Opponents, including some deputies, have alleged that the committee had a hidden agenda, and that its borrowing intentions should have been explicit in its tax reform policy letter.
‘There are no hidden plans to borrow,’ said P&R member Andrew Niles, who raised the prospect of £250m. of borrowing and the need to maintain a strong credit rating as a result in the States last week.
‘The figure I referred to in the Assembly relates to two projects that are already in the public domain and my purpose in raising it was to explain why acting responsibly now secures the most affordable options for our island’s future,’ he said.
The projects are £150m. intended to build affordable housing, plans for which are progressing. The loan would be repaid through rental income.
The second is intended to purchase a second electricity interconnector for Guernsey Electricity. Funding options for that may go to the States by the end of the year. Borrowing would be serviced from Guernsey Electricity’s standard charges.
The island’s credit rating was important in keeping the costs of any borrowing as low as possible, he said.
‘Guernsey currently holds an A+ rating from Standard & Poor’s, and that rating is a key driver of the interest rate we pay when we borrow.
'If it were downgraded, the cost of borrowing £250m. would rise.
‘How much would depend on the circumstances and the type of borrowing, but if it were to rise by 30 basis points, which sounds small, then that would add up to around £750,000 a year in interest costs or about £30m. over a 40-year term – and that £30m. would simply go to lenders instead of into homes, infrastructure and public services. Protecting our S&P rating is the responsible way to make sure every pound we borrow works as hard as possible for islanders.’