Treasury and Resources
Ministerial Decision Report
Allocation of fiscal stimulus funding to the Economic Development Department for the project to support the finance industry
1. Purpose of Report
The purpose of this report is to summarise the recommendation of the FSSG to the Treasury Minister to agree green light funding in respect of the Economic Development department’s (“EDD”) support for Jersey Finance Limited’s third overseas office in 2011, as part of the overall fiscal stimulus project to support the finance industry.
2. Background
The £44m fiscal stimulus fund was approved by the States to be set aside from the Stabilisation Fund (2009/P55) to stimulate the local economy during the economic downturn following advice from the Fiscal Policy Panel (the “FPP”), an independent advisory body set up to advise the Treasury and Resources Minister on the Island’s fiscal policy, and in particular the use of the Stabilisation Fund.
All fiscal stimulus projects are designed to put additional money back into the economy, to add to demand and mean that the fall in output and extent of job losses will be less severe than would otherwise be the case.
This allocation of £230,000 in 2011 to the project to support the finance industry, which has already been allocated £2,517,000 (to the Chief Minister’s department and the Economic Development department as set out in Treasury and Resources ministerial decision references MD-TR-2010-0032 and MD-TR-2010-0088), facilitates the opening of Jersey Finance Limited’s third overseas office in 2010 by providing security of funding into the next financial year, recognising that it would not be of benefit or deliver best value for money to establish such a presence for a period of less than one year. A further provisional allocation will be held in reserve within the provisional programme for 2012, on the understanding that the Economic Development department will work with Jersey Finance Limited, and others, to secure a longer term funding solution beyond 2011. These allocations of funding facilitate direct measures to assist the financial services sector, which has, and will continue to, come under increasing pressures and threats as a result of the global economic downturn. Jersey’s finance industry contributes 53% of the Island’s wealth, measured by Gross Value Added (GVA), and its 13,000+ direct employees are the most financially productive in Jersey’s economy.
3. Fiscal Stimulus Rationale
The statistics set out above demonstrate the significance of the finance industry in Jersey. As a result it has been widely agreed during the assessment process that it is simply unacceptable to do nothing. Managing the risk of adverse impacts on Jersey as a result of increased scrutiny of offshore finance centres is of huge importance to steering the Island successfully through the downturn. It is extremely important to take necessary measures to protect existing and foster new opportunities within the Finance Industry in the light of the external threats it is facing.
The overall project of which Jersey Finance Limited’s third overseas office forms a part is uniquely targeted at meeting the third objective of this discretionary intervention (as described in P55/2009), being the creation of new opportunities for business to help support them through the downturn and mitigating job losses across the economy as a whole. The delivery of this project complements existing fiscal stimulus activity and provides an overall programme of measures that is balanced across the overall objectives as well as across the main sectors of Jersey’s economy.
The work stream is to be undertaken by the Economic Development Department (“EDD”) indirectly through the award of a grant to Jersey Finance Limited, a non-government body which has an existing funding relationship with EDD.
4. Recommendation from the Fiscal Stimulus Steering Group
The FSSG recommends a ‘green light’ to the Treasury Minister for the 2011 costs of Jersey Finance Limited’s third office, with the funding to be allocated to EDD’s 2011 revenue budget, and EDD making grant payments in tranches as appropriate based on the actual costs incurred by Jersey Finance Limited operating the overseas office.
The FSSG also recommends that the Treasury Minister include a further (maximum) amount of £230,000 within the provisional programme (an “amber light”) in reserve to fund the costs of the third office in 2012, on the understanding that the Economic Development department will work with Jersey Finance Limited, and others, to secure a longer term funding solution beyond 2011.
There is no impact on manpower.
5. Reason for Decision
A discretionary fiscal stimulus allocation from the Stabilisation Fund of £44m has already been approved. The finance industry support programme, including this particular activity, meets the key criteria for fiscal stimulus being timely, targeted and temporary and will benefit local business and individuals. The allocation of £230,000 to the project in 2011, together with an amber light sum of £230,000 for 2012, will enable the third overseas office to be opened by Jersey Finance Limited which will strengthen the promotion of Jersey in the middle-east and India.
6. Resource Implications
No financial resource implications other than those explained above.
No manpower resource implications.