Why hasn't priority list been questioned?

WHAT if someone said you could have a nice new school, mental health facilities, a shiny waste plant and a revamped runway and not borrow a penny? The first reaction would probably be something along the lines of 'Yes please – now show me the money'.

That is exactly what a group of five deputies has done. On Saturday, they released an alternative funding model to Treasury's plans to borrow £175m. externally for £300m.-worth of projects this term.

And the sums add up, or at least they should do because the group's members had the help of Treasury's staff to check them.

It is one of those things that, at first glance is very attractive. If, of course, you believe the repeated arguments that every one of these projects is essential.

But there are large caveats, as there are with borrowing,

The battle is now on between Treasury and its minister, Charles Parkinson, and the group of five, led by Deputy Matt Fallaize, to win over States members' and the public's hearts and minds ahead of May's debate.

That it has come down to how these projects are funded more than if they are necessary is the most disappointing part of the debate, however.

No one – other than this newspaper's Comment column – is ready to challenge the need or extent of all these projects, or their timing. But then it is so much easier and politically safer to keep focus on the borrowing argument.

Rejecting a new school is not a vote-winner in anyone's book.

Nodding through the programme in May is not the end, however, because each project has to come back for detailed approval. But how many deputies are going to challenge these things once funding is in place?

Some have expressed surprise that the five deputies did not come up with an alternative programme.

In their report, they say: 'a third option was to recommend that the priority one list of projects be turned into a longer programme of investment, for example over six years rather than four years. We rejected this option primarily because of the need to ensure that our alternative funding model is directly comparable with Treasury and Resources proposals.'

The report also states it is 'neutral' on the extent of the list because that is a decision for the States.

It comes across as just ducking the point, although group members would argue their model leaves more flexibility to reject projects when they return in detail than the commitment to borrowing does.

But back to funding...

The group of five would use £30m. operating surplus from 2008, and get £4m. from the next States capital allocation.

So far, not too contentious.

A large chunk of money then comes from 'internal borrowing' (cash already in the States' coffers) for the waste plant and part of the runway – the old argument that it is acceptable to borrow against projects with an income stream.

The first would be paid back through gate fees and the other by either increasing passenger duties by under £2 a journey or making better use of the commercial side up there.

The impact on the airport will be one area of the proposals where Public Services and Commerce and Employment could come in and attack.

But more importantly, the extent of internal borrowing also leaves the group open to the accusation that they are simply stripping the bulk of Guernsey's reserves.

The £113m. of internal borrowing would probably be from the general revenue cash pool, which at January stood at £281m., and includes deposits from the States-owned trading companies.

Combine existing pressure on States finances with this and they would exhaust the capital reserve.

For a model that makes much of being the more prudent approach, this all sticks somewhat in the throat.

Why? Because any wriggle room left in case of an emergency would then come from the contingency reserve, already taking a hit under zero-10.

What members may be asking themselves is how sensible is all that in the time of a recession?

But then no plans are risk-free and the current financial uncertainty can be used to go after Treasury's borrowing plans as well – and the five do.

'It is interesting to note that Guernsey has remained free of 'national debt' during its fairly recent years of unprecedented economic growth, a period during which, in theory, repayments on any borrowing arrangements entered into might have been manageable because of successive and significant States operating surpluses.

'However the States is now being invited to accumulate a very considerable level of external debt at a time of significant budget deficits, which shall have to be addressed during an era when the global economic, social and environmental outlook is so uncertain. On top of the challenges that our successors will face we believe it would be wrong to burden them with a requirement to pay off debts accumulated unnecessarily by this Assembly.'

And what of the future? Under Treasury's plans, without further borrowing, spending cuts or higher taxes, the next States would be left with £13m. a year for capital projects based on 2009 levels.

Experts argue there is no better time for a government bond issue, critics that it will just lead to more borrowing.

There are sound economic as well as social reasons to pursue the capital spending programme, but should it really come in at £301m.?

Remember, too, that figure itself is an estimate. When you come to tender for the projects the figures could be very different as the economic climate changes.

They may have already shaved £7m. off the price of the runway work, maybe £5m. off Les Beaucamps School. None of this is reflected in the report, but will the waste plant really have held its price at the 2004 quoted figure?

When work would start on mental health in the middle of 2011, would the rampant inflation some predict have taken hold in the UK?

When will someone really explain what all those IT projects are for?

And surely the debate about commercialising the harbours and airport should take place before a massive investment programme in them?

The group of five's alternative will win significant support, and it probably sits more comfortably with where the 'man in the street' comes at things – that the States simply should not borrow.

But as he walked down the street, the man in it would also argue you do not spend unnecessarily. But on one has yet proven that side of the coin.