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The Government is not currently considering using loans or debt to fund any new public projects, according to the Treasury Minister.
Releasing a report setting out the circumstances and policies around when the Government would consider taking out a loan or issuing a bond, Deputy Ian Gorst said that the only long-term debt being considered was to refinance existing drawdowns from an overdraft known as a ‘revolving credit facility’ incurred to pay for health facility upgrades.
However, he added in the 'Debt Framework' that it was only a possibility and there was no formal approval for this to happen.
The Government has taken out loans and issued debt in the past, which are yet to be paid back.
These include a £250m social housing bond issued in 2014, which matures in 2054, and a £500m bond for general use, which has to be repaid in 2052.
That second bond was issued last May, with £477m of the money used to refinance past pension liabilities and the £23m balance used to pay for the development of this Government’s plans for ‘New Healthcare Facilities’ at Overdale, Kensington Place and opposite St. Saviour’s Hospital.
The Government also has States approval to take out a new £300m revolving credit facility – which is a form of credit that provides the borrower with the ability to draw down or withdraw, repay, and withdraw again – with the option to increase the ‘overdraft limit’ by another £200m.
This will replace a £500m credit facility which was issued in 2020 to pay for the Government’s covid response, which is due to expire this year.
All covid debt was cleared at the end of last year.
The Assembly has approved a maximum drawdown of £90m from the new £300m facility for this year. The purpose of this ‘RCF’ is to fund spending on the multisite hospital plan over the “short to medium term”, with its annual financing costs coming out of the £1 billion Strategic Reserve, or ‘Rainy Day Fund’.
Deputy Gorst said: “The RCF will serve as a flexible drawdown facility to fund expected expenditure on healthcare facilities.
“The facility will allow the Government to more closely align the value of drawn debt with the cash flow requirements of the project, as debt will only be drawn when required.
“There are several options for the repayment of the facility; however the most likely method will be through the issuance of long-term debt.
“The flexibility of the revolving credit facility will allow the Government to opportunistically enter the debt market when conditions are favourable.
“Alternative options such as the use of investment reserves from the Strategic Reserve could be applied if appropriately approved.”
The previous government had planned to pay for its single-site 'Our Hospital' by issuing two bonds totalling £756m bond to pay for most of the £804.5m project. However, the current administration plans to build its healthcare facilities in phases over a longer period of time, which, it argues, negates the need to accrue a single source of debt.
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