Hospital: could total borrowing costs touch £1 billion?

Wednesday 24 February 2016

Jersey's Treasury Minister has confirmed that borrowing up to £400 million in the bond market is set to be part of the way the Island funds a new hospital. Once you add in interest payments, the total cost could actually be close to £1 billion.

Speaking in the States Assembly this week, Senator Alan Maclean said the Island would need to act soon, if it was to take advantage of "cheap money" which was currently available. He added that a "Sovereign Bond" would be issued for 40 years, and he expected the rate to be even more favourable than the first States bond to fund social housing.

When the States secured that £250 million loan, they managed to agree terms on a 40-year bond at an interest rate of 3.75%.

If the same terms were secured for a £400 million loan, interest payments would total £600 million over 40 years; with the £400 million capital also having to be repaid at the end of the term, that would take the total repayments to £1 billion.

The total build costs for the new Hospital are estimated as being between £444 million and £630 million depending on the site chosen, but the Treasury Minister said that borrowing would be just one part of a "blended solution" to paying for the hospital, along with selling States assets, using financial reserves and as last resort, introducing new health charges for islanders to pay. 

Senator Maclean was challenged by Deputy Geoff Southern, who said that the difference between borrowing to pay for social housing, and borrowing to pay for a hospital, was that the States had income through rentals to pay the interest payments on the housing bond, but there was no such income to pay the hospital borrowing costs. 

The Treasury Minister responded by saying that the States would have income in the form of investment returns on its main financial reserves. 

Yesterday, the Council of Ministers agreed to take the People's Park off the shortlist for potential sites for the new Hospital.