Just £5m drawn from emergency £500m fund

Monday 03 August 2020

Just £5 million has been drawn from the government’s borrowed half-a-billion pandemic emergency funding pot, as the island fares better than expected in response to the health crisis.

Meanwhile, the ‘Rainy Day Fund’ – officially known as the ‘Strategic Reserve’ – hasn’t been touched at all.

After dropping to around £750m as pandemic fears hit global markets, it has nearly returned to its pre-pandemic level of £921.8m.

At the end of June, the reserve was valued at £874.2m.

While the government hasn’t yet been forced to dip into these emergency cash supplies, it is expected that more money will be needed to fund previously planned spending in 2021.

So far, the most expensive economic measure in response to covid has been setting up the co-funded payroll scheme, which has been financed through the use of various other reserves, according to Treasury Minister Deputy Susie Pinel.

On Friday, she announced it would be phased out from September 2020 until March 2021, alongside Economic Development Minister Senator Lyndon Farnham.

Pictured: The co-funded payroll scheme will be phased out between September and March.

The initiative - which sees the government pay 80% of an employee's wages, up to £1,600 per month - launched in the early stages of the pandemic to help keep thousands of islanders in jobs.

It was due to end in August, but Ministers have now announced plans to continue it until March 2021, gradually reducing government input.

It is estimated the scheme will cost the government £93m by the end of August, while the tapering of the scheme is estimated to cost between £26m and £53m, bringing the estimated total to be between £108m and £137m, which is within the original predictions of the government.

This money has so far been drawn from the Government’s various reserves, such as the stabilisation fund – established in 2006 to create a more stable economic environment with low inflation – and the consolidated fund. 

Pictured: Deputy Susie Pinel, the Treasury Minister.

The Government hasn’t had to use the £500m it borrowed to keep the island through the health crisis to fund the scheme. 

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

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 a letter, and had been alluded to by the Minister for External Relations, Senator Ian Gorst, who emphasised that Jersey's cash supplies were "finite" at a previous press conference.

It was the Assistant Treasury Minister, Senator Ian Gorst, who confirmed that, having assessed the likely level of financial damage covid-19 would cause, the government was planning to withdraw the full £500m allowed - something he described as a "super duper overdraft".

“…The current preferred option – although this needs to finally be approved by the Minister and she will have to discuss with Council colleagues – is to go up to that maximum that’s allowed using a short credit facility that’s two to three years with the banks,” he said.

Pictured: The Government has only used 1% of the £500m it borrowed.

But Deputy Pinel said that, so far, the Government, hadn't had to tap into that money - although a government spokesperson later revealed to Express that £5m has in fact been drawn from the £500m revolving credit facility.

“We haven’t had to use the revolving credit facility yet, but it is there and that is something we can draw down as we need it or if we don’t need it,” Deputy Pinel said in response to questions from Express at Friday's press conference.

“It’s just a facility which was taken out quite a while ago now, when we estimated, based on the global situation, that we would be hit far greater than we have been at the moment.”