Scotland faces worst economic impact in the UK from coronavirus
Nicola Sturgeon has said Holyrood’s spending powers must be enhanced to weather the impact of the coronavirus after experts warned the economic fall-out may be worse in Scotland than elsewhere in the UK.
MSPS on Holyrood’s Finance Committee were told yesterday that Scotland’s economy is likely to suffer more than the UK as a whole, with key sectors such as North Sea oil and gas and the tourism and hospitality industries among those hardest hit.
The First Minister then echoed calls from former SNP MSP Andrew Wilson, who drew up the revised economic case for independence, for further fiscal powers for Holyrood.
Mr Wilson called for the
Treasury to consider “transformational” new borrowing powers to overhaul Scotland’s economy and suggested ministers at Holyrood should be able to issue large-scale bonds to rejuvenate industries hit hard by the pandemic. Ms Sturgeon said: “Conversations with the Treasury are ongoing on a whole range of things We have made clear that the
current fiscal powers of the Scottish Parliament are probably not sufficient to deal with the reality now and into the future of this crisis.
“So we want to have constructive discussions about how we change these powers in order to better equip us and that would be an ongoing discussion.”
Mairi Spowage, deputy director of the Fraser of Allander Institute think tank, told the Finance Committee the pandemic has highlighted how greater flexibility is needed in Scotland’s financial arrangements.
The fiscal framework was drawn up to help governments in Edinburgh and London deal with Holyrood being given increased powers over income tax. But Ms Spowage warned there could be a negative impact on the Scottish budget “if there is a poorer performance of Scottish tax revenues per head” as a result of Covid-19.
Speaking to MSPS on Holyrood’s Finance Committee, she said “on balance” she is of the view that “Scotland is more at risk of having a more severe impact than the UK as a whole”.
The oil and gas sector has been “severely impacted” by Covid-19, as people across the world stay at home, with trade body Oil and Gas UK warning up to 20,000 jobs could lost.
Ms Spowage said this would have a “significant impact” on the economy of Scotland’s north east, and on Scotland as a whole.
Meanwhile she said the tourism and hospitality sector is “more prevalent in Scotland than the UK as whole, so there is likely to be more impact”.
Ms Spowage added: “More importantly these industries are just so key for particular parts of Scotland, so there is likely to be quite a big regional impact, particularly in the Highlands and islands and these sorts of areas who rely heavily on tourism and hospitality spending.”
She warned such businesses could be left struggling until spring2021,sayingevenifpubs and restaurants are allowed to reopen later this year, people could be “very wary” about returning to them.
These businesses are also the ones that are hit when people are forced to cut down spending if they lose their job or their income is cut, she said.
Looking at dealing with the economic impact of the pandemic, Ms Spowage was clear “there aren’t really that many options within the fiscal framework right now to deal with these differential impacts”.
She said the borrowing powers the Scottish Government has are “fairly limited” and there is “not very much money” in the Scottish reserves to “manage this current crisis”.
The expert said Scotland’s borrowing levels could be increased by the UK Treasury “depending on the flexibility they are prepared to grant in order to deal with these unprecedented times”.
But she also said the Scottish Government would have to look at how it spends its cash.
“The Scottish budget is not an insignificant amount of money,” Ms Spowage said. “It is a large budget of £30 billion, so there may be options for the Scottish Government to look at spending the money it has differently in order to get through the crisis.”
She said the Scottish Government might be able to divert cash from projects which can no longer take place because of the Covid-19 crisis, such as the introduction of the Scottish Child Payment, which has been delayed.
Some areas of spending may be “deprioritised” as ministers seek to deal with the impact of the pandemic, Ms Spowage said.
The calls for more fiscal autonomy were dismissed by Tory constitution spokesman Murdo Fraser, who said Scotland’s economy will only emerge from the crisis through the financial strength of the UK and that the SNP has “no credibility” on public finances.
Mr Fraser said: “Scotland’s economy will only survive this unprecedented crisis because of the financial strength of , the UK. In addition, the SNP’S fiscal record is laughable. From their inability to grow the tax base, to the billion pound black hole in the public finances, the SNP has no credibility left.
“The SNP are only calling for more borrowing powers because they maxed out Scotland’s existing borrowing limits, leaving nothing in reserve for a rainy day.
“Now, when crisis hits, there’s nothing left to fall back on. Whatever the case for more borrowing powers, they wouldn’t be needed if the SNP had shown more prudence in the good times.”
The number of Scots meanwhile being helped with employment issues has quadrupled in just two months in the wake of the coronavirus pandemic, according to Citizens Advice Scotland (CAS).
Last month 16 per cent of advice the charity issued concerned employment – a rise from 4 per cent in February.
CAS said the “continued rise in advice given on employment issues suggests ongoing uncertainty around workers’ rights and entitlements, despite the significant and unprecedented levels of support announced”.
“We have made clear that the current fiscal powers of the Scottish Parliament are probably not sufficient to deal with the reality now and into the future.”
NICOLA STURGEON
Scottish First Minister