‘P&R will propose GST again after a U-turn on borrowing’

In 2021 Sasha Kazantseva-Miller asked deputies to stick to a long-established convention of borrowing only for projects with an income to service the debt – at least until they had agreed a long-term plan to deal with a funding shortfall projected to reach £100m. a year by 2040.

Instead they authorised P&R to borrow an additional £200m. with almost no conditions.

Earlier this month the senior committee wrote to deputies telling them that their lengthy list of capital projects – including developing the Princess Elizabeth Hospital and building a post-16 campus at Les Ozouets – would require more borrowing together with a plan to pay back the debt.

Deputy Kazantseva-Miller has told the Guernsey Press that this means it is now ‘inevitable’ that P&R will have another go at getting GST through the States this autumn, having failed in 2021 and again in February this year.

‘However, this will be a death blow to the capital portfolio and funding and investment plan debates, risking another no-decision outcome,’ she said.

‘Not enough has changed between the outcome of the tax debate and now to recommend bringing back GST at this stage.’

P&R’s position on borrowing has changed at least twice since it was elected in October 2020.

It said in 2021 that more borrowing was needed to pay for capital projects and boost economic recovery. It changed its mind in 2022 and announced it was no longer necessary. Now it has told deputies that ‘borrowing would need to form part of the overall sustainable solution’.

Deputy Kazantseva-Miller claimed that P&R’s repeated U-turns on issuing more debt were undermining trust in government.

‘The ongoing mixed messages have been very confusing and detrimental to Guernsey’s international and local public relations,’ she said.

‘P&R might have been communicating based on the live data they were receiving, such as a good investment performance in 2021, followed by a terrible year in 2022. However, this shows there must be confusion if short-term results are significantly affecting our medium- and long-term fiscal planning.

‘This is one of the reasons why there is a continuous lack of trust in the States’ forecasting capability and disbelief about the long-term deficit numbers.

‘If we go through completely mixed messages within a three-year period, how can the public trust us to make informed long-term decisions?’

The States avoided borrowing for decades, until issuing a £330m. bond in 2014.

Earlier this year P&R said that £150m. of the bond proceeds had been loaned to States-owned trading operations and that £180m. was unallocated but mostly ring-fenced to fund ongoing States expenditure.

The Guernsey Press asked P&R to provide updated figures last week, but the committee refused.

Deputy Kazantseva-Miller said that in principle she was open to proposals for additional borrowing.

‘I don’t see any problem with the view that we can use borrowing as a way to finance our capital programme because it would be imprudent to use the cash on the balance sheet to pay for big-ticket items such as hospitals and schools,’ she said.

‘Having said that, we need to make sure we are able to service the debt and that we are not plunging the States into an unsustainable financial cycle.’