Deputies question how loan will be paid back

STATES members are inching closer to agreeing to borrow half a billion pounds to cope with coronavirus pandemic and its aftermath.

At a special emergency meeting there was widespread consensus among deputies that borrowing was vital in order to prevent a long-lasting economic slump causing permanent damage.

But there was criticism surrounding the lack of information about how the debt would be repaid, and questions about why no outline economic strategy had been published.

Deputies also wanted some broad idea of how long the lockdown could last, the island’s leaders have so far been reluctant to put a timescale on it, although the document being debated put a 13 week time frame on the restrictive measures.

Deputy Laurie Queripel said that if Covid-19 was a horror movie, the policy document was the sequel.

He wanted more details and reminded his political colleagues not to splash around cash that had been hard-earned by generations of prudent Guernsey people.

Policy & Resources member Deputy Jonathan Le Tocq outlined how borrowing was a crucial tool, because the alternative was unthinkable.

‘This would inevitably see the States limiting ourselves to having to increase taxes very substantially and introducing service cuts and austerity measures at a time when investment will be in the best interests of the island’s economy.

‘The scale of the challenges means that balancing the budget is unlikely to be achievable in the short term, and austerity, while it may help balance the books, it will not deliver recovery.’

One of the main themes of the debate was how the money was going to be paid back.

Deputy Andrea Dudley-Owen placed an amendment to the policy letter, in an effort to inject more transparency, accountability and due diligence to the process.

Deputy Andrea Dudley-Owen. (28210663)

She wanted to divide the £500m. borrowing into two tranches so that immediate promises to businesses could be honoured; but the second £250m. could be subject to budgetary planning, the recovery strategy and proper checks and balances.

‘It is evermore important that we have a clearer view of the analysis, modelling, forecasting, and intended use of the proceeds of borrowing before we agree to authorise any delegation to the committee.

‘It is unlikely that we will be asked to make a decision of this bearing and magnitude again, a decision that could change the way that we manage our economy and government finances here in Guernsey forever.’

Deputy Jennifer Merrett was eager to see the details of the exit strategy, which are due to be published next week, because she said that should inform the economic recovery package.

She also remarked on the scant details about how the mountain of debt would be repaid.

‘Repay isn’t mentioned in the policy paper. Pay back will always be unpalatable, and maybe that’s why it isn’t in there?

‘Is there even an intent to pay off any borrowing or is the intention of a new national debt is that part of the new norm?'

Announcing himself as a cloth-capped little Guernseyman who hated debt, Deputy Peter Roffey hoisted the white flag and said they had no choice but to pursue the borrowing option.

He thought that capital projects like the schools programme and more social housing should be accelerated to help the ‘shivering’ economy.

The debate will resume this morning.

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