Some cheer in Budget and latest FM announcement
The First Minister’s announcement of a possible phased return of pupils to schools on 22nd February and her comment that she is “cautiously optimistic” that a gradual easing of lockdown restrictions may start in March have provided some positive cheer. This follows the publication of the Scottish Government’s draft Budget last week that promised additional support for businesses hit hard by lockdown and the opening of more sector-specific business support Funds.
Some of the key measures announced by Finance Cabinet Secretary Kate Forbes were the extension of 100% rates relief for retail, hospitality, leisure and aviation sectors for three months from April, a reduction in the Business Rates ‘poundage’ and an extra £30m of discretionary funding in this financial year. She also set out investments to support the recovery from Covid and deliver the Scottish Government’s Fair Work and Net Zero objectives. There will be £6bn of capital investment in 2021-2022, £1.6bn for rail and bus services and £2.7bn for education and skills. View the Budget here
Commenting on the Budget, the new sector support Funds and the First Minister’s latest statement to the Scottish Parliament, Alan Mitchell, Chief Executive of Fife Chamber of Commerce, said: “There have been some positive developments and the partial return of pupils to schools will be welcomed by all home schooling employee and their bosses, but the economic damage from the measures being applied to subdue covid is increasing every passing day. It isn’t just the businesses that have already shut for good or that will do soon unless they are able to start trading again, taking many more jobs with them, but also the businesses and jobs that we are at risk of losing even after restrictions ease and then stop.
“The Finance Secretary clearly had a difficult job. She can only guess what Block Grant and Barnett Consequentials will come to her in 2021-22 from the UK Government and her Administration only has limited borrowing powers to fill the gap. But, with a record pot of money to spend, she still had choices about how best to spend it. She could have elected to forego the up to 3% pay increase for public sector workers and instead use that money to keep more businesses open and protect the jobs of those who work in them, or reduce tax bands so that public and private sector employees alike could enjoy a boost to their spending power. Or she could have channelled the money to the vast number of private sector workers who have already lost their job because of Covid.
“Scottish Ministers and their counterparts in the UK Government have some big decisions to make in the coming months but at the top of their list must be more support for business to allow economic recovery. Many of the businesses that simply ‘survive’ the end of restrictions will not be in a position to invest quickly for growth unless they get substantial help now. Without it, recovery from Covid will be slow and uneven, with no guarantee that GDP will revert to pro-covid levels even by 2024 as current gloomy forecasts suggest.
“A 90% economy means 10% less businesses, jobs, investment, taxes and opportunities, and that cannot be allowed to happen. So when Kate Forbes said “I know that businesses will continue to need support as long as they need to close” she was only partly right. Many of them will need support for much longer than that. The Chancellor of the Exchequer has to rise to this challenge in his Budget in March and then the Scottish Government needs to follow suit by deploying any extra income it receives as a result to business support.
“This extra business support will, of course, mean we end up with even more frightening levels of national debt and subsequent interest payments, with all the damaging consequences this will eventually bring to the country’s wealth and health. But right now that is very much the lesser of two very large and very scary evils.”