The former President of Policy & Resources has warned that the island may have “missed the boat on borrowing” following an announcement that future borrowing could be considered to fund capital projects.
P&R is concerned that Guernsey will exhaust its financial reserves if it pursues all of its large building projects at the same time, suggesting that borrowing could be the answer.
However, Deputy Gavin St Pier – former President of P&R – is concerned that it may be too little too late.
"By dithering, we have missed the boat on borrowing,” he said. “We could have done so, like Jersey, to lock into record low interest rates of around 2.5% a year as a result of the pandemic.
“If we do so now, we will be borrowing at the peak of the interest rate cycle and will need to pay nearer 7.5% a year. On £500m of borrowing, that will cost taxpayers an extra £25m a year for the next 30 years.”
Pictured: Deputy St Pier.
The constant changes of direction and timeline “will not give confidence to an already sceptical public” said Deputy St Pier.
“There is no merit in a 'green paper' debate. It will just waste time and delay decisions. It's only being done this way to avoid pitching phase 2 of the hospital, which P&R don't support, against the ludicrously expensive secondary schools model, which they do.
“They know they would lose that debate, but this way the schools project can keep marching on, no doubt getting to a point where we will be told it'll cost too much not to proceed.
“Government keeps coming up with daft ideas like moving the Sixth Form for a year from its current purpose-built site, to an unfit for purpose site at La Mare. It makes no sense to anyone. And all the while, there is no appetite to tackle the known overcapacity in the primary school system. The public aren't going to buy into the need for more taxation and borrowing until they are convinced that government really has done all it can before asking for more money."
His concerns have been echoed by other deputies following the release of the GWP ‘mid-term reset’. While speaking to Express about the tough financial spot Guernsey finds itself in, Deputy Peter Roffey raised concerns about the potential of borrowing.
“I am worried that the way many states members may square the circle is just by going down the easy route of borrowing, which just puts the problem on our children's shoulders rather than our own.
“So, you know, I would not be in favour of borrowing unless we are willing to also agree a tax strategy which will provide the revenues to make sure that that borrowing is affordable.”
He said he understands why borrowing is more effective than spending all of the island’s reserves, because having no reserves at all would leave the island in a very vulnerable position.
"All you need is something like another COVID-19 to come out of left field... and you'd be very exposed."
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