Hospital debt could cost £700 per taxpayer every year - investment expert

Tuesday 28 July 2015

Islanders could be saddled with hundreds of millions of pounds in interest payments to banks if ministers go ahead with a huge loan for the new hospital on top of last year’s housing bond, a former minister has warned.

Ben Shenton – an investment manager who used to serve as Health Minister in the States – has warned that instead of being “easy money”, borrowing for major projects could leave the next generation picking up the pieces.

His comments come after Treasury Minister Alan Maclean confirmed that ministers were in the early stages of considering a loan to pay for the estimated £400 million cost of the new hospital. That follows the £250 million loan taken out last year to fund social housing refurbishment and the development of new homes.

Last year, when the States secured a £250 million loan to invest in social housing, 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 for the hospital, interest payments would total £600 million over 40 years, with the £400 million also having to be repaid at the end of the term.

Mr Shenton said that ministers, and the public, should think carefully before taking on more debt.

He said: “Once you let the debt genie out of the bottle it will be very difficult to put it back. If you add Andium Homes debt to General Hospital debt and throw in a little extra such as States of Jersey Development Company debt you soon get to a debt figure of around £700 million.

“Pay that back over 40 years mortgage style and the annual cost will be around £34 million per annum.

“If funded by the workforce you are probably looking at additional tax of around £700 each year per taxpayer - furthermore the loan will have cost over £600 million in accrued interest by the time it is repaid.

“The States need to be absolutely sure that this cost is both justified and necessary? Will it prove to be another case of this generation fleecing the next and leaving them to pick up the pieces?”