This Is Guernsey

By Thom Ogier

RULES that would allow borrowing of up to £333m. are expected to pass easily through the States.

Both Chief Minister Lyndon Trott, who is proposing the framework on behalf of the Policy Council, and Deputy Matt Fallaize (pictured), who leads a group of deputies that plan to bring an alternative funding option to Treasury’s £175m. borrowing plans, said they thought the fiscal framework would be passed.

Deputy Trott said the decision on borrowing that will follow was less important to him than the discipline that government must adhere to under the framework to remain credible.

‘I’m confident it will be supported,’ said the chief minister.

Ministers have also unanimously backed the framework.

Deputy Fallaize confirmed the group would not try to amend it.

‘We acknowledge that these rules in no way commit the States to borrowing,’ he said.

‘The whole idea of it is to put into place fiscal rules before we debate Treasury’s proposals to borrow. They amount to a limit on borrowing.’

He predicted that some deputies would be happy to vote for the fiscal framework but would not support borrowing in May.

However, he considered the framework’s limits much too high.

‘I would prefer any rules to be much tighter than those proposed but, frankly, there is no point in bothering to do anything with them because the majority of States members accept them and see them as a set of constraints if the States subsequently borrows.’

‘And the mere existence of fiscal rules doesn’t give me any assurance we should borrow,’ he said.

He would have liked to see other assurances included in the framework, he said.

‘I would rather the fiscal framework made it very clear that the States will not borrow for projects with no associated income stream.’

‘One of the proposals relates to a 3% budget deficit. I’d much rather it preclude the States from running budget deficits.’

He said that despite the fact the framework could be considered conservative when compared with other jurisdictions, it represented a move toward a far more relaxed view and fiscal policy than the island had seen since the Second World War.

‘I am convinced that if the States borrow this time it will develop an insatiable appetite for it in the future.’

Deputy Fallaize said he understood why the Policy Council had told Treasury Minister Charles Parkinson that a framework was needed, despite Deputy Parkinson’s lack of demand for one.

‘Clearly, the scale of borrowing proposed is a massive departure from States policy. On the one hand Policy was right to put Treasury under some pressure to postpone debate to consider fiscal rules first,’ he said.

‘But Deputy Parkinson would probably say “what is the point of putting rules in place if they can be changed at any time?”’

He anticipated the shape the May debate would take.

‘At the presentation I asked if it was economically viable to fund capital projects out of capital reserves and internal borrowing, and unequivocally the answer was yes.’

‘So in May we will end up with the Treasury model and ours, which are both apparently economically viable, and the States will have to decide which is riskier.’

The group’s proposal will not take anything out of the contingency reserve.‘We acknowledge that these rules in no way commit the States to borrowing’

Deputy Matt Fallaize

Article posted on 11th April, 2009 - 2.29pm