing the Island at a competitive disadvantage. Entering markets later is more difficult , more expensive and less effective.

Speaking to senior members of the finance industry it is clear that they believe GF has a major role to play. In particular the following 3 areas of work were considered crucial;

1.  by adding significant value to the various Industry associations such as AGB, GIIA and GAT.
2. by organising forums where industry can come together to discuss new opportunities for the jurisdiction, including issues such as where new market opportunities are emerging and considering where Guernsey could introduce new legislation to take advantage of developments internationally.  Here GF both facilitate and provide insights from their international discussions especially based on their access to foreign governments and industry associations (this is especially the case in places such as China where regular visits and high level contacts have developed relationships which would not be accessible to industry representatives directly.
And finally 3. Through international Seminars and workshops GF delivers events  where local industry professionals can showcase the finance sectors’ key attributes particulary new developments and local responses to international developments such as AIFMD or FATCA.

So, it is not just about selling Guernsey. It is finding out what is happening in the marketplace, what our competitor jurisdictions are doing, where the gaps are and ensuring Guernsey is on the ball.

If Guernsey is to continue to be the innovative centre it is in the future, we need to invest now.

If a job’s worth doing its worth doing well and I urge members to support this report to enable Guernsey Finance to do just that.

Financial Services Ombudsman

I was pleased to be a Member of the Commerce & Employment Board that put forward the successful report into the creation of  a Financial Services Ombudsman at the December 2013 States meeting. Due to the large amount of reports going through the States at the end of the year, this had been delayed for 2 months. However, we got there in the end and the report was passed. My speech is below.

Sir, this has been a long time coming. The need for a  financial services ombudsman has been talked about for decades.

That could be explained by the view that Guernsey has such strong financial services regulation and it would mean extra cost without any perceived benefit.

Indeed, I have to say that for many years, as someone working in the finance industry I did question the need of a financial services ombudsman and whether the industry should have to pay more on top of rising licence fees.

However, if, like me, you have been contacted by a parishioner who tells you that the money they had put aside and invested for their retirement had been mismanaged and that they could not afford a lawyer to fight their case without using up the funds they had left and with no guarantee they would win, you will realise why it is essential we have such an Ombudsman in Guernsey.

According to the UK FSO website, 9 out of 10 people say they have no complaints about their bank, insurer or financial services firm and most financial transactions take place without any problems.

But, sometimes things go wrong and sometimes the financial services business does not sort things out to the customers satisfaction. It is then that the FSO can help out.

That the GFSC provides no support here was evidenced by my parishioner who was told to go to an Advocate. Great, but they don’t come cheap.  I believe  bringing in an FSO will make the former give more attention to the retail side of financial services, rather than the institutional focus that it has had to date. At the same time the proposals take into account concerns from industry that the need for an FSO to cover all aspects of the financial services sector, such as Class B funds aimed at institutional investors, is unnecessary.

This is about protecting those people who aren’t rich sophisticated investors with enough capital to fight their case through the courts. This is about helping those people we should be supporting  those who carefully save throughout their working life to pay for their retirement but would not be considered wealthy by any stretch of the imagination. These are people who have taken responsility for their own lives trusting in professionals to invest their money wisely. These are people who won’t be a burden on society, and we have a duty to ensure that they have some level of protection. At the end of the day this will save us money.

 

The G20 High Level Principles on Financial Consumer Protection , adopted by the Organisation for

Economic Cooperation and Development in October 2011, include –

Jurisdictions should ensure that consumers have access to adequate complaints handling and redress mechanisms that are accessible, affordable, independent, fair, accountable, timely and efficient. Such mechanisms should not impose unreasonable cost, delays or burdens on consumers. In accordance with the above, financial services providers and authorised agents should have in place mechanisms for complaint handling and redress. Recourse to an independent redress process should be available to address complaints that are not efficiently resolved via the financial services providers’ and authorised agents’ internal dispute resolution mechanisms. At a minimum, aggregate information with respect to complaints and their resolutions should be made public.

 

Whilst there will initially be costs that will be spread across industry, which is not ideal, I believe this is the necessary approach  to take before we build up a good enough picture of who the most complaints are directed at and making sure those are the businesses that pay.

 

And whilst I am probably one of those who is more sceptical than others about to how far we can work with Jersey, I do believe that this is one example of where sharing the service will keep costs down, and that we should be working with our sister Island to reduce the burden on industry.

So, I urge Members to support this report to help to support improvements and reduce disputes; help financial businesses themselves to resolve disputes with consumers; resolve any consumer disputes that financial businesses fail to resolve themselves; and reduce the burden on the courts.

Employer Contributions

I spoke in support of an amendment, which I seconded, to reverse the proposed increase in employer contributions proposed by the Social Security Department to employee contributions at the adjourned October 2013 States meeting. Whilst the amendment was probably a step too far and was defeated, I was delighted that the proposal to increase employer contributions was not supported. The reasons why I was against an increase in employer contributions is given below.

Sir, I declare interest as part owner of a business which is an employer.

Members will note from the Social Security Department’s report and may remember from Deputy Langlois’ speech that the Board of Commerce and Employment, of which Deputy Queripel and myself are members, do not support the Social Security Department’s proposals to increase employer’s contributions.

We are concerned that the burden of increased contributions should be borne by employees not the employer. To increase more burden on the cost of employing individuals could be detrimental to the economy  and discourage new business moving to the Island.

 

And It will be the smaller local businesses, the majority of employers on this Island who will be affected most.  I have been told from a number of local employers that the continuing rise in this tax, which is exactly what it is, will force them to lay off staff. Deputy Green in his speech a couple of weeks ago stated that it would be the lower paid who would suffer most. However, I would say that they may suffer more by the very fact the jobs won’t be there.

 

Members must understand that this tax bears no relation to the profitability of a business, but is just another overhead that has to be paid for.

It does seem ludicrous to me that employers  are being asked to fill a hole in a pension fund. Why are employers being asked to  pay for someone’s retirement? Nowhere in the report does it explain why employers have been targeted not employees. The benefits of increasing employee contributions are that the increased costs will be spread amongst a significantly more individuals.  By my calculations the average employer would have an increased annual cost of just under £2,000. This at the same time TRP rates on commercial premises have increased by 5%, which in turn are already much higher than domestic rates. And saying that the self-employed are not being hit by a contribution increase ignores the fact that the small business owner who employs staff will be adversely affected by virtue of the increased employer contributions going out of the business.

Now member may recall that Deputy Green mentioned in his speech that the amount of contributions raised from a 05.% increase in employer contributions would be £300,000 more than from employers.  This was more than I was expecting and following an enquiry with the Department they admit that there was an error in the calculation and the difference would be more in the order of £100,000. I’d like to thank the Department for admitting their mistake and coming back to me so promptly.

However, in reality, this point is irrelevant if we think  about who the employers are we are raising the contributions from. I ask you Members –  who is the largest employer on this Island? Yes, the States of Guernsey. I had worked out from the States accounts that roughly 20% or £1million would be paid by the States of Guernsey as an employer. Since the last meeting I have now had it confirmed that the total paid for 2012 was £930,000. In other words, just under £1 million will simply be a transfer  between 2 reserves – credit one reserve and debit the other.  Take money from general reserve and add it to the Insurance Fund. Hardly the most efficient means of raising additional funds then. And that doesn’t include contributions from the trading entities.

 

No, I believe that, if a half percent on contributions is needed to be raised, which the Social Security Department claim it does, then  it should be on the employees contribution.

Now, we hear from T&R Minister that his Department doesn’t believe there should be any increase and, in reality none of us wants to see an increase. Clearly our system of Social Insurance ( or paying our stamp) creates an entitlement and expectation that on reaching retirement age we can stop work and the state will look after us for as long as we live. But it no longer makes sense for individuals and employers to pay into a fund for 40 years and then expect that fund to pay 100% of our living needs for the next 30 or more.

 

However, there is no alternative proposal at the moment and this amendment will at least create a level playing field before we consider proposals arising from the personal tax, pensions and benefits when it is brought before us for debate. Yes this is a difficult decision, but it makes sense financially for the States of Guernsey and the economy as a whole.

I therefore urge members to support this amendment.

 

University of the Channel Islands

I placed an amendment to the Policy Council’s report on a proposed University of the Channel Islands. Basically the report was asking Members to support a university in principle. Although the proposal would be a private venture, due to the effect it may have on the Island it was necessary to ensure that politically it would be acceptable.

I laid an amendment, which was successful, to ensure that the financial regulatory implications were considered. My speech is below.

Sir,

When I first found out about the potential opportunity of a University on Guernsey my immediate reaction was wow, this could be a real game changer. Could this be the silver bullet we are looking for, that reduces our dependence on the finance industry and at the same time helps our other economic sectors such as retail and tourism?

Now, several months on, having had time to  consider it in some depth and undertaken quite a bit of research, I still think this is something worth exploring but I am really concerned that by approving the idea of a University in principle, it will be considered a fait accompli.

It is for that reason that I have proposed the 2 amendments – one relating to finance specifically, the other to regulation. Both of which are about managing risk.

My first amendment seeks  to direct Treasury & Resources to report to the States on the financial cost implications to the States of Guernsey and how it proposes to mitigate such financial cost implications arising from the establishment of a University.

 

I believe that  the Policy Council’s statement that a University would not involve States funding is naïve. It is my worry that if that is what it believes now, no proper consideration will be given  to  the financial cost implications of such an establishment being set up in Guernsey. That is, before fees are raised, buildings leased and people employed.

There will be costs and we will need to ensure that it’s not the Guernsey taxpayer that foots the bill. We have to be satisfied that the business model stacks up, that the University can pay its way and that it will bring a net economic benefit to Guernsey and I will consider these points in turn.

Without sight of the business model of this specific proposal it is impossible to know whether the assumptions made are reasonable.  However, it is possible to look at what is currently happening  elsewhere in this sector and assess whether what is stated in this report makes reasonable sense.

From the research I have undertaken I understand that it is very difficult to build up an outside market and that is what will need to be done here. It is not evident whether the proposers in this instance have done this before as from my research I do believe their plans may be ambitious from a cold start.

 

There are over 100 universities in the UK and there’s intense competition to attract students now. It isn’t like it was 20 or 30 years ago when you would be delighted to get a place at a University. And nowadays the whole world is pitching for same market – India and China. So what is our USP? What can we offer that others can’t? Why would a Chinese student come here?

If it is such a good idea, why aren’t  existing UK universities beating a path to our door? Postgrads in particular – see why go to Cambridge with technology parks, incentive is the research facilities. Will this Uni be able to attract those kind of people?

It seems the University will be heavily dependent on what is called a flying faculty, but who will be arranging this? Not an easy job. And v Expensive – will this match with being competitive on pricing?

 

So, there are questions as to whether it will be viable in the first place. And what happens if it fails. Yes there will be reputational issues of course but there could be serious cost implications if the necessary contingencies are not put in place, there will be a moral obligation for the States to pick up the pieces. I therefore do not subscribe to paragraph 11.1, which states;

“ The organisers plan to generate funds in part from contributions from HNWI individuals and there is always the risk that those funds cannot be raised but this is purely a matter for the proposers.”

With all due to respect, comparisions made with horticulture, finance and export sector are not valid, a university is a completely different kettle of fish.  You can’t just  switch it off.

Private universities can and do fail for a number of reasons, such as the backer pulling out, failing to meet quality assurance standards, or just not being able to attract enough students to make it a viable business.

It will be necessary for the States to plan for this eventuality and mitigate the risks for the Island. Whether this is secured through insurance or by other means, it still needs to be thought about at the start.

So, that is the University’s business model. But what about the wider impact of having a University with 2,000 students. On the one hand, yes spending on goods and services should increase. It might result in Beau Sejour, bus service and Aurigny becoming profitable and for other leisure facilities to either be developed or enhanced. However, there is a need to consider the impact on our infrastructure and other services.

 

Whilst we have been told about how Loughborough and Birmingham have benefited from their Universities, Research done in Pennsylvannia in 2007 showed that there can be a negative economic impact on a host municipality compared to towns without universities. This was because of the fiscal regimes in that State that meant the Universities and students ended up benefiting from the services of the towns without contributing to the provision of those services.  This could be the case for Guernsey.  For example, the work of the Border Agency will increase, with visas having to be dealt with. The police and health services will also be affected. This will require expenditure and we can’t expect our local resident population to pay for it.

One method adopted in Pennsylvania has been a scheme called PILOT, Payment In Lieu of Taxes, which the educational institutions pay. Guernsey would need to consider such a method to ensure we get back what we put in.

In addition, we need to consider whether a University would provide a net economic benefit to Guernsey. With the reliance on a flying faculty, will we get any of the potential tax take from lecturers. Based on our current fiscal regime we could find that fees come in and fees go out without the States seeing any of it. I therefore believe Treasury & Resources need to start thinking laterally, seeing how we can do things differently from what we do at the moment. This might involve consideration of withholding taxes or other fiscal measures that mean the risks of allowing such a body to set up here to be worthwhile financially.

My second amendment relates specifically to the activities of the University itself and directs Policy Council to report to the States on the necessity for any future University to be regulated.

And by this I don’t just mean regulation in terms of financial matters, but also in terms of quality assurance.

I felt it necessary to place this amendment as I was not convinced from reading the report that the Policy Council had given this any thought, although the risks, both financial and reputational could potentially be quite high.

By ensuring that the University is adequately regulated it will provide assurance to the States of Guernsey that such risks are being adequately managed.

The need for quality assurance is essential to ensure that the University can award degrees that are internationally recognised.

In addition, we must be satisfied that the finances are such that the States of Guernsey have assurance that the business is viable, before it is too late.

Whether this is something that CICRA could or should be involved in may need to be considered. It is not something I have the answers to, but as I said at the start, I think it does needs proper review. Instinctively I believe regulation is required, but I believe this is something Policy Council should be looking at formally before we allow anyone to establish a University in Guernsey.

I hope fellow members will understand the need for these amendments.



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