£460m in pandemic emergency funding untouched

Friday 02 September 2022

The government’s half-a-billion emergency pandemic overdraft has not been required for nearly a year, with just under £40m withdrawn overall.

The £500m ‘Revolving Credit Facility’ was set up in 2020 to keep the island afloat during the health crisis, though States Members only gave the Government approval to use up to £385m.

However, with the island having fared better than expected, £460m remains undrawn, with no money taken out since last year.

The Government plans to refinance this debt by taking out a 20-year public bond.

Allowing the Treasury Minister to borrow hundreds of millions to help keep the island afloat was one of the emergency powers passed by the States Assembly at the end of March 2020.

The option had already been suggested by tax policy advisers, who urged the government to “consider flexibility in all of the financing options it has available, including borrowing” in order to weather the storm.

Having assessed the likely level of financial damage covid-19 would cause, it was decided that the Government should look to secure £500m via a "short credit facility" of two to three years.

By May, it had signed off on what was described as a "super-duper overdraft" provided by a consortium of five local banks - Barclays, Butterfield, HSBC, Lloyds and RBS International.

At the time, it was expected that much of the money would be needed to fund the most expensive economic measure in response to covid: the co-funded payroll scheme.

Pictured: It was expected that the money would be needed to fund expensive economic measures like the co-funded payroll scheme.

However, the job retention initiative ended up being funded through other reserves, such as the stabilisation fund – established in 2006 to create a more stable economic environment with low inflation – and the consolidated fund.

Instead, withdrawals were used to fund the creation of a Fiscal Stimulus Fund – a money pot for projects aimed at stimulating the economy, ranging from sports facility upgrades to the refurbishment of Howard Davis Hall. While States Members agreed that up to £50m could be spent on such projects, the total given out to the 40 projects that successfully applied for funding amounted to under £20m.

The overdraft expires in 2023.

A report published by Treasury this week confirmed that the Treasury Minister had not authorised any drawdowns from the overdraft this year, and capped the maximum amount able to be used at £120m.