Scotland's Economy

Scotland needs more financial powers to manage COVID-19

June 9, 2020 by No Comments | Category Finance

by Finance Secretary Kate Forbes

The coronavirus pandemic is the greatest health and economic challenge of our lifetimes.

It has required an unprecedented response from government to ensure our NHS has the capacity and equipment needed to respond to the health crisis and to help businesses manage the economic impact.

Looking ahead, our economic focus is going to gradually shift from keeping businesses afloat to equipping them for the post-COVID world.

I do not underestimate the challenge but I also see opportunities, for instance to speed up digitisation, enhance our tech sector and develop the green economy. We should grasp the chance to emerge from the tragedy of COVID-19 with a modern, sustainable economy that works better for everyone.

As you would expect, the funding involved is significant – £4bn committed so far – and on Friday I will outline to MSPs the ongoing impact of the pandemic on the Scottish Government’s finances.

Our priority has been, and remains, to control the virus, save lives and ensure the NHS and social care services can cope with the significant extra demands placed on them. Hence the extra £620 million added to date to the health budget.

But from the outset we understood this was also going to be an economic emergency. Our support for business is currently estimated at more than £2.3bn and is tailored to the particular needs of the Scottish economy. We have sectoral schemes – such as the 100% rates relief for tourism, retail and hospitality businesses; focused assistance for groups such as fishermen, the self-employed and small B&Bs; and strategic aid, with the Pivotal Enterprise Resilience Fund supporting companies considered vital to the economy.

Unlike the UK Government, the Scottish Government does not have revenue borrowing powers for a crisis like this so the bulk of the £4bn is being met from Scotland’s funding share of the UK Government’s spending plans. This accounts for about £3.6bn and is very welcome.

However, our funding needs for the NHS, business and the third sector are greater than the sums provided by the UK Government and, as things stand, the Scottish budget will have to make up the balance. While we have been able to re-prioritise some existing budgets, it is becoming increasingly difficult without impacting on vital public services

The devolved arrangements were not designed for a health emergency and an economic crisis of this scale. With a global pandemic raging, fast decisions on public spending are required and it is critical that we have borrowing powers and greater financial flexibility to respond effectively. Otherwise, the only way the Scottish Government will be able to fund our ongoing response would be to make deep cuts to other public services.

The situation is made even more difficult if promised funding is not delivered, as happened when we were informed that £70m of funding for businesses and charities would no longer come to Scotland.

We had committed to spend that money in good faith – and will keep that commitment – but it makes our task of meeting the shortfall much more difficult.

There is a real risk that this could be repeated on a far larger scale, compounding the need for the Scottish Parliament to have greater fiscal powers to allow us to respond effectively.

Additional funding is always welcome, but if there isn’t going to be anything further then at the very least we must have the ability to manage financial uncertainty.

The Scottish Government will always resist a return to austerity, but only with greatly enhanced fiscal powers can we ultimately reject it.


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