finance – Page 12 – The NEN – North Edinburgh News

Latest COVID-19 funding allocations

Money for business support and vaccine programme

More than £1.8 billion of extra funding has been allocated to tackling the impact of coronavirus (COVID-19) in Scotland.

It covers areas including health, transport and business support, accounting for all but £330 million of the latest consequentials generated by UK Government spending. The remainder will be used to meet further urgent demands relating to both COVID-19 and Brexit up to the end of March 2021.

The funding is detailed in a letter from Finance Secretary Kate Forbes to the Scottish Parliament’s Finance and Constitution Committee.

Ms Forbes said: “From the outset, I have ensured that the money we receive is distributed as quickly as possible to where it is needed most. Our decisions have provided vital additional resources to our NHS, schools and other public services, they have kept our transport system running and provided much needed financial support for businesses impacted by the pandemic.

“To provide full transparency, I detailed earlier allocations in the summer and autumn budget revisions. This latest round will deliver measures such as the COVID-19 vaccination programme, local business support packages and free school meals over the holidays.

“The UK Treasury has indicated that this funding covers the period up to March 2021, so I have allocated £330 million as a contingency to ensure we are in a position to provide further support to health and businesses, including for issues arising from Brexit, as it is required over the coming months.

“Our limited borrowing powers mean we do not have flexibility to increase spending to meet demand and therefore must manage our expenditure – much of which is demand led so cannot be accurately calculated in advance – within the consequentials provided.”

The latest allocations include:

around £600 million for health and social care, wider public health initiatives and welfare support. This includes the COVID-19 vaccination programme, test and trace and the £500 bonus for health and social care workers.
support for business and the wider economy totalling £570 million, including funding for the strategic framework, local business support packages, the newly self-employed hardship fund and local authority discretionary business funding
an estimated £139 million of previously announced funding for government, bringing the overall support package to councils to more than £1 billion
around £500 million to support transport services and cover pandemic-related income shortfalls within organisations such as Police Scotland, the Scottish Funding Council and the Scottish Courts and Tribunals Service

The latest COVID-19 consequentials bring the total received by the Scottish Government to £8.2 billion.

A further update on COVID-19 spending will be provided through the Spring Budget Revision in the New Year.

A copy of Ms Forbes’ letter to the Finance and Constitution Committee Convener Bruce Crawford is below:

Dear Bruce,

I am writing to update the Finance and Constitution Committee on usage and allocations to date of consequential funding received during 2020-21 as a result of the Covid-19 outbreak.

We have drawn down and allocated this funding over the course of the year in response to what has been an exceptional and dynamic set of circumstances. I have updated Parliament on several occasions and, although a further update will be provided through the Spring Budget Revision in the New Year, I thought it would be helpful to provide further information in advance of that.

Around £6 billion of consequentials were allocated in the unprecedented Summer Budget Revision and as part of the Autumn Budget Revisions. Since then, consequentials provided have been increased to £8.2 billion.

I can confirm that thus far, further allocations have been provided as follows:

Around £600 million has been provided to health and social care, wider public health initiatives and welfare support. This funding supports the public health response to Covid including: vaccinations and test and trace; the £500 non-consolidated payment for health and social care staff; and the Winter Plan for Social Protection, which helps people pay for food, heating, warm clothing and shelter as well as free school meals over the school holidays and the self-isolation support grant.
Support for business and the wider economy of £570 million, including grants via the Strategic Framework, funding for local support packages, the newly self-employed hardship fund, digital support, Local Authority Discretionary Business Funding and remaining allocations from the £97 million support for culture and heritage.
Previously announced support for Local Government, relating to the estimated £90 million Lost Income Scheme as well as £49 million of additional funding confirmed to councils in September. Added to additional funding already committed, this brings the value of the overall support package to councils to more than £1 billion.
Around £500 million of funding to support continued provision of transport and funding for income shortfalls within our partner bodies including Police Scotland, the Scottish Funding Council, Registers of Scotland and the Scottish Courts and Tribunals Service in order to ensure that they can continue to deliver vital services, as well as mitigating shortfalls in devolved tax as a direct result of Covid-19.
Due to the nature of the Covid-19 outbreak, the potential asks for further demand led spend with regards strategic framework support for business in Scotland and additional demands on health, and the requirement that the funding provided to date will cover all costs until the end of March 2021, I have allocated £330 million of funding in order to support these asks. This is consistent with the terms of the funding guarantee provided by HM Treasury to the devolved administrations, which specified the funding was to cover the period until March 2021. This contingency is also required in order to support any additional funding requirements as a result of the end of the EU transition period.
The Scottish Government’s limited borrowing powers means we do not have flexibility to increase spending and therefore must manage demand-led expenditure risks within the consequentials provided.

The figures above remain a snapshot of a dynamic funding position. I will formally advise of final allocations as part of Spring Budget Revision, the last formal opportunity in the financial year to transfer budgets.

KATE FORBES

https://twitter.com/i/status/1337006754421501952

Businesses across Scotland will benefit from a new £185 million package of targeted coronavirus support.

The announcement follows discussions with business groups and sees a wide range of sectors benefiting, from taxi drivers and arts venues to travel agents and hospitality.

In addition, there will be additional one-off payments to hospitality businesses in January to help them deal with the traditional post-Christmas dip in demand. These will be of £2,000 or £3,000, depending on rateable value.

The package was announced by Finance Secretary Kate Forbes, who also said she had written to the Treasury calling for Scotland to receive its share of rates relief reimbursed by supermarkets “to ensure this is spent on those areas hardest hit as part of Scotland’s recovery from COVID-19”.

Ms Forbes said: “Today I am pleased to confirm an allocation of £185 million for new and additional business support in the new year. We have listened to businesses and this assistance will be provided on a sector-by-sector basis, targeted at those who need it most.

“We are developing grant schemes for hospitality, for the events sector, live music and cultural venues, for the arts, indoor football centres and for the food and drink sector, including £1.8 million for brewers.

“We will give £1.5 million to travelling show people ineligible for other support, while a new £19 million fund, plus a one-off grant, will help taxi drivers.

“I can also announce that further support of £60 million will be provided to the tourism sector, details of which will be developed in consultation with the industry.

“I am listening to the needs of business and we will continue to review and refine our COVID-19 support offer within the available resources.”

Specific support detailed in Wednesday’s announcement includes:

£15 million for the wedding sector and its supply chain, including photographers
one-off grants totalling £15 million for mobile close contact services, such as hairdressers
a £19 million fund and one-off grants for taxi drivers
£5 million for travel agents
almost £6 million for coach companies and tour operators
£1.5 million for visitor attractions.

More detail on the package will be announced in the coming days and businesses can expect to apply for all the new grant schemes in January.

Growing gulf between savers and those with debts amongst UK households, says new report

COVID-19 is having a massive impact on household finances, with personal debts increasing. But some people are seeing their savings rise as their incomes remain unaffected and their spending has been curtailed, says a new financial inclusion monitor from the University of Birmingham and the University of Lincoln.

The research also shows that the impact of COVID-19 comes on top of poor economic performance in 2019 (a likely result of Brexit uncertainties). Economic growth was negative and in the fourth quarter of 2019 it was zero. Furthermore, unemployment, under-employment and zero-hour contracts had all increased in 2019, while wages had started to fall in real terms towards the end of that year and into early 2020.

The 2020 briefing, now in its eighth year, highlighted that even though strains on family budgets were there prior to the pandemic, the impact of COVID-19 on top of this situation looks set to be monumental.

From just March to May 2020, between one quarter and one third of jobs were furloughed, and from March to April that year there were 2 million more claims for Universal Credit than there had been in the same period in 2019. By the end of May 2020, 28 per cent of the population said that COVID-19 had had a direct negative effect on their income.

For some households the Job Retention (furlough) Scheme and the boost to Universal Credit have been incredibly important interventions to support people’s incomes. However, those on ‘legacy’ benefits, are not seeing the same level of income protection, leading to a two-tier benefit system.

Karen Rowlingson, Professor of Social Policy and a member of the Centre on Household Assets and Savings Management (CHASM) at the University of Birmingham, and co-author of the report said: “COVID-19 has had, and is likely to continue for some time to have, a devastating impact on UK household finances.

“But it is important to note that, even prior to the pandemic, family budgets and the UK’s economy more generally were already faltering in many ways, possibly as a result of Brexit-related uncertainties during 2019.”

“Our research shows these are extremely difficult times for the country and many within it. Some statistics reveal, however, that a significant minority of the population is unaffected, financially, by COVID-19 or, indeed, are somewhat better off financially as their incomes remain the same but their expenditure drops. Inequality is rising still further as a result.”

Other key findings of the report show:

Unemployment had started to increase even before the COVID-19 crisis, possibly due to Brexit-related uncertainties.
Underemployment was similarly trending slightly upwards again to 2.5 million in December 2019. And the number of zero hour contracts also began increasing again in 2019 to a record high of 974,000.
The Trussell Trust has seen a doubling of emergency food parcels going to children in April 2020 compared to April 2019.
Prior to the COVID-19 crisis, nearly 2 million families (6 per cent) said that they could not keep up with bills and regular debt payments according to 2018/19 data. Levels of problem debt were highest among renters, particularly council and housing association renters with Council Tax debt being the most common type of debt in 2018/19.
There has been an increase in the last year from 1,590 mortgage possessions in the third quarter of 2018 to 2,130 in the third quarter of 2019.
There is slightly more positive news in relation to financial inclusion with the number of people ‘unbanked’ reaching an all-time low in 2018/19. But there is growing concern about access to cash as bank branch closures escalate and free cash machines continue to disappear from local high streets.

Steve McKay, Distinguished Professor in Social Research from the University of Lincoln and a co-author of the report says: “COVID-19 has led to an increase in already high levels of anxiety about finances with an estimated 4.6 million people now in arrears on household commitments totalling around £6 billion.

“As the furlough scheme finishes at the end of October and the eviction ban on tenants has already ended we will see a further rise in personal debt and people losing their homes”

Download the Financial Inclusion Annual Monitoring Briefing Paper 2020.

Clydesdale no more

VIRGIN MONEY INVESTS IN NEW FLAGSHIP STORE IN SCOTLAND’S CAPITAL

New store first of its kind in Scotland
55 Clydesdale Bank branches will rebrand to Virgin Money Stores
Entire nationwide network of stores will operate under the new Virgin Money brand by spring 2021

Virgin Money has opened its state-of-the-art flagship Store in Edinburgh as part of its UK wide store rebrand programme.

The new flagship store located at 83 George Street, is the latest example of Virgin Money’s innovative approach to what a bank branch can offer. Once Covid-19 restrictions have been lifted, customers will be able to experience the full range of the new store’s features, including a space for entrepreneurs to co-work and create, a venue for events and much more as Virgin Money invests in UK high streets as part of its nation-wide rebrand.

The multi-million-pound rebranding of its national network of Clydesdale Bank, Yorkshire Bank and Virgin Money sites to the new Virgin Money branding will be completed by spring 2021, bringing all stores under a single brand.

Each rebranded store will offer full banking services to all 6.6 million customers in the Virgin Money Group, vastly increasing the network of available stores to existing Clydesdale Bank, Yorkshire Bank and Virgin Money customers. Over the coming months customers will also begin to see credit cards, banking apps and account statements change to Virgin Money as part of its wider rebrand activity.

Customers will continue to benefit from the same friendly and knowledgeable teams, providing excellent customer service and access to a wide range of Virgin Money products and services from current account to mortgages and credit cards. Customers will also have access to exclusive products and services from the wider Virgin Group of businesses.

Paul Titterton, Head of Personal Distribution at Virgin Money said: “These are exciting times for Virgin Money as we invest in our stores and move to a single brand for all customers.

“The new George Street store brings together the very best of digital banking with a unique offering on the high street. It’s a new chapter for our history, and our new approach to stores proves that a bank branch can be a buzzing creative space where businesses and people can come together.

“We can’t wait for the Covid restrictions to lift so customers can enjoy the full Virgin experience in our new Edinburgh store.”

As part of the programme 55 Clydesdale Bank branches will be rebranded to Virgin Money Stores across Scotland.

Virgin Money are in communication with its customers in advance of their own branch being rebranded to let them know about when they can expect the changes to be made.

Huge jump in number of people missing card and loan payments as financial support cut back

The number of people missing a credit card or loan payment in the UK is estimated to have almost doubled in just a month, new Which? research has revealed.

The consumer champion warns scaled back financial support measures may not be sufficient to protect consumers in financial difficulty.

The latest findings from Which?’s consumer insight tracker reveal that approximately 370,000 more people defaulted on a credit card or loan in October than in September, with the estimated number rising from 410,000 to 780,000. This is the sharpest rise in missed payments of this type since the start of the pandemic.

Overall, 5.8 per cent of respondents to the Which? survey reported that their household had defaulted on at least one housing, credit card, loan or bill payment in October. This was a significant increase from September’s figure of 3.8 per cent, and was driven by the increase in defaults on credit cards and loan repayments.

A missed payment is an indicator of significant financial difficulty, and the large spike is highly concerning as it comes as the financial regulator reduces the level of support given to people who are in financial difficulty on 31 October – the same date that the government’s Job Retention Scheme also finishes.

With the Bank of England predicting that unemployment is expected to rise to around 7.5 per cent by the end of the year, and debt advice charity StepChange seeing 13,000 people seeking debt advice for the first time in August alone, Which? is concerned that the Financial Conduct Authority’s scaled back measures will not be enough to tackle the looming challenge to the financial wellbeing of huge numbers of people.

The FCA initially responded rapidly to the coronavirus outbreak, working with the banking industry to introduce a range of financial assistance measures – including payment holidays for mortgages and other forms of credit for those who are struggling financially as a result of the pandemic.

Which? has been warning since August about the need to prepare robust plans to help people through the winter months, after its research indicated that furloughed workers are three times more likely to have defaulted on at least one payment in the previous month. The consumer champion subsequently called for an extension of existing support measures until the start of next year.

However, the FCA has since announced that, from 1 November, lenders will be required to carry out assessments of individual circumstances in order to provide support, rather than consumers being able to self-report their financial difficulty.

Which? has serious concerns about the industry’s capacity to handle a potential deluge of requests for urgent assistance.

Recent research from the consumer champion found that 22 per cent of mortgage holders had contacted, or attempted to contact, their lender since the start of the pandemic and 61 per cent of those requested a payment holiday.

Worryingly, more than half (56%) reported having a problem doing this – with issues including long call wait times, and no responses to email or phone messages.

While it will always be better for a customer who can afford to continue to make payments towards their credit card or loan payments to do so, these figures suggest many people are struggling financially and will need support from their lender.

The consumer champion fears that the additional requirement to assess people’s personal circumstances could create a significant backlog with firms who are having to deal with consumers needing financial support as their payment holidays come to an end, and an additional influx of people seeking help after the government’s job retention scheme finishes on 31 October.

Which? does not want to see consumers denied support altogether, or facing delays that mean they are unable to access help before missing a payment. It believes the regulator should be prepared to move quickly to reintroduce measures similar to the original support if the industry struggles to cope with demand.

Which? is also opposed to a return of normal reporting of financial support on consumer credit files, as this risks pushing large numbers of people facing temporary financial hardship into long-term difficulties.

Currently, payment holidays are not marked on credit files as it has been acknowledged that these are exceptional circumstances. However after 31 October, if a lender offers a payment holiday or agrees an arrangement with a consumer to make reduced payments, these will be reported as missed payments.

Which? believes it is not fair to penalise customers who fall into financial difficulty at this stage of the pandemic through no fault of their own, when people who needed help at the start were able to take payment holidays without facing the same consequences.

Gareth Shaw, Head of Money at Which?, said: “This significant increase in missed payments is a warning sign that large numbers of people could be on the brink of really struggling financially, and it reinforces our concerns about the impact of the government, regulators and industry rolling back vital support.

“There is a real risk that the additional hurdles customers face could mean help is delayed, or impossible to access at all – which could leave many facing serious debt problems.

“Firms need to be proactive and flexible with people who need urgent help, and if there is evidence that customers can’t get the support they need quickly enough, the regulator must be prepared to introduce stronger measures.”

Cosla welcomes additional support worth £750 million

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.”

Devolved nations issue united call for financial action

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.”

Finance Secretary Kate Forbes’ statement to the Scottish Parliament is available online.

40% of Scots feel worse off due to the coronavirus

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.”

FCA confirms the next stage of support for mortgage borrowers

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.”

Today: talking Health at Holyrood

MSPs to quiz NHS Lothian on impact of Covid-19

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:

Calum Campbell, Interim Chief Executive, NHS Lothian
Susan Goldsmith, Director of Finance, NHS Lothian

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.

Full meeting papers:

https://www.parliament.scot/S5_HealthandSportCommittee/Meeting%20Papers/20200915_HS_PUBLIC_PAPERS.pdf

You can watch the session live here: https://www.scottishparliament.tv/

New report highlights the impact of Covid-19 on affordable credit providers

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.

Fear and Loaning – The Impact of Covid-19 on affordable credit providers serving financially vulnerable customers was published yesterday.

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.

The report is available here.

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.