New hospital: Ministers' plans sent back for scrutiny

Thursday 19 January 2017

Ministers' plans to borrow up to £400million for a new hospital have been delayed again as States Members just didn't believe they had so far been properly thought through.

Moment ago, they agreed by 29 votes to 13 to ask Scrutiny to double check the proposals, before they can come back to the States for more discussion.

The debate was derailed yesterday following a query from St John Deputy Tracey Vallois as to whether borrowing £400million - which the Island has never done before - was actually legal or not? When combined with an existing loan of £250million to pay for new housing, it puts the States very close to the borrowing limit set by the Public Finances Law, under which the Island cannot borrow more than its annual tax receipts. 

To get over the line, Ministers needed the new Long Term Care Charge to be classified as a tax, and so count towards that total, and this morning the Solicitor General confirmed that in this particular case, the charge should legally be seen as a new tax. 

But the debate convinced States Members that the proposals needed more thought, and they will now be sent to Scrutiny for further review. There was considerable dissatisfaction that Ministers had pushed ahead with the plans without involving Scrutiny earlier. 

The cost of the new hospital is likely to be £466million, but Ministers are warning that is an "indicative estimate"only not a final cost, and more work needs to be done on "...design, planning and procurement." They also say it does not include any work needed to adapt or demolish redundant buildings.

Their plan to pay for it all is to issue another bond for up to £400million, which the Island would pay back over the next 40 years, in addition to the annual costs of around £10.5million (2.6%), making a total repayment over the full term of £820million not including the initial transaction cost of up to £2.5million - it follows the States' previous decision to issue a £250million bond to pay for social housing, which put the Island into debt for the first time. Once both bonds are taken into account, the Island's debt will be 16% of its GDP.