In 2013, the States agreed to borrow a quarter of a billion pounds to fund 1,000 social housing units in an unprecedented step for the Island’s government. The money is to be paid back over a 40-year period.
And during a Corporate Services Scrutiny Panel hearing yesterday to discuss the 2016 budget, which was lodged last month, Treasury Minister Alan Maclean said that Andium Homes had come up with several potential new projects that they were unable to fund. Senator Maclean said that no additional funding had yet been agreed for Andium Homes but that early discussions had taken place about the financial implications of the proposed projects.
And the minister confirmed that additional borrowing had not been ruled out, provided that the projects were viable and were of benefit to the Island.
He said: ‘Andium Homes have identified several projects particularly in social housing.
‘They looked at them and said that they may not have funding to do the projects that they feel will benefit the Island and came to us to discuss that.
‘Their range of projects exceed the current funding allocation.’
When asked by panel member Deputy Simon Brée whether additional borrowing was an option, Senator Maclean added: ‘That is always an option.
‘If it is advantageous to do so then yes we could do that. If it is of benefit to the Island then yes, of course we would consider it.’
States Treasurer Richard Bell added that the Treasury Department was aware of proposals for ‘other projects that could be viable’ and that it was now a case of deciding if the States could afford them.
Discussing the wider proposals contained in the Budget, the minster re-iterated previous promises to reduce the impact of future charges, such as the proposed £35 million health charge which was approved during the Medium Term Financial Plan debate, should income forecasts remain higher than previously thought.
Among the proposals set out in the Budget is the phased withdrawal of Mortgage Interest Tax Relief, which effectively allows house buyers on lower incomes to borrow more.
During the meeting, it was confirmed that the decision was made using information from a study on the UK housing market and that no review was undertaken to specifically look at the Jersey market before proposing the removal of the tax relief.
Senator Maclean said: ‘The point is we are not taking it out next year, we are phasing it out over a ten-year period starting in 2019.
The Corporate Services Scrutiny Panel is comprised of chairman Deputy John Le Fondré, Deputies Simon Brée and Kevin Lewis and St John Constable Chris Taylor.
Editorial, October 9 2013
THANKS to a wealth of information provided in the Budget statement, which was made public yesterday, we now know where and how the Island’s new hospital will be developed.
The ‘where’ of the matter is interesting, given that the present General Hospital site will be used, coupled with new facilities to be built at Overdale.
However, it is the ‘how’ part of the information that is most intriguing. There might well be concern over the decision to redevelop the present hospital while it is still in use, but those planning the process clearly believe that it can be done.
On the other hand, the method of funding that is favoured for the project is likely to be widely welcomed.
In a nutshell, the money will be taken – in phases – from the Strategic Reserve. This reserve, of course, is the famous ‘rainy day fund’, which will have to find a new popular name, given that the decision to use it for the new hospital does not amount to an admission that a ‘rainy day’ has finally arrived.
It is, meanwhile, significant that this call on the Strategic Reserve is the first since 1998, when £10 million was withdrawn to fund information technology initiatives.
That sum seemed to disappear without trace, but the £297 million required for the hospital can hardly be expected to suffer a similar fate. Internal funding will also be the way forward for the unglamorous but necessary liquid waste project focused on the plant at Bellozanne, but untypically for Jersey, money will be borrowed for a third major capital undertaking, the enhancement of social housing.
That said, the form of borrowing that is envisaged to pay for up to 1,000 new units of accommodation and the refurbishment of existing stock will bear little resemblance to loans taken out by ordinary Islanders.
A public bond will be issued and repayments would be made from rental income. Although the borrowing structure envisaged for housing is sophisticated, it still represents a departure from what is regarded as standard practice and an important element of the prudent ‘Jersey way’.
Money has been borrowed in the past, but, in the words of the Budget statement, such borrowing has been ‘judicious’.
You have, in fact, to go back to the mid- 1990s to find the last example of similar bond-based funding.
