Borrowing an option to avoid PEH v Les Ozouets decision

Policy & Resources announced today that it was delaying a landmark debate on capital projects worth more than £500m. until September – and said it was ‘already considering borrowing as part of the overall solution’.

Health & Social Care and Education, Sport & Culture have been trying to win public and political support for their respective capital projects – each of which is now expected to cost more than £125m. – since P&R revealed in April that it wanted to go ahead with the post-16 campus, but delay the development of the PEH by years.

‘These are huge decisions on whether we can deliver our most essential priorities. This is about whether we can afford to do the must-do work of government as recommended by the principal committees of the States,’ said P&R’s treasury lead Deputy Mark Helyar.

The States issued a £330m. bond in 2014 and agreed in principle that P&R could borrow an additional £200m. in 2021.

P&R said today that it would issue further debt ‘only on the basis that there is enough revenue to service that borrowing’. But it confirmed it was considering borrowing for capital projects which would not generate their own income.

Deputy Carl Meerveld, who has previously expressed doubt about whether either project was affordable, urged caution about borrowing for projects without an income stream to repay the debt.

‘If that was proposed, I would be very concerned,’ he said.

‘If you’re borrowing for projects, you’ve got to have the income stream to service the debt. How is revenue going to be raised to service borrowing for a hospital or a school when they do not have large or regular streams of income?

‘Guernsey has always been reluctant to go into debt, spend money unnecessarily and then let future generations have to pay it back.’

P&R had been preparing for a July debate on which capital projects should go ahead and which should be delayed and a September debate on funding. Deputy Meerveld revealed that its timetable had come under pressure from other States members.

‘I and other deputies who were briefed asked why we were being asked to approve capital projects first and then come back to a debate on funding them,’ he said.

‘Our fear was that P&R would let deputies vote for their ambitions rather than what was practically possible, and then P&R would come back and propose GST as the only way of funding them.

‘If they are proposing debating the projects and the funding of them alongside each other, I would be very supportive of that.’

P&R said a debate on the Government Work Plan – through which the States co-ordinate policy – would still go ahead in July.

‘The bottom line is we need to ensure we are only doing work that is genuinely critical and that we can pay for that without completely exhausting Guernsey’s reserves and leaving the community vulnerable.

'That’s what the debate on these plans will be about,’ said P&R member Bob Murray, political lead on the Work Plan.