Tynwald members have overwhelmingly agreed to allow the gov to borrow up to £400m, to be repaid over 40 years, after a lengthy debate this afternoon.
Treasury Minister Alf Cannan asked for permission to borrow the cash, £178m of which will be loaned to the MUA and a further £160m to the Steam Packet in order to allow both of the publicly owned companies to refinance existing debt and to pay for the Packet’s new boat.
Detailing the money being lent to the MUA, Mr Cannan stressed that it is ‘existing debt’ that is being refinanced and assured members ‘this is not new MUA debt’ and that it would not change the amount of money it owed to the gov.
Turning to the Steam Packet, Mr Cannan said the refinancing of the existing loan was debated by members in 2019 and that they had agreed for the Steam Packet to seek a private financing deal to pay the money itself. However, as times have changed with Covid, he said the change of those plans ‘makes sense’ as it is the ‘most effective and economic way to secure this finance, the Treasury can borrow more and [do so] cheaper than the Steam Packet can’.
Of the remaining cash, £60m is for infrastructure projects with the rest being put into the reserves. Mr Cannan also said the island didn’t need to borrow the money, but that doing so would ‘boost the war chest’ and promised that a sinking fund would be in place to ensure the MUA and the Steam Packet would be repaying the money and that the gov ‘wouldn’t be saddling future generations with debt’.
The Treasury Minister said that the focus was on long term funding and said that was where the focus of the money would be, he added that it ‘would not be used to top up departmental budgets’.
Rising first to speak during the debate was Speaker Juan Watterson who agreed that seeking the funding was ‘perfectly reasonable’ and welcomed the repayment plan but said it was ‘a shame that it isn’t included in the motion’. He added: ‘However when you look at the debt of the MUA and the Steam Packet, there is merit in doing it.’
However Mr Watterson said there was a ‘lack of scrutiny’ about the proposal and wanted to know what levels of security would be on the loan and said members didn’t know the borrowing terms, the rate of interest, or what the money would be spent on. He also confirmed that members have been given indicative levels of interest, but asked not to share these with the wider public.
A regular critic of the way the island’s Budget is formulated, Mr Watterson said that if members back the plans, they would have no future say on what it would be spent on outside of the annual Budget vote and said he had concerns that the money was being borrowed in the ‘right way’.
Another regular Treasury and spending critic Lib Vannin leader Lawrie Hooper said he could see the logic behind the move, but he too had concerns about the long term risk of the loan and that if the gov borrow the £400m, it could set a precedent for coming back to borrow more and more money.
Arbory, Castletown and Malew MHK Jason Moorhouse said he was apprehensive about the loan plan and was concerned that the debts were just being shifted from the MUA and Steam Packet to the Treasury and said it was a ‘vast amount of money to borrow’. He said he has concerns about the lack of controls on future spending of the money and the impact of the debt on future administrations given that the Quayle administration is ‘in its final days’.
He added: ‘Appropriate debt can be justified, I’m not sure it is appropriate, it’s opportunistic.’
Chris Thomas asked why the gov was seeking to use the International Stock Exchange to borrow the money, what the level of the reserves would be once this money was invested and that members of the public had doubts that this borrowing would remove the restrictions on gov and public sector spending. However he said he didn’t think that Mr Moorhouse was correct as the island does have a history of borrowing large amounts of cash.
The Douglas Central MHK said it was important that people recognise that the money is used for long term capital projects and not for bulging department budgets. And said that the alternative to what Tynwald was doing was to discuss the entirety of the proposed debt would not be appropriate and wouldn’t be done in other parts of the world.
Treasury member Bill Shimmins said members had to ‘invest in our island’ and that ‘sitting on our hands is not an option’. The Middle MHK did recognise the concerns of Mr Moorhouse saying: ‘He is concerned about this debt, but he is also concerned about the state of Castle Rushen High School, how is he going to fund that?’ He said that Tynwald should back the motions ahead of an anticipated boom in the post Covid economy.
Mr Shimmins said that using the International Stock Exchange, would reduce the cost of borrowing the money and that it is a ‘highly reputable exchange with an office here in Douglas’. He said the money would be used to pay for the long term infrastructure needs of the island in ‘the most efficient way for the taxpayer’.
Onchan MHK Julie Edge said her biggest concern was who would control the debt and raised the historic borrowing problems of the MUA (when it was the MEA). Ms Edge said Mr Thomas and Mr Shimmins had helped to assure her that borrowing was the right thing to do but she was still concerned about what it would be spent on and that the gov was ‘putting all its eggs in one basket’ and asked Tynwald to remember that the money will belong to taxpayers.
She also said that she’d like to know why the gov hadn’t chosen to underwrite the loans and told the MUA and Steam Packet to take them out instead and said the gov hadn’t addressed the existing pension debt and the growing size of departments such as DHSC despite the introduction of Manx Care.
Education Minister Dr Alex Allinson said he welcomed the positivity of members and recognised the reasons behind the caution of those who had spoken. He said that it would be easy for the island to ‘withdraw into austerity’ given the health and economic crisis that has dominated the political playground in the past 15 months but that it would be better to invest and push on.
Captain Paul Quine MHK also rose to congratulate the Treasury for bringing the motion and praised Mr Shimmins and Mr Thomas for their in depth knowledge of the subject and explanation behind the systems involved. He said the loan would not be a ‘cavalier’ approach but would allow the gov to borrow the money as an investment that would be repaid and that the island ‘has to invest in the infrastructure projects that lay ahead’.
Infrastructure Minister Tim Baker, who is chairman of the MUA, said he wanted to ‘make it clear that there is no change in Manx Utilities finances’ or its relationship with the gov and that it would have no impact on its balance sheet or pricing structure.
Peter Greenhill MLC, who has worked in international banking, said the motion was a well timed measure and that it would ‘take the island forward’.
Mr Cannan said he was concerned about the impression that the £400m was new debt. Instead he said the MUA and the Steam Packet loans were not new debt, with the exception of the financing for the Packet’s new boat. He said: ‘This is not lumping the nation with new debt.’
He said that while he can’t control the future, he could present the opportunity to ‘do what we think is best for the island’ and that members had to ‘leave the details to the experts’.
With the approval of the loan, Mr Cannan said that the estimated level of the reserves would rise to about £2bn based on the currently invested money and the additional cash available. Referring to Mr Watterson’s questions, Mr Cannan said he did understand why he had those concerns, but he said it was not appropriate for members to consider things with that level of detail and instead advised members to ‘think strategically’.
He also reiterated that if the gov was to underwrite the debt instead of borrowing it itself, it would cost extra money and in the terms of the Steam Packet this would likely trickle down to the company’s customers. Mr Cannan wrapped up by saying members should ‘think positively’ and ‘prepare the island for the future’.
While debated together, the three motions were taken independently, with 22-2 (Mr Watterson and Mr Moorhouse) in favour in the Keys on the first vote to actually borrow the cash. That passed unanimously in LegCo, with all members then backing the refinancing motions for the MUA and Steam Packet.