Co-Funded Payroll Scheme (CFPS) Phase 5: Reserve Funding

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A decision made on 1 April 2021

Decision Reference: MD-TR-2021-0037
Decision Summary Title:	Reserve Funding for CFPS Phase 5		Date of Decision Summary:	1st April 2021
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:	Reserve Funding for CFPS Phase 5		Date of Written Report:	1st April 2021
Written Report Author:	Head of Investment Appraisal		Written Report : Public or Exempt?	Public
Subject: Approval of the Co-Funded Payroll Scheme (CFPS) Phase 5
Decision(s): The Minister: approved an extension to the CFPS to establish Phase 5 from 1st May 2021 until 30th June 2021; approved changes to the Guidance for the CPFS Phase 4 as documented in the attached report. These changes will take effect from 1st April 2021 and apply to claims made in respect of March and future months; and agreed that these changes will be funded from unspent allocations previously approved for the CFPS in 2021.
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. A business case has been recommended by the Investment Appraisal Team (IAT). The revisions to the CFPS Phase 4 as set out in the attached guidance, and extension of the Scheme to establish Phase 4 was agreed by the Competent Authorities Ministers and the Ministers responsible for the CFPS on 31st March 2021. Based upon the above, the economic advice, the business case, and after having weighed the relative economic benefits and risks, the Treasurer recommends that the Minister agrees the extension of the CPFS to establish Phase 5, and approves the proposed changes to the guidance for CFPS Phase 4. 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. In MD-TR-2020-0100 and MD-TR-2020-0168, the Minister indicated an intention for extend the Scheme into 2021 subject to approval by the States Assembly of the Government Plan 2021-24. The Government Plan 2021-24 makes available £11.3 million in the Covid-19 Response Head of Expenditure for the CFPS in 2021. Through MD-TR-2021-0011, the Minister allocated a further £27.6 million to meet the costs of the Scheme in 2021 bring the total balance available in 2021 to £38.9 million. Following approval of the extension by the Competent Authorities Ministers and the Ministers responsible for the CFPS, the Minister is satisfied that there is a need to provide funding in the public interest and that threats posed to the economy warrant the higher than normally acceptable risks inherent in the extension of the CFPS, including the inevitable dilution of the Scheme’s efficiency. Under delegation from the Principal Accountable Officer the Treasurer appoints the Director General of customer and Local Services as the Accountable Officer for this expenditure allocation and that made by MD-TR-2021-0011.
Resource Implications: This decision is forecast to increase costs for the CFPS by £4.8 million in 2021 under the central scenario. It is expected that these costs can be met from within the £38.9 million that is available for the Scheme in 2021. Given that expenditure on the CFPS is subject to significant uncertainty owing to its link to the underlying performance of the economy, actual costs may be substantially higher or lower.
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 5: Reserve Funding

Treasury and Exchequer

Ministerial Decision Report

Reserve Funding for co-funded payroll scheme phase 5

Purpose of Report

Approval of an extension to the Co-Funded Payroll Scheme (CFPS) to establish Phase 5 and approval of changes to the Guidance for CFPS Phase 4 to take effect for claims made in respect of March 2021 and future months.

Background

The Government Plan 2021-2024 provides £40 million as a Covid-19 Reserve within the General Reserve for Covid-19-related funding needs that cannot be met from existing heads of expenditure in 2021.

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. In MD-TR-2020-0100 and MD-TR-2020-0168, the Minister indicated an intention for extend the Scheme into 2021 subject to approval by the States Assembly of the Government Plan 2021-24. The Government Plan 2021-24 makes available £11.3 million in the Covid-19 Response Head of Expenditure for the CFPS in 2021. Through MD-TR-2021-0011, the Minister allocated a further £27.6 million to meet the costs of the Scheme in 2021 bring the total balance available in 2021 to £38.9 million.

CFPS Phase 5

The CFPS has been the Government’s primary economic policy response to the Covid-19 pandemic. At its peak the Scheme supported almost half of all businesses in Jersey and almost 16,500 workers – more than 30% of the private sector workforce.

The CFPS is a policy response that is suited to an environment where public health restrictions are artificially impacting upon the normal functioning of the economy. Once businesses are able to return to business as usual trading conditions other forms of economic policy such as the £50 million being made available from April through the Fiscal Stimulus Fund are a more appropriate way of stimulating economic activity.

As part of the Government’s economic strategy, the CFPS has sought to provide bridging support until such time that public health measures are having a more limited impact on economic activity and to allow time for medical solutions to be developed that will limit the potential impact of Covid-19 on the economy. Given the strong progress being made with the Island’s vaccination programme there are now credible reasons to believe that vaccinations will enable the public health risks to be managed. Likewise, following the announcement of the Island’s Reconnection Roadmap, there is a now a clear path to the likely lifting of public health restrictions by Summer 2021.

Evidence from CPFS claims shows that most sectors in-scope for the Scheme have now largely recovered and the overwhelming majority of businesses therefore no longer meet the minimum detriment criteria to make a claim. However, that experience is not shared by the businesses that were most affected by the Winter Strategy Circuit Breaker or are reliant on inbound travellers.

The chart below compares claims from January and February 2021 to the Scheme’s peak in April 2020. The sectors most affected by the Circuit Breaker, namely hospitality, retail and close contact personal services, are still claiming at 45% of the previous peak. Whereas claims in all other sectors are now at only 15% of the Scheme’s peak.

The latest version of the Scheme, CFPS Phase 4, is due to expire in April 2021 and whilst the data shows that is reasonable for most sectors. It may be premature for those that have been impacted by the Circuit Breaker. Some will continue to recover strongly as implied by the significant fall between January and February after certain businesses were able to reopen. However, the current Roadmap shows that other sectors such as events-related businesses will continue to be impacted by public health restrictions until June.

The CFPS has been regularly adapted since it was launched on March 2020 to enable it to provide support that was appropriately tailored to the economic context. In light of the continuing need that is apparent in some sectors of the economy, it is necessary to extend the Scheme for the businesses that were severely impacted by the Circuit Breaker until June 2021. The Scheme will end in April as planned for the remaining sectors that have now substantially recovered.

The scope of the extension will include the sectors that can currently access the 90% (of monthly salary up to £2,500) elevated CFPS and structurally significant businesses reliant on inbound travellers including hire car providers, and inbound passenger transport businesses and their support services.

To avoid risks associated with a potential cliff-edge exit from the Scheme, the formula used for calculating the subsidy payable will taper as follows:

	Apr	May	Jun
Elevated Scheme: Subsidy Formula	+30%	+20%	+10%
Elevated Scheme: Max Subsidy	90%	90%	90%
Core Scheme: Subsidy Formula *	+20%	+20%	+10%
Core Scheme: Max Subsidy *	80%	80%	80%

*Available in May and June, only for hire car companies and inbound passenger transport services and their support services

Changes to the Guidance for CPFS Phase 4

In addition to the extension of the scheme for selected sectors after April 2021, following a review of the CPFS, Ministers have decided to make the following changes to the existing CFPS Phase 4 that will take effect from claims in respect of March 2021 (made in April):

1) Access to elevated CFPS for events-related businesses

Several businesses that are connected to the events industry were not required to close by public health restrictions during the Winter Strategy Circuit Breaker but are amongst the most severely affected by the reintroduction of public health restrictions. Large scale events have also been consistently prohibited by public health measures since the onset of the pandemic. Unlike many other sectors, events-related businesses did not significantly benefit from the relaxation in restrictions that took place in 2020. A large proportion of the events industry is able to access the elevated CFPS scheme. However, businesses that are suppliers to events are not eligible as they were not legally required to close. To ensure adequate support is available for all businesses that have been severely affected by the Circuit Breaker, from March 2021 businesses that meet the following definitions will be eligible for the elevated CFPS scheme if they are not already:

- Event and/or conference organisers and promotors who promote events, conferences or concerts as their only business.

- Event suppliers who can evidence that they derive their principal source of income from events, conferences, or concerts requiring gatherings or more than 40 people.

- Event venues that can evidence that they derive their principal source of income from the hosting of events.

2) Reintroduction of the requirement to be open and trading

As the public health restrictions are eased and fewer businesses face severe restrictions on trading there is an increased risk that businesses will be incentivised to artificially restrict their trading to ensure that they meet the detriment test. Accordingly, provisions will be reintroduced that require businesses to be open and trading if permissible within public health guidance in order to qualify for the CFPS. These requirements were removed to aid the public health response and to allow business owners latitude to optimise their operations when the Circuit Breaker was introduced. However, now that the case numbers are well managed, it is right that the CFPS gives businesses every incentive to maximise their revenues where safe to do so within public health guidance.

Risks

The risks inherent in the CFPS are greater than would normally be acceptable to Government Ministers. However, Ministers involved in the development of the scheme have acknowledged and agreed to accept the increased risks given the continuing unprecedented threats to the economy posed by the Covid-19 pandemic.

Recommendation

Based upon the above, the economic advice, the business case, and after having weighed the relative economic benefits and risks, the Minister is recommended to:

approve an extension to the CFPS to establish Phase 5 from 1st May 2021 until 30th June 2021;
approve changes to the Guidance for the CPFS Phase 4 as documented in the attached report. These changes will take effect from 1st April 2021 and apply to claims made in respect of March and future months; and
agree that these changes will be funded from unspent allocations previously approved for the CFPS in 2021.

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.

A business case has been recommended by the Investment Appraisal Team (IAT). The revisions to the CFPS Phase 4 as set out in the attached guidance, and extension of the Scheme to establish Phase 4 was agreed by the Competent Authorities Ministers and the Ministers responsible for the CFPS on 31st March 2021.

Given the IAT recommendation and the approval of the Competent Authorities Ministers and Ministers responsible for the CFPS, and based upon the above, the economic advice, the business case, and after having weighed the relative economic benefits and risks, the Treasurer recommends that the Minister agrees the extension of the CPFS to establish Phase 5, and approves the proposed changes to the guidance for CFPS Phase 4.

Following approval of the extension by the Competent Authorities Ministers and the 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 the extension of the CFPS, including the inevitable dilution of the Scheme’s efficiency.

Under delegation from the Principal Accountable Officer the Treasurer appoints the Director General of customer and Local Services as the Accountable Officer for this expenditure allocation and that made by MD-TR-2021-0011.

Resource Implications

This decision is forecast to increase costs for the CFPS by £4.8 million in 2021 under the central scenario. It is expected that these costs can be met from within the £38.9 million that is available for the Scheme in 2021.

Given that expenditure on the CFPS is subject to significant uncertainty owing to its link to the underlying performance of the economy, actual costs may be substantially higher or lower.

Report author : Head of Investment Appraisal	Document date : 1st April 2021
Quality Assurance / Review : Head of Financial Governance	File name and path: L:\Treasury\Sections\Corporate Finance\Ministerial Decisions\DS, WR and SD\2021-0036 - Reserve Funding for CFPS Phase 5\WR - Reserve Funding for CFPS Phase 5.docx
MD sponsor : Treasurer of the States