Covid in Scotland: No ‘new money’ for firms in lockdown
- Published
The Scottish government says it is "surprised and disappointed" that a £4.6bn UK support scheme to help firms in lockdown has no new money for Scotland.
On Tuesday the chancellor revealed a funding package to help businesses forced to close as a result of the new restrictions.
It includes one-off grants of up to £9,000 for retail and hospitality firms, depending on their size. Scotland was initially expected to get £375m under the scheme.
However, it said it later learned the funding was part of cash already guaranteed by the UK government to the devolved administrations under the Barnett Formula, which is expected to total £8.6bn for Scotland in this financial year.
A Treasury source indicated the cash was likely to come through in a future tranche of guaranteed funds.
Just when you thought the Barnett Formula couldn't become more complicated: it has, due to Covid.
The funding mechanism that links each spending announcement in Whitehall to block grants for Holyrood, as well as Stormont and Cardiff Bay, used to mean a fixed share would be added.
But because so much is being added, and some of it is demand-led (meaning it's open-ended), it's not clear how much should be added. The Treasury can borrow to meet any unexpected surge in demand, but devolved administrations cannot.
Funding guarantee
So the Treasury is giving a funding guarantee this year, in tranches. But it's not making clear which funds for England apply to which tranche, and how much.
Some of the English funding is found from other, underspent Whitehall budgets, in which case there won't be any that gets added to the devolved block grants.
That's why there's confusion: the chancellor says devolved administrations "will receive additional funds as a result of (his) announcements in the usual manner".
But there is no "usual manner" any more, leaving Scottish ministers scratching their heads to see what has been allocated, and what more they can expect.
Until they figure that out, Scottish businesses may have to wait a while to see if £375m of badly-needed support grants come their way.
Scottish retailers and small firms called for the funding to be targeted at firms hardest hit by the lockdown.
The new lockdown extends the length of time non-essential shops are forced to close from mid-January to 1 February.
The Scottish Retail Consortium (SRC), which described the latest lockdown as "unsettling", has estimated its members will lose as much as £675m by then.
SRC director David Lonsdale said it was "vital" for a proportion of the devolved funding to be made available for businesses which will continue to be closed as a result of the new restrictions.
'Early clarity'
He called on Finance Secretary Kate Forbes to provide "early clarity" on forthcoming support.
"In England these funds will be directed at retail, hospitality, and leisure businesses forced to close down," he said.
"Whilst the mechanisms of support may well be different here - and the Scottish government has already laid out some support - it's fair and appropriate these new funds are used to support the same types of firms in Scotland."
Andrew McRae, from the Federation of Small Businesses (FSB), said the cash injection could help "a share of Scottish firms" survive until the vaccine is rolled out.
He said: "The Scottish government must ensure this new funding reaches businesses before the end of January.
"The new £375m should be split between cash grants for smaller property based firms, and extra help for non-premises based operators that have had little or no help so far."
Scottish Chambers of Commerce chief executive Liz Cameron said the additional business support was "needed and to be welcomed" but added that it did not go far enough to mitigate the costs of shutting down businesses.
"At a time when employees are anxious about their jobs and business owners are struggling to plan ahead, with cash running out, we ask that the Scottish government allocate every penny of this additional funding to supporting businesses and saving our jobs," she said.
Responding to the chancellor's announcement, a Scottish government spokesman said the £375m was money that had already been guaranteed by the Treasury under the Barnett consequentials, and was therefore not new.
'Surprised and disappointed'
In a statement, Finance Secretary Kate Forbes said the Scottish government was "both surprised and disappointed" that the additional funding for businesses in England would not generate further new funding for the the devolved administrations.
"We fully understand that while the tight new restrictions now in force are necessary to slow spread of the virus, they represent another blow for businesses," she said.
"That is why we have allocated £570m since October to helping businesses, and this sum will rise due to the number of new businesses eligible for support under the latest lockdown restrictions."
The UK government's Scottish Secretary Alister Jack conceded the £375m was not new, but urged the Scottish government to use the £8.6bn made available from Westminster to support businesses north of the border.
He said: "The chancellor has set out additional support for businesses in England.
"We hope the Scottish government uses some of the £8.6bn we have provided to support struggling Scottish businesses similarly."
- Published6 January 2021
- Published5 January 2021
