Attempt to reduce first wave of States borrowing

Wednesday 29 April 2020

Two Deputies want to limit the States' initial borrowing to £250m, which is half of the amount that Policy & Resources want approved to help stage an economic recovery following the corona virus pandemic.

The States' are meeting today to debate P&R's proposals to use £100m from the rainy day fund and borrow up to half a billion to tackle the economic consequences of covid-19 and the subsequent lockdown.

P&R President Gavin St Pier said that early modelling indicates that the States of Guernsey have an immediate requirement of up to £172-190m in order to fund the short-term implications of Covid-19, with measures including financial support schemes for businesses, support for Aurigny and financing cash-flow as some business' payments to the States are deferred.

"However, this would increase to up to £250million if an extension of some business support measures is necessary; or the impact on taxation and other income is greater than currently forecast; or ongoing liquidity is required to address cash-flow consequences," said Deputy St Pier.

"Undoubtedly, there will also continue to be an impact on the States’ financial position in future years as the global and local economic climate recovers and income receipts are restored. There will be a need for government to play a key role in facilitating economic recovery, for example, through the public sector capital investment programme. It is considered that allowance of up to a further £250m is made in order to fund the longer-term implications of Covid-19 on States’ finances and to facilitate economic recovery."

Pictured: Deputy Gavin St Pier, during last week's virtual States meeting. 

Deputies Andrea Dudley-Owen and Emilie McSwiggan are concerned about approving that additional £250m without any detailed plan of how it will be spent.

Under their amendment, the initial funds would still be approved, but P&R would have to return with more information in the future ahead of any further borrowing.

In their words, the amendment: 

• Accepts the need for £100m to be spent on businesses and the community as part of our immediate response to Covid-19 (as in P&R’s proposals), with a commitment to transparency by publishing how such funding has been spent.
• Authorises P&R to seek a short-term (2-3 year) borrowing facility of no more than £250m to meet the States’ current cashflow requirements.
• Directs P&R to return to the States with a plan before entering into longer-term or larger amounts of borrowing.

The States meeting starts today from 09:30 and the debate can be watched through the following link.

Pictured top: Deputies Andrea Dudley-Owen and Emilie McSwiggan.