Scrutiny find fault with Future Hospital Funding Strategy

Tuesday 04 April 2017

A Scrutiny Panel has lodged an amendment to the current funding plan for the new £466 million hospital after concluding that unexpected economic shocks could pose a threat to the current borrowing model.

The funding plan is currently to issue a bond of £400 million, which the Island would repay over the next 40 years, with the rest of the costs met from Jersey's reserves. Ministers are hoping to use the reserves' annual interest to pay off the bond.

But a Corporate Affairs Scrutiny Panel last month expressed concerns that an external borrowing model would be sensitive to small changes in assumptions resulting from the economic climate, such as the investment return over the next 40-year period or a fall in States revenues.

They are instead proposing that costs are entirely met by the Strategic Reserve, with a mechanism for doing so to be proposed by the Minister for Treasury and Resources and approved by the States Assembly.

According to the Panel, the sum required would therefore sit between £5 and £7 million per year.

Deputy John Le Fondré, Chairman of the Panel, commented: “Following the Panel’s Scrutiny review of the Hospital Funding strategy, we identified that whilst at first glance, borrowing at a time of low interest rates is not unreasonable, this has to be balanced with the reality that we are living in a very unstable economic period.

“As such, following the examination of evidence that suggests only a small fluctuation in our current financial position would wipe out the Strategic Reserve or even leave it in deficit, we wished to provide States Members with a realistic alternative funding option.”

The decision came as part of the Panel’s on-going review of the funding model, which will be published prior to a States Assembly debate on the amendment on Tuesday 18 April.