Economy and Fair Work Committee
Pre-Budget 2022-23 scrutiny - Covid-19 Financial Support
Letter from the Cabinet Secretary for Finance and Economy, 22 July 2021
Dear Claire,
Thank you for your letter of 28 June regarding the Economy and Fair Work Committee’s consideration of the financial support that has been awarded to businesses by the Scottish Government since the outset of the COVID-19 pandemic
Firstly, let me take this opportunity to congratulate you on your appointment as Convener of the Economy and Fair Work Committee. I look forward to working with you and with the Committee over the coming months as we work towards Scotland’s economic recovery from the devastating impacts from the pandemic.
I welcome the Committee’s focus on the allocation and distribution of the £3.7 billion the Scottish Government has so far committed to supporting businesses impacted by COVID-19 and, in particular, the opportunity to demonstrate the approach that we took to channelling funding towards specific sectors and groups of businesses.
The remainder of this letter responds to the specific questions posed by your letter. Before doing so, I would like to take this opportunity to acknowledge the hugely important role that our partners across the public sector have played in ensuring financial support reaches businesses. The challenges associated with distributing such large quantities of funding to so many different businesses cannot be understated. Despite these challenges, however, our partners right across the public sector including local authorities, enterprise agencies, Visit Scotland and Creative Scotland have engaged with us constructively and in a spirit of collaboration to ensure that thousands of hard-hit businesses across Scotland receive much needed financial support. I am committed to ensuring the Scottish Government builds on this collaborative approach in supporting Scotland’s economic recovery.
I hope you find this information contained in the responses to your specific questions helpful and I look forward to discussing this matter in further detail with the Committee at a future date.
The Committee would welcome, if possible, details of Covid-19 related business support provided by sector and an aggregate overview of all spend by local authority
The framing of the first question posed by the Committee clearly recognises the challenges inherent in capturing and curating data associated with delivering such significant volumes of financial support to the many thousands of businesses that have been impacted by the Covid-19 pandemic. To ensure the targeting of financial support was both proportionate and effective, the Scottish Government developed a number of different schemes for the purposes of channelling support towards specific groups of businesses. In most cases these schemes were aimed at a particular sector although there were some funds that were either sector agnostic or where eligibility was predicated on another aspect of the business i.e. its strategic importance (i.e. the Pivotal Enterprise Resilience Fund) or to support those groups ineligible for UK Government support schemes (i.e. the Newly Self-Employed Hardship Fund).
The table at Annex A to this letter provides the Committee with an indicative breakdown of total spend across a number of key economic sectors including Retail, Hospitality and Leisure; Culture and Creative industries and Tourism amongst others. This table also includes details of cross-sectoral funds that have been launched by the Scottish Government. Clearly, each of the awards paid out through these schemes will have been given to a business that inhabits a certain sector but we have not yet disaggregated the data from these funds sectorally and so I would ask the Committee to bear this in mind when reviewing the table. I also wish to draw your attention to the assignation of the Small Business Grant and the Retail, Hospitality and Leisure Grant scheme delivered in March 2020. At present we are unable to disaggregate spending across these two funds by sector but we have classified them under Retail, Hospitality and Leisure given that much of the funding will have gone to businesses in these sectors.
There are similar challenges in providing the Committee with a breakdown of the business support delivered by local authority area. While a number of the funds were administered on our behalf by local authorities, a considerable portion were administered by regionally or nationally focused public bodies including the enterprise agencies, Visit Scotland and Creative Scotland amongst others. We have not yet interrogated the award level data from public body delivered funds sufficiently to provide a breakdown of all the financial support that we have provided by local authority area. The table at Annex B does, however, provide details of spending by area for those schemes that were administered by local authorities to provide the Committee with a flavour of how business support spending to date has been allocated across Scotland.
I will share updated information with the Committee on level of spend by both sector and Local Authority area once this information has been disaggregated for all of the Covid-19 Business Support schemes.
For clarity, the figures contained within Annexes A and B do not include the £965 million that was provided in the form of Non-Domestic Rates Relief.
We regularly publish management information on spend against our business support funding schemes. Previous and forthcoming publications can be found at the following link. Coronavirus (COVID-19): business support funding statistics - gov.scot (www.gov.scot)
What business support funding remains to be allocated?
There is currently no business support funding that remains to be allocated. Indeed, the financial support we have made available to businesses has exceeded the value of business support consequentials to date. Within the original 2021-22 portfolio budget, funding of £460 million was allocated to the Finance and the Economy portfolio for the purposes of directing additional funding to businesses impacted by Covid-19. This has been fully utilised to fund the business support schemes awarded this financial year including the Strategic Framework Business Fund Transition Payment and Business Restart Grant as well as Localised Restrictions Funds such as those introduced for businesses in Moray and Glasgow. Further support has been announced in addition to this including for the Taxi and Private Hire Vehicle Drivers and Operators. These allocations will be formally set out at Autumn Budget Revision.
Has the funding been oversubscribed or are some specific funds undersubscribed?
The majority of the financial support schemes launched to date have been demand- led, that is to say that rather than delivering funding on a first come first-served basis, the amount of support we have provided has been responsive to the need within the business community. For the purposes of planning, it has been necessary to estimate likely pressures on a specific scheme using the latest data on number of businesses in each sector and to allocate an appropriate level of funding in order to service anticipated demand on the fund. The level of funding subsequently paid out was determined by the level of eligible applicants, which may have been lower or higher than the original estimated budget, once applications were processed. Whilst there were funds where the level of demand was higher than anticipated, additional resources were made available to ensure all eligible applicants received the financial support that they were entitled to, as was the case with the Mobile and Home-Based Close Contact Services Support Fund where we committed an additional £5 million on top of the budget allocated in order to meet demand. Equally, in cases where demand was lower than expected we have worked with delivery partners to improve awareness of the fund to elicit applications from eligible businesses, for example, the Taxi & Private Hire Vehicle Driver Fund. Where underspends have occurred in relation to specific funds these have been recycled into other business support schemes.
How much of the £3.6 billion business support made available was allocated from Covid-19 Barnett consequentials? Are there Barnett consequentials related to business support yet to be allocated?
Our latest statistics demonstrate that, as at 25 June 2021, businesses have directly benefitted from more than £3.7 billion in support. All of the consequential funding attributed to Covid-19 business support has been fully allocated and used to fund financial support to businesses since the start of the pandemic. As noted above there are no further consequentials related to business support yet to be allocated.
What analysis has been carried out on the effectiveness of the Covid-19 business support funding provided over the past year to inform the forthcoming draft budget?
The Office of the Chief Economic Adviser (OCEA) is currently engaged in an ongoing programme of work to monitor and evaluate Covid-19 support measures available to businesses in Scotland. OCEA produced an interim evaluation in Summer 2020 which covered schemes in response to the first lockdown, and is completing a second interim report to evaluate additional support covering the period March 2020 to June 2021. A full evaluation of the whole support package is expected to be undertaken later this year that will involve a survey of beneficiaries of Covid-19 support. The outcome of that evaluation will be published and I will be happy to update the Committee in due course.
The aim of the programme of evaluation work is to assess the short, medium and longer-term outcomes of the business support package in Scotland and its impact on the Scottish economy. The interim evaluations draw on currently available management information data, survey data, business intelligence and modelling work undertaken by the OCEA to better understand the impact of the support package and the extent to which the measures have helped businesses survive and maintain employment.
We have also utilised the Office of National Statistics Business Insights and Conditions Survey which runs every two weeks to produce weighted estimates for businesses with a presence in Scotland and that have 10 or more employees. This includes analysis on both UK and SG schemes applied for and received including a sectoral breakdown. The latest tables showing trends over time can be found here BICS weighted Scotland estimates: data to wave 33 - gov.scot (www.gov.scot).
Going forward, have contingency funds been set aside for future Covid-19 business support for this forthcoming financial year should further restrictions need to be imposed on businesses?
In April, we provided grants to help businesses re-open progressively. Businesses in receipt of the Strategic Framework Business Fund automatically received a Restart Grant. Retail businesses were eligible for grants of up to £7,500 and hospitality and leisure businesses were eligible for grants of up to £19,500. Additionally, accommodation providers who pay Council Tax rather than Non-Domestic Rates, were also eligible for a £9,000 grant under this scheme. In total, £444.8 million was paid out to eligible businesses through the Business Restart Grants. Since distributing the Restart Grants we have made a further £22.7 million available specifically for the purposes of supporting those businesses impacted by the extension of restrictions beyond the staging posts set out in the Routemap. Furthermore, we have also extended 100% non-domestic rates relief for all retail, leisure, aviation and hospitality premises for all of 2021-22 and, in line with the 100 days manifesto commitment, have allocated up to £62 million to provide further financial support to the taxi and private hire vehicle sector which includes a further £1,500 to licensed taxi drivers.
We recognise, however, that the pandemic will continue to present significant financial challenges for businesses for the foreseeable future and, as such, I continue to press the UK Government for further consequentials to ensure that businesses are supported through the legacy of COVID-19 Restrictions.
In addition to the £3.6 billion made available for business support, what funds have been allocated for economic recovery? How much of this funding has been spent to date and how will this recovery funding be targeted by sector and region?
Since March 2020, we have committed more than £1.7 billion to drive recovery across the Scottish economy. This includes funding to bring capital investment as part of a construction-led stimulus, investment in our digital recovery, support for Scotland’s universities and investment in a just transition to net zero, as well as significant funding to maintain and prepare the country’s transport infrastructure for our exit from COVID restrictions.
Work has begun on the development of a 10 year strategy for Economic Transformation, with the recent announcement of the 17 members of the Advisory Council on Economic Transformation. This work, allied with the 2021-22 Programme for Government and the additional activity to deliver support for COVID Recovery across the rest of Government, will see support targeted to the areas of greatest need and impact, delivering a green and just wellbeing economy, building on Scotland’s current strengths and future economic opportunities.
The majority of the funding allocated to economic recovery activity is anticipated to be spent by the end of the 2021-22 financial year with the exception of those programmes which are set out as multiyear commitments – including:
- the £30m national Islands Plan, which will run from 2021 to 2026; and,
- the £25m fund for low carbon heat and energy projects as part of Clyde Mission which is also allocated across 2021-26.
In terms of targeting, most of the funds are intended to have national coverage, such as the support for Towns and Business Improvement Districts or the investment in the Scotland Loves Local campaigns to promote town centre and online businesses across the country. Similarly, the £125 million funding invested in employability programmes are available to people right across the country and the Young Person’s guarantee continues to provide opportunities for work, education or training for every 16 to 24-year-old in Scotland.
Since the onset of the pandemic, what learning has there been around communicating and engaging with the business base?
The Scottish Government and business have long worked closely together towards our shared economic ambitions. One of the core strengths of the response to the COVID-19 crisis in Scotland has been the boost in collaborative efforts by businesses in Scotland and the public sector and going forward we remain committed to developing new partnerships and strengthening existing ones. Since the very outset of the pandemic the Scottish Government has engaged extensively and worked collaboratively with businesses and their representative organisations, and continue to have regular meaningful engagement with business leaders on a range of priority issues, including economic recovery and business support.
The value of working closely with business has been demonstrated in developing Covid-19 sectoral guidance and reinforced by Industry Leadership Groups which have played an important role in developing sectoral recovery plans that are tailored to specific sectoral needs. The sectoral guidance work has taken place alongside weekly Director General Economy-led engagement with the main cross-sectoral business representative organisations and a few key sectors most impacted by Covid-19. This senior official-led engagement has included reflection on what has worked well and where there is scope to improve the SG-business relationship.
In addition, we engaged closely with the relevant representative bodies when developing the policy and eligibility criteria for many of our business support funds. For example, when developing both the Taxi and Private Hire Driver Support Fund and subsequent Taxi and Private Hire Driver and Operator Fund, officials engaged with the Scottish Taxi Federation, Unite Union, Scottish Chambers of Commerce and Scottish Association for Private Hire.
It is Scotland’s businesses who will drive the economic recovery which is the foundation for our wider wellbeing ambitions and, as such, we have now established a Council for Economic Transformation to guide the development of our 10 year Economic Transformation Strategy which will set out the steps to create the best conditions for entrepreneurs and business to flourish. Several Council members are successful business leaders and I am encouraging all businesses to contribute to the national endeavour of economic recovery and transformation, in recognition of the value early and meaningful business engagement brings to policy development.
Yours Sincerely
Kate Forbes