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Chamber and committees

Finance and Public Administration Committee

Covid-19 Financial support - Scottish Government update

Letter from the Cabinet Secretary for Finance and the Economy to the Convener, 22 December 2021

Dear Kenneth,

Covid-19 Financial Support

Thank you again for the session with the Committee yesterday, where we covered much ground across the 2020-21 to 2022-23 budgets and beyond. We noted the pace of developments linked to COVID-19, and this was duly followed by announcements in the course of the day. I wish to outline some of the underlying detail to continue our transparent approach.

On 15 December, the UK Government announced consequentials of £220 million which was subsequently increased on December 19 to £440 million. Yesterday, the Chancellor announced additional UK-wide funding of £1 billion to support businesses hit by the rise in Covid cases which I welcome. HM Treasury confirmed the associated consequentials of around £80 million are within the £440 million envelope they notified to us earlier this week.

Yet our view is that this funding does not go far enough for business, given the scale of the current situation. Accordingly the First Minister yesterday outlined an enhanced business support package of £375 million (including the initial £100 million announced on 14 December), which incidentally equates to around a £4.6 billion UK equivalent package.

The First Minister also noted in the chamber our view that of the £440 million only around £175 million was effectively additional spending power. In order to fund yesterday’s package as well as supporting the funding of the business and self-isolation support announced on 14 December, we have taken challenging decisions to support the additional spend, by repurposing health consequentials to directly support public health compliance via business restrictions and self-isolation, re-profiling commitments across a wide range of different spending lines, including some on employability and by reducing our expected income in 2022-23 so that it can be deployed in 2021-22. This means that if no further funding is received, our 2022-23 plans will require to be reprioritised accordingly. For 2021-22, I will formally advise of final allocations as part of Spring Budget Revision, the last formal opportunity in the financial year to transfer budgets.

I have also written to the Chief Secretary to the Treasury. I am disappointed by the intention to undertake a reconciliation with the UK Supplementary Estimate consequentials in the new year, with any funding in excess of the consequentials to be repaid. Any negative reconciliation would have a serious impact on our public services and hamper our attempts to recover from the pandemic. I am therefore seeking an urgent Finance Ministers Quadrilateral to help broker a reasonable way through this, and will keep you updated on progress.

I trust this information is useful, and would be happy to follow up as required on any aspect.

Yours sincerely,