South Hill sale could help reduce £400m covid debt

Wednesday 14 October 2020

Any profit from selling off public assets like its offices on South Hill should be ringfenced to reduce the Government’s £395m debt, caused by its response to the Covid pandemic, the Chief Minister has said.

However, Senator John Le Fondré ruled out putting JT and other publicly owned businesses up for sale.

Attending a Corporate Services Scrutiny Panel hearing focusing on the recently published Government Plan - a document setting out how taxpayers’ money, and debt, will be spent from next year until 2024 - Senator Le Fondré stressed that his priority was to pay back borrowed money as soon as possible.

“Crucial to our borrowing is the rules that have been set,” he said. “Although there are no capital receipts [cash from the sale of an asset] included the Government Plan, we might get a return on, say, development on South Hill. Does it get wrapped up in normal government spend? No, you ringfence it to repay debt in the future.

“If our income is better than we were expecting, any capital receipts, and any efficiencies we identify, also go into a fund to repay the debt.

“We have to be serious about paying off our debt; we don’t want to hamper generations to come.”

The Chief Minister, however, defended the Government’s decision - recommended by its Fiscal Policy Panel (FPP) of economic advisers - to pay the unexpected £400m cost of covid by borrowing rather than by dipping into the £900m Strategic Reserve, which is often referred to as the 'Rainy Day Fund'.

“With covid, there has been both a health and short-term economic impact. The 2008 financial crisis didn’t hit here until 2011 and, with covid, there will also be a time lag around the world before it fully impacts Jersey. To use a sporting analogy, we are only at half-time in the football match. 

“If we were to use half or a third of the Strategic Reserve to clear the debt when interest rates are very low, we wouldn’t have recourse to that later.

“So the advice of the FPP is keep the reserves reasonably intact for a future contingency and use borrowing instead. I am comfortable with that on the basis that we have rules around how we repay.”

Pictured: Chief Minister John Le Fondré launched the 2021-24 Government Plan this week.

“However, we are not retaining our investments to retain our credit rating but how we manage the debt will affect that rating. This is why we are keeping the investments in our back pocket as a reserve for unknown future shocks a few years down the line.”

The Chief Minister also defended the proposal to pool the 2019 taxes of the 55,000 islanders currently paying their tax a year in arrears. He hopes the States Assembly will back his plan next month to move everyone on a current-year basis. 

“It is a neat plan because the total amount more or less equates to the money we will borrow to pay for our covid response. However, if the Assembly doesn’t support it, we will have to repay our debts by another way, and that will have to be by a permanent increase in taxation.”

The Government Plan also includes a £371m capital programme over the next four years.