Independent economic advisers say it's right for the government to borrow to support the economy, while there is a lot of spare capacity.

Ministers have set out plans to borrow more than £300million because of the unprecedented impact of the coronavirus pandemic on finances.

The Fiscal Policy Panel has published advice ahead of the government plan in December - saying flexibility is needed to make sure the budget can be balanced when the economy has recovered.

Chair of the panel, Dame Kate Barker, says it's really important to keep in at least some contact with the labour market, so Jersey can have a reasonably quick recovery when the crisis is over.

"We shouldn't be under any delusions - in the long run, this crisis and this pandemic is going to leave us all poorer.

"But the more we can do today to maintain economic linkages and keep economies going, the easier it will be to come out of this pandemic with reasonably strong economies and not to have to do much later on in terms of expenditure cutting or revenue raising."

£100 million is being set aside for the ongoing response to the pandemic in 2021 alone  - including testing, track and trace and a vaccine rollout when one is available.

The new Government Plan targets savings of £120 million by 2024, which is what the FPP advised, but the government has been told to plan now how their ideas should change as the economy either strengthens or weakens in the coming months.

Dame Barker says it may well be appropriate to speed up capital projects if the economy is weakening, or slowing them down if it's recovering well.

"We wouldn't want the government to abandon things that were really necessary, but it can certainly slow down capital projects.

"Equally, if the economy is really doing less well, some of the schemes that you have at the moment could end up having to be extended, if things don't go to the plan.

"On the other hand, if the economy is stronger than we expect, you could start to think about revenue measures sooner."

• The panel has published a series of recommendations, which include:
• Considering options for revenue-raising in the future
• The next government plan including a clear estimate of the size of the structural deficit and what will be done to try and close it
• It not being advisable to transfer any money to the Strategic Reserve over this Government Plan period, because of the pressure on the Consolidated Fund.
• Not drawing on the Strategic reserve, unless the Covid-19 crisis has an even more significant impact

Treasury Minister, Deputy Susie Pinel, has welcomed the report.

"I am grateful to the Fiscal Policy Panel for their clear and detailed advice, which they have presented to States Members. The Panel has advised that it is appropriate to run deficits in the near future and seek to close the deficit over time. This is the approach that the Council of Ministers have adopted in the Government Plan and follows previous advice from the Panel.  

"The report contains a number of recommendations that I will consider with my ministerial colleagues. The Panel has stressed that we will need to manage our capital programme carefully to maximise the benefit for the Island and also strengthen our programme to deliver efficiencies and other difficult measures to close the deficit.

"In financing the deficit, the FPP has advised that it would be preferable to borrow to pay for the health and economic impacts of the Covid-19 global pandemic rather than draw down on our reserves. It is the strength of Jersey's public finances and our commitment to balancing the books that provide us with this flexibility in such difficult times.

"This is our second Government Plan, and it highlights the measures we’ve had to take as we responded to the pandemic, while also protecting the Island’s future.

"We’ve had to re-examine the delivery timescales for some projects, re-prioritise how we use our resources, and re-think how we continue to invest in our Island while continuing to support Islanders’ jobs, livelihoods and the local economy."