Unbalanced futures

I inadvertently found myself listening to the States on Wednesday afternoon. It is a habit I thought I had overcome ! It was on the funding of the new hospital. I haven't followed the debate on the selection of the site, but I was interested to hear some of the points being made about the funding. 

 At one extreme was Deputy A Lewis who was arguing we should be borrowing more. The basis of his case was that with abnormally low interest rates it would cost less than the return on the funds we have invested. The amount of debt the States carry would be considered very low in business and more is affordable. At the other end of the spectrum was deputy Bree and Sen Ozouf arguing it is too much of a burden on future generations. The proposal was for a fixed interest 40 year bond. In all probability the value of the capital repayment will be significantly eroded by inflation, but its not guaranteed and we have had extended periods of deflation in the past. 

 Both cases are based on some degree of facts, though I'm bound to note there are companies, even quoted ones, that operate without debt. Taking on debt necessarily requires you to have a view that you will have inflation or income growth in the intervening period. Both are plausible over the next 40 years. And in many way that is the problem. 

I was waiting to hear someone raise the question over other commitments and problems we shall have to fund over the next 40 years. Problems that themselves stem from growth - the growth needed to afford repaying the loan. Not one mention of the issues of climate change, resource depletion etc etc. A whole assembly making 40 year future commitments as though somehow finances are isolated and independent of the realities of growth in the physical world over a comparable timescale is folly. 

Of course we are in a hole, there is no good solution from this position. Deputy Noel made a good observation here. The reason we had to borrow £250million (issue a bond) to sort out the housing problems was because we (The States) did not invest in the housing stock over the years. Similarly with the health buildings. I believe that is true. And there was a reason that was allowed to continue. We had for decades a mentality that the tax system was perfect, so the revenue available fairly static, regardless of the scale of the problems to be addressed. That was folly. It is one that we somewhat persist with . 

All these new capital projects have to be funded of course, but as ever when you launch a big building programme you are committed not just to the capital costs, but a significant amount of ongoing maintenance and management costs, at least you are if you are doing it properly. My problem is we seem not to have learnt, we are still not making adequate provision it seems for future commitments. And if we aren't doing that financially when the whole assembly is looking at the finances, what do you imagine is going on about ecology and sustainability where practically no member of the States takes a strong lead?