A package of financial flexibilities and extra funding for councils which could be worth up to £750 million has been agreed by the Scottish Government in partnership with COSLA.
To address the financial pressures caused by the coronavirus (COVID-19) pandemic over the next two years, councils will be granted additional spending powers which could be worth around £600 million.
In addition to this, a Lost Income Scheme will be established to help compensate councils and council trusts for lost sales, fees and charges from services such as sports centres and parking charges.
Councils and their trusts will have access to an estimated £90 million of funding with council trusts delivering services on behalf of councils able to receive a share of a further £49 million of support through the scheme.
Added to additional funding already committed, this brings the value of the overall COVID-19 support package for councils to more than £1 billion.
Finance Secretary Kate Forbes said: “I have been clear that the Scottish Government needs appropriate fiscal levers in order to respond effectively to the COVID-19 pandemic. That is equally true for local government, which is why I am very pleased that we have been able to deliver a package of support for local services worth up to £750 million.
“Working in partnership with COSLA, the Scottish Government has delivered on our commitment to support councils across Scotland with a game changing package of financial flexibilities, giving them the powers they need to make informed decisions about spending at a local level.
“In addition, we are close to finalising the details of additional financial support through a Lost Income Scheme, worth an estimated £90 million subject to confirmation of the funding from the UK Government. For trusts delivering services on behalf of councils this can also be topped up with £49 million of additional funding already confirmed.
“This support will help councils and their trusts manage the loss of income they are facing from local services due to COVID-19.
“These measures are excellent examples of how the Scottish Government is working together with COSLA and local authorities to ensure that we are doing everything within our power to save jobs, protect our public services and reboot our economy.”
COSLA’s Resources Spokesperson Cllr Gail Macgregor said: “We welcome this substantial package of measures from which councils can choose, depending on local circumstance.
“Responding to COVID-19 whilst continuing to deliver essential, everyday services has put extreme pressure on Local Government finances this year. The pandemic has also meant substantial losses of income across a range of council services including leisure, sport, culture, and planning.
“Balancing budgets will be a real challenge and this has been fully recognised by Scottish Government who we have worked with constructively and positively.”
Finance Ministers from across the devolved nations have joined forces to call for flexibility, fairness and clarity from the UK Government.
For the first time, all three finance ministers – Kate Forbes, Rebecca Evans and Conor Murphy – today made co-ordinated statements in their respective legislatures.
The ministers are asking the UK Government for greater fiscal flexibility to manage the implications of coronavirus (COVID-19), meaningful involvement in the Spending Review to enable planning of budgets and an assurance that lost EU funding will be replaced in full and brought under the control of devolved administrations.
Finance Secretary Ms Forbes said: “Today the finance ministers of the devolved administrations are taking this unprecedented step to demonstrate the level of concern we share across the different nations of the UK, across different parties and across different legislatures.
“The importance of these issues cannot be overstated. They directly impact our ability to respond to COVID-19, to manage our nations’ finances and to support our communities and businesses during the pandemic.
“As representatives of our three nations, we are calling for the UK Government to provide the clarity, certainty and flexibility we require. These calls must not go unanswered.”
Ms Evans said: “I am focused on protecting the people of Wales from the worst impacts of the pandemic, while laying the foundations for recovery based on jobs, our young people and the environment.
“However, the Chancellor’s decision to cancel the UK autumn budget, alongside the uncertainty of the Spending Review and the complete lack of information on replacement EU funding, all contribute to making our task harder still.
“Wales, Scotland and Northern Ireland are today calling on the UK government to provide the fairness, flexibility and clarity we need to support and protect our communities and businesses.”
Speaking in the Northern Ireland Assembly, Mr Murphy said: “As Finance Ministers we represent over 10 million people and today we speak with one voice. We are calling for more fiscal flexibility to manage the implications of COVID-19.
“We are calling for proper involvement in the Spending Review so we can plan our Budgets. We are also calling for lost EU funding to be replaced in full, and brought under local control.”
The financial impact of the lockdown imposed at the end of March has been revealed in new research of UK adults by credit reference agency Equifax. The study found that 40% people living in the Scotland feel worse off financially due to the coronavirus lockdown.
Figures suggest this could be a consequence of the fact that 38% of people living in Scotland reported they took home a reduced salary during lockdown, compared to 37% nationally, with 1 in 5 people believing they will be made redundant when furlough ends.
43% of people in Scotland believe it will take up to 12 months to recover financially compared to 36% nationally
1 in 10 of those living in Scotland are behind on regular payments for which they don’t have payment holidays
52% of people in Scotland continued saving during lockdown and 44% saved more than pre-lockdown.
Lisa Hardstaff, credit information expert at Equifax, commented: “For those on furlough, the fear of redundancy once the scheme comes to an end is very real. And even for those who don’t believe they will be made redundant; nearly a third of people living in Scotland believe their employer will ask them to reduce their salary in the immediate future once they return to work.
“Everyone has been affected differently during this crisis. National figures show that more than half (52%) said they were able to put aside more money into their savings compared with pre-lockdown.
“And nearly a quarter (24%) said they actually feel better off. However, in contrast, 18% admitted they were behind on regular payments for which they don’t have a ‘payment holiday’ in place
“Expenditure on outgoings has changed since lockdown; nearly half of those surveyed that live in the Scotland spent more each week on their food bill and 43% spent more on gas and electricity. As the work from home culture continues it’s likely these additional costs will remain, even though, not surprisingly 66% said they spent less on travel.
“With areas of the country in localised lockdowns and a second COVID-19 wave predicted in the Autumn, recovering from the financial impact of COVID-19 could be prolonged.
“National figures also show that over a third (36%) believe it will take them up to 12 months to recover and 31% said they think it will take between 13 to 24 months to get back on a solid financial footing. Now more than ever, therefore, it’s vital to have a really good understanding of financial incomings and outgoings.”
With uncertain times ahead Equifax has created an online budget planner that allows people to monitor their income against their outgoings, to help them take control of their finances now and in the future.
Lisa Hardstaff concluded: “A financial planner not only helps manage outgoings each month, it allows people to prioritise important financial commitments like mortgage payments, council tax, etc.
“It can also help to see where money can be saved, such as unused memberships or cutting back on food bills.”
The Financial Conduct Authority (FCA) has confirmed the support mortgage borrowers will receive if they continue to face payment difficulties due to coronavirus.
The FCA has published additional guidance for firms, to ensure that consumers who have benefitted from payment deferrals under the current guidance who still face financial difficulties, as well as those whose financial situation may be newly affected by coronavirus after the current guidance ends, continue to get the support they need.
The measures mean firms will offer further short and longer-term support reflecting the circumstances of their customers. This could include extending the repayment term or restructuring of the mortgage. Where consumers need further short-term support, firms can continue to offer arrangements for no or reduced payments for a specified period to give customers time to get back on track. This additional guidance will come into force on 16 September 2020.
Christopher Woolard, Interim Chief Executive at the FCA, said: “Some consumers will continue to be impacted by coronavirus in the coming months, or be impacted for the first time. Consumers in these situations will benefit from firms providing them with tailored support.
“However, it is very important that consumers who can afford to resume mortgage payments should do so for their own long-term interests and so that help can be targeted at those most in need.”
Under the guidance published today, firms will prioritise support for borrowers who are at most risk of harm, or who face the greatest financial difficulties. The new guidance reinforces the need for firms to deliver outcomes that are right for individual borrowers rather than adopting “one size fits all” solutions. The FCA will be monitoring firms to ensure borrowers are treated fairly having regard to their individual circumstances.
Firms will also signpost borrowers to the support they need in managing their finances, including through self-help and money guidance, or refer borrowers to organisations that can provide free debt advice if this meets their needs and circumstances.
Where borrowers have taken, or are taking, payment deferrals under our existing guidance and require further support from lenders these further arrangements can be reflected on credit files in accordance with normal reporting processes. This also applies to borrowers newly affected by coronavirus who receive support from their lender after 31 October.
This will help to ensure that lenders have an accurate picture of consumers’ financial circumstances and reduce the risk of unaffordable lending. Firms are required to be clear about the credit file implications of any forms of support offered to borrowers.
The FCA’s current guidance published in June will continue to provide support for those impacted by coronavirus until 31 October 2020 – with consumers able to take a first or second three-month payment deferral until this date.
The June guidance is due to expire on 31 October and we do not intend to extend this guidance. The guidance published today ensures consumers will still be able to obtain the support they need from their lenders after their payment holiday ends or they are newly affected by coronavirus after 31 October.
Gareth Shaw, Head of Money at Which?, said:“While the FCA has announced some support for certain customers who will struggle financially after the current support period ends, it is disappointing that payment deferrals will no longer be available in the same way.
“We are also concerned about the impact of allowing normal credit reference agency reporting to resume even where consumers fall into temporary difficulty. It is unfair that consumers who have not yet had a deferral but may need support after the furlough scheme ends will feel the effects longer-term.
“Lenders should ensure that people can easily access the support they need and not shy away from offering a range of support options. They must be clear with customers about how any arrangements, such as payment deferrals, will be marked on their credit file.”
The Health and Sport Committee will hear from NHS Lothian on the impact of the Covid-19 pandemic today.
This will include discussion of the health board’s 2020-21 budget, such as whether costs associated with the pandemic have been offset by savings in other departments.
The Committee will also explore the long-term effects of Covid-19 on health boards, including the funding of Integrated Joint Boards (IJBs). The Committee will also seek to find out what planning has been carried out in anticipation of a potential second wave of the virus.
Appearing before the Committee for this evidence session will be:
The NHS Lothian session follows the appearance of NHS Greater Glasgow and Clyde.
The Cabinet Secretary for Justice, Humza Yousaf MSP, will also give evidence on the latest travel regulations relating to the Covid-19 pandemic. This will be the first item on the Committee’s agenda, which starts at 9.45am.
New research by Community Finance Solutions (CFS) at the University of Salford and Carnegie UK Trust has highlighted the impact that COVID-19 is having on affordable credit providers across England, Scotland and Wales.
More than 60 Credit Unions and Community Development Finance Institutions (CDFIs) in England, Scotland and Wales took part in the study, which asked about the impact of Covid-19 on demand; lending volume; income; liquidity; viability, and confidence.
They reported a decline in the number of people seeking loans and a reduction in the size of loans being sought; a rise in the number of customers seeking payment holidays on their loans; and an increase in saving deposits.
Providers have furloughed staff and closed branches to help them deal with the impact of the pandemic. Some have adapted their business models, increasing the use of digital tools and introducing new products.
Those providers with the smallest average loan amounts (under £1,000) appear to have been most adversely affected by Covid-19, with a higher likelihood of furloughing staff, closing branches and of using government support schemes.
They are also less confident and more likely to forecast breaches of regulatory ratios or covenants and inability to meet short-term costs. These providers are the most likely to serve the most vulnerable and financially excluded.
There are likely to be a range of complex reasons behind the drop in the demand for credit. Positively, it may be because people have had support through other channels set up in response to the pandemic, such as the Job Retention Scheme or an interest free overdraft.
There have also been fewer opportunities for consumption during the crisis. Alternatively, some people may have not sought a loan from an affordable credit provider because their financial position has worsened and they may have to take other action, such as borrowing from family and friends or going without an important purchase.
There is concern that household finances will come under severe pressure as financial support interventions introduced in response to COVID-19 taper off and unemployment rises.
Affordable credit providers have a crucial role to play in supporting families through these difficult times, but this new research by the Trust and CFS shows that these providers are themselves vulnerable to the pandemic.
It will be essential that the affordable credit sector is supported to sustain and scale during this challenging period, so that it is able to support families and communities in the months ahead.
Pål Vik, Director, Community Finance Solutions said: “This research report finds that the short-term effects of Covid-19 are more acutely felt by those lenders targeting low-income consumers.
“The findings underline the needs for ongoing research and data collection to inform interventions to preserve the access to affordable credit for those that need it the most.”
Sarah Davidson, Chief Executive, Carnegie UK Trust said: “Affordable credit providers have a vital role to play in helping disadvantaged communities cope with Covid-19 and rebuild resilience afterwards.
“This research highlights the need to continue to monitor the impact of the pandemic on affordable credit providers, and for the sector to receive the support that it needs to sustain and scale, ensuring that it can support those who are financially vulnerable.”
Sasha Romanovich, CEO, Fair4All Finance said: “Many more people in the UK will find themselves in vulnerable circumstances and the need for fair and affordable credit is likely to grow significantly over the coming months, not least as some high cost providers fail or withdraw from the UK market place.
“Fair4All Finance have a role as a catalyst to create a thriving and sustainable affordable credit sector, and we welcome this research.”
Michael Sheen, actor and social activist said: “It is vital that affordable lenders come through the current stage of the crisis to be able to support financially vulnerable consumers in the medium to long term.
“We need all those people with a voice – councils, housing associations, the third sector and the media – to highlight to those borrowers that often need access to small sums of money that fair credit is out there, at a fair price. ”
The Carnegie UK Trust has also recently published The 10% solution: How to make affordable credit more available to those who need it most as a short and full report.
This research examines the levels of high cost credit use and the provision of affordable credit across seven Scottish local authorities, reveals the gap between demand and appropriate supply, and puts forward a range of interventions available to local authorities that can support affordable credit providers and make a significant difference to the lives of low income individuals in their areas.
Increasing the market penetration of affordable credit providers in these seven areas to 10% of demand could save low income households nearly £5m a year.
While the research fieldwork for this report took place before the COVID-19 pandemic, it demonstrates the need for affordable credit, and the importance of supporting a resilient sector which can provide for financially vulnerable consumers in the years ahead.
As the Chancellor stands up to make his ‘summer statement’ today, families across the country will be facing up to the possibility of unemployment (writes the TUC’s KATE BELL):
The Chancellor has a chance to prevent the devastation of mass unemployment leading to the situation this country saw in the 1980s – young people left on the scrap heap, lives ruined, and communities decimated. But he needs to act fast and decisively.
Here’s the TUC’s plan for decent jobs:
1. Introduce a real jobs guarantee – offering paid jobs for young people who face unemployment
We’ve heard that the Chancellor may invest in apprenticeships, or traineeships – unpaid work placements with some training attached. It’s not clear yet whether these will be voluntary, or how the Chancellor expects people to live while they’re undertaking these. The TUC has always opposed mandatory unpaid work placements. And unpaid work experience is no substitute for a real jobs guarantee.
We want the government to invest in supporting real jobs, paid at least the Real Living Wage, for young people facing the prospect of long-term unemployment. Government funding should support additional jobs in the public and private sector that support regional growth strategies, and provide real benefit, including helping to decarbonise the economy.
That jobs guarantee must go alongside a rapid redundancy response service and investment in jobcentres. And we desperately need an increase in social security payments to stop those who lose their jobs spiralling into debt.
2. Invest across the economy to create jobs
We know the country needs an infrastructure upgrade to help drive productivity, and urgent action to tackle the climate crisis. And after a decade of austerity, our public services are desperately overstretched.
Fixing these problems now can help create the jobs we need. Research for the TUC shows that an £85bn investment in green infrastructure could help create 1.24 million jobs in the next two years, including 500,000 jobs through building and retrofitting social housing, and almost 60,000 jobs in electrifying transport.
And we should support our public services by investing in jobs. There are over 100,000 vacancies in social care, and 100,000 more in the NHS – even before we deliver a better system. Local government saw 100,000 redundancies in the past decade, jobs that are needed now to deliver vital services and help tackle the pandemic.
3. Work with unions and business on new rescue plans for hard hit sectors
We’ve seen how the pandemic, and the social distancing measures it requires, has hit some types of business harder than others. Aviation and hospitality have been particularly badly affected. Government needs to come together with unions and businesses to design rescue packages for these sectors – including setting out how those plans can be used to deliver better and greener jobs.
The Job Retention Scheme has done valuable work throughout the crisis in protecting people’s jobs, and is now supporting many people to work part-time. Government should extend it beyond October for businesses that can show they have a viable future but need more time to get back on their feet.
4. Prioritise progress towards equality
We know unemployment is bad for everyone. But those who already face discrimination in the labour market often see their prospects held back even further. BME groups faced higher unemployment in the 2008-09 recession, and still have high unemployment rates.
Research shows that during upturns disabled people are the last to gain employment, and during downturns they are first to be made unemployed. With the childcare sector on the brink of collapse, women’s employment prospects face being put back a generation.
The Chancellor needs to prioritise progress towards equality when he sets out his plans. That means tackling the insecure work that leaves BME workers disproportionately having their hours cut or being let go. It means monitoring the impact of employment programmes on different groups.
And it means the Chancellor needs to protect those who can’t work due to the fact they are shielding or have caring responsibilities from being forced out of work by extending the job retention scheme.
Mass unemployment and a new wave of inequality aren’t inevitable. We can build back better. But the Chancellor needs to be bold and act fast.
Finance Ministers from the devolved administrations are urging the UK Government to ease the financial restrictions imposed on devolved governments so they can better respond to the coronavirus (COVID-19) crisis.
Ahead of the Chancellor’s Summer Statement, Kate Forbes, Rebecca Evans and Conor Murphy are calling for assurances that will give them the freedom to switch capital funding to day-to-day revenue and put an end to the arbitrary limits on borrowing. They are also looking for more clarity on details around the forthcoming Spending Review.
Kate Forbes, Scotland’s Cabinet Secretary for Finance (above), said: “The powers we are seeking will enable the Scottish Government to respond to COVID-19 more effectively and reboot our economy. They are relatively limited powers, but would ease some of the immense pressures on our budget and give us more tools to kick-start our recovery.
“At the moment, any extra money spent bolstering services and supporting the economic recovery must be taken from other areas. That creates risks for our essential public services, jobs and businesses. I am therefore calling on the Chancellor to ease these rigid fiscal rules and give us the flexibility we need to properly address the monumental challenges our economy is facing.
“I also want to see greater ambition in the level of investment in our economy. Last week the Scottish Government set out a proposal for an £80 billion UK-wide stimulus package. What is needed at this time of crisis is bold and practical policies that will boost consumption, promote investment and protect jobs.”
Northern Ireland Finance Minister Conor Murphy said: “It is crucial that the devolved administrations are equipped to respond swiftly and effectively to the challenges arising from COVID-19.
“More financial flexibility can help us deal with these challenges and use our budgets to support public services, protect the vulnerable, and deliver an economic recovery.”
Welsh Finance Minister Rebecca Evans said: “Our response to the COVID-19 crisis has been hampered by UK imposed rules that limit our ability to get more resources to the frontline.
“There is no clear rationale for these rules, which undermine good budget management in Wales.
“The Welsh Local Government Association, Wales TUC, FSB Cymru and Institute for Fiscal Studies and, more recently, the Senedd’s Finance Committee, have all made the same calls for change.
“The crisis has made the issue urgent. It’s time for the UK Government to act and provide the flexibility we need to respond and invest in Wales’ recovery.”
Today we launch our 2020 Social Impact Report, it shows how charities and social enterprises are using our loans to make a difference to the world around them.
The aim of Charity Bank is to leave these organisations in a stronger position, both financially, and in terms of their ability to carry out their mission.
Last year, 67 borrowers used a new Charity Bank loan to support their mission. Some used their loan to expand services and reach more people. Others used it to improve their financial stability by reducing their reliance on grant funding, increasing their assets or cutting their outgoings, putting them in a stronger position to help local communities for many years to come.
We invite you to look inside our report and find out more.
Today Finance Secretary @KateForbesMSP launched a report which sets out the principles we believe the UK Government should follow to kick-start the economy and reduce inequalities following the #coronavirus pandemic.
A UK-wide £80 billion stimulus package should be created to regenerate the economy and reduce inequalities following the coronavirus (COVID-19) pandemic, a new Scottish Government report proposes.
The package could finance a temporary reduction in VAT and move the tourism and hospitality industries onto a reduced VAT rate of five per cent.
A two pence cut in employers’ National Insurance Contributions to reduce the cost of hiring staff is also recommended in the report, entitled COVID-19: UK Fiscal Path – A New Approach.
Other action it proposes the UK Government should take to kick-start the economy includes:
introduce a jobs guarantee scheme for young people and extend sector-specific employment and business support schemes
create a National Debt Plan to help business and household budgets recover from the effects of the pandemic
adopt new fiscal rules which prioritise economic stimulus over deficit reduction in times of crisis
accelerate major investment in low‑carbon initiatives, energy efficiency and digital infrastructure
extend Scotland’s financial powers to allow it to shape its own response to the pandemic
The report was launched yesterday by Finance Secretary Kate Forbes.
Ms Forbes said: “We are emerging from the biggest economic shock of our lifetimes. It has hit the most vulnerable in our society disproportionately and presents challenges that the Scottish Government does not currently have the powers to meet.
“The UK Government’s fiscal policies are still key in determining our budget, so today we set out the principles we believe it should follow to ensure we emerge with a fairer, greener economy that values wellbeing alongside growth.
“This report recommends bold, practical steps which would provide an immediate boost to our economy, protect existing jobs and deliver new ones. It tackles public debt, employment and proposes measures to further support business. Crucially, it avoids any return to austerity. Economic stimulus must be prioritised over deficit reduction until the recovery has fully taken hold.
“Germany has already adopted a similar-size stimulus package, representing four per cent of GDP, and the UK Government needs to be similarly positive, proactive and ambitious.
“Action is needed now. If the UK Government is not prepared to respond then Scotland must have the additional financial powers required to secure a sustainable economic recovery.
“Without those powers we will be at a severe disadvantage to other nations. It would be like trying to chart our way to recovery with one hand tied behind our back.”
Almost £258 million of additional funding for vital local services, such as food provision for those in need, education and social care, has been approved by the Scottish Parliament.
The provision of a further £72 million is being agreed with COSLA and will be subject to Parliamentary approval in due course. This will bring the total additional funding provided to help Scotland’s local authorities combat coronavirus (COVID-19) to almost £330 million.
This extra funding is on top of the local government finance settlement of £11.4 billion, which already provided an increase of £589.4 million (5.8%) compared to the previous year.
To prevent local authorities experiencing cash flow problems the Scottish Government is providing £455 million in weekly advanced payments to councils until Parliamentary approval is secured. Councils received an additional £150 million in May, £255 million in June, and will receive £50 million in July.
Public Finance Minister Ben Macpherson said: “We have taken exceptional measures in every area of government as we deal with the challenges of COVID-19 – and that is particularly clear in our support for local services.
“To date, Scotland’s councils have received £405 million in advanced payments this financial year, and by the end of July this will have risen to £455 million.
“The Scottish Government has also relaxed current guidance on some of the education grants to allow additional resource to be diverted to the COVID-19 response.
“We will continue to work with COSLA and local authorities, as well as pressing the UK Government for urgent additional funding and flexibility for our partners in local government.”
