7. Supporting the economy
The pandemic is a public health crisis, with global economic consequences unlike any we have seen before. Not only in terms of scale and speed of impact across the world, but also the nature of the extraordinary steps we have had to take to protect our health. Businesses and individuals have made extraordinary sacrifices as we tackled the pandemic together. While we are starting to see gradual and cautious signs for optimism across the economy, and growth is now recovering from an unprecedented fall, the economy remains significantly smaller than its pre-Covid level in February (-10.7%).
That has particularly hit key sectors. Even where businesses have continued to trade, turnover is down, resulting in precarious cash flows. Where they have started to reopen, often that has not been on a business as usual approach, and many not be for the foreseeable future. And we know that the risk of unemployment is to an extent distorted by the Job Retention Scheme, with record falls in hours worked and slowing of pay growth impacting incomes – reflected in record rises in the claimant count, which doubled to 8.0% in September from 4.0% in March, and may represent a truer reflection of the unemployment rate.
Our economic response and recovery programme initially focused on protecting the economy through insulating businesses and households from the worst impacts of COVID 19 including a £2.3 billion package of support with an additional £230 million economic stimulus package, guidance and support to help businesses to safely restart. We also moved quickly to protect people made redundant, and will scale up our PACE initiative which offers free advice and is available to all individuals affected by redundancy. Most recently, we provided additional funding of £40 million to help businesses closed or very directly affected by temporary protective measures to slow the spread of the coronavirus which already provided the most generous support in the UK.
Jobs and skills will be central to our ongoing economic response. We recognise the potential of the COVID-19 pandemic to exacerbate existing labour market inequalities for disabled people, women, and those from a minority ethnic background, increasing the gender and employment gap for these groups in the long term. These groups are most likely to be in occupations with higher exposure risks, and over represented in work that is not secure or has stopped.
Recent reports from both the Advisory Group on Economic Renewal and the Education and Skills Strategic Board have been clear that economic recovery needs to be grounded in well-being and a green recovery, with skills and jobs in the digital economy or similar, and with a clear need to focus on the future of young people. All efforts have now turned to implementing our response. As set out in our recent Programme for Government, we are taking forward an ambitious package of support – with a national mission to help businesses create new jobs, good jobs and green jobs – to ensure we do all we can to protect businesses and individuals from the worst effects of the crisis, and support them to be a central part of renewal and recovery. But we cannot shy away of the scale of the challenge facing us, and the long-term – and potentially irrevocable – impacts it will have.
Support for businesses impacted by protective measures
Supporting businesses under protective measures not only helps to foster a more robust and resilient economy but can also help to sustain and build on the compliance businesses of all sizes and sectors have demonstrated since March. We want and need that support to continue, and we are confident most business will act to protect, assist and influence their employees and customers. We know there will be significant financial hardships and risks for businesses as a result of any further protective measures – something we have recognised most recently through our COVID-19 Restrictions Fund, including additional help with the costs of re-furloughing staff during the October reset, by supporting the 20% salary contribution required by the UK Government.
As we move to a levels approach, businesses in different parts of the country may face different protective measures. To provide greater certainty for business alongside the introduction of a levels approach, we will introduce a new package of support for those firms that must close by regulation, or operate in a restricted way as a result of public health decisions. The support we set out here is the maximum we can provide within the resources currently available to us, but the minimum we think is necessary.
It is welcome to see the UK Government's recent announcement of improved support for businesses and workers in England – heeding the calls of businesses and workers to ensure more generous support was available – but this will not deliver any upfront additional funding for Scotland, and provides no guarantee that funding will be available to see us through this crisis.
We will match the UK Government's offer to businesses in England – but without any guarantee that funding will be available to sustain that. It is incumbent on the UK Government to ensure Scotland, and all the devolved administrations, receive an equitable share of funding, to meet our specific public health and economic requirements, and for that support to be available for as long as it is needed to get the virus suppressed.
Our new financial support will provide:
- A grant of £2,000 or £3,000 (depending on rateable value) for business required to close by law, payable every four weeks for the duration protective measures are in place
- A hardship grant of £1,400 or £2100 (depending on rateable value) for businesses that remain open but are specifically required to modify their operations by protective measures, payable every four weeks for the duration measures are in place
- These grants will be provided regardless of level, to eligible businesses, and paid in fortnightly instalments (subject to discussions with local authorities)
We would expect this bespoke support to be supplemented by UK Government support, not least the revised Job Retention Scheme launching on 1 November, and will continue to press them to ensure this recognises specific circumstances across Scotland.
Financial support will be made available as levels are reviewed, and we will work with local authorities to ensure a quick and efficient local delivery mechanism for this support. We will also continue to engage with specific sectors who have may face unique impacts.
This funding will go some way to supporting businesses through the necessary public health protections we may need to put in place. But we have to be realistic about the scale of the challenge our economy and our society faces: a sharply rising claimant count, many businesses in a precarious situation, and diminished resilience across the board. With the limited financial and economic levers at our disposal, we will not be able to protect every business; and financial support cannot replace all lost income or save every job.
We are not able, financially, to offer local funding packages beyond the grants set out above without the further consequential funding which we need from the UK Government. Indeed, due to the nature of the crisis, and the challenge in estimating demand for funding, the grant support provided may well exceed the funding provided via consequentials to date, especially if protective measures are required for an extended time period. We will continue to support local authorities through the funding settlements we have previously agreed and we will continue our efforts to tackle poverty caused by COVID-19 through our support for programmes such as the Scottish Welfare Fund and Free School Meals. We have and will continue to argue for greater flexibility and support from the UK Government to meet the demands Covid places on our public services, our economy and our communities.
While the economic package set out here is predicated on the potential for differing protection levels being applied across areas, we will respond as necessary should the public health evidence necessitate a return to more national measures, building on the comprehensive support we provided earlier in the year. We will do everything in our power to help Scotland's businesses to weather the storm as we all work, together, to suppress the virus and restore the conditions for future growth.