Covid-19 (Barnett Consequentials and Business Support)

– in the Scottish Parliament on 17th April 2020.

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Photo of Michelle Ballantyne Michelle Ballantyne Conservative

As the Cabinet Secretary for Finance is aware, businesses are still questioning the level of support that they are getting to handle the crisis. On Monday, the cabinet secretary tweeted that she

“could do a lot more if consequential funding from the UK Gov was based on business need rather than population share.”

Could she explain why she believes that and what impact that would have on the economy?

Photo of Kate Forbes Kate Forbes Scottish National Party

I appreciate the question, because it is on a point that is regularly raised by my counterparts in the Welsh Government and the Northern Irish Administration in our quadrilateral meetings with the Chief Secretary to the Treasury.

As the member will know, Barnett consequentials are based on population share, and in each nation of the United Kingdom there is a slightly different economic need. As I have already mentioned, in Scotland considerably more than three quarters of non-domestic rate payers are in the small business bonus bracket, which means that there are more of them. Our rateable value cut-off for the small business bonus scheme is £18,000, rather than £15,000 in England or £12,000 in Wales. That means that more small businesses here are getting a £10,000 grant, and that the changes this week will make them eligible for multiple grants if their properties are all within small business bonus scheme requirements. In England, by design, the small business bonus scheme is essentially restricted to one property.

That means that we are trying to push that funding as far as possible. I have a responsibility to ensure that businesses are getting the support that they need, but there is a gap between what Barnett consequentials can do in Scotland and what we know the need is in Scotland. That is why taking a sectoral approach—ensuring that we provide funding to particular sectors—is important.

I will give one last example. The UK Government’s announcement today on fishing will see approximately £450,000 of consequentials come to Scotland. In contrast, our funding for the seafood industry now amounts to almost £23 million—£450,000 does not go terribly far, so we have had to top up the funding to £23 million. That is an example of where we have had to take different decisions because of the need in Scotland, recognising that Barnett does not cover Scotland’s unique needs.

The Presiding Officer:

Michelle Ballantyne would like to ask a supplementary question.

Photo of Michelle Ballantyne Michelle Ballantyne Conservative

The Barnett formula will be reviewed next year and the cabinet secretary’s thinking on the issue will be very important with regard to the recovery of the economy, which, if the predictions are correct, will need to be significant. I would like to understand whether, as we come out of the crisis, she will be looking for the Barnett formula to change to a business need-led model as opposed to a population share model.

Photo of Kate Forbes Kate Forbes Scottish National Party

I have had a lot of constructive conversations with the Treasury. In the emergency, there have been questions about how quickly we can access funding and how funding will be allocated. Michelle Ballantyne might be aware that Barnett consequentials are done on estimates, so they can still be clawed back at the end of the year, as they were last year. All those issues have formed the substance of our conversation.

I have appreciated the constructive way in which the UK Government has, for example, ensured that we can have the funding up front, so that we do not have to wait for it to become available. The UK Government has given us an estimate that it believes is as robust as possible, but that might still move later in the year.

I have made the point to the Treasury that, at a time of emergency, we have to park business as usual and look at the best means of supporting the economy. That applies even more so to our health system. In order to ensure that businesses get the right support in an emergency crisis such as this, we might need to do things differently. Barnett will never cover business need, because it is based on population share. We have more rural areas in Scotland. We have more small businesses. We have particular sectors that are disproportionately more important in Scotland. Those are all facts that are regularly acknowledged by my Welsh and Northern Irish counterparts and which are understood by the Treasury.