Vision CI - realising the potential - Chris Brock

1. Summary

Vision CI is a thought-provoking case study designed to generate positive debate on the potential integration of public services across the Channel Islands and sets out possible next steps options for consideration by all potential stakeholders and interested parties.

The concept of a pan-Channel Islands vision was raised at the turn of this decade when Critical Economics produced an outline framework on the subject. Despite the intervening Covid Pandemic, this possible framework only heightened interest in developing such a vision.

The impact of common challenges facing both Jersey and Guernsey set against the current escalating backdrop of long-term international and national tensions and events is a daunting scenario. Therefore, it is unlikely that there will ever be a better opportunity to review a pan-CI approach to the provision of many key public service functions.

There are some major global and regional challenges facing not only the Channel Islands but also island jurisdictions throughout the world. These ‘game-changing’ events are becoming more frequent and will require greater on-island resilience to combat the inevitable repercussions. Taking a pan-CI stance in relation to these events could well be a lot more effective than meeting these challenges on a separate island basis.

The funding of public services also presents an increasing challenge and the merging of key public services on a pan-CI basis should ensure that CI public expenditure, now standing at £1.65 billion a year, is contained as far as possible and even reduced by harnessing the benefits of critical mass and economies of scale.

CI residents may be able to take advantage of more specialised and efficient services delivered locally rather than having to travel to the UK and rely on Mainland services. Already, there is every likelihood that the UK is going to face severe resourcing issues over the next couple of decades. This is already manifesting itself in a number of areas, particularly in healthcare which already represents a third of overall CI public expenditure.

Finally, many resources worldwide are becoming scarcer due to increasingly limited and finite reserves or as a result of global conflict and trade constraints. By pursuing a common CI policy, the duplication of services requiring the provision of such scarce, including human, resources could well be reduced. This also applies to the adoption of a CI procurement policy.

2. Unforeseen Global Impact Events

Geo-political tensions and events in all parts of the world are having ever greater impacts on how island jurisdictions plan their affairs in the medium and long-term. This was far less the case in the past. At the time of writing, the following issues, amongst others, are identified as being of significant importance directly or indirectly:

• Chinese and Russian foreign policy particularly in the Far East and eastern Europe, including the ongoing war in Ukraine.
• The Middle East conflict and its potential escalation.
• Human migration trends globally.
• United States domestic and foreign policy post the 2024 presidential election.
• The widening gap in many countries between left and right-wing populist politics. There are many key elections during 2024 - e.g. USA, UK, India, Indonesia, European Parliament.
• The general erosion of the democratic process in many parts of the world.
• Continued human rights abuses in several countries.
• Tax harmonisation and international financial regulation.

While it is impossible to predict how any of these as well as other external factors (e.g. another pandemic) will evolve over time, they can certainly have destabilising impacts on government administrations not directly associated with a particular area of tension or event. These impacts to a greater or lesser extent have financial, economic, social and environmental consequences which, in turn, can materially and rapidly alter the direction of any long-term strategies in place at the time.

3. Local Island Factors

In addition to the international and national pressures now impacting more than ever before on the effective rollout of island strategies and policies, there is a whole set of on-island factors which can rapidly divert the implementation process of any medium and long-term initiative. These factors include:

• Funding - It is becoming much harder to project long-term, reliable revenue streams.
• Politics - Growth of party politics and reduction in consensus government is resulting in frequent policy changes after each general election (i.e. four-year cycles).
• Economic and Social Change - Ever shorter economic and social lifecycles are affecting the way people live and work with the erosion of tolerance levels and increased demand for change.
• Public Engagement - The gradual reduction in public engagement with government is noticeable and is being replaced by an increase in lobby groups and social media influences.
• Demographics - An ageing population is tending to detract from the need for a long-term vision.

However, there is clear evidence globally that all islands have major challenges to address, primarily relating to the funding and delivery of public services, which require long-term strategic planning and financial commitment. Therefore, questions arise as to what island ‘A’ with a population of, say, 16,000 residents should have by way of on-island versus off-island services and infrastructure as opposed to island ‘B’ with a population of, say, three times the size. That infrastructure ranges from such things as the provision of hospital and medical services to airport and harbour facilities.

But the most important point to make is that, based on only population size, island ‘A’ does not necessarily have just a third of what island ‘B’ has available. In many instances, island ‘A’ may well strive to provide similar service levels and facilities as Island ‘B’ because its citizens demand the same level of on-island public services that island ‘B’ can offer.

These scenarios equally apply to the Channel Islands which currently has an overall population of 170,000 (the same as Reading in the UK). But unlike a UK mainland town, the population is unevenly split between a number of island locations only a very short distance apart comprising four separate government structures and population sizes ranging from over 100,000 down to just 500. In addition, any significant population expansion is difficult to achieve due to the increasing shortage of suitable land.

As already stated, total CI public sector operational expenditure is now well in excess of £1.6 billion annually and rising. In addition, some very costly capital infrastructure projects are either in the pipeline or being considered (e.g. hospital facilities, educational establishments, airport re-development).

In comparison with most other island communities of a similar size, the Channel Islands enjoys a high standard of living and is geographically well positioned in terms of connectivity and market access. On the other hand, the islands are vulnerable in that:

• The economic performance and social infrastructure of the two main islands - Jersey and Guernsey - are diverging. The much smaller islands of Alderney and Sark face real challenges because of ageing demographics and connectivity issues.
• Nearly half of the Channel Islands economy is dependent on just one sector - Financial Services. However, the 2008 financial crisis illustrated that no economic sector is immune to potential shocks. While the islands came off relatively lightly over the subsequent ten-year period, there are always yet unknown factors which could adversely impact that sector once again.
• Over the next twenty years, there will be a significant increase in the number of people who will reach retirement age. However, those who will be aged over 80 will probably be well in excess of 20,000. It is this latter age group which takes up most healthcare resources and, therefore, costs. In addition, there will also be an inevitable burden placed on the voluntary care system including family household units looking after elderly relatives.
• A previous period of real economic and geo-political tensions occurred in the early 1970s when the UK joined the EEC at the same time as a world oil crisis. These events had serious repercussions particularly on Guernsey’s economy. However, unlike in the early 1970s when the CI population profile was predominantly under 30 - thus providing a degree of resilience - it is now approaching 60 and far less adaptable to rapid economic and social change.

It should be stressed, however, that the challenges of critical mass and economies of scale are not unique just to the Channel Islands but are common to other island jurisdictions elsewhere in the world with advanced economies.

4. The Private Sector already embraces a pan-CI Approach

Over the last fifteen years or so, critical mass and economies of scale have already been applied in many areas of the CI private sector. There have been numerous businesses, particularly UK corporate organisations, which have seen the merit in operating seamlessly across both Jersey and Guernsey and, in some instances, Alderney as well.

However, since the 2008 financial crisis and the contraction/recovery of the finance sector in each island, companies have increasingly recognised the financial and business advantages of embracing critical mass and economies of scale primarily through:

• a merger of separately owned businesses previously located in one particular island, and
• the expansion in the number of companies now operating on a pan-CI basis.

This growing pan-CI trend can now be seen across the vast majority of economic sectors. In some instances, mergers and acquisitions have occurred out of necessity because of a contraction of market size and/or greater competition, but other factors come into play including:

• a reduction in the frequency of inter-island travel,
• the growth in the use of IT and artificial intelligence,
• the varying pace of economic development in each island, and
• the need to achieve economies of scale by providing a broader skills base within the organisation and increasing overall buying power.

However, one resultant trend over the past few years has been the preference for new business to favour Jersey as the CI hub. There are some important factors which have encouraged this to happen including:

• better air transport connectivity to and from Jersey,
• lower cost of travel to and from Jersey,
• more flexible labour/immigration policies in Jersey than in Guernsey, and
• the benefits of a greater land area in Jersey as compared with Guernsey which has enabled an expansion of business premises to occur and private household accommodation to be constructed.

A number of marketing functions are still undertaken separately in each island. The three most significant are in tourism, financial services and the attraction of new business and high net worth individuals. While there are synergies within tourism (benefits of island hopping, shared external marketing promotions etc.), very little joint working occurs in the promotion of financial and business services.

Finally, it is important to note the growth in business being generated in the CI market as a whole by companies based in other parts of the world. A notable example is Amazon.

5. Embracing Island Best Practice

The need to benchmark and draw upon best practice in other island communities is a key component of Vision CI. The saying ‘there is nothing new under the sun’ is very appropriate in this case in that there are many examples of services already being provided effectively and efficiently across small groups of island communities.

A number of island best practice examples have been selected to demonstrate how critical mass and economies of scale are being effectively applied by these island communities and which could equally be adopted in the Channel Islands. These cover areas such as health, education and physical connectivity (e.g. a tunnel network). Many are in island communities which:

• are more remote than the Channel Islands in relation to mainland (‘mother’ country) connectivity and services, and
• comprise many more islands than the CI and where the actual physical distances and population distribution between each island community are far greater than between Jersey, Guernsey, Alderney and Sark.

As in any island group, inter-island ‘rivalries’ are always a factor whether these appear in areas such local politics, sporting events, tourism product offer, etc. However, island groups pursuing best practice recognise the need to work efficiently and effectively as one entity in a whole range of functions for the good of the archipelago as a whole.

6. Conclusions

Vision CI is designed to be thought-provoking by setting out the significant issues facing the Channel Islands as a whole and then to:

• highlight the potential benefits of ‘critical mass’ and the application of ‘economies of scale’ in meeting these issues jointly rather than separately across the islands, and
• develop a possible way forward which would stimulate and embrace pan-island co-operation in the delivery of public sector services including public/private partnerships in the provision of essential services.

Innovative lateral thinking will be a key element in the success of the Vision. Much has been written and debated in recent years about the need to promote innovation within the public sector. Current circumstances now open up real opportunities to maintain and develop an ‘innovation mindset’ to speed up government decision-making in tackling the immense challenges which inevitably will arise in the future. Of course, there will always still be a requirement for checks and balances to be built into the process.

There are many opportunities identified in justifying the Vision CI concept, but the primary benefits are seen as follows:

• Rationalisation of a range of public services across all the islands leading to a greater ability to resource and deliver specialist services in the future.
• Financial savings/cost containment in the future provision of public services (e.g. centralised procurement, non-duplication of certain functions, etc.).
• The justification of an interconnecting tunnel between Guernsey and Jersey being a substantial economic and social enabler.
• Capital infrastructure rationalisation (healthcare, education, transport, etc.) including the positive use of artificial intelligence on a pan-CI basis (e-learning, telemedicine, etc.).
• The adoption of common employment policies across all the islands, particularly relevant in the current world shortage of skilled personnel.
• The islands speaking with ‘one voice’ in the international and national arena.
• The adoption of joint strategies in addressing the demographic challenge.
• A joint focus on island internal and external resilience/vulnerability factors (e.g. climate change).
• The greater use of public/private partnerships in the delivery of key services.

Above all, Vision CI endeavours to open up objective debate rather than ‘spark’ inter-island jealousies and competing agendas. At the same time, it hopefully preserves (and sensitively) takes account of the constitutional integrity of each of the islands.

There is no reason why the Channel Islands as a whole could not be ‘fit for the future’ and become a centre of excellence in a whole range of areas in the medium and long-term.

The full Vision CI Case Study can be found at www.criticaleconomics.com/visionci

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CHRIS BROCK

Chris Brock has worked at the highest level of the public sector in island strategic and economic planning, tourism and utility services.

In the private sector, Chris pioneered a unique research capability which not only benchmarked island economic, social and environmental strategies and policies around the world but also identified best practice in many functions and activities. He has also presented at a number of international conferences. A current focus is to identify how resilient islands are in meeting external and internal threats and challenges.

Chris is a Member of The Royal Institute of International Affairs (Chatham House).

Contact: chris@criticaleconomics.com

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