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Co-Funded Payroll Scheme (CFPS) Phase 3+ and Scheme Guidance: Amendment

A formal published “Ministerial Decision” is required as a record of the decision of a Minister (or an Assistant Minister where they have delegated authority) as they exercise their responsibilities and powers.

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A decision made on 22 December 2020

Decision Reference: MD-TR-2020-0168

Decision Summary Title:

Amendment to the CFPS - Phase 3+ and scheme guidance

Date of Decision Summary:

22nd December 2020

Decision Summary Author:

Head of Investment Appraisal

Decision Summary:

Public or Exempt?

Public

Type of Report:

Oral or Written?

Written

Person Giving

Oral Report:

n/a

Written Report

Title:

Amendment to the CFPS - Phase 3+ and scheme guidance

Date of Written Report:

22nd December 2020

Written Report Author:

Head of Investment Appraisal

Written Report:

Public or Exempt?

Public

Subject: Approval of an amendment to the Co-Funded Payroll Scheme (CFPS) Phase 3+ and scheme guidance.  

Decision(s):

 

The Minister approved an amendment to the CFPS Phase 3+ to take effect from 1st December 2020 as set out in the attached report and agreed the scheme guidance.

The Minister noted the intention for the Comptroller of Revenue to issue direction 2020/07 using powers given to him under Article 41(1) of the GST Law 2007 (as amended).

 

Reason(s) for Decision:

 

Article 15(3) of the Public Finances (Jersey) Law 2019 states that the approval by the States of a Government Plan authorises the Minister to direct how an approved appropriation for a reserve head of expenditure in the plan may be spent (including on another head of expenditure) in the first financial year covered by the plan.

 

The current Policy for Allocations from the Reserve agreed by the Minister for Treasury and Resources on Friday 17th July 2020 sets the requirement for all allocations from the General Reserve (Covid-19) once approved by the States Treasurer to be referred for review to either the Council of Ministers or the relevant Competent Authorities Ministers and to seek comments from the Principal Accountable Officer (PAO) prior to submission to the Minister for approval. However, it also states that ‘Where a request is made for £100,000 or less, or where the Minister is satisfied that there is an urgent need to provide funding in the public interest, an allocation may be made by the Minister on the recommendation of the Treasurer.’

 

The Minister for Treasury and Resources approved MD-TR-2020-0049, to establish the Co-Funded Payroll Scheme Phase 2 (with £46 million allocated to Customer and Local Services by this decision, a maximum cost of £138 million and further drawdowns to be approved by the Treasurer), and MD-TR-2020-0063 and MD-TR-2020-0100 to extend the scheme until 31st August and 31st December 2020 respectively. The Minister has subsequently limited the cost to a drawdown of £125 million in 2020.

 

The amendment to the CFPS was agreed by the Competent Authorities Ministers on 22nd December.

 

The revised guidance for the Co-Funded Payroll Scheme Phase 3+ was agreed on 22nd December 2020 by the Ministers for Social Security; External Relations; and Economic Development, Tourism, Sport and Culture.

 

The Principal Accountable Officer was consulted on 21st December.

 

Following approval of the amendment by the Competent Authorities Ministers and Ministers responsible for the CFPS, the Minister is satisfied that there is an urgent need to provide funding in the public interest and that threats posed to the economy warrant the higher than normally acceptable risks inherent in this enhancement of the CFPS, including the inevitable dilution of the Scheme’s efficiency.

 

On the basis of the above, and having considered the available options, taken economic advice, and weighed the potential economic benefits against the relative risks, the Treasurer recommends that the Minister agrees the amendment to the CFPS Phase 3+.

 

The Minister noted the intention for the Comptroller of Revenue to issue direction 2020/07 using powers given to him under Article 41(1) of the GST Law 2007 (as amended).

 

Costs that may be incurred in 2021 may require an additional allocation to be made in 2021 from within the resources provided in Government Plan 2021-24.

 

Resource Implications:

 

The additional costs arising from this decision are forecast to be up to £1 million in 2020 and can be met from the £125 million available for the CFPS in 2020.

 

The maximum available funding of £138 million allocated by MD-TR-2020-0049 was reduced by £13 million to a revised maximum funding of £125 million in 2020 by MD-TR-2020-0100.

 

Up to an additional £1 million per month is also required in 2021 depending on the public health restrictions that will be in force. Funding in 2021 will be made available from the £11.3 million budget for the Co-Funded Payroll Scheme within the Covid-19 Response Head of Expenditure in the first instance, and beyond that any additional funding needed above that amount may require an allocation for Covid-19 Reserve within the General Reserve.

 

Action required: Head of Financial Governance to ensure this decision is published on www.gov.je  and notify the Head of Finance Business Partnering for Customer and Local Services.

 

Signature:

 

 

Position:  Deputy S J Pinel, Minister for Treasury and Resources

Date Signed:

 

Date of Decision:

 

Co-Funded Payroll Scheme (CFPS) Phase 3+ and Scheme Guidance: Amendment

Treasury and Exchequer

Ministerial Decision Report 

 

 

 

 

Amendment to the co-funded payroll scheme phase 3+

 

  1. Purpose of Report

An amendment to the Co-Funded Payroll Scheme (CFPS) Phase 3+ to take effect for claims made in respect of December and remain in place for subsequent months.  

  1.     Background

Funding provisions were made in the Government Plan 2020-2023 in the General Reserve for funding needs that cannot be met from existing heads of expenditure in 2020. The Minister has increased the amount available in the General Reserve by transferring £65.3 million from the Treasury and Exchequer head of expenditure (MD-TR-2020-0035), approving an additional £99.99 million of expenditure (MD-TR-2020-0047) and making transfers of £28 million and £50 million from the Stabilisation Fund (MD-TR-2020-0055 and MD-TR-2020-0112).

 

The Minister for Treasury and Resources approved MD-TR-2020-0049, to establish the Co-Funded Payroll Scheme Phase 2, MD-TR-2020-0063 and MD-TR-2020-0100 to extend the scheme until 31st August and 31st December 2020 respectively.

 

Amendment to the CFPS Phase 3+

 

In light of the requirement to extend public health restrictions and following further representations from businesses about the severe impact these restrictions are having on their cashflow, Ministers, having requested options be developed at short notice, have decided to enhance the CFPS Phase 3+ for the sectors that are most severely affected.

 

The closure of licensed premises for January will place further pressure on businesses that have seen a reduction in trading at a time when they would expect to generate profits that would support them through a typically quieter period in Q1. This will impact not only the premises that are closed but also immediately adjacent businesses, in particular wholesalers who are heavily reliant on hospitality and cannot readily adapt their business models to the domestic market given the national supply chains of many food and beverage retailers, and the difference in offerings and logistics required for sales direct to consumers.

 

There are still good reasons for business to remain optimistic about their longer-term future prospects given that the Covid-19 vaccination programme has started in Jersey and there was a strong resurgence in trading in most sectors when restrictions were lifted earlier in the year. However, many businesses have operated on lower levels of revenue for several months and this will have placed sustained pressure on cashflow and reserves. It is likely in that context, that businesses may now be less able to find additional liquidity either from reserves, borrowing or shareholder investment than they were when the CFPS was first introduced. As a result, they may be less able to cope with a further cessation of, or severe downturn in, trading so additional CFPS is judged to be necessary to mitigate the potential impact this may have on employment, wages and, ultimately, the survival of businesses that are affected.

 

Should the public health scenario deteriorate further there may be needed to introduce trading restrictions for other sectors of the economy, many of which will face the same liquidity challenges. The CFPS must, therefore, be capable of adapting to the public health scenario as it evolves.

 

 

In response to the increasing needs of businesses, Ministers have agreed the following changes:

 

-          An increase in the maximum subsidy available from 80% to 90% for businesses, such that, in line with the Scheme’s subsidy calculation methodology of detriment plus 20%, businesses with at least 70% detriment will be able to access a higher level of subsidy

-          New businesses established since March 2020 can claim support

 

These changes will apply only to the sectors that are most directly affected. To qualify businesses must meet one for of the following criteria:

 

-          A business that is required to close for part of a month as part of the Island’s Winter Strategy

 

-          A wholesale business that can demonstrate that at least 75% of their income is generated from sales to businesses that are required to close for part of a month as part of the Island’s Winter Strategy.

 

These changes will take effect until the end of the Scheme on 31 March 2021. Other businesses that do not meet the additional criteria will still be able to claim subsidy of up to 80% if they meet the existing entry criteria for the CFPS.

 

Other economic support measures

 

Ministers have also agreed to defer the payment of GST and Social Security contributions for the fourth quarter (known as ‘D quarter’ for Social Security) for the businesses that qualify for additional CFPS support. This additional support will provide much needed liquidity to businesses to help ensure they are able to remain solvent until restrictions can begin to be relaxed again.

 

Risks

 

The risks inherent in the CFPS are greater than would normally be acceptable by Government Ministers and these changes will increase the risks. Particularly those linked to deadweight loss, fraud, and the increased risk of default in respect of Social Security/GST deferrals. However, Ministers involved in the development of the scheme have acknowledged and agreed to accept the increased risk, based upon the economic advice which has consistently emphasised the likely substantial economic benefits of the scheme and the continuing unprecedented threats to the economy posed by the Covid-19 pandemic.

 

  1. Recommendation

Due to the urgent need to provide additional support, it has not been possible to prepare a suitable business case for this variation to the CFPS. Given the direction from Ministers that additional support is required, having considered the available options, taken economic advice, and weighed the potential economic benefits against the relative risks, the Minister is recommended to approve the variation of CPFS Phase 3+ if she is satisfied that there exists an urgent need to provide funding in the public interest.

On the basis of the above, the Minister is also recommended to approve the amended Guidance for the CFPS, which will give effect to these changes and those set out in MD-TR-2020-0153.

 

  1. Reason for Decision

Article 15(3) of the Public Finances (Jersey) Law 2019 states that the approval by the States of a Government Plan authorises the Minister to direct how an approved appropriation for a reserve head of expenditure in the plan may be spent (including on another head of expenditure) in the first financial year covered by the plan.

 

The current Policy for Allocations from the Reserve agreed by the Minister for Treasury and Resources on Friday 17th July 2020 sets the requirement for all allocations from the General Reserve (Covid-19) once approved by the States Treasurer to be referred for review to either the Council of Ministers or the relevant Competent Authorities Ministers and to seek comments from the Principal Accountable Officer (PAO) prior to submission to the Minister for approval. However, it also states that ‘Where a request is made for £100,000 or less, or where the Minister is satisfied that there is an urgent need to provide funding in the public interest, an allocation may be made by the Minister on the recommendation of the Treasurer.’

 

The Minister for Treasury and Resources approved MD-TR-2020-0049, to establish the Co-Funded Payroll Scheme Phase 2 (with £46 million allocated to Customer and Local Services by this decision, a maximum cost of £138 million and further drawdowns to be approved by the Treasurer), and MD-TR-2020-0063 and MD-TR-2020-0100 to extend the scheme until 31st August and 31st December 2020 respectively. The Minister has subsequently limited the cost to a drawdown of £125 million in 2020.

 

The amendment to the CFPS and revised guidance was agreed by the Competent Authorities Ministers and the Ministers responsible for the CFPS on 16th December. The PAO was consulted on 21st December.

 

Following approval of the amendment by the Competent Authorities Ministers and Ministers responsible for the CFPS, the Minister is satisfied that there is an urgent need to provide funding in the public interest and that threats posed to the economy warrant the higher than normally acceptable risks inherent in this enhancement of the CFPS, including the inevitable dilution of the Scheme’s efficiency.

 

On the basis of the above, and having considered the available options, taken economic advice, and weighed the potential economic benefits against the relative risks, the Treasurer recommends that the Minister agrees the amendment to the CFPS Phase 3+.

 

The Minister noted the intention for the Comptroller of Revenue to issue direction 2020/07 using powers given to him under Article 41(1) of the GST Law 2007 (as amended).

 

Costs that may be incurred in 2021 may require an additional allocation to be made in 2021 from within the resources provided in Government Plan 2021-24.

 

 

  1. Resource Implications

The additional costs arising from this decision are forecast to be up to £1 million in 2020 and can be met from the £125 million available for the CFPS in 2020.

 

The maximum available funding of £138 million allocated by MD-TR-2020-0049 was reduced by £13 million to a revised maximum funding of £125 million in 2020 by MD-TR-2020-0100.

 

Up to an additional £1 million per month is also required in 2021 depending on the public health restrictions that will be in force. Funding in 2021 will be made available from the £11.3 million budget for the Co-Funded Payroll Scheme within the Covid-19 Response Head of Expenditure in the first instance, and beyond that any additional funding needed above that amount may require an allocation for Covid-19 Reserve within the General Reserve.

 

 

Report author: Head of Investment Appraisal

Document date: 21st December 2020

Quality Assurance / Review : Head of Financial Governance

File name and path: L:\Treasury\Sections\Corporate Finance\Ministerial Decisions\DS, WR and SD\2020-0168 - Amendment to the CFPS Phase 3+\WR  - Variation to CFPS Phase 3.docx

MD sponsor : Treasurer of the States

 

 

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