COVID-19 Barnetts for 2020-21 – the final reckoning

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Over the course of 2020-21, the Scottish Government has been allocated a total of £9.7 billion in Barnett consequentials.  These consequentials result from the UK government’s spending on its COVID-19 response measures in devolved areas, such as health, local government and education.  A series of SPICe blogs have tracked the amounts allocated and how the Scottish Government plans to use them.  This blog sets out the final position for 2020-21.  Future blogs will continue to track the position for 2021-22, which is already evolving even before the start of the financial year.

How much will be spent in 2020-21?

Of the £9.7 billion allocated for 2020-21, the Scottish Government plans to spend £8.6 billion in this year.  The remaining £1.1 billion will be carried forward to 2021-22.  The Scottish Government requested permission to do this because the final £1.1 billion was allocated very late in the financial year (15 February).  As a result of the late notification, the Scottish Government did not consider there to be enough time to allocate and spend the money before the end of March 2021.

The final details of changes for the 2020-21 portfolio budgets were set out in the Spring Budget Revision.  The main priority areas for additional COVID-19 funding have been health funding and support for businesses.  Significant elements of the support for businesses have been delivered via local authorities, so are shown as an increase to the ‘Communities and Local Government’ portfolio area.  Other aspects of COVID-19 business support have been delivered via agencies such as Scottish Enterprise, so feature in the ‘Economy, Fair Work and Culture’ portfolio budget.  There has also been substantial support for operators of public transport services to compensate them for the drop in income they have suffered through the pandemic.

Understanding the increases for local government

Of the £2.5 billion increase to the ‘Communities and Local Government’ budget, around £1.3 billion has been funding to be passed on to businesses through various grant schemes.  Other support has also been provided for local authorities to pass on to individuals and households in need, for example through Discretionary Housing Payments, the Scottish Welfare Fund and via self-isolation grants.  The Scottish Government has also provided £972 million in additional funding to local authorities to make up for the anticipated shortfall in business rates income, because the Scottish Government guarantees the combined General Resource Grant and Non-Domestic Rates Income figure to local government. This does not have the effect of increasing the overall level of funding to local government, it just means the funding is coming from the Scottish Government, rather than as business rates income.  Separately, the Scottish Government has also provided money to local government to compensate it for loss of income from fees and charges during the pandemic e.g. parking charges, planning fees and charges for leisure services.

So, is that the end of the COVID-19 Barnett consequentials story?

No!  As noted at the start of this blog, the Scottish Government intends to carry forward £1.1 billion of this year’s Barnett consequentials to 2021-22.  The Scottish Government has announced that it will use some of this funding to provide 100% business rates relief for retail, hospitality, leisure, aviation businesses and newspapers for the whole of 2021-22.  Prior to this, the 2021-22 budget had only factored in a three-month extension to the rates relief for these businesses.  Also, the removal of charitable rates relief for mainstream independent schools is to be delayed until 1 April 2022.

In addition, the following areas will benefit from the additional £1.1 billion of funding:

  • £120 million for mental health
  • £120 million for affordable housing
  • £100 million to support people on low incomes
  • £60 million for schools to help pupils catch-up on missed education
  • £60 million for NHS recovery
  • £45 million for heat decarbonisation, energy efficiency and fuel poverty
  • £21.5 million for Scottish Enterprise.

As the impact of the pandemic looks set to continue into 2021-22, so will the additional funding for dealing with the ongoing effects.  The 2021-22 Scottish Budget already includes £1.3 billion for COVID-19 that was announced in the UK Spending Review.  On top of this, in the Budget for 2021-22 presented on 28 January 2020, the Scottish Government allocated £500 million in COVID-19 consequentials.  Although these had not yet been confirmed, the Scottish Government considered this to be a prudent assumption.  This reflected that the UK government’s November 2020 Spending Review included £21 billion of contingency funding set aside by the UK government in respect of its ongoing pandemic response package, which makes further consequentials seem likely.  Already there have been announcements in respect of further support for businesses and the UK budget on 3 March is likely to provide further details.

Future SPICe blogs will continue to track the evolving picture of COVID-19 financial support through 2021-22.

Nicola Hudson, Senior Analyst, Financial Scrutiny Unit