P&R makes the case for borrowing £500m.

States spending has shot up and its income streams have been decimated.

Early modelling indicates a requirement of up to £250m. in order to provide immediate liquidity and fund the business support measures, replace income lost, service cash-flow requirements as payments to the States are deferred, and make overdraft facilities available to trading assets like Aurigny to finance losses and support cash-flow.

It wants to be able to borrow a further £250m. to support the economy through the recovery.

Previously the States has only borrowed to support major capital projects that have a guaranteed income stream.

'Our economic recovery and future prosperity will require us to be vigorous and bold,' said P&R vice-president Lyndon Trott.

'This is the right time with the right reasons to look at borrowing, to make sure we can support our community and help it bounce back from a crisis that puts both our health and our economy at risk. We are working hard to prevent the health crisis turning into a deep recession. Governments around the world have the same focus, the difference here is that we cannot print money to the extent seen elsewhere.

'The cost so far to our public purse is expected to be just shy of £200m. this year and this is likely to grow. As such the relevant question for the States this week is not whether we can, or should, borrow up to £500m. to fund our continuing route through this crisis, but rather can we afford not to?'

It has estimated the impact on States finances assuming a 13 week lockdown period.

Its early modelling suggests direct financial support for business for the first three months would have cost £50m.

States revenues will decline by up to £70m. due to substantially lower income tax receipts, fuel duty falling by 75%, document duty being hit due to property sales stalling and investment returns being effected.

Income support payments could be £6m. more than budgeted, while other hardship payments are being funded to the tune of £5m.

Other areas of increased spending, like of PPE equipment, are expected to be covered by unspend balances elsewhere and by using the budget reserve.

'The overall effect on General Revenue in 2020 is currently modelled to be in the range of £122-132m. but there is considerable uncertainty around this figure and further work is being undertaken to review and refine the assumptions, model various scenarios and prepare sensitivity analysis,' P&Rs report says.

'The impact would increase if the business support schemes were extended beyond the current forecast duration of three months either in full or in part with more targeted support of sectors remaining in prolonged lockdown. In addition, there could be a cash-flow delay in the timing of receipts if businesses take advantage of support measures such as deferring commercial rents and TRP.'

Committees have been told to look at their current spending.

Aurigny needs up to £27m. to support its operation, while the airport and harbours largely account for an extra £8m. needed for the trading assets.

Up to £3m. more will be paid out in unemployment and sickness benefits, while at the same time there will be a delay in businesses paying their contributions to the States.

P&R says that there will be a need for government to play a key role in facilitating recovery and exploiting economic opportunities.

'This could include, for example, kick-starting the local construction industry through accelerating the public sector capital investment programme or supporting and encouraging connectivity, both within the island and with the wider world in order to promote our competitiveness, including in areas such as data connectivity and transport links. Whilst the pandemic has had similar impact across the world, the response will undoubtedly be different and it is anticipated that governments who are able to respond swiftly, boldly and imaginatively to initiate recovery will reap benefits and recover economic and financial strength.'

It there wants to be able to borrow up to another £250m. to help the economic recovery.

If the £500m. in borrowing is used, Guernsey would have a government debt of 30%, breaching its own many of its own rules.

P&R also wants to use £100m. from the 'rainy day fund' to fund business support schemes.

It has estimated that the payroll co-funding scheme, where the States will cover 80% of an employee's wage based on minimum wage, will cost £40m. to £45m. for three months.

A £3,000 grant is available to small businesses and the self-employed, which could cost up to £7m.