BANKS would be prepared to lend to the States of Guernsey to get urgent capital projects under way.
With the airport runway, mental health services and two schools all vying for a limited amount of capital, Education minister Carol Steere said last week that the States would need to borrow.
And, it has emerged, despite the credit crunch with its forced mergers and rescue nationalisations, banks would be prepared to lend to the island’s government.
Alan Bougourd, council member of the Association of Guernsey Banks, said: ‘There’s no doubt that the finance community would look to support the States of Guernsey in commercial arrangements should it feel the need to borrow money to finance its corporate projects.’
Deputy Steere said yesterday that it was not the function of her department to find the funding for such projects. That was Treasury and Resources’ role.
‘It’s become clear to me that we are under pressure at the moment,’ she said.
‘I have a concern with competing directly with the Health and Social Services Department.
‘We don’t have income.
‘With some of the other projects [that do produce income] there is the potential of going out to the private sector and securing some form of loan.
‘I personally feel we have to look outside the box with options of support from the private sector. I am open to that.’
Deputy Education minister Allister Langlois, who is also a member of Treasury and Resources, backed his minister.
‘I very much support Deputy Steere’s view that financing of capital projects must be considered in the near future,’ he said.
‘Consequently as a member of Treasury and Resources, I expect we will be considering that.’
Capital project prioritisation will be debated by the States at the March sitting.
Projects up for discussion are expected to include mental health facilities, the extension of the runway and the redevelopment of Les Beaucamps and La Mare de Carteret high schools.
The debate was postponed from this summer.
Article posted on 6th October, 2008 - 1.00pm
6 Article Comments
Don’t put the Island in debt.
Lyndon Trott made enough blunders authorising multiple capital expenditure projects between 2001 and 2005 (airport, harbour jetty, prison, schools,Beau Sejour etc) rather than rationalise and prioritise them, using States related interest from the significant budget the States had.
Ask Lyndon to publish the States coffers available for use in 2000 and the revised figures for 2006 after he had wittled away the funds?
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Already in debt.
£50 million facility for GHA at RBS to fund housing developments, all backed by the states.
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Some sensible borrowing must surely be aceptable.
Any borrowing mustbe kept withing limits and deputies should be reminded that loans need servicing in the paying of interest and ultimately, repaying the capital. The repayment should be fairly minimal with banks being persuaded to lend at very favourable rates of interest.
How to decide what borrowed funds can be used for will probably take is into the next States.
What needs to be avoided at all costs are the PFI PPP proposals that cost and arm and a leg, but are convenient to politicians as the debt is “off balance sheet” until the bailiffs appear at the door..
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Bermuda strictly limits its government borrowing to 9% of GDP and by my reckoning a similar limit here would enable Guernsey to borrow around £130m which doesn’t seem too different from what we need to fund two new secondary schools and a sewage system.
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Darren – just to clarify, I don’t think Lyndon Trott was actually the head of what was the A&F Committee prior to it becoming T&R. Besides which, it was the States as a whole that pushed these projects through – in some cases against the recommendations of A&F/T&R at the time.
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It is perfectly understandable that the Education Minister, Carol Steere, should be pressing the States for further capital funding for schools. However, I would suggest that the time has come for our government to put the brakes on capital spending projects.
Our Island has benefitted from years of strong economic growth and our spending has been commensurately high (some might say extravagant). The “black hole” fiasco has already forced us to dip into the rainy-day fund and now we are facing a dramatic economic downturn. Projects like Le Rondin special needs school, while laudable in terms of their social benefit, were ludicrously expensive given the small size of our population (and the even smaller numbers of children who actually need those facilities).
Make no bones about it, hard times are on their way. We depend on heavily the finance industry for our economic wellbeing and that, of all sectors, is going to be the hardest hit by the forthcoming recession.
We may have avoided the worst of the storm so far but I am sure that the negative effects of the economic crisis are going to filter down to the Guernsey economy in the very near future. Banks are going to be forced to rationalise and lay-off staff, investment activity is going to slow as investors seek long term security rather that short term profit and the retail sector will shrink as people have less money to spend.
All this will mean greater public spending on welfare – combined with a much reduced tax income ofr the States.
With harder times coming most of us are going to have to tighten our belts. The States would be very foolish not to do the same.
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