Jennifer Strachan: What would managing our assets better look like?

There have been many thought-provoking articles on what needs to be done, but little on how it gets done – how we get well-researched decisions approved, cost-effectively funded and efficiently implemented.

Guernsey needs to create a proper framework for analysing our current and future income and expenditure, and their impact on our assets. With this in place at the outset, we would have more realistic and productive discussions and potentially less- risky answers to many of our current challenges.

If this sounds complicated, it is not, as those lucky enough to own a house do this all the time. While they manage current income and living expenses, they also have a mortgage with future interest payments, possible rental income and savings. A key factor in any decision-making, on say, maintenance expense or a new kitchen, is the eventual value of the property and how they can pay for the extra work.

So what is the equivalent of Guernsey’s ‘house’, what can it contribute to the solutions and are we managing it well? There are three basic categories:

• Financial assets (Guernsey investment reserves). Guernsey holds several long-term investment portfolios, either dedicated to a specific liability (pensions, social security, loans) or held in reserve (the so-called ‘rainy day’ fund and other reserves). These reserves are substantial. Guernsey is well placed, relative to other jurisdictions, who operate on a pay-as-you-go basis.

• Physical assets. Our natural environment is an asset that has value. This includes the potential use of our seabed for a wind farm, our land that provides housing and development potential and supports the biodiversity we need to thrive, our harbours that provide business and hospitality potential, our fisheries and the considerable natural beauty that contributes to our wellbeing and tourists pay to visit.

• Social capital. For an island of 63,000 people, we have an extraordinary amount of expert, networked, skilled people, including talented students, tradespeople, professionals, experienced retirees, and hard-working civil servants. IoD Guernsey published a study in 2024 identifying that our social capital is a ‘key to economic growth and social well-being in Guernsey’. This also includes our culture and heritage, which make our society unique and attract tourists and scholars. Social capital is a valuable asset but failing to maintain this comes with a real cost in terms of social cohesion and retaining on-island those with local roots.

The importance of the first two assets are measurable and significant. Properly managed, they can earn hundreds of millions per year, which places our concerns over budget deficits in context. It is an opportunity that needs to be carefully managed.

This approach does not mean we go on a spending spree, far from it, nor does it mean we do not look at the issues surrounding general taxation and benefits for those less well-off. But it does mean we have room and time to plan a revolving balanced budget, five years is typical, and not live in a state of crisis with knee-jerk reactions and rejection of key projects. Projects that we must do now if we are to safeguard the prosperity of the island and retain what is special for our children and grandchildren.

A medium-term asset management framework

So, what would managing our assets better look like? A Guernsey macro-economic and social model needs to be developed on-island, which would ignore our government silos and look at the implications for all income, expenditure, assets and liabilities over the current and medium term. This is standard practice for many small, successful nation states. We need to have a local team undertaking this work to develop and maintain a local model on a continuous basis and not rely on ad hoc external consultants.

This model would then give us the tools to better understand the links between different assets, the risks and opportunities from any decision, how the whole is to be best funded and the impact on our assets, including some we possibly don’t recognise as assets.

It would also incorporate the significant multiplier effect of using on-island businesses instead of going off-island. We could identify missing skills on-island to invest in to target our training and even reach out to the Guernsey diaspora to encourage those with missing skills to return.

It would be a standard, accessible report indicating the implications for Guernsey in terms of any expenditure and not burden the deputies and decision makers with huge reports with limited clarity on outcomes. Future planning rather than crisis management. Some examples of what this might look like, include:

• Housing. Our limited land means we must balance green spaces with housing demands, meaning there is a ‘cost’ to unproductive land that hasn’t been built on, such as lapsed building control, brownfield sites, and property with excessive contamination or flooding risk, making construction financially unviable without a different risk structure. Government might need to assume part of these risks to kick-start badly needed development. The costs, once properly presented, over the lifetime of the project, might seem modest versus the benefit of affordable housing now.

• Education. Are we calculating the implications of providing sub-standard educational facilities for our sixth form students and the higher-than-inflation building costs that were part of the delay? Analysis might have led to a different decision on timing and funding.

• Infrastructure. The Offshore Renewable Energy Commission has been established. This will involve spending money with experts, so should we capitalise on this decision by actively expanding our local expertise in renewable energy?

• Capital reserves. The proper investment of the capital reserves is critical. Using local service providers as part of the investment management pool creates a multiplier effect that should be analysed. Identifying what part of the reserves should be invested in local infrastructure and how this is controlled should be examined.

In conclusion, and I accept that this is a little controversial, the funding is there, but we need to manage these assets better. This involves how best to support the decisions on spending, so we fully understand their impact on Guernsey and our assets.

This would help us to better address the next challenge – how we can make the correct decisions more decisively, fund them properly and implement them efficiently.

Jennifer Strachan is associate director at IAM Advisory, which was the investment advisor to the States of Guernsey from 2007 to 2021. She will be running for election to the States of Deliberation in 2025.