Financial clarity call ahead of summit

Ahead of the rescheduled four-nations Covid recovery summit, the FM is calling on the UK Government to extend furlough, rule out a return to austerity and prioritise a just recovery from the pandemic, ensuring that pre-existing inequalities are not further exacerbated by the coronavirus (COVID-19) crisis.

First Minister Nicola Sturgeon said:

“We have made significant progress on the way out of this pandemic, which has devastated the lives of so many. But we are clearly still in a precarious situation, and it is vital to make sure that we support the people who have been most badly affected by the past 14 months. We have done everything we can with the limited powers we have to tackle inequality and mitigate the impact the pandemic has had on peoples’ livelihoods, but we cannot allow that to be eroded as we enter the next phase of living with the virus. A return to the pre-pandemic austerity would be disastrous for jobs, for public services and for people and families across Scotland.

“As the UK Government hold the key financial levers to help us recover from this, I will be calling on it to commit to maintain public spending  during the period of recovery, and to extend the furlough scheme for as long as it is needed to protect businesses and people who have been required to stop working to protect others, and I will be emphasising that it is managed sensitively in a way that supports longer term recovery.

“I’ve been given assurances that this will be a meaningful discussion, and it must be. Working to recover from Covid cannot be a PR exercise – it must be a collaborative process that properly respects the devolution settlement.  

“The Scottish Government requires certainty over funding. Without it, people across Scotland who have had to endure so much these past 14 months would lack the reassurance that their jobs are protected, and their public services will continue to be funded to an appropriate level, whatever the virus has in store – that is the bare minimum of our expectations.

“The depth and severity of the health, social and economic impacts of COVID-19 are clear and are being borne unequally. For this summit to be in any way productive all UK nations must work collaboratively.  As part of that, the UK Government needs to ensure meaningful engagement with the devolved administrations on the negotiation and governance of trade deals, and to respect the devolved Parliaments by not diverting money to be spent by UK Ministers.”

Background

The Scottish Government seeks:

• an urgent review of the criteria of entry to the Job Retention Scheme (furlough), so that people who have started new jobs since 2 March 2021 can be furloughed over the summer if required. Consideration should also be given to the impact of requiring employer contributions to the costs of furlough in July, August and September and to extending the scheme beyond September if this is required
• extension of the “Barnett guarantee” – which gives devolved administrations increased funding certainty - to cover 2021-22, with a commitment to monthly updates
• a process for setting out a business case for additional funding for COVID-19 recovery measures in Scotland and the other devolved nations, where there are disproportionate public health or economic impacts as a result of the virus, to remove the dependency on decisions about funding for measures in England
• additional fiscal flexibilities for the devolved governments - including greater borrowing powers and flexibility to move funding between capital and resource budgets  to mobilise funding in the most efficient and effective way
• close operational dialogue between the four administrations about the design and timing of future Covid interventions, from the perspective of the public finance implications

• Confirmation of the long term approach to the Test and Trace Support Payment in England and early confirmation of any consequential funding for the devolved nations
• revision of the entry criteria to the Self-Employment Income Support Scheme to allow those who became self-employed more recently than 2019-20, and other excluded groups, to access support
• Restarting of UK R&D funding for aerospace and that long-term capital for supply chains are recapitalised to address the expected £1bn shortfall due to COVID-19
• changes in VAT to support a green recovery in construction, eg application of reduced rate of VAT to all renovations; expanding eligibility criteria for this reduced rate and including a broader range of energy-efficient products; eliminating VAT on energy-efficiency measures