WATCH: “There is no such thing as free money”

Friday 10 April 2020

The Assistant Treasury Minister has warned the public that “there is no such thing as free money”, as he revealed taxes will likely rise to cover Government debt when the health crisis abates.

Senator Ian Gorst’s comments came during a press conference alongside Minister for Economic Development Senator Lyndon Farnham, who announced that more industries have been added to the revised 80% wage subsidy scheme designed to support businesses during lockdown.

The new sectors now added to the scheme which were previously ineligible include: air transport, private waste disposal, freight transport, media activities, advertising and design agencies, digital businesses, estate agencies, recruitment agents, vets, architects, local legal and accountancy practices and security firms. 

This follows the loss of a major local freight company, Paul Davis Freight Services (PDFS), earlier this week – prompting criticism from Jersey’s key business lobby group about where the current Government support schemes were lacking.

Pictured: PDFS, which went under earlier this week, following a drop in demand due to the health crisis.

Senator Gorst announced that this revision of the co-funding scheme, subsidising 80% of each employee’s wage up to a £1,600 cap, would cost up to £140million over three months.

Although the scheme is due to run for an initial period of three months (April, May, June), Senator Gorst noted that Treasury had “budgeted not just for those three months, but also for a potential extension of two months”, therefore taking the scheme up to £280million.

This will sit on top of the schemes already announced, amounting to a total of up to £180million in potential loan guarantees, grants and social security and GST payments.

It also emerged that over £1.1million has already been paid to over 4,000 employers so far.

The Assistant Treasury Minister remarked that those included in the scheme had shifted due to the “reality of the lockdown”, saying: “Let us remind ourselves that we announced that enhanced scheme over a week ago, before medical advice recommended a lockdown. 

Pictured: £1.1million has already been paid to over 4,000 employers.

“And once we had announced that scheme and once we had then moved within a few short days into lockdown he [Senator Farnham] and I knew that the assumptions that we had used to develop the phase two first approach would need to hit the reality of the lockdown. And officers have been working to refine those assumptions and of course the lockdown has affected far more businesses than social distancing the prior week where we made that first announcement.” 

After revealing the cost of the scheme, Senator Gorst immediately alluded to the fact that they will come at a delayed cost to the taxpayer, stating: “...Our resources are not infinite and I believe we have a duty and an obligation to our children and those that will come after us to replenish and to refresh the reserves because, let’s be clear, this health crisis is a rainy day and it’s right that we use the rainy day fund and we borrow against those assets which aren’t liquid.

“But future generations may also face rainy days, and so as we make the relatively easy decisions to spend the reserves that others have put aside for us, we will also as we come out of this health crisis have to make the difficult decisions to refill the rainy day fund, to repay the debt, and that will be a challenge. It will be a challenge for individuals. It will be a challenge for businesses, who will have to contribute more in the future to refresh that fund. Anything else, I believe, would be a dereliction of duty to future islanders.”

Pictured: Senator Gorst was clear that future taxpayers would have to bear the brunt of borrowing payback.

In light of these comments, when asked by Express whether islanders and businesses should brace themselves for taxes to rise after this crisis, Senator Gorst replied: “...All of those measures of taxation will have to be reviewed and Council of Ministers and States Members will have to come to an agreement about increases in one or all of those tax measures. They’ll also have to think about other charges that can help to refund this money.

“Let us be absolutely clear: there is no such thing as free money. The Government does not have its own money, taxpayers pay for the money that Governments spend and as we are taking this decision which is the right decision – absolutely it’s the right decision – we also need to be mindful that these monies, the rainy day fund the borrowing that we’re going to need to do – they will need to be repaid. Otherwise we will be failing in our responsibility to our children and I for one am not prepared to let that happen.”

Elsewhere in the conference, Senator Farnham denied that not initially including freight services in the co-funding scheme was a mistake, given the collapse of PDFS.

Responding to a question from Express, the Minister said: “Firstly, I completely dispute... that we’ve made mistakes. I don’t believe we have. I believe we’ve introduced a scheme appropriately given the fast-moving nature of the crisis. Since we announced the first case, the economy has suffered more than any of us could have imagined and that’s why our package of measures has progressed as we’ve actually begun to under[stand] better the impact of the situation.

“In relation to freight companies and the two businesses... That has been the choice of the owners of the businesses. Both businesses would have been able to take advantage of all of the packages that we’ve put in place, including payroll support. But they have taken decisions above that in the best interests of their businesses and in their positions as directors, they have legal responsibilities."

In contrast to a previous hope that no local business would go under on his watch, the Minister added: “Whilst our aspiration is to protect as many businesses as possible, we simply won’t be able to protect them all.”

When asked by Express if the inclusion of freight services in this new, revised scheme was an acknowledgement that the island’s supply chain was more vulnerable than first anticipated by Government, Senator Farnham said that the scheme had been discussed “at length” at the Council of Ministers, and that “the general feeling was that this scheme had to absolutely be as broad as possible. It had to encapsulate as many businesses and as many jobs as we could".

He continued: “And those handful of exclusions we have now are deemed to be the businesses that are trading... The handful of exemptions are the businesses that are least affected at the moment.”

WATCH: The press conference in full...