Allocation of Discretionary Fiscal Stimulus Funding to the Resources Department (Jersey Property Holdings) in respect of a grant award to Jersey Hospice Care.
14 January 2010
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 Stabilization Fund.
The advice received from the FPP in March 2009 (and re-confirmed in November 2009) stated that discretionary policy actions that are truly counter cyclical and meet certain criteria are necessary. The key criteria are as follows:
- Timely;
- Targeted; and
- Temporary
In addition, “business as usual” requirements and financial directions apply to economic stimulus initiatives, particularly value for money and ensuring intrinsic value to the States and the Island.
Since the approval of P55 on 19 May 2009, a Steering Group has been, on behalf of the Treasury and Resources Minister, assessing and overseeing a programme of specific projects 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.
As recommended by the Corporate Services Scrutiny Panel the programme of projects includes schemes to be undertaken by both States departments and non-States organizations.
Jersey Hospice Care (the “Hospice”) is an independent charity which provides palliative care for terminally ill patients, primarily with cancer and neurological disease. It does not receive any funding from the States of Jersey, although it delivers a service that is aligned with the strategic objectives of the States, and one that the public sector would have to deliver in the absence of the Jersey Hospice facility. It also does not receive any funding from the Marie Curie Foundation or Macmillan Cancer Nursing. Its running costs are necessarily high, and currently met through fundraising efforts and generosity of islanders.
Jersey Property Holdings (JPH) has sponsored a bid from the Hospice for a grant from the fiscal stimulus funds for the first two phases of a 7 phase project to extend and modernize the facilities at its Clarkson House site, which will give a significant boost to the construction industry by way of releasing project phases which total £5.2m and will not, in the absence of matched funding from the fiscal stimulus fund, take place at this time.
The first two phases are to be carried out within the required time frames for the Fiscal Stimulus, therefore meeting the timely objective, and are:
- Phase A1 – North car park and new entrance (January 2010 to Sept 2010
- Phase A2 – Double the capacity of the Inpatient Unit ( Jul 2010 to Dec 2011)
Fiscal Stimulus Rationale
This bid was initially evaluated in July 2009. It scored highly against the Fiscal Stimulus evaluation criteria – ie the 3 T’s - “timely, targeted, and temporary” and also value for money, economic impact and achievability.
- Timely – a significant proportion of the stimulus will take effect in 2010, and will begin during the period now predicted to be the most affected by the economic downturn.
The need for projects which target the construction industry at this time is supported in the Jersey Business Tendency Survey (published by the Statistics Unit), which shows that the weighted net balance of respondents in the sector reported that they were working below capacity as at September 2009, with negative business optimism and negative indicators in respect of new business. The latest results as at December 2009, which were published yesterday, demonstrate a situation that has worsened significantly in those areas, indicating that the construction sector is becoming increasingly dependent on this type of discretionary government intervention as a result of the economic downturn.
- Targeted – Fiscal Stimulus funding will be matched by Jersey Hospice care ie a £2.6m investment from the States of Jersey will result in an additional £5.2m plus of expenditure in the local construction industry and will provide certainty of income for the successful contractors for 24 months, thereby contributing to job security throughout the anticipated period of the economic downturn. The expansion and modernization of the inpatient unit would not go ahead at this time without Fiscal Stimulus Funding but would be deferred until Jersey Hospice Care had raised the full sum.
- Temporary – there will be no recurring costs for the States of Jersey
- Value for Money - The Fiscal Stimulus Steering Group has examined the project in some detail and is satisfied that the scheme as proposed represents good value for money.
The Hospice Board undertook a full option appraisal, including moving the entire Hospice permanently or knocking down the existing building and starting again for which it has sought assistance from the States in the past in identifying potential sites, without a clear solution being available at this time. The option of a 7 phase extension and modernization over a period was agreed to be the best available solution for meeting the predicted increase in demand for Hospice services over the next 5 to 10 years, which are associated with the ageing population.
The new facility will increase the capacity of the inpatient unit by 100% which will be required by 2016 to service the ageing population. The day centre will also be a far better equipped facility that has the ability to provide the service to a larger number of clients. At present the day service is open only 3 days a week and the new facility would provide the scope to change this. Therefore, the spend will add a significant capacity to the Hospice as whole.
Without any stimulus funding, the current strategy would be to complete enabling works on the car park and then stop for an indefinite period, pending fundraising.
The costs have been prepared by Quantity Surveyors, are therefore considered to represent a reasonable estimate.
It is understood that the proposed design is the cheapest option (as determined by competitive tender) and have been scaled back during the design phase in order to make the plans a lower cost option.
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- Economic impact - The project will utilise a number of local contractors, sub-contractors and supporting trades people and has a relatively low off island spend on materials.
- Achievability – the project structures have been thoroughly assessed and will be supported by professionals from Jersey Property Holdings who are sponsors of the bid.
With these considerations in mind, provisional “amber light” approval for a capped contribution of up to 50% the project costs of these was given in MD-TR-2009-0134 dated 30 July 2009. Over the past 5 months, the Fiscal Stimulus Programme Manager and Jersey Property Holdings have worked closely with the Hospice in order to work up the bid and satisfy some specific additional conditions prior to “green light” approval. The conditions were:
- A suitable governance structure must be put in place and the handling of the project must comply with Financial Directions 5.6 and 5.7;
- A legal agreement must be in place in respect of the grant conditions and must satisfy Financial Direction 5.4, especially in relation to the creation of an asset;
- Hospice must submit proof that they can and will match the contribution of the States of Jersey as the liabilities are incurred;
- Hospice must accept that the grant is capped and accept the risk of budget overspends;
- Timelines must still be in keeping with Fiscal Stimulus at the point of mobilisation.
The Fiscal Stimulus Steering Group has been informed of developments since the provisional “amber light” was approved and undertook a detailed review and discussion of the Programme Manager’s report at its meeting of 21 December 2009, following which it is satisfied that the conditions have now been met and the project is ready to go.
Recommendation
The Fiscal Stimulus Steering Group has reviewed latest cost estimates and recommends that a sum of £2.6m is allocated to Jersey Property Holdings to allow them to make grant payments on a matched funding basis to Jersey Hospice Care to enable them to carry out the project outlined above. The project will continue to be centrally monitored to ensure that the conditions of the grant are met.
The provisional timing for transfer of grant funds to Jersey Property Holdings is:
Year ending 31 December 2010 £1.1m
Year ending 31 December 2011 £1.5m
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