P&R has already told deputies 'States needs to borrow more’
POLICY & RESOURCES has already told other deputies that the States needs to borrow more money.
The senior committee issued a public statement late last week where it said that it was ‘considering borrowing’ to fund a lengthy list of capital projects costing hundreds of millions of pounds.
But the Guernsey Press has learned that just hours earlier P&R told States members it already ‘believed that borrowing would need to form part of the overall sustainable solution’ to the States’ increasing financial challenges.
P&R’s more emphatic private position on borrowing was set out in a letter to deputies which explained why it was delaying a landmark debate on the States’ portfolio of capital projects until September.
‘While it is too early to comment on what the potential funding options look like, we are concerned that the capital portfolio, however it is adjusted, would result in our reserves being exhausted,’ said P&R in the letter.
‘We believe that would leave our community in a very risky position beyond the short-term. We therefore believe that borrowing would need to form part of the overall sustainable solution, but only if we can be sure that borrowing can be serviced.
‘Allowing until September for the capital portfolio and funding and investment plan debates also helps us develop those options, albeit still on a very short timetable.’
The States avoided borrowing for decades, until issuing a £330m. bond in 2014, which is due for repayment in 2046. At that time, concerns were expressed that issuing a first tranche of debt could in the future encourage the States to borrow repeatedly without certainty about how to meet repayments.
The previous States set up a revolving credit facility of £225m. to help fund its response to the Covid-19 pandemic. And in 2021 the current States authorised P&R to borrow an additional £200m.
In response to an enquiry from the Guernsey Press, P&R said that the £330m. bond was currently the only external borrowing carried by the States.
But it also confirmed it is thinking of departing from a long-established convention of borrowing for capital projects only if they generate income to service the debt.
That could appeal to deputies who want to avoid having to choose between developing the Princess Elizabeth Hospital and building a post-16 campus at Les Ozouets, each of which is now expected to cost more than £120m.
In its letter to deputies P&R also told them that it intends to turn July’s debate on the government work plan – through which the States co-ordinate policy – into a ‘green paper’ discussion. It has not yet disclosed this publicly.
Such a debate would mean P&R does not have to put forward detailed proposals and would stop other deputies from submitting amendments.
‘In previous years, the government work plan, capital portfolio and funding and investment plan have not been the most headline-grabbing pieces of States business, and that’s understandable given their role has been more to co-ordinate the overall work of government.
‘But now, getting them right is more important than ever,’ said P&R’s treasury lead Deputy Mark Helyar.
