Statement by President, Policy & Resources Committee

Wednesday 20 March 2024

General Update

Madam,

It is a great privilege to hold the office of President of the Policy & Resources Committee and a further privilege to give my Committee's first general statement to the Assembly since our election in December. I am grateful to the Assembly in allowing this statement to be moved to the afternoon in order that I could accompany Deputy Le Tocq to a GFSC and Guernsey Finance event in London last night, highlighting the significant economic and social value which Guernsey's financial services sector provides to the whole of the UK. Celebrating the Island's continued successes in this regard in the company of various Ministers, MPs, and Lords proved a useful contribution to our ongoing engagement with UK parliamentarians particularly as they head towards their General Election.

Moving back to P&R and our priorities. In December, I made clear the challenge of the work ahead of us and I have not been proved wrong. Later this week, we'll have been in office some 100 days and in addition to managing our own diverse priorities, a significant amount of our time is dedicated in responding to the requests of other Committees and external stakeholders.

Personally, I have very much enjoyed this aspect of our mandate and the engagement with colleagues across the Assembly, and beyond. We look forward to maintaining this ongoing dialogue for the remainder of the term.

Given the time constraints, I can't do justice to the full breadth of the Committee's mandate and will therefore focus on our three most significant areas of work; public finances, housing, and MoneyVal, before providing some high-level observations on wider activity.

The provisional closing position for 2023 is now available, subject to further year-end adjustments and audit, while an underlying deficit of £35m remains, it is positive news. With income achieving expectations, and expenditure lower than budgeted, there is (excluding investment return, capital income and Guernsey Port losses) a surplus of £41.7 million, an improvement of nearly £32 million compared to the original 2023 Budget.

Revenue income for the year stands at over £600 million, £18.1 million ahead of budget. This is largely attributable to income tax receipts which benefited from a one-off increase in tax from banks due to the increasing interest rate environment enabling a temporary widening of margins.

ETI receipts - which is the best real-time indicator of economic performance - also performed strongly, up on budget by £8.4m with year-on-year growth of over 2%in real terms.

This was partly driven by growth in the number of individuals working. This together compensated for the reduction in document duty, reflecting a slowdown in housing market activity.

Moving to expenditure, the overall allocation was underspent by some £13.7 million, reflecting a period of restraint on service developments whilst the Funding & Investment Plan was being developed. Of course, individual Committees have faced their own financial pressures, most notably the Committee forHealth & Social Care who overspent by 1.8% or £3.9 million. This illustrates the importance of investing in the system wide changes needed to ensure the long-term sustainability of health and care challenges and I'm grateful for the ongoing work being undertaken by Deputies Soulsby and Murray with colleagues from Health & Social Care.

Turning now to investment return - that is the unrealised gain on our investments based on market valuations at year-end.

There was a positive variance of £7.6m against a budget of £26.6m. Of course, this was below the return of global equity markets, reflecting the balanced range of investments held by the States of Guernsey; including equities, property, and bonds.

The significant activity to restructure the portfolio during 2023 also resulted in a drag on performance.

Overall, however, despite the improved performance compared to budget an underlying deficit still exists.

Once depreciation (£29m), finance charges (£10m), non-capitalised project spend (£23m) and the deficits for Trading entities (£7.5m) and Contributory Funds (£8.5m) are taken into account, an underlying deficit (excluding investment return) of £35m is revealed. To put that figure into context, it equates, for illustrative purposes, a 2% increase in personal income tax rates based on 2023 values.

Looked at in those terms there are meaningful opportunities available to address the deficit if considered appropriate.

Similarly, the Assembly needs to address how demographic pressures are increasing the pressures on the social insurance funds.

We're currently in a position where year-on-year we're depleting the reserves as expenditure to support those accessing the schemes exceeds the income being received from the working population.

Resolving the supply of affordable housing, is our top priority. Not only will this have a direct and positive impact on those islanders currently unable to find and fund suitable housing, but it is also a key facilitator to achieving wider success for our community. We need to attract and retain staff in an ever more competitive recruitment market. Ensuring appropriate housing is available is critical in supporting businesses, the delivery of the GWP and ultimately the economy.

We must not be under any illusion of how difficult the task is especially with last week's publication of the Property Stock Bulletin which shows there was only a net increase of 94 Units of accommodation in 2023. This is nothing short of a significant failure which cannot be allowed to continue.

As a Committee, we have focused on facilitating the work of Principal Committees to accelerate building activity. The States and the Guernsey Housing Association have over recent years taken positive steps to acquire land; it is now a case of ensuring spades in the ground as quickly as possible. Deputy Murray, as property lead, is working with the States Property Unit - and external advisors where complementary skills are required - to ensure our housing priorities are appropriately resourced.

Deputy Soulsby and I are meeting regularly with Deputies Roffey and de Sausmarez to understand and address the barriers to delivery and to co-ordinate the progress being made against the Affordable Housing Capital Programme and Guernsey Housing Plan.

This means not just looking at the building of houses in isolation, but the wider enablers and infrastructure requirements.

A key example has been seeking to accelerate work surrounding flood defences at the Bridge which will support not just the development of Leale's Yard but also the Guernsey Housing Association sites in the vicinity. We have agreed that these enabling flood defences will be progressed separately to the housing aspects of the Bridge Regeneration work by the Committee for theEnvironment & Infrastructure in order that a resolution may be found as quickly as possible, noting that the likely costs fall under the Committee's delegated authority limit of £5m.

The Committee is looking to bring proposals to the States as soon as possible regarding Leale's Yard and is working closely both with the developer and with an external expert, Arup, to discharge the due diligence requirements so the Assembly can make an informed decision on the potential purchase of homes on the site.

This is a key distinction between this project, where the States would be seeking to purchase homes in turnkey condition from an external developer, from wider housing projects where the States, or the Guernsey Housing Association, are directly involved in the build process itself. The due diligence process has been designed to acknowledge this distinction.

Through Arup, work is ongoing to independently assess, and refine, the construction and project logistics proposals, including the use of modern methods of construction.

This will allow the negotiation of a potential purchase price for the final properties. However, to reach this stage, we remain reliant on the provision of further information by the developers which mean we cannot confirm the timeframes or details at this stage. We are doing all we can to ensure that this information is available as quickly as possible and have recently written to the developers setting out our detailed requirements.

We expect this information will be received shortly, with the view that we will meet again with the developer over the coming weeks.

Finally on the topic of housing, in January when the States' approved the funding necessary for the development of the Les Ozouets Campus through P&R's successful amendment to the Government Work Plan, we took a significant step towards being able to release the Coutanchez site.

The Development & Planning Authority is considering its Development Framework and we are keen to accelerate the master planning working along with the other landowners. We must be ready to clear that site immediately it is available; have approved plans for homes and infrastructure; be confident of the construction capacity to build; and have access to funds.

Extensive work continues in preparation for our MoneyVal mutual evaluation. While the on-island element is next month, the preparation has been ongoing for some time across the very many agencies who collectively ensure that, as a jurisdiction, we work to the very highest international standards.

This team effort has been ongoing since our last assessment in 2014 with our AML/CFT/CPF Framework enhanced significantly over this time.

Guernsey is held to the same standards as any other jurisdiction and will be judged with the same rigour as jurisdictions many, many times our size. This has required, and will continue to require, substantial investment and political commitment in order to support the resources, regulatory and legal framework which the international community require of the Bailiwick.

Guernsey has invested £23m since 2019 in a mixture of one off enhancements to our AML/CFT/CPF regime as well as funding new recurring expenditure to establish the Economic and Financial Crime Bureau, to create a new and dedicated Economic Crime Division within the Law Officers of the Crown as well as enhancing the capacity of the Financial Intelligence Unit and the Guernsey Registry.

With the Technical Compliance assessment in mind, all relevant agencies have been working to ensure that the Bailiwick has the appropriate legislation in place in order to meet the FATF Recommendations.

A significant amount of legislation has been approved by the Assembly, and I'm grateful to the Presiding Officer for allowing the publication of an additional Billet for this meeting allowing the final regulations to be laid.

Engagement has taken place directly with the finance industry in the lead up to the assessment with the intention of continuing to raise awareness about a range of issues including the National Risk Assessment and sanctions.

This is important as expectations and assessments by international bodies have become ever more stringent and consider the whole financial services sectors as well as the authorities' response to AML/CFT/CPF and we are expecting this to be the case when MoneyVal shortly return to inspect us again.

Having focused on those three key topics in detail, I'll close by providing a brief overview of wider ongoing work and recent milestones.

This includes the recent changes to the Royal Assent process so that the Lieutenant-Governor can approve much of the Guernsey, Alderney and Sark primary legislation here within the Bailiwick; continued joint working with Guernsey, Jersey and the Isle of Man to increase transparency and accessibility of information held on their registers of beneficial ownership, including the publication of a joint commitment in December; and the formal extension of the Paris Agreement on climate change.

Not only does this extension highlight Guernsey's commitment to complying with international standards and contributing to global efforts to combat climate change, but it is also important when negotiating Guernsey's participation in international trade agreements, which in turn supports our continued economic competitiveness.

Madam, I am grateful for the opportunity to make this statement and look forward to answering any questions.

Public link

Please use the above public link if you want to share this noodl on another website.