Treasury Minister Alfred Cannan is ’going to market’ to raise £400m in a move he describes as stocking the Isle of Man’s war chest for the future.

He’ll be seeking parliamentary approval for a bonds issue at this month’s sitting of Tynwald.

If Tynwald gives the go-ahead, the money will be used to refinance the Steam Packet to the tune of £160m, refinance Manx Utilities’ existing £178m internal debt to Treasury and to invest in long-term government priorities.

The money will not be used to top up reserves - there seems to be have been a misunderstanding there. And in any case reserves have actually increased to reach £1.65bn, not dropped.

Also, the Manx Utilities debt is entirely unrelated to the bonds which were issued to address the unauthorised loans.

Those bonds still exist separately and are being paid off by MU.

Mr Cannan said: ’Covid has impacted our cash position. Do we eat into our reserves or do we take this opportunity when the market is favourable?’

Taking advantage of low interest rates will put £260m into reserves for future investment, said Mr Cannan.

He highlighted core pillars of future spending as infrastructure, health and the environment.

To date, the global pandemic has cost the island £200-260million.

’We need to raise liquidity,’ said Mr Cannan.

’Our finances remain strong. We are fortunate in that respect but we have to consider all the options for funding. We are going to market at this very late stage in an administration but it’s the appropriate time. If approved by Tynwald, we expect this to happen in September.

’We need to stock the war chest for the future and to meet the challenges of climate change and health care.’

The exact sum of any borrowing will not be finalised until all market-related options have been examined and considered.

Mr Cannan said: ’I must be clear that Isle of Man Government finances are in a healthy condition and while this is certainly not a case of borrowing to pay for the pandemic, nevertheless the cost of the pandemic may restrict plans for future investment.

’There are three other important factors to consider.

’Firstly, it was always the intention that the Steam Packet took on an appropriate debt structure to pay for both the Manxman cost of £80m and to repay a government loan of £76m. The debt issue will allow for this to happen in a cost-effective and suitable manner.

’Secondly, with interest rates at a favourable level and in considering both the impact of Covid but also likely future commitments for infrastructure on our island, it is an appropriate time to undertake this exercise.

’Thirdly, the refinancing of Manx Utilities’ internal debt can be managed in such a way so as not to disturb their financial plans and incur additional consumer cost.’

The Manx Electricity Authority - subsequently part of Manx Utilities - acculated debts of tens of millions of pounds when it took out unauthorised loans in 2004.

Mr Cannan added: ’I am confident that raising this debt is being undertaken with solid foundations and that it is in the best interests of the island to do so at this point.’

Treasury has appointed external professional advisors to assist with the process.

In a further motion to Tynwald, the Minister will also seek to bolster the contingency fund available to the Treasury for unforeseen expenditure by £20m.

Mr Cannan said: ’The Covid impact on the contingency fund continues to be felt and it would be irresponsible not to give the Government some room for manoeuvre during the election period and while Tynwald is in recess.’