‘Minimal impact’ on cost of hospital from debate delays
DELAYS to finalising proposals on how to fund the new hospital are likely to have a ‘minimal impact’ on the total cost of the project, the Treasury Minister has said.
Proposals on how to fund the new hospital have been plagued by a string of setbacks and delays over the course of the year with several States debates being postponed and the plans ultimately withdrawn before being re-lodged virtually unchanged last month.
On Monday, during a Scrutiny Panel hearing specifically to review the future hospital project, Treasury Minister Alan Maclean said that a failure to win unanimous approval for his plans among his Council of Ministers colleagues as well as alternative funding methods put forward by ‘private individuals’ had led to the significant delays.
At the end of November, Senator Maclean lodged proposals to borrow up to £275 million to fund the new hospital, with the remaining amount to meet the total £466 million cost of the project to come from the Island’s ‘rainy day’ fund.
Senator Maclean said that it was ‘not appropriate’ to name those involved but confirmed that the Treasury Department had received submissions which had led, in part, to the withdrawal of the original funding solution.
Deputy Simon Brée, chairman of the panel, asked repeatedly whether the delays to the debate, combined with the recent increase to the base rate – which is used by the banks as a benchmark for their own lending rates – would lead to increased costs.
Senator Maclean said that the borrowing rate had largely evened out to the point it was at when the proposals were first due for debate at the beginning of the year. He added that any negative impact would be ‘minimal’.
The minister also said that under the proposals, the £275 million to be borrowed would be held in the Strategic Reserve pot with smaller amounts transferred to a separate ‘Hospital Construction Fund’ when it was needed. He said that the borrowed money would be invested on a ‘smaller risk investment profile’ than the rest of the rainy day fund.
‘We will never get a scenario where we have no risk,’ he said. ‘But, the investment strategy for the bond for the hospital project will not be on the same level of risk profile as the Strategic Reserve because this money is going to be needed in the short term for the hospital.’
When asked what had led to the delays in May, Senator Maclean said: ‘There are individuals who have extensive experience in this area of financing who put forward, via representatives in the States Assembly and ministers, alternative options.
‘For the majority of cases it would be a majority [vote within the Council of Ministers]. I didn’t believe that in this case – the largest capital project in history – there should be any concerns.
‘The States will be much better informed in December than they may have been earlier in the year.’
The proposals are due to be debated on 12 December.
Deputies Richard Renouf, Terry McDonald, John Le Fondré, Kevin Lewis and Senator Sarah Ferguson were also sitting on the panel.