Coronavirus (COVID-19) business support: equality impact assessments

Island Equivalent Payment

Name of Grant:

Island Equivalent Payment

Policy Lead

Andrew Baird

Legal power used:

Section 126 of the Housing Grants, Construction and Regeneration Act 1996.

Grant Overview:

The Island Equivalent Payment was introduced in February 2021 to ensure parity of support for businesses on island communities impacted by restrictions introduced to control the spread of Covid-19.

Operating in conjunction with the Strategic Framework Business Fund, the Island Equivalent Payment was designed to recognise that, despite being subject to fewer restrictions on their operations comparative to those across mainland Scotland, travel restrictions had placed businesses within the retail, hospitality and leisure sectors on the islands under significant financial pressure and that additional support was required in order to mitigate these pressures.

In doing so, the additional funding given to island local authorities, and those with island communities in their area, enabled them to make payments to businesses otherwise eligible for support through the Strategic Framework Business Fund equivalent to the amount they would have been eligible for had the Islands been at Protection Level 4. Additionally, this funding also enabled local authorities to make one-off ‘Top Up’ payments to businesses equivalent to the Hospitality, Retail and Leisure Top Up Fund awarded to businesses closed by law across mainland Scotland.

Through the Island Equivalent Payment, businesses in island communities that would have been required to close by law at Protection Level 4 were eligible for payment of up to £3,000 every four weeks for the period January – March 2021 (depending on their Rateable Value). Additionally hospitality businesses were eligible for a one-off payment of up to £25,000 while retail and leisure businesses were eligible for a one-off payment of up to £9,000.

Executive Summary:

The extraordinary measures taken by the Scottish Government to protect the right to life and right to health for the people of Scotland throughout the Covid-19 pandemic have placed unprecedented pressures on Scotland’s economy and business community. Health protection regulations required certain businesses to close or placed specific restrictions on their operations at different times between March 2020 and August 2021. Many others were impacted by significant reductions in demand due to these restrictions or as a result of the introduction of domestic travel restrictions.

Since the start of the pandemic, the Scottish Government has spent £4.3 billion in providing direct financial support to those businesses impacted by Covid-19 restrictions and regulation. As the impacts of restrictions were felt differently across the business community, varying according to factors such as sector and location, a range of different funding streams were developed to target financial support towards specific sectors or types of business based on the challenges they were experiencing as a result of the pandemic. Given the unprecedented challenges presented by Covid-19 it was necessary to develop financial support schemes at pace to ensure that funds were distributed rapidly in the interests of preventing business closures and preserving jobs.

Key Findings - impact assessment of benefits and/or disadvantages.

Data from the census and the Annual Population Survey indicates that the demographic composition of Scotland’s island communities typically differ from that of mainland Scotland. While the demographic profile of Scottish island communities in terms of gender is comparable to that of mainland Scotland (in 2020, there were more females (50.2%) than males (49.8%) living in Orkney Islands which is comparable to 51.2% females and 48.8% males living in Scotland overall), there are distinct differences in terms of the age profile and ethnicity, where the islands generally have an older population and less ethnically diverse in comparison to mainland Scotland. According to Highlands and Islands Enterprise nearly a quarter (23%) of the region’s population are aged 65+, whereas for Scotland, the 65+ age group accounts for 19% of the population.^[3] Scottish islands have far lower numbers of young people in the population than is typical for the Scottish population overall. While the data we have on the sectors impacted by Covid-19 is limited to business ownership and labour market trends at a Scotland or UK level, the impact this assessment has sought to take account of the specific demographics of island communities to understand the variable impact of Covid-19 on the business community on Scotland’s Islands. Taking this into account, the impacts of Covid are likely to be more pronounced on older age groups and less pronounced on younger age groups and minority ethnic groups. For example a lower number of young people on the islands are likely to work in the retail, hospitality and leisure sector.

Equally, however, evidence suggests that island communities have been disproportionately impacted by the COVID-19 pandemic to date, when compared to Scotland and the UK as a whole. The economy of island communities is heavily reliant on many of the sectors that were directly impacted by Covid-19 restrictions such as the hospitality sector. At 15%, ‘Accommodation and food services’ sector has a much larger share of employment in remote rural areas compared to the rest of Scotland where 8% of people are employed in this sector).^[4]

In their submission to the Rural, Economy and Connectivity Committee regarding ‘The Impact Of Covid-19 On The Rural Economy And Connectivity In Scotland’

the Scottish Islands Federation states “Tourism has become an established cornerstone of many island economies, integral to jobs, shops, transport and other services, with self-employment, small and micro-businesses forming the backbone of many island economies. The negative financial impact of lockdown on islanders has been exacerbated by higher costs of island living and doing business on islands. Many islanders have suffered reduced income, some losing their entire livelihoods.^[5]

Advancing equality

By distributing funds through the Island Equivalent Payment the Scottish Government acted to mitigate the impact of these regulations on businesses to support them in remaining financially viable while restrictions were in place. In doing so, this assessment shows that the Islands Equivalent Payment acted to advance equalities by protecting businesses in sectors that impact on the lives of those with protected characteristics disproportionately. Financial support distributed through the Island Equivalent Fund has targeted those sectors which have instances of insecure employment and low pay and are least resilient to financial shocks. It is worth noting that data from the Department of Business Energy and Industrial Strategy’s (BEIS) Longitudinal Small Business Survey shows that a high proportion of businesses across the retail, hospitality and leisure sectors (78%) identified as having employees with protected characteristics.

Specific data on the demographics of business ownership within island communities is not available but figures at a national level would appear to show that the Island Equivalent Fund not only advanced equality by preserving jobs, it also protected businesses in sectors where there is a disproportionately high number of women-led businesses thereby protecting the livelihoods, assets and investments of those with those protected characteristics. Data shows that the proportion of women-led businesses across the Retail, Hospitality and Leisure sectors is higher than the average across all other sectors. Statistics from BEIS also show, however, that businesses within the Retail, Hospitality and Leisure sectors are significantly more likely to operate from specific business premises that are liable for Non-Domestic Rates. An average of 85% of firms across these three sectors identify as operating from designated business premises, 6% higher than the average across all sectors of the economy. Across the UK, minority ethnic groups have a higher likelihood of owning a business within the retail, hospitality or leisure sector.

As highlighted above, however, without specific data on the impact of Covid-19 on island economies the exact impact of the Island Equivalent Payment on advancing equalities is difficult to measure. Certainly the economy of island communities is more reliant on those sectors eligible for support through the Island Equivalent Payment but there are also fewer people from groups with protected characteristics that are typically clustered within these sectors such as young people and those from a minority ethnic group.

Eliminating Discrimination

While the majority of the Scottish Government’s Covid business support funds, including the Island Equivalent Fund, were established specifically to support businesses to meet overhead costs associated with operating from premises,

it is important to recognise that many businesses impacted by restrictions introduced through the Regulations felt the impact of the restrictions differently depending on their location. The Island Equivalent Fund recognised that while islands faced a lower level of restrictions, there were significant impacts on many island businesses particularly in the retail, hospitality and leisure sectors. In addition, individuals with specific protected characteristics are over-represented including young people and women across these sectors.

As part of assessing the impact of the Island Equivalent Fund on groups with protected characteristics, consideration has also been given to the variable awards given to the retail, hospitality and leisure businesses to island businesses in Level 3 in comparison to the funding available to Level 4 businesses in mainland Scotland. The Islands Equivalent Fund brought payments to islands businesses in line with businesses on the mainland even though they were in different Protection Levels. In addition island businesses received a further top-up payment in January 2021, again in line with mainland businesses. This was in recognition of the fundamental part tourism plays in the islands’ economies and the fact people were unable to travel under the restrictions in place.

Rural island economies have a higher proportion of businesses reliant on footfall and contact – e.g. hospitality and tourism – which will potentially be those which have the most challenging route out of lockdown and a return to pre-COVID trading conditions. This is particularly acute due to the extreme seasonality of trading for tourism businesses in particular, who faced a truncated season with substantially reduced demand and challenges around reopening. Further support was necessary to ensure that businesses remained viable and to provide employment opportunities and economic activity.^[6]

Fostering Relations

Businesses within the Retail, Hospitality and Leisure (RHL) sectors are important spaces not only for economic activity but also for social and community interaction providing an opportunity for engagement across and between groups with protected characteristics, helping to foster good relations between these groups. This is particularly applicable with more rural and island communities who rely on these facilities in order to prevent loneliness and social isolation. Businesses in the RHL sectors promote engagement between and across groups in a number of ways. As well being shared spaces, as highlighted above, there is a clustering of several different groups with protected characteristics in the RHL sectors including young people, women, minority ethnic groups and those experiencing socioeconomic disadvantage. By sharing workplaces this promotes close interaction and engagement between these groups including those with intersecting protected characteristics. In providing financial support to businesses in these sectors to remain financially viable through the restrictions, the Scottish Government is therefore acting to foster good relations between groups with protected characteristics.

Age: Older People and Children and Young People

According to Highlands and Islands Enterprise (HIE), the Highlands and Islands are characterised by population sparsity, an ageing population and net out-migration of young people. Nearly a quarter (23%) of the region’s population are aged 65+. For Scotland, the 65+ age group accounts for 19% of the population. The working age (16-64) population is expected to fall and make up a lower share of the total population by 2040 (54% compared to 61% in 2018), while the share of the population under 16 is expected to remain relatively stable (15% by 2040 compared to 16% in 2018).^[7] This data suggests there are fewer young people on Scottish Island communities.

Employment figures published by the Office for National Statistics (ONS) show the extent to which the impacts of Covid-19 on the labour market in Scotland have fallen disproportionately on young people many of whom are employed in sectors subject to restrictions including the hospitality, leisure and retail sectors which were all required to close or modify their operations through the Strategic Framework. 2019 data from the ONS related to the employment of young people shows the following:

• Hospitality - 37% of employees working in the food and beverage services and accommodation sectors were aged between 16 - 24 compared to an average of 12.3% across all other sectors.
• Leisure - 27% of employees working in the sport, amusement and recreation sector are aged between 16 – 24.
• Retail – 22% of employees working in the retail sector are aged between 16 – 24.

While the island economies are heavily reliant on retail, hospitality and leisure sectors, since there are likely to be fewer young people living and working on the islands a lower proportion of them are likely to own or work in retail, hospitality and leisure businesses in comparison to the rest of Scotland. It is important to stress that this is an assumption based on the population data available, we do not have the data to say with certainty what the impact is.

Since island communities are disproportionately made up of older people, there is likely to have been an impact on them by the restrictions in terms of the retail, hospitality and leisure sectors. However detailed data is not available to confirm this. Nevertheless Scotland-wide data suggested that 44% of accommodation managers/proprietors in Scotland are over the age 55 compared to a labour market share of 20%.

Similarly 41% of taxi and private hire vehicle drivers in Scotland are over the age 55 compared to a labour market share of a 20%.

Sex: Men and Women

An assessment of the restrictions introduced through the Strategic Framework shows that it has also had a disproportionate impact on women. This has been primarily driven by two factors, high numbers of women-led businesses in the retail, hospitality and leisure sectors as well as a clustering of female employment within these sectors. Based on the analysis of the 2011 census males comprised a slightly higher proportion of the population of inhabited islands than in Scotland as a whole, 49.4 per cent and 48.5 per cent respectively. This data would suggest therefore that the impact on women is likely to be slightly less pronounced in the islands than in other areas of the economy but not in a way that is statistically significant.

Nevertheless research suggests that women in more remote communities have still been impacted by the pandemic due to the increased likelihood of them being responsible for childcare and home-schooling. This has led to women being more likely to resign from jobs due to childcare commitments. Female-dominated industries (e.g. hospitality and retail) have been disproportionately hit meaning that women are more likely to be made redundant.^[8]

2019 data from the ONS related to the employment of women shows the following*:

• Hospitality - 53% of employees working in the food and beverage services and accommodation sectors were women compared to an average of 48.8% across all sectors.
• Leisure - 40% of employees working in the sport, amusement and recreation sector are women.
• Retail – 61% of employees working in retail sector are women.

*As there is no island level data we have assumed these figures have been applied right across the Scottish economy.

Both men and women experience disadvantage as a result of the eligibility criteria for the Strategic Framework Business Fund and its derivative funds including the Islands Equivalent Fund which exclude specific business despite being impacted by Covid-19 as highlighted above. 91% of tradespeople and 95% of taxi and private hire vehicle drivers are men compared to a labour market share of 51.2%.

Conversely, 93% of close contact service providers, 84% of domestic cleaners and 53% of fitness instructors are women compared to a labour market share of 48.8%. Again, at an islands level this would be exacerbated due to the small populations and importance of each and every job for their economies.

Race

Between 2001 and 2011, the proportion of island residents in a minority ethnic group increased slightly, from 0.6 per cent to 1.0 per cent. Nationally there was an increase in this proportion from 2 per cent in 2001 to 4 per cent in 2011. It was less than 1 per cent in most island groups.

Minority Ethnic Groups are also disproportionately represented among some of business types impacted by restrictions for instance according to Close The Gap’s report^[9], Black and Minority Ethnic women are more likely to work in a sector that has been shut down; more likely to be in insecure work which puts them at increased risk of loss of hours and earnings; and are concentrated in low-paid service sectors which are more susceptible to redundancies over the course of the crisis.

The hospitality sector has the highest proportion of non-UK nationals in the workforce in distribution, hotels and restaurants – 12.5% of its workforce were non-UK nationals^[10] in 2019. For example national data shows that 15% of waiters and waitresses and 16% of restaurant and catering establishment managers and proprietors are from a Black and Minority Ethnic background.^[11]

While national data has suggested that Minority Ethnic Groups have been disproportionately affected by the pandemic due to pre-existing disparities, there is a lack of significant data with respect to islands available and therefore no conclusions can be made.

Disability

Based on the analysis of the 2011 census the proportion of island residents with a long-term (lasting 12 months or more) health problem or disability that limited their day-to-day activities was just under 20 per cent, similar to the proportion for Scotland.

While national data has suggested that disabled people have been disproportionately affected by the pandemic due to pre-existing disparities, there is a lack of significant data with respect to islands available nevertheless national data suggests that 26.6% of the accommodation and food services sector workforce had a long-term condition or illness in 2019, compared with 27.5% for Scotland overall.

Religion and Belief

No discernible impact

Sexual Orientation

No discernible impact

Pregnancy and maternity

No discernible impact

Gender reassignment

No discernible impact

Marriage or Civil Partnership

No discernible impact

Socio-economic disadvantage: any people experiencing poverty

According to the Social Metrics Commission those employed prior to the crisis and already in the deepest forms of poverty have been most heavily impacted by the economic fallout of the pandemic. For example, compared to those more than 20% above the poverty line, those more than 50% below the poverty line have been more likely to have been furloughed, had reduced hours or wages, or lost their job.

Impacts have also varied significantly between workers in different industries. For example, 81% of those working in hospitality and leisure have been negatively impacted, compared to just 16% in financial services.

Research by the Fraser of Allander Institute shows those employed in the tourism and hospitality sector - those hardest hit by Covid-19 - already face precarious employment, the lowest hourly pay of any sector, the lowest hours worked per week, and are more likely to be in poverty. The poverty rate for households with a worker in these sectors is 28%, compared to the Scottish average of 19%, with child poverty at 41% amongst these households, compared to 24% across Scotland.

Figures from the Outer Hebrides Anti-Poverty Strategy shows the significant impact the pandemic has had on an already fragile economy. Figures show that 3,100 residents, or 24% of the working age population, in the Outer Hebrides were ‘furloughed’ under the Covid-19 Job Protection Scheme by 21 August 2020. In addition, 700 individuals in the islands had made claims to the Self-Employment Income Support Scheme, with the claims amounting to an estimated total value of £1.7m and applications for Universal Credit also initially increased threefold (from 350 to 870) as a result of the impact of COVID-19 on local employment opportunities.^[12]

Coronavirus Job Retention Scheme statistics: 7 October 2021 - GOV.UK (www.gov.uk)

Stakeholder Engagement:

We have engaged extensively with businesses and their representative organisations during the pandemic. In the year to March 2021 the Scottish Government had more than 1,270 ministerial engagements with business, including virtual conferences, roundtables and calls.

Engagement with business leaders included regular communication with HMRC, CBI, FSB, IoD, SCC, SCDI, SFE, STUC, Scottish Retail Consortium, Scottish Tourism Alliance and Scotland Food and Drink etc.

This provided an opportunity to listen to stakeholder views, test ideas, share information about progress and discuss and address specific issues identified by sectors and individual businesses.

Mitigations –

We have recognised the differing impact the pandemic has had across Scotland’s economy, sectors, communities and locations by introducing a specific funding packages. In addition to the Island Equivalent Fund there were two further location specific funds introduced by the Scottish Government to support businesses in Glasgow and Moray who were specifically impacted by localised restrictions

The Scottish Government has set up a number of other grant support schemes for the purposes of ensuring that those experiencing financial hardship, as a result of Covid-19 receive appropriate support. This included schemes for the wedding sector, taxi and private hire vehicle drivers, accommodation providers that pay Council Tax rather than Non-Domestic Rates, as well as the Local Authority Discretionary Fund which identified businesses that operate from closed or restricted sectors those that rely on entering domestic premises and those in the supply chain of closed or restricted sectors as types of business that local authorities should consider supporting.

Next Steps (if any)

N/A

Declaration and Publication

I have read the Equality Impact Assessment and I am satisfied that it represents a fair and reasonable view of the expected equality impact of the measures implemented.

Signed:

Date: 19/11/2021