No experts consulted on £150m economy restart plan

Tuesday 28 July 2020

No independent economists were asked to analyse the effectiveness of the government’s £150m plan to get the economy going again, which included at least £100 for every islander, it has emerged.

Announced earlier this month, the package intended to get money flowing around the island economy again and restore consumer confidence in the wake of the health crisis.

It included: 

• £100 for every islander in the form of a voucher or pre-paid card.
• An additional £100 for 13,000 low-income islanders.
• Plans to drop Social Security contributions from employees temporarily from 6% to 4% up to the Standard Earnings Limit (subject to States Assembly approval).
• Two years for employers to repay deferred GST and Social Security payments.
• And a £50m Fiscal Stimulus Fund for government departments and arms-length bodies to drive forward infrastructure and training projects.

At the time of its launch, Ministers said that they had been following the advice of the Fiscal Policy Panel (FPP) – an independent group of economists specifically established to help the government with economic policies – that any interventions to rescue Jersey’s pandemic-hit economy should be “targeted, temporary and timely”. 

Pictured: The £100 schemes are aimed at boosting local spending.

However, Express has now learned that neither the FPP – nor any other independent experts - were invited to analyse the proposals in advance of them being announced to ensure they have the desired outcome for the economy. 

Instead, the Council of Ministers worked with “advice and analysis developed by the Chief Economic Adviser and a team of officials from Treasury, Customer and Local Services and Strategic Policy, Planning and Performance”. 

Asked why the FPP or any other economists were not further involved, a spokesperson said: “This is partly due to the amount of detailed analysis and evidence delivered at pace to develop the options for the fiscal stimulus package, which would not have allowed the FPP time to provide detailed advice on the measures.”

They continued that the FPP were expected to comment on the “overall balance of fiscal policy rather than on specific measures”, adding: “It is the responsibility of the government to consider advice given by the FPP when developing policy.” 

It comes amid some concerns that the package is not ‘targeted’ or ‘timely’, with a £100 pre-paid card or voucher due to be gifted to every man, woman and child in the island, and able to be spent anywhere (apart from online or at the bookmakers) rather than simply the hardest-hit sectors, including in place of normal spending. The £11m plan is not due to be rolled out until September.

Meanwhile, the recent gift of an additional £100 to 13,000 islanders on Income Support or Pension Plus - costing the government £1.3m - did not come with any guarantee that the money will remain on the island to help the local economy, as the payment was made directly into islanders’ bank accounts last week.

Pictured: The £100 to low-income islanders was placed directly into their bank accounts, so there's no guarantee the money will be spent locally.

It also lacks the wellbeing safeguard of being unable to be spent in bookmakers that the £100 pre-paid card or voucher to every islander will have. 

Challenged on this, a government spokesperson replied: “In line with the principles of the Fiscal Stimulus Plan, the Spend Local payment is designed to provide temporary, targeted and timely support to the economy. 

“By choosing to make a direct payment to the 12,500 Islanders in receipt of Income Support or Pension Plus payments, we have been able to provide support to low-income households in a timely manner. This has been possible because we already hold bank details for these islanders."

While there is no guarantee that the money will be spent locally, they added: “We have encouraged those receiving the payment to support the local economy and spend it on-island.”

Meanwhile, the Social Security Minister yesterday put forward proposals to temporarily drop the contribution rate, which are scheduled for debate by politicians in September.

In a report accompanying her plans, Deputy Judy Martin said: "The short-term and immediate impact of the covid-19 pandemic on the economy has been significant. There were 1,950 people registered as unemployed at the end of June 2020, compared to 820 people registered the year before (1,130 more). Almost 3,500 businesses declared that they have suffered a loss in revenue of 30% or more compared to an equivalent trading month through the Co-Funded Payroll scheme. The Fiscal Policy Panel has forecast that output in Jersey’s economy will fall by 6% this year."

Explaining how the plans fit the FPP's criteria in a report accompanying her plans, she added: "The reduction in Social Security contributions are part of the package because they are:

• Timely – taking effect in the small window of time when we need to stimulate the economy to help it to recover as quickly and as fully as possible
• Targeted – by increasing take home pay across working households.
• Temporary – The regulations have a fixed end point so they do not provide help for longer than is necessary."