The Covid-19 outbreak has required an unprecedented response from the Government. It has focused primarily on the health of our citizens but also on the needs of our economy in response to the significant steps that we have taken to keep people safe. That has meant that significant additional resources have been deployed, or redeployed, from the budget that the Parliament passed in March.
Our action to date has been swift and targeted. We committed early on to pass on all health and social care consequentials, which are currently estimated at £620 million, including those for hospices, to support our front-line services. We launched a £350 million package to support welfare and wellbeing. Partly from that, we have provided an extra £175 million for local government, and we have underwritten integration authorities’ costs in order to reduce delayed discharge.
Within days of the outbreak, we committed £320 million to a package of small business grants and sector-targeted rates reliefs, and then we expanded that into a £2.3 billion business support package. That has removed this year’s business rates liability for retail, leisure, hospitality and aviation, and for all other businesses it has in effect removed the inflationary increase in the poundage. It has offered £1.3 billion in grants for small businesses and for retail, leisure and hospitality, and now we have added a £100 million fund to support the newly self-employed and small and medium-sized enterprises, addressing gaps in United Kingdom Government provision.
The scale of the challenge required us to move quickly. Therefore, I feel that it is important to have the opportunity to update Parliament on the budget implications of the outbreak, and of the actions that the Scottish Government is taking to protect the interests of Scotland’s people, communities and businesses. I will provide regular updates on our financial approach to Parliament and the Scottish Fiscal Commission, and I will provide detail later this month, for Parliament’s approval, of an early summer budget revision.
Our health and care services are at the front line of the efforts to tackle Covid-19, and we are working closely with the UK Government to ensure that all additional costs are fully funded. We are providing additional funding for national health service boards and integration authorities, and we are responding to the urgent need to continue to ensure that front-line workers have the appropriate personal protective equipment. Along with my colleagues in Wales and Northern Ireland, we are seeking clarification from the Treasury that our committed PPE spend to date will be covered by Barnett consequentials relating to spend by NHS England and for the social care sector. As the Cabinet Secretary for Health and Sport indicated last week, we have provided a direct delivery of PPE to care homes and have worked with local partners to significantly improve the operation of local PPE hubs.
On the economy, I am proud that we are delivering a strong package of support worth around £2.3 billion for businesses in Scotland. We have provided £50 million to effectively freeze the non-domestic rates poundage at 2019-20 levels, and we are the only country in the UK to do so. We have committed £824 million to provide 100 per cent rates relief to properties in the retail, hospitality, leisure and aviation sectors, and we are the only part of the UK to support the aviation sector in that way. We have made £1.3 billion of support available through two grant schemes for small businesses and for retail, hospitality and leisure. We estimate that around 3,500 properties in the broader economy will benefit from a £7,500 grant in Scotland; their equivalents will receive nothing in England.
I am delighted that on 30 April the Scottish Government opened applications for a £100 million package of additional grant support for small and medium-sized businesses and newly self-employed people. Today marks the opening of the second phase of our original business grants funding scheme, which will relax the restriction on multiple properties.
Unfortunately, we do not have the resources to protect every single business from the economic damage of Covid-19. However, by last Tuesday—a week ago—over £526 million of grants had been paid out to businesses, and I thank local authorities for mobilising their resources so quickly to get those grants out.
The £350 million package of communities funding that was announced by the Scottish Government on 18 March, in advance of the UK Government’s announcement of support for local government, ensures that local authorities, community groups and the third sector are able to support people and communities that are affected by Covid-19. Since its launch, we have already committed over £182 million from the package across various funding streams. Over £100 million has been allocated to local authorities through our £50 million hardship fund, an increase of £22 million to the Scottish welfare fund and a £30 million food fund. Over 160,000 free school meals are being distributed each day by local authorities, and the funding for those is supported by that investment.
We have committed considerable other investment to charities and community organisations. To date, we have provided significant additional resources and flexibilities to local government, including committing £175.6 million of direct funding and further flexibility, including de-ring-fencing grants. We will also provide additional support for health and social care through integration joint boards. The Scottish Government had already committed £175.6 million to local government before we had an indication that the UK Government would provide us with additional consequentials for local government, and in the past week or so, we have received an indication of £155 million of consequentials from local government spending in England. That money will be available to local government in full, but in order to make decisions on how it should be distributed among councils to top up the original £175.6 million, I need details from the Convention of Scottish Local Authorities on the funding pressures that its members are facing so that the money can be spent fairly on the areas of greatest need.
This continues to be an incredibly difficult time for people across the country and my sympathy is with every family affected and with those touched by every life lost. That is why ensuring that Scotland has the support that it requires to deal with Covid-19 and to recover from its effects continues to be the top priority for the Government. Our actions have been welcomed by the private and third sectors alike and are making a real difference to the lives of people in Scotland.
I would like us to do more, but we are constrained—financially and through our limited devolved powers. We currently anticipate an estimated £3.5 billion in Barnett consequentials this year to support the Covid-19 response. That funding is welcome, and I place on record the constructive conversations that I have had with my counterparts in the Treasury. We remain committed to ensuring that every penny at our disposal will be spent on safeguarding Scotland’s interests, but it does not cover the need. I will continue to engage with the Treasury to ensure that Scotland’s NHS and businesses get the funding that they need.
That is the only source of additional funding that is available to us without appropriate borrowing powers, but nobody can argue that it reflects the full magnitude of what we have needed, and will continue to need, to face this unprecedented situation. Other Governments are free to borrow to fund their Covid-19 response, but we have no powers to do that, given the unnecessary restrictions that are imposed on our borrowing powers by the fiscal framework. It is one of the remarkable aspects of the fiscal framework that Scotland’s national Government cannot borrow in the way that Scottish local governments can.
The longer-term health and economic impacts of Covid-19 in different parts of the UK remain uncertain. It is important that Scotland’s public finances are not exposed to undue risk on the basis of circumstances outwith our control. We will continue to engage with the UK Government—as we have been doing—to make sure that that does not happen. The UK Government must surely now recognise the fundamental flaws that are inherent in the fiscal framework and must permit further flexibility to allow us to respond to the crisis. For example, I have asked the UK Government to guarantee that the Barnett consequentials that have been notified thus far are not subsequently reduced, thereby clawing back money from the Scottish budget at a later date.
The inherent uncertainties of the fiscal framework are well documented and have been much debated here. If that was true before the health and economic crises, it is even more accurate now. Putting party differences to one side, I hope that there will be unity in Parliament on the importance of managing our budget position with additional fiscal flexibilities, through borrowing, guaranteed consequentials and managing future reconciliations.
Fairness and transparency are essential here and also sit at the core of Scottish Government tax policy. We recognise the challenges that are presented by tax avoidance behaviours and remain vigilant, particularly regarding the financial assistance schemes that have been announced by both the Scottish and the UK Governments.
To even begin to think radically about big responses to big issues, or about ideas such as a universal basic income, we need enhanced taxation and other powers. We will continue to make that case.
We have published our overarching framework for decision making, which describes the approach that the Scottish Government will take to the initial transition out of the current lockdown arrangements. We will keep that approach under review.
Although it is hard to be precise about future impacts, the legacy of Covid-19 will last for a considerable time. There will be a continuing public health response. There will be changes within society—in the way people and businesses interact with each other and to models of service delivery—as we look to restart and to recover the economy.
As the framework notes, before this crisis we were focused on making Scotland a greener, fairer and more prosperous country. Although that has not changed, our starting point has. We will work with, and will all learn from, Scotland’s private, third and public sectors and from Governments around the world.
I want to continue to invest to support Scotland. For the avoidance of doubt, I say that the recovery will not and should not be a time for austerity. It is essential that we take the opportunity of recovery and think radically, embracing digital technologies and low-carbon reforms. To do that, we need to think long term, we need to work across party lines and we need the powers to invest in our future.
In the past few weeks, we have seen businesses across Scotland repurpose to deliver new products and services. I am proud that many have pivoted their operations to deliver support for the NHS supply chain, thereby saving jobs and lives. Through necessity, we have seen sectors embrace new technologies and innovation at a rate and scale that would ordinarily have taken years.
The Scottish Government must play its role in maintaining that speed and momentum, moving with pace towards a new high-tech, low-carbon economy. To realise that vision, we need to catalyse our most innovative and emerging sectors, ensuring that they fulfil their full potential as economic propositions in their own right and as sources of innovation for our wider economy.
I am therefore pleased to announce that, from next week, Mark Logan—a well-known name—will lead a short-life review of the Scottish tech ecosystem. He brings a wealth of experience, accumulated through 25 successful years in building Scottish tech start-ups, culminating in the success of Skyscanner, one of the most significant European tech unicorns. I have been clear with Mr Logan that we are looking for clear, ambitious and deliverable proposals that allow us to seize the opportunities that economic recovery present. He is passionate about creating an ecosystem that provides opportunities for a new generation of tech talent, and I look forward to receiving his recommendations.
That the fiscal challenges from Covid-19 are significant is beyond doubt, but our priority must continue to be protecting lives and supporting the economy through this turbulent period. In Scotland, our recovery and future renewal will be guided by our long-term vision of investing in an inclusive, sustainable, wellbeing economy. How we design and deliver our recovery can help us make progress towards that vision.
We will recover, and the Scottish Government is determined that Scotland will emerge stronger, with a fairer and more sustainable economy, with opportunities for all.