Friday 26 May 2017
Statement from Deputy Gavin St Pier, President of the Policy & Resources Committee, in response to the review of the States of Guernsey bond.
'We have not yet had an opportunity as a Committee to discuss the publication of the Scrutiny Management Committee's independent review into the States of Guernsey's bond but, personally, I welcome it. As expected with any review like this, it has a number of recommendations which we will consider in detail. But it also analyses the excellent financial performance of the bond and affirms that the decision-making around its issuance was appropriate and the costs of issue were reasonable.
'Far from the bond being a millstone around the States of Guernsey's neck, it has reduced the cost of borrowing to those bodies, such as the Guernsey Housing Association, who have taken the opportunity to re-finance their debts from the proceeds of the bond. For example, Aurigny's interest costs reduced by approximately £1m in 2016 as a direct result of taking a loan from the bond proceeds or, to put it another way, the airline's losses would have been £1m greater without the bond. It has also had a direct, positive impact on public finances, making taxpayers £8.3m so far.
'A total of £143.8m has now been approved for lending to fund projects that, in accordance with States' direction, have clearly defined revenue streams that can pay back both the interest and the capital on the loan. The remaining amount is invested as part of our investment funds.
'The bond costs taxpayers £11m a year in interest. However the investment returns since it was issued have substantially exceeded this amount, resulting in a surplus on the Bond Reserve of £5.8m at the end of 2016. The investment performance has been similarly positive during the early part of 2017. For the first four months of 2017, we estimate that the investment returns have exceeded the interest payable by a further £2.5m.
'The programme of lending continues, with the waste station being the most recent to secure loan approval, and more are expected if the capital portfolio is approved as part of the States' debate in June on the Policy & Resource Plan.
'I look forward to discussing this in more detail, alongside Deputy Trott, with members of the Scrutiny Management Committee at its public hearing in July.'
