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Co-Funded Payroll Scheme Phase 3: Approval of the extension

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 31 July 2020

Decision Reference: MD-TR-2020-0100

Decision Summary Title:

Extension of the CFPS - Phase 3

Date of Decision Summary:

31st July 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:

Extension of the CFPS - Phase 3

Date of Written Report:

31st July 2020

Written Report Author:

Head of Investment Appraisal

Written Report :

Public or Exempt?

Public

Subject: Approval of the extension of the Co-Funded Payroll Scheme (CFPS) to establish Phase 3  

Decision(s):

 

The Minister approved an extension to the CFPS to establish Phase 3 from 1st September 2020 until 31st December 2020. It is intended that a further extension from 1st January 2021 to 31st March 2021 will be proposed in the Government Plan 2021-2024.

The Minister also approved changes to the Guidance for the CPFS Phase 2 as documented in the attached report. These changes will take effect from 1st August 2020 and apply to claims made in respect of August and future months.

The Minister instructed the Treasurer of the States not to authorise drawdowns of funding that would exceed a total of £125 million in 2020.

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.

 

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 to extend the scheme until 31st August 2020.

 

This extension was approved by the Council of Ministers on the 30th July 2020. The PAO was consulted on the 29th July 2020.

 

Following approval of the extension by the Council of Ministers, 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.

 

A business case has been appraised by the Investment Appraisal Team and recommended to the Treasurer. Based upon the above, the economic advice, the business case, and after having weighed the relative economic benefits of the options and the respective, relative risks, the Treasurer recommends that the Minister agrees the extension of the CPFS to establish Phase 3, and the proposed changes to the guidance for CFPS Phase 2.

 

Costs intended to be incurred between January and March 2021 will need to be agreed by the States Assembly through the Government Plan 2021-2024.

 

 

Resource Implications:

This decision is forecast to increase costs for the CFPS by between £21 million and £38 million in 2020. It is expected that these costs can be met from within the £138 million that has already been allocated to deliver the CFPS, which the Minister is now limiting to £125 million in 2020.

 

The effect of this decision is to limit spending on the CFPS. The maximum available funding of £138 million allocated by MD-TR-2020-0049 is reduced by £13 million to a revised maximum funding of £125 million in 2020.

 

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: 31st July 2020

 

Date of Decision: 31st July 2020

 

Co-Funded Payroll Scheme Phase 3: Approval of Extension

Treasury and Exchequer

Ministerial Decision Report 

 

 

Reserve Funding for FISCAL STIMULUS PACKAGE: Direct Payments and vouchers

 

  1. Purpose of Report

An extension of the Co-Funded Payroll Scheme (CFPS) to establish Phase 3 and approval of changes to the Guidance for CFPS Phase 2 to take effect for claims made in respect of August and future 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) and approving an additional £99.99 million of expenditure (MD-TR-2020-0047) and approving the transfer of £28 million from the Stabilisation Fund, with associated authority to spend from the General Reserve (MD-TR-2020-0055).

 

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

 

CFPS Phase 3

 

The CPFS was established to support the livelihoods and businesses through the economic consequences brought about by Covid-19. The key aims of the scheme are as follows:
 

  • Support Islanders’ livelihoods, by ensuring employment and allowing workers continue to benefit from a reasonable level of income to avoid hardship during the crisis and preserve demand to support an economic recovery once social distancing and Stay at Home restrictions are lifted.
     
  • To maintain, as far as possible, existing employment relationships so that businesses are able to retain trained and experienced staff. As far as possible, employees should be kept in employment that is as similar as practicable to the situation they were in pre-COVID-19.
  • Along with other economic support measures being taken by the Government, to allow businesses and self-employed individuals a greater chance to remain solvent during COVID-19. This should also allow for businesses to resume normal business activity where appropriate as soon as possible post COVID-19, once restrictions are eased.
  • Ultimately the scheme aims to accelerate the recovery of the economy post COVID-19 by ensuring that businesses and employment income can restart quickly once restrictions are eased. 
  • To support Charities and their work in the community during COVID-19, and their paid employees.

The CFPS has been effective in delivering its intended aims and, as the economy moves into the recovery phase, there is a need to transition to other forms of support for the economy. To that end, the Government announced a package of fiscal stimulus measures on 10th July. Nevertheless, it is important to ensure a smooth transition to optimise government support for the economy. Therefore, in order to maximise the CFPS’ ability to support businesses, employment, livelihoods and, in so doing, promote the Island’s economic recovery, it is proposed that the Scheme is extended until March 2021.

 

To achieve a gradual return to business as usual, from 1st September 2020 the subsidy available will reduce over time as shown in the table below:

 

March End

Sep

Oct

Nov

Dec

Jan

Feb

Mar

Subsidy

60%

60%

40%

40%

30%

30%

20%

Max Payment

1,200

1,200

800

800

600

600

400

 

The current qualifying detriment threshold of a 30% fall in turnover will also decrease to 20% to avoid businesses facing an abrupt exit from the Scheme, and to recognise that this lower threshold still represents significant detriment, which could severely impact upon businesses and employment.

 

In support of the desire transition the economy to a new normal, and in light of low uptake (less than 1%), the Special Exemption Scheme will be withdrawn from September onwards. In order to qualify for the CFPS, employers must therefore contribute the difference between the employee’s wage at the subsidy that is available.

 

The extension of the Scheme from 1st September 2020 until 31st December 2020 will be achieved via this Ministerial Decision. The extension into 2021 will need to be agreed by the States Assembly and will be proposed in the Government Plan 2021-2024.

 

Changes to the Guidance for CPFS Phase 2

 

To improve the operation of the CPFS from August, the following changes to the Scheme guidance are proposed:

 

1)      Replacement employees

 

Under the current guidance, if an employee leaves their employment, a business is unable to claim a subsidy for the employee’s replacement unless that person has been on the ASW register for more than 6 months. In line with the objectives of the Scheme moving to supporting businesses more generally, it is proposed that employers should now be permitted to replace employees provided the replacements are Entitled, Entitled to Work, or were Registered and on another business’ payroll in March. The total number of employees claimed for must not exceed the total employees on the March Schedule.

 

2)      Artificial restrictions on trading

 

As the public health restrictions are eased and fewer businesses face severe restrictions on trading there is an increased risk that businesses will artificially restrict their trading to ensure that they meet the detriment test. Accordingly, a principle will be included within the Scheme guidance that businesses must not artificially restrict revenue generation such as through the manipulation of trading hours. This will also end support for the small number of businesses that have chosen not to open, unless they elect to resume trading.

 

These changes will take effect from 1st August 2020 for claims made in respect of August and future months.

 

Risks

 

The risks inherent in the scheme are greater than would normally be acceptable by Government Ministers. However, Ministers involved in the development of the scheme have acknowledged and agreed to accept the increased risk, based upon the economic advice which identifies the likely substantial economic benefits of the scheme and the continuing unprecedented threats to the economy posed by the Covid -19 pandemic.

 

  1. Recommendation

Based upon the above, the economic advice, the business case, and after having weighed the relative economic benefits of the options and the respective, relative risks, the Minister is recommended to approve the extension of the CPFS to establish Phase 3, and to approve the proposed changes to the guidance for CFPS Phase 2.

In light of the lower forecast costs for the CPFS, the Minister is further recommended to instruct the Treasurer not to authorise drawdowns of funding that would exceed a total of £125 million in 2020.

 

 

  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.

 

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 to extend the scheme until 31st August 2020.

 

This extension was approved by the Council of Ministers on the 30th July 2020. The PAO was consulted on the 29th July 2020.

 

Following approval of the extension by the Council of Ministers, 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.

 

A business case has been appraised by the Investment Appraisal Team and recommended to the Treasurer. On the basis that the Minister for Treasury and Resources and the other Ministers responsible for the Scheme have accepted that an extension of the CFPS will dilute the efficiency of the Scheme and increase the risks associated with it, and on the basis of economic advice that the benefits should outweigh associated risks, the Treasurer recommends that the Minister agrees the extension of the CFPS to establish Phase 3.

 

Costs intended to be incurred between January and March 2021 will need to be agreed by the States Assembly through the Government Plan 2021-2024.

 

  1. Resource Implications

This decision is forecast to increase costs for the CFPS by between £21 million and £38 million in 2020. This will bring total costs in 2020 to between £113 million and £125 million. It is expected that these costs can be met from within the £138 million that has already been allocated to deliver the CFPS.

 

The effect of this decision is to limit spending on the CFPS. The maximum available funding of £138 million allocated by MD-TR-2020-0049 is reduced by £13 million to a revised maximum funding of £125 million in 2020.

 

Report author : Head of Investment Appraisal

Document date : 31st July 2020

Quality Assurance / Review : Head of Financial Governance

File name and path: L:\Treasury\Sections\Corporate Finance\Ministerial Decisions\DS, WR and SD\2020-0100 - Reserve Funding for CFPS Phase 3\WR  - CFPS Phase 3.docx

MD sponsor : Treasurer of the States

 

 

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