Treasury support u-turn
Forbes demands answers on cancelled £60m fund
Kate Forbes: ‘deeply problematic’ (pic: Terry Murden)
Scottish Finance Secretary Kate Forbes has demanded the UK Government explain why it has suddenly cancelled a £60 million business support package which she says has already been spent.
On 2 May UK Business Secretary Alok Sharma announced a £617m package of measures to help companies that are not directly paying business rates, such as those operating in shared spaces.
It said this would generate £60m of consequentials under the Barnett Formula.
Following pressure from business groups and the Scottish Tories to match Mr Sharma’s pledge, Ms Forbes committed to spending the money.
However, she has now been told this additional funding is no longer available, increasing the pressure on the Scottish budget. Holyrood must work to a fixed budget rather than borrow, and is therefore reliant on Westminster funding.
Additionally, £35m of consequentials was earmarked to the Scottish Government in respect of a charity support direct grant, but this was also cut by the Treasury – to £25m.
The withdrawal of previously agreed support comes amid growing concern at Holyrood that the cost of dealing with Covid-19 is significantly higher than the funding provided by the UK Government.
Ms Forbes is now demanding Stephen Barclay, Chief Secretary to the Treasury, explains the sudden withdrawal of the money which has impacted on all the devolved governments.
“It is deeply problematic when we are given mixed messages and the funding position changes. Consequently we have committed to spending £70 million that we have now been told we will no longer receive.
“This is hugely frustrating and undermines the Scottish budget,” she says in her letter.
“My counterparts from Wales and Northern Ireland share this concern. We have made clear to the Treasury the risk of late budget reductions unwinding the funding pledged so far. That is why we are seeking assurances that no in-year reductions will be applied to our budget.
“I endeavour to be fully transparent with the Scottish Parliament about updates to the funding position, and am consistently pressed by respective sectors and parties to act quickly in passing on Barnett consequentials to the areas in question.
“Therefore I am seeking reassurance from the Treasury that funding announcements will be robust and reliable enough to act upon without creating unnecessary financial risks.
“As well as certainty on funding we now, more than ever, urgently need the Scottish Parliament to be given greater financial powers to ensure that we can continue to meet the challenges caused by the pandemic.”
The SNP Treasury spokesman, Stephen Flynn, added his voice in his own letter to Mr Barclay.
The Scottish Government committed to spending that money in the belief that the UK Government would honour its word– Stephen Flynn, SNP Treasury spokesman
“Funding commitments from the UK Government have to be taken in good faith as we work through this pandemic, but the fact the UK Government has simply pulled the rug on £70 million of funding completely undermines the whole process,” he said.
“The Scottish Government committed to spending that money in the belief that the UK Government would honour its word – this funding has failed to materialise, raising serious questions around future funding positions.
“We’ve already seen the Scottish Government take action to fill gaps in UK-wide support schemes through the Pivotal Enterprise Reliance Fund and the Newly Self-Employed Hardship Fund, so the last thing we need is an additional financial burden because of the Treasury’s change of heart.
“The Treasury must act immediately to ensure the £70 million they promised is allocated to the Scottish Government as quickly as possible and in its entirety.”
Despite the funding not being forthcoming from Westminster, Economy, Secretary Fiona Hyslop today confirmed the government will extend the eligibility of the current small business and retail, hospitality and leisure grant to businesses that occupy multiple premises with a cumulative value above £51,000.
It is also allocated to businesses occupying premises such as shared office spaces, business incubators and shared industrial units where the landlord is the ratepayer.
“We are also working with local authorities to support small business who aren’t on the rates system and were not eligible for the Hardship Scheme solely because they did not have a business bank account. Further detail on these arrangements will be set out later this week,” she said.
Funding deal fell short of demand
One reason why Scotland’s share of this funding may have been withdrawn is that the £617m fund allocated in England was woefully inadequate to cope with demand.
Administration of the scheme was handed to local authorities but they have been overwhelmed with applications.
Qualifying businesses thought they were getting grants of £10,000 but for 9,400 businesses in Manchester alone to get that size of grant would have cost £94m and the city council was allocated just £5.4m.
Manchester City Council released a statement on its website today (26 May) saying: “As much as we want to we cannot provide a grant to every business and charity that applies.
“There are tens of thousands of small businesses in Manchester, but we only currently have funding for, at most, about one-in-thirty of the small businesses or charities who could qualify. Based on the funding pot of £5.4m, if we issued grants of £10k, we could only support 540 businesses. If we issued grants of £5k, we could support 1,080 businesses.”
Jonathan Ratcliffe, founder of shared spaces company Offices.co.uk, said: “It comes down to money, pure and simple.
“The council are not in the mindset of restricting the distribution of grants, it is down to HM Treasury to provide the funds to do this, and the money is clearly not there.
“The bad bit is that I know small businesses in Manchester expecting £10,000, and they might get, what, £600? – it is totally unfair.”
Support needed for larger firms
UPDATE 28 May: Finance Secretary Kate Forbes said she was in talks with the Treasury to help firms that occupy multiple premises with a rateable value above £51,000.
Her comments follow a warning from UKHospitality that additional business support from the Scottish Government does not go far enough and will result in business failures and lost jobs.
Economy Secretary Fiona Hyslop yesterday announced further support for Scottish businesses including extending the small business retail, hospitality & leisure grant to businesses that occupy multiple premises with a cumulative value below £51,000.
But no grant support has yet been extended to those businesses occupying premises with a rateable value above this figure.
UKHospitality executive director for Scotland, Willie Macleod said: “This is a disappointing move by the Scottish Government that will see too many businesses in dire need of support continue to be excluded from the grant scheme.
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