The Covid-19 pandemic has brought profound challenges to businesses and communities around the world. Small businesses contribute enormously to our economy and provide countless jobs in our communities, but they are economically vulnerable. To address the new challenges, the response must be innovative, flexible and adaptive, which is what the Scottish Government’s response has been, including through the design of schemes that are not available in England, as the cabinet secretary outlined.
The fiscal powers of the Scottish Government are constrained. As long ago as late March, David Phillips of the Institute of Fiscal Studies said:
“as it stands, the funding arrangements for devolved Governments may not be appropriate for the task in hand. This is because they have limited reserves, constrained borrowing powers, and the funding flowing to them as a result of the Barnett formula may not reflect the challenges that they face”,
including not having powers to borrow, which sums up the problem. The Scottish Government is bound by law to produce a balanced budget and cannot respond quickly to emerging needs by borrowing. Scotland should not be refused the fiscal flexibility that is needed to prevent the healthcare crisis from spiralling into an economic crisis. I think that we all agree that, sadly, that process is already well under way.
I welcome the Scottish Government’s commitment to spending all £8.2 billion of the Covid Barnett consequentials on supporting our response to Covid-19, and I welcome its reprioritisation of significant sums to combat the virus. However, the UK Government’s 2020 spending review puts barriers in Scotland’s way. It offers only limited information on the 2021-22 Scottish budget envelope, as it covers only one year. That makes it impossible to plan with any certainty. We experienced a similar scenario earlier this year, when the UK Government’s budget was not announced until March. The delay created serious difficulties in our budget setting and scrutiny processes.
Now more than ever, the UK Government must give the Scottish Government the powers that are needed to respond to the challenges of the pandemic. If we are to build back better, we need in our hands the economic tools for the job.
Within those restrictions, the Scottish Government has done well in designing the strategic framework business fund, which provides grants to help businesses that face closure or restrictions to trading. I particularly welcome the £30 million discretionary fund to assist businesses in areas such as my region, which, although they are in level 2, are affected by restrictions elsewhere—whether that is related to travel or because they operate in both Scotland and England—which stop their customers coming or affect their supply chains.
However, I am concerned that, on an operational level, some local authorities do not seem to be rolling out the discretionary fund quickly enough. I would appreciate it if the cabinet secretary could provide her understanding of how many councils have gone live with that excellent fund that the Scottish Government provides.
For the Scottish economy to bounce back in a way that is fair and equal, we need to support small business. In order to do that to the best of our ability, the Scottish Government needs full financial powers, so that we are no longer held back by UK budgetary decisions.