Politicians told: "Beware if you borrow more"

Tuesday 23 February 2016

States Members have been warned that more borrowing could push down Jersey's credit rating further.

Last week the US credit ratings agency Standard & Poor’s downgraded the Island's rating from AA+ to AA because of fears over increasing regulation and international pressure on the finance industry. It was also worried about the amount the States might have to borrow to fund capital projects.

Yesterday States Treasurer Richard Bell told the Public Accounts Committee that he was “concerned” that the credit rating could fall further if the Assembly chose to borrow more money.

“We need to be clear that further downgrades are a possibility and we have to consider the impact on the rating in everything we do. It is concerning but, then again, I have concerns about a lot of things because it is part of my job.

“If States Members intend to borrow money in future, it is something they will have to bear in mind.”

Mr Bell told the Committee, which scrutinises public finances, that the Treasury had been advised that it could safely borrow up to £400m in the form of a bond to pay for the new hospital, which will cost between £400m and £630m depending on which site is chose, without affecting its rating.

The States could, in theory, borrow more but it would risk not being able to cover paying back the money, likely to be over the next 40 years, from agreed sources of funds.

The Treasurer added that the £400m figure was now being reviewed in light of last week's rating downgrade.

Treasury Minister Alan Maclean told the committee that any spending on the new hospital above the £400m bond maximum – or any revised figure - would have to come from a potential ‘blend’ of extra taxes, selling off States assets and spending the interest accrued from the Strategic Reserve.