Coronavirus (COVID-19): local authority discretionary fund - information for local authorities

Information for local authorities about the local authority discretionary fund.

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Who is eligible

Local authorities can use this funding to provide direct financial support to businesses in their area so long as it is specifically for the purposes of mitigating immediate financial challenges arising from COVID-19 restrictions and regulations. We only request that local authorities specifically exclude businesses that are:

  • in administration, insolvent or where a striking-off notice has been made and 
  • in receipt of an enforcement notice as a result of breaching COVID-19 Regulations should not be considered eligible for funding by local authorities

What local authorities should take into account when determining who to fund

First and foremost, local authority decisions on where they should direct their funding allocations must be based on their knowledge of the local economy and understanding of the impacts of COVID-19 regulations and restrictions on businesses within their area. Limits to the funding available through this scheme will inevitably require councils to prioritise which types of business should receive support and so local knowledge will be vital in determining where the funding will be most effectively deployed. Local authorities may wish to draw on the experience of Regional Enterprise Partnerships (where relevant) and/or the enterprise agencies in determining where funding should be directed. 

The Scottish Government is content for local authorities to use this funding in order to provide direct financial support to Limited Companies (including Scottish Charitable Incorporated Organisations and social enterprises), Sole Traders, Trusts, Partnerships, Community Interest Companies, freelancers or the self-employed in their area. We do not consider that ALEOs are eligible for this fund.

A key priority of Ministers’ for this funding is to reach those groups and sectors that have received limited direct financial support from the Scottish Government despite experiencing disruption due to COVID-19 regulations and restrictions introduced since October. In determining where to target this funding, local authorities should therefore prioritise specific sectors and businesses that have received limited or insufficient direct financial support from the Scottish Government since October to enable them to continue trading. This may include groups such as businesses whose trade relies on entering domestic premises or offices, businesses in the supply chain of restricted sectors and businesses that rely on access to facilities or premises that have been closed due to restrictions and regulations. Their connections with the business community in their area mean that local authorities are well-placed to identify and deliver funding towards this particular cohort of businesses. The Scottish Government considers that businesses should not be precluded from support on the basis that they are in receipt of the Self-Employed Income Support Scheme (SEISS) and/or the Coronavirus Job Retention Scheme (CJRS) which do not take account of business overheads. A full list of Scottish Government grant funds is set out at Appendix 1.

Precedence should also be given to businesses that have been adversely impacted  without having been specifically required to close or adapt their operations as a result of regulations. This may, for example, include businesses in the supply chain of or that derive a significant portion of their trade from closed or restricted sectors such as hospitality and tourism as well as companies impacted by travel restrictions

Where appropriate, local authorities should also consider how financial support awarded through the Discretionary Fund interacts with eligibility for and access to other types of financial support. This encapsulates the proposed upcoming funds set out at Appendix 1 to this guidance.

We also ask that local authorities prioritise micro, small and medium-sized enterprises (250 employees or fewer) and the self-employed as the intended recipients of this funding. The original guidance for this funding suggested that local authorities specifically target their support towards small and micro businesses given the lower levels of financial resilience that typically exist within this group but it is felt necessary to broaden this guidance to incorporate medium-sized businesses in response to the ongoing impact of national restrictions. 

Local authorities are actively encouraged to consider the experience of businesses across their area that meet some or all of the criteria set out above and, in doing so, to support as many businesses as possible to address the immediate financial challenges that they face with the confines of the funding available.

How much funding will be provided to businesses

We recognise that the appropriate level of grant will vary depending on the type and size of business as well as the sector that it operates in and so this guidance does not mandate the scale of funding that individual businesses should receive and in fact the Scottish Government considers it important that local authorities exercise flexibility in the level of grant awards that they issue particularly in the context of the broader scope of this guidance to incorporate medium-sized enterprises which are likely to have higher fixed costs. In determining levels of financial support councils may wish to have regard to the following considerations:

  • this funding is to mitigate the short term financial challenges being experienced by businesses and not to replace lost income
  • it is the view of Ministers’ that precedence should be given to MSME
  • there are likely to be a number of businesses impacted in some way by restrictions that may not be in receipt direct support from the Scottish Government

In taking decisions on the appropriate level of grant, local authorities may wish to factor in the level of fixed costs faced by the business in question, the number of employees, whether they are unable to trade online and the consequent scale of coronavirus losses.

How businesses will apply

The application process will vary based on the specific sectors or business types that individual local authorities choose to support. It is the Scottish Government’s view that it is vitally important that local authority application processes are accessible and transparent to give businesses greater certainty of the funding that is available to them. Local authorities are required to be assured of the validity of an application and any supporting information requested in determining eligibility for a grant. Local authorities should also conduct prepayment checks that should include confirming that, by accepting payments, recipients are in compliance with State Aid rules.

Monitoring and reporting requirements

As this funding is made available by the Scottish Government through the General Revenue Grant there are no specific and regularised monitoring requirements associated with this funding. Local authorities are, however, asked to provide high level proposals as to how they intend to utilise this funding with outcome reports to follow illustrating final usage once individual schemes are closed. This replaces the monitoring requirements set out in the grant offer letter issued to local authorities on 9 December. Local authorities may, however wish to record and retain case level detail for the purposes of fraud detection and prevention.

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