Comment: Remove complex assets from the "dead-hand" of government

Tuesday 30 January 2018

One of the key tasks of our government is to look after public assets wisely - and that goes much further than simply being about money in the bank.

It also includes major assets such as land and property; and that's the focus this month for Express's new columnist, The Insider - a very senior figure in the local financial services industry, he'll be giving the inside track on some of the major issues facing the sector.

"Government often fails because it ends up trying to do too many things, with the result that it does most of them badly.

Over-promise and under-deliver is one reason for growing dissatisfaction with the political class, which Jersey needs to deal with soon, or risk a Corbyn-style lurch to the left - with potentially catastrophic consequences for the Finance industry. 

Take the example of Jersey’s assets, which remember, are owned by us, not the government.

States officials are not skilled asset managers (why would they be?) and so the government plugs its skills gap by using expensive consultants.

This is rather frustrating (and I would say insulting) for the local industry when they are expensive consultants from ‘outside.’ If we have people in Jersey who are good enough for the rest of the world to want to use our financial expertise, it is a shame when our own government goes elsewhere.

We have seen this approach in the funding debate on the new £466million hospital.

For the record, I think it is right to use cheap long-term debt, when interest rates are so low, and we have had a long period of deflation/low inflation - as the odds are that inflation will erode the real cost of repayment over the long term.

But the critics of that debt funding policy have a point, which they have generally not made well, around repayment.

Those critics are right to worry about how the debt will be repaid, when the money has been used to fund a wasting asset, which itself will eventually need replacing.

However, the forthcoming elections give our politicians an opportunity to be honest about the limitations of government.  I believe that this is possibly the last chance for the political class to close the gap between ‘over-promise and under-deliver,’ and to provide a stable platform for the economy going forward.

An easy area for the government to get traction with this approach is around complex assets.

Now, complex assets often require complex solutions, which use political capital, but they always require stamina and time: something that rarely comes from short-term election cycles, or hired help with no alignment of interest. Consultants also rarely provide joined-up solutions because they have necessarily narrow terms of reference.

Let’s use the ‘complex asset’ of Fort Regent as an example of an asset which has been undermanaged, or mismanaged, for years, by successive governments, because it is too complex for the government’s skills set.

The asset has been left to rot to the point where it is a liability, both in terms of the cost of annual losses and the substantial investment (which comes with a substantial risk, not least political) required to revive it. 

An asset has been allowed to rot into a liability because the government has failed to admit its limitations. The government has a number of such complex assets which have or are in the process of becoming liabilities.  They should be recognised as such, and a ‘non-standard’ approach taken.

If these were transferred into a company, with the mandate to make the difficult decisions required to create sufficient value over the next 20 years to make a meaningful contribution to the repayment of the hospital debt, the government could focus on its core competencies.

It ought to be possible to identify a small number of clever, and qualified, locals to run the company who will provide their services as a civic duty (and perhaps good PR) rather than a financial reward.  Their interests would be aligned with the public, and they can take a long-term approach.    

The company could take a long-term approach, reporting annually to shareholders and the public, and removing these complex assets from the dead hand of government.

Now that’s something I would vote for in May."