Covid-19 may have caused turmoil – experts

Experts have warned Scotland could have been plunged into financial turmoil if the coronavirus pandemic had hit harder because the current UK funding arrangement may have been insufficient.

The funding and financial powers of governments in Scotland, Wales and Northern Ireland are governed by fiscal frameworks that link changes in funding to spending in England, and put strict limits and controls on borrowing.

Researchers from the Institute for Fiscal Studies, the Fraser of Allander Institute and Stirling University found these funding arrangements “largely coped” but only as a result of “luck, the huge sums of money provided by the UK Government to address the crisis in England, and ad-hoc bypassing of the normal rules of the frameworks”.

David Eiser, from the Fraser of Allander Institute, said the shift away from the usual process of allocating funding by Barnett consequentials was “critically important in providing the devolved governments the resources and flexibility they need”.

He said: “Uncertainty around whether the furlough scheme would be available within a devolved nation if a devolved government felt the need to apply tighter restrictions than prevailed in England may have influenced the timing of restrictions in Scotland and Wales at various points.

“But in the end, the UK government’s decision to extend lockdown in England averted major crisis around this issue.”