Bond money could be lent to private firms
STRICT RULES about how government borrowing can be used could be relaxed to allow private companies to access the cash.
Since December 2014, the States has agreed to spend just £190m. – and actually used only £140m. – of the £330m. bond.
When members agreed to take on the debt, they said it could be used only by States bodies for projects that had an income stream to pay the money back.
‘Notwithstanding that it would inevitably take a period of time to lend on the proceeds of the States of Guernsey bond issue, the amount currently approved is lower than was anticipated at the time of issue,’ Policy & Resources says in the 2019 Budget.
‘This is partially due to short-term timing issues as there are some entities which currently have external borrowings, guaranteed by the States of Guernsey, where breaking the existing arrangements and replacing with a loan from the bond proceeds is not considered to be cost effective (e.g. due to cost of exiting fixed rate arrangements or the attractiveness of short-term funding in the current interest rate environment).
‘In addition, the solid waste strategy is no longer being funded by a loan from the bond and there are some entities where the timing of the funding requirement has changed, significantly including Guernsey Electricity Limited where there is no longer an immediate requirement to replace a cable.
‘As it is currently forecast that a portion of the bond proceeds will not be lent on in the medium-term to entities currently authorised by the States, the Policy & Resources Committee is investigating the possibility of introducing a scheme for providing loans to organisations which are not part of, or wholly owned by, the States for projects which support delivery of the priorities set out in the Policy & Resource Plan.
‘This investigation includes the development of a policy for how any such support would be accessed and the terms which would apply. The committee will report back to the States with recommendations, if appropriate, to change the policy for the on-lending of the bond proceeds.’
Where the bond money has gone (data from 2017 States Accounts)
From 2015:
GHA - £51m. to re-finance existing borrowings - £49.1m. used
GHA - £24m. to re-finance existing borrowings - £22.4m. used
Cabernet Ltd (Aurigny’s parent company) - £31.7m. to re-finance borrowing for jet and purchase of Dornier aircraft - £26.4m. used
JamesCo750ltd - £13.1m. to re-finance borrowing to buy two fuel tankships - £11.6m. used
HSC - £2.1m. to re-finance borrowings for keyworker accommodation - £1.8m. used
From 2016:
Cabernet - £6.8m. for new Dornier - £4m. used
GHA - £5.1m. for social housing development - £4.9m. used
GHA - £10m. for social housing - nothing used
From 2017:
Guernsey Registry - £300,000 to introduce beneficial ownership register - £200,00 used
Guernsey Water - £9m. to re-finance long sea outfall project - £8.9m. used
Solid Waste Trading Account - £33m. to buy waste infrastructure - £9.1m. used
Guernsey Harbour - £3.3m. to re-finance purchase of two mobile cranes - nothing used
