States may 'borrow to build' for capital projects
CASH-STRAPPED Guernsey is prepared to consider borrowing to pay for necessary capital investment, Policy & Resources Committee confirmed yesterday.
Borrowing is one of a number of ways it is considering to find the money needed following last week’s news that the States faces an annual general revenue deficit of more than £50m. in four years’ time.
Other options include using existing reserves, and issuing public debt on the wholesale and retail markets.
When P&R revealed last week that ‘there is no more money’, treasury lead Mark Helyar said it would consider creative solutions to the shortfall in government revenues.
Responding to Guernsey Press questions, he said all options would be explored, including securitisation – creating tradeable financial instruments issued against existing States’ cash flows and backed by assets – and partnerships with the private sector.
P&R is also considering contributing to joint investment and development ventures by ‘gifting’ assets as a capital contribution to enable projects to go ahead.
‘It is too early to give any further detail at this stage,’ Deputy Helyar said, ‘but the committee is keen to take an open-minded approach and not restrict itself only to the sorts of options that have been adopted in the past.’
Borrowing through the States bond issue has not been fully utilised so far, P&R vice-president Heidi Soulsby told last week’s Scrutiny Panel hearing on the Government Work Plan, and she warned that future demands for capital spending would challenge States members.
‘This is where we as a States need to decide if we want to live within our means or do we need to borrow more to be able to do things,’ she said.
Deputy Soulsby said that the appetite within P&R for borrowing had not so far been considered.
‘We haven’t sat down and agreed our approach, nor on what sort of borrowing we may do, or the alternatives.’
Ideas for a Guernsey public bond issue had not been pursued, she added, due to concerns about structure and terms, but it may be reconsidered in a different way.
She accepted that public-private partnerships and private finance initiatives did not enjoy a good reputation, especially within the UK government, but had worked well in countries such as Australia and Canada.
