Answers needed on the 'once-in-a-lifetime' deal

WHEN the States voted to borrow, the basic premise of the argument seemed entirely sound and plausible.

There was an opportunity to do so at very good rates because of the market situation and Treasury would be able to consolidate all the bits of borrowing that were happening anyway to take advantage of this.

Naturally, there was some unease from those who are philosophically opposed to storing up debt for future generations – but in the end the States plumped for something that was perhaps seen as a once-in-a-lifetime opportunity.

What has happened since illustrates the dangers of making decisions without all the information on the table.

Indeed, the lack of transparency on the details persists today, with broad-brush answers to written questions by Deputy Laurie Queripel the last example of this.

Deputy Queripel admits to not being an expert in this area; indeed, few politicians who voted on this back in 2014 would have been.

They were reliant on making judgements based on the advice they were given – it is what they were not told that is troubling.

Most people now probing this issue agree that the bond issue may well have been a good deal for Guernsey – the trouble is, there is no real guarantee at the moment that is the case and value for money has been achieved.

We do not know yet, for example, what savings are being made by those States-related entities that have taken advantage of the bond.

We do know that some of the existing deals they have can either not be bettered or are not worth extracting themselves from to use the bond proceeds instead.

That was one of the missing pieces of the jigsaw from the outset – what talks had taken place with those that Treasury intended the bond was for and how much did they know about those existing deals?

Another large part of the puzzle was the hidden costs.

Treasury paid out an upfront bill of some £15m. to set up the bond – there was no estimate of that within the Billet when the States voted for it.

In its carefully crafted answers to Deputy Queripel, the implication from the department is that these costs weren't known at the time of the debate.

And of course they are right, some of the costs were reliant on what happened when the bond was issued – but in that case where were the predicted costs?

How good a deal did we get compared to those?

Was the £9.3m. bill for an interest rate lock good or bad? T&R has provided an explanation for why the lock was needed, how it works, but no analysis.

It is fair to ask where the financial experts at the Public Accounts Committee have been in this debate.

They asked questions during last year's Budget debate but beyond that have done little to probe the issue in a way that offers up the reassurance that the public deserves.

The committee does not believe enough information has come out, but not done enough itself to make sure that is corrected.

The type of questions coming from Deputy Queripel and more informed sections of the public should have been dealt with by now.

Was it right to issue one large bond or should it have been done in stages to match spending requirements?

How is the investment of the remaining proceeds of the bond performing?

In casting their votes, some deputies would have taken comfort from the borrowing limits the States had agreed and the limits placed on the use the funds could be put to.

The golden rule remains that States borrowing cannot exceed 15% of GDP.

But that rule may well be open to some interpretation.

Could, for example, existing deals by States-related entities remain outside of its reach? Remember that ultimately the States acts as guarantor for those deals.

Remember also that this isn't £330m. and 'that's it'.

As the GDP figure goes up with economic growth so does the opportunity to borrow more money – this is not a one-off.

Currently £122m. of the £330m. has been used.

In its Budget, Treasury now talks of 'other projects' not in the original list of intended recipients that this can be used for – there is a danger that simply because the money is there States spending increases and scrutiny of that spending is lessened.

Another of the rules agreed by this States is that the proceeds can only be used for capital projects with an income stream.

But who is to say what the next Assembly will do when faced with its list of building priorities and a tantalising pot of money? Political rules are as easy to change as they are to make.

At the moment the bond issue feels dangerously like an issue where States members and the public were told only as much as was necessary to get the decision through – that is simply not good enough.

If it is a once-in-a-lifetime great deal, those behind it should be using all the information they have to sell that message to the public, not dead-batting political questions and hoping they go away.