Competition watchdog divorce facing probe

Tuesday 16 June 2020

A panel of politicians is considering a formal probe of the abrupt break-up of the Channel Islands’ competition watchdog.

The decision to terminate CICRA so that Jersey and Guernsey could go their separate ways was announced in April by Guernsey’s Economic Development President, Deputy Charles Parkinson.

In a statement, he said the divorce followed a shock request from Jersey’s Economic Development Minister, Senator Lyndon Farnham, in February.

While Deputy Parkinson said his committee believed any perceived issues with the regulator could be ironed out, he said his Jersey colleague felt the shared path could be followed no further. 

Video: Economic Development Minister Senator Lyndon Farnham was grilled about the CICRA demerger at a recent Scrutiny hearing.

Despite those discussions taking place in February, it wasn’t until two months later that news of the separation was made public, with few reasons given for the abrupt break-up and the decision-making behind it. 

But now it looks set to come under closer examination.

A scoping document for a review of the demerger of CICRA by the Economic and International Affairs (EIA) Scrutiny Panel - a group of politicians responsible for probing government decisions impacting the economy - has now been approved. 

News of the potential review follows a hearing in which the Economic Development Minister admitted that the costs of the break-up and establishment of a fully independent Jersey Competition and Regulatory Authority (JCRA) were not yet fully clear.

Pictured: The exact cost of splitting up CICRA and setting up a fully independent JCRA is not yet known, the Minister said.

Grilled by EIA Panel Chair Deputy Kirsten Morel, Senator Farnham said that the cost of running the JCRA had been around £1million in 2018 while it was still part of CICRA, and that he estimated the cost of recruiting additional staff to operate alone would lead that cost to rise to between £1.1m and £1.4m.

He commented that the additional cost of operating alone “not insignificant”, but argued that it was a “small price to pay” for something that he believed could deliver “significant dividends”.

Despite being unable to provide a specific rationale for the £100,000 to £400,000 cost rise estimation, Senator Farnham disagreed with Deputy Kirsten Morel’s suggestion that the exercise was “undertaken without a real sense of cost going forward”. 

He later added: “Until we start the work, you know the crystal ball’s not that good, I’m afraid.”

Asked what analysis had been undertaken before the decision was taken to split up CICRA, the Minister said that it was based on discussions within his department, commenting: “I think it’s fair to say that on discussing the matter with officers that we outlined some fors and against, and the only against was the fact it could cost a bit more.”

Pictured: Economic Affairs Panel Chair Deputy Kirsten Morel pressed the Minister for more detail on the break-up.

He further admitted that there was “very little” consultation with stakeholders, and that he had “no direct communication” with CICRA prior to the decision being made.

Elsewhere in the hearing, it emerged that the Minister had asked Guernsey if the CICRA demerger could be paused due to the pandemic, but that the island still “decided to go ahead so it moved quickly on from there”. 

However, Senator Farnham maintained: “Whilst it might not have been perfect timing, it's going to turn out to be good timing because competition is going to be so important as we rebuild the economy.”

Having previously suggested that the freight market could be an area of examination for a new authority, he added that Jersey was better off with its own competition watchdog, as it would be more “attuned to local requirements” - comments in direct contrast to those of CICRA’s CEO, who had told the EIA Panel he believed a pan-island model was the most “optimum and efficient” structure.

Challenged by Deputy Morel, the Minister also disagreed that a single-island watchdog would be less able to regulate telecoms companies that operate across both islands.

Pictured: The Economic Minister said he didn't believe a single-island authority would be any less effective at scrutinising pan-island telecoms companies.

Deputy Morel suggested that telecoms companies would be less likely to make an investment in 5G if its roll-out was not highly coordinated across both Bailiwicks.

The Minister, however, maintained the view that many companies work successfully across different jurisdictions with different legislative regimes.

Express has asked the government a number of questions about the CICRA demerger decision, and is still awaiting a reply after one week.

Pictured top: Senator Lyndon Farnham (Jersey), and Deputy Charles Parkinson (Guernsey).