Fiscal rules set extent of borrowing
Thursday 9th April 2009, 2:29PM BST.
THE States would be able to borrow up to £333m. under proposals released today.
It would set a limit on gross borrowing at 20% of Guernsey’s gross domestic product, a position described as conservative by the Policy Council’s economist.
And if approved it would also mean the annual operating deficit of the States could not exceed £50m., all based on the latest figure for Guernsey’s GDP of £1,666m.
Ministers unanimously back the council’s fiscal policy framework, including Treasury and Resources minister Charles Parkinson, who was previously happy to go ahead with his department’s £175m. borrowing proposals without any rules in place.
That brought criticism from Chief Minister Lyndon Trott, who remains non-committal on whether the full extent of Treasury’s borrowing is necessary.
Deputy Trott (pictured) said he was surprised with Deputy Parkinson’s initial decision that a framework was unnecessary. ‘So were many of my colleagues on the Policy Council. That’s why we’re unanimous in presenting this policy to the States at the end of the month,’ he said.
‘We had a debate and it became quite obvious that Treasury and Resources’ desire to provide solutions to our capital programme had, maybe on this occasion, allowed them to take the eye off the bigger strategic picture. But that’s why we have the Policy Council: it’s there to provide advice and guidance.’
He said that together they had come up with a credible solution and that was a credit to all involved, including Treasury.
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What an incredible statement to make.
The States had over £800m in Cap ex and Op ex in 2003 – to go from that to a £300m defecit means that it is possible by 2011 to have spent over £1,333m and then be in £333m of debt.
How outrageous.
As I said elsewhere, the Ex Treasurer and Lyndon Trott have caused the black hole by over extending Capital spending in the last 6 years – this was because of unilateral decisions and decisions borne out of the ‘boys club’ – little sensible rationale, prioritisation or risked based decision making occurred.
Guernsey will head into decline rapidly now and will be owned, lock stock and barrel by the private sector – if you think I am being sensationalist look at what Barclays did for Sark!
Guernsey has been mismanaged from day one by Deputy Trott and the ex-Treasurer. Lets hope Deputy Trott sees sense and eventually cares about the people of Guernsey.
Debt is bad; full stop.
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Be honest Trotty boyo; you’re just angry it didn’t come from you; so any other scheme is to be pooh poohed by you; get a life; hopefully not in Guernsey.
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Ok, I buy handbags so am a bit ditsy. T&R are proposing £175million and PC want to bring forward to cap the limite of something we haven’t even decided if we are doing it. And the cap has been span out to the public as setting the limit of double the proposal that hasn’t been debated is good.
Is it me?
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“allowed them to take the eye off the bigger strategic picture.”
What is the bigger strategic picture that T&R took their eye off? Any ideas?
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It’s quite simple really, we must not borrow unless there is an income stream. This means that the Beaucamps school rebuild and other so called priority items must be put on hold until we have the money in the bank to pay for it.
Once we start down that slippery slope, we will find reasons to justify borrowing for all sorts of things
Don’t borrow a penny!!
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How stupid is Trott? What has caused this World wide recession?? Debt! And what are we doing?? Something to leave the Grandchildren I suppose!!
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Well folks. the answer is obvious Those in favour of borrowing such huge sums of money, and are members of our ruling body must go.. not next election day– but now-
If you don’t get rid of them; many of you will turn in your graves when you see your children staggering under the weight of loans from these MASTER MINDS.
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Jackie
How naughty of you to sks “What is the bigger strategic picture that T&R took their eye off? Any ideas?”
One part of the bigger economic picture T and R ignored was the risk involved if the fragile assumptions on what of zero 10 was based failed to materialise.
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What find to be an amazing item in all this talk of borrowing.
Is the fact that CM comes out with such an audacious little speech about having council to regulate band advice,
Yet he went out on a limb and bought some boats; “Oh arh! me old shipmates I’m an old sailor-lad tha knows.”
If any one believes his patter then there is no hope.
He should read a little more from Shakespeare, to wit Hamlet..
“-Neither a borrower nor lender be:
For loan oft loses both itself and friend,
and borrowing dulls the edge of husbandry;”
As it was over 500 years ago so it hasn’t change today: Borrowing is a sign of weakness.
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The idea that because we have a fiscal framework agreement, it means that the States are going down the route of borrowing is a long way from the truth, I haven’t found much support for the idea of borrowing amongst the States members I have spoken to. This fiscal framework agreement is a mechanism that has to be put in place in any event, T&R at the moment are free to borrow limitless amounts of funds if they so choose, what this agreement is saying is no you can’t and any borrowing will be limited to 20% of GDP, with the other proviso that the maximum annual operating deficit must not exceed 3% of GDP. The other part of the agreement is a commitment that any structural deficit will be acted upon within 2 years of identifying such a deficit. Why wasn’t it needed before? Well we seldom had a year in the past when we weren’t several millions in surplus, that is clearly no longer the case. This agreement It is not much different from the framework agreement that was put in place for GST, it is there if the States choose to implement it. I think Pyer is right, there may be a feeling amongst States members that some of these projects will have to wait until the economy picks up and we can afford to do them without borrowing. As for the “bigger picture” the bigger picture is the overall economic future of the island, it is also looking at things like the local construction industry, jobs and the amount of government money flowing through the economy, there is no doubt that the States will want to continue with some of our capital projects. And while I believe this fiscal framework agreement will go through without too much blood on the carpet the same cannot be said for the debate on borrowing.
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Will the “formula” take into account the existing and proposed debts of Aurigny, Housing Association, etc. that we are already guaranteeing? There’s probably another hundred million there already. Maybe that’s why they are aiming at £330M, so they can fiddle those in!
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Bob the GHA has assets that far exceed its States guarantee, so there is no fiddling as you put it required. It also has 6 month internal audits which are copied to Treasury and Housing, so the likelihood of the States taking a tumble on the GHA are fairly remote and even if the whole thing did go belly up, all the homes and properties would revert back to the ownership of the States.
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You’re not talking about some backward country Dave Jones; these places you talk about (Houses) are Guernsey whatever you say.
One of your many problems (faults) is that you hunt with the hounds and run with Hinds. As proven by your own words when you say I only do as I’m told it’s THEM that dictate.
You would do well with Brown I should think. Your long propaganda letters are worth about as much as last years Press.
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Can you lend me a million ?
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‘The idea that because we have a fiscal framework agreement, it means that the States are ‘
Deputy Jones. Then you have been fobbed if you believe that. You call it framework, well it looks more like a cap to me.
So tell me how can the States agree a cap to something that they haven’t agreed that they are doing? It is what it is Deputy Jones, all part of the process.
Proposer: Let’s borrow
States: No, bad idea
Proposer: But you agreed a framework last month
States: So we did
Proposer: Let’s borrow
States: Yes, good idea
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If the GHA goes belly – up, and I would agree that is unlikely – because the states will ALWAYS bale them out – the fact remains that the debt would be picked up by Guernsey as guarantor. As for the debt being secured – so what? The assets are irrelevant. A fire-sale of mass-built, part-owned social housing developments with no vacant possession to god-alone-knows-who will not cover it. At the point of any such possible collapse, the states would have to step in and take possession of the whole shooting match, debt and all, in order to preserve any meaningful residue of social housing in the island. Then we are simply back in the position prior to GHA, except with more modern housing stock and a massive debt burden.
The debt is real. The funds spent on infrastructure of benefit to the island.
No different to mortgaging Beaucamps for the rebuild cost. You could shove it in an “LBG” quango, call it a private school and fund it with “grants” from education. Charge the parents a small fee for sending the kids there. Then the debt wouldn’t exist, eh?
If there’s no commonsense limit to it, why set one at all?
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Deputy Jones I presume….
Please can you furnish on this website the figures of Capital and Op Ex surplus for 2002 and those figures now and further explain why it was squandered away on capital programmes and projects?
I can tell you in detail, however lets see your substantiated, qualified and highly intellectual retort Deputy Jones.
Jackie – I don’t think it is you at all (my word, is that me agreeing with Jackie!).
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Who covers the debt if Guernsey’s bankrupted through borrowing above our means.. I take it that it would be the UK government as we are a crown dependancy?.
Oh that means the UK will have to take over our economy and the running states which would become a local council ?.
Don’t like where this is leading now.. Borrowing in the short term is going to be great for the Island.. But in the long term and not for our children who were saddling with debt and extra tax’s… It’s another nail in our coffin
If were couldn’t afford these projects in the last ten years, why are we going to be able to afford them in the next ten years..
My grand dad as ways said “Robbing Peter to pay Paul is never the answer”
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Melc
The island is already living beyond its means. Instead of reducing cost of running the island the best the government can come up is borrow and spend more. Most of which will benefit friends of government and large contractors.
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Jackie.. you are so right
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