On 22nd April 2020, the Policy and Resources Committee presented the States Assembly with an Urgent Proposition entitled ‘Covid-19 Pandemic – Funding of Financial Response’ requesting approval to spend reserves and borrow significant amounts.
After much debate and several amendments, the final amounts agreed were up to £100million funded from the Core Investment Reserve. To borrow £250million for an initial period of 2-3 years, to meet short-term cashflow requirements. An addition £50 million through individual local investors. And another tranche of £250million of longer term debt subject to States approval of the recovery strategy.
This amounts to a staggering potential total of £650 million, £100 million from reserves and £550 million in new debt.
While the amounts needed to cover short term cashflow and the various business support packages will be significant, they will not come anywhere near this total.
Thus, leaving very significant amounts available to fund the Revive and Thrive strategy. However, the strategy, which has yet to be detailed, has already been hijacked by the inclusion of asocial agenda unrelated to economic stimulation.
The Revive and Thrive objective declares “not only recover economically within the next three years”, but also to “build on our inclusive community values and capitalize on our many strengths to make Guernsey a safe haven based on sustaining health, wealth and community”.
The danger is money intended for economic recovery measures will be hijacked by those wanting to pursue expensive social engineering and capital intensive pet projects.
It will result in significantly higher debts than purely focusing on stimulating the economy and will require higher taxes to service this debt (paying interest and repaying capital), higher taxes which would need to be in place for up to 30 years.
We need to exclude any social engineering or pet projects from the Revive and Thrive recovery strategy. We should be targeting smaller investments which produce an income or reduce future costs plus providing financial support in areas where the majority of the money will be spent on-island and rapidly
enough to stimulate the economy quickly.
Our economy has suffered an economic shock due to COVID-19. The real impact of which is likely to start being felt in the first half of 2021. It needs to be addressing through a prudent and targeted range of investments and financial support packages designed to offset the worst of what is coming.
Large capital projects, such as reclaiming Belgrave Bay as part of the Seafront Enhancement Project, do not fit these criteria. Our planning requirements and budget approval processes for projects of this scale will take years, even if expedited. And they require vast amounts of money for a single project.
Due to the scale of large projects, much of the money spent goes off-island on consultants, materials and imported labour, reducing the local economic stimulus created for every pound we spend.
How I propose stimulating the economy is through smaller, more direct investments which can immediately be implemented, timed for optimum impact and creating almost instant economic stimulus.
PROPERTY MAINTENANCE – This is something the States has never appropriately done due to the processes surrounding revenue and capital budgeting. Maintenance projects could be implemented quickly and would reduce future costs.
INFRASTRUCTURE INVESTMENT – Improving necessary infrastructure (telecoms, utilities, roads, sea defenses, etc.) reduces future costs and underpins
BUSINESS SECTOR SUPPORT – Tourism, catering and other sectors have suffered disproportionally and need more financial support to survive until a return to normality.
THIRD SECTOR SUPPORT – The Social Investment Fund has been providing support, but this should be extended and increased to enable the charities to assist our community during the difficult times ahead, avoiding this burden falling onto the States.
All of these measures could be implemented gradually, as needed, with the majority of funding likely to be spent on the island creating the desired local
economic stimulus and reducing future States costs, making income available to service debts, most importantly, reducing the need for tax increases.