Letter from the Cabinet Secretary for Finance and the Economy to the Convener of 24 January 2022
On 12 January I attended the Finance Ministers’ Quadrilateral by teleconference with the UK Government Chief Secretary to the Treasury, the Welsh Government Minister for Finance and Local Government and the Northern Ireland Executive Minister of Finance. As this meeting was arranged at short notice, I regret that I was not able to give you advance notice. This letter, however, updates the Committee on the key points of the meeting.
The agenda items for the meeting were:
Under the first item we discussed the prospects for further economic interventions at UK and devolved levels. We recognised the importance of job retention schemes and the appetite and practical difficulties regarding regional schemes. The devolved administrations welcomed the advance of consequentials, but stressed the need for certainty regarding this funding and for enhanced flexibility options to deal with exceptional circumstances. It was noted that the funding information would firm up as the UK Supplementary Estimates process concluded, and that official-level information-sharing would continue to be important.
It was noted that the UK Spring Statement and associated OBR forecasts were scheduled for 23 March, and the proximity to devolved pre-election periods. The cost of living challenges were highlighted, with discussion of the urgency in considering household support measures.
The focus of the respective devolved administrations’ 2022-23 budgets were discussed, during which I reiterated our challenging financial position, our strategic priorities around child poverty, climate change and COVID and economic recovery, and the process regarding our resource spending review.
A date was not set for a subsequent meeting, but reference was made to the new arrangements following the intergovernmental relations review (on which the UK Government proceeded to publish information the following day). The devolved administrations issued a joint statement following the meeting, which I have annexed to this letter for information.
I hope that the Committee finds this update helpful.
Yours sincerely,
Finance Ministers seek Covid funding flexibility
Joint call from the devolved governments.
Finance Ministers in Scotland, Wales and Northern Ireland have called on the Treasury to guarantee that money allocated to support Covid responses will be provided in full, following a meeting with the Chief Secretary to the Treasury.
They are also urging action to tackle the cost of living crisis and help households with rising bills.
Last month, as a result of spending in England, the Treasury announced it would provide additional funding to tackle Covid, with the Scottish Government allocated £440 million, the Welsh Government £270 million and the Northern Ireland Executive £150 million. The devolved governments are concerned they may not be granted permission to carry over into next year’s budgets any late consequential payments – despite this flexibility being provided in 2021/22.
The Finance Ministers today also re-iterated a request for the Treasury to provide support to Scotland, Wales and Northern Ireland if the public health situation in each nation demands it, not just when the assistance is applied in England.
In addition, they are calling on the Treasury to help households facing a cost of living crisis. In October the UK Government withdrew the £20-a-week uplift to Universal Credit, a cut that was opposed by all three devolved nations. Last month it was confirmed that inflation had risen to 5.1% - the highest rate in a decade – with increasingly expensive food, transport and clothing contributing to higher household bills. Powers to help households meet the cost of living lie mainly with the UK Government, and the three Finance Ministers want the Treasury to step up and deliver more support to households.
Scottish Government Finance and Economy Secretary Kate Forbes said:
“I welcome today’s discussion and the constructive approach taken by all sides.
“However, along with the other devolved administrations, the Scottish Government remains concerned that the additional funding we have received to mitigate the impact of the Omicron variant may be subject to future deductions. Without the ability to borrow, this continuing uncertainty could have a substantial damaging impact on our COVID response and our ability to support public services in Scotland.
“More fundamentally, the situation highlights once again that it is not tenable for funding only to be triggered by public health decisions in England. A system is required that supports the decisions of each devolved administration and is not beholden to the decisions of one part of the UK.
“The Scottish Government has set out a range of ambitious actions - within our limited resources - to support households and reduce inequalities, including our commitment to double the game-changing Scottish Child Payment to £20 per child per week. But people are facing a cost of living crisis and the UK Government, which reduced the lifeline Universal Credit uplift in October despite our representations, must now urgently intervene.”
Welsh Government Finance Minister Rebecca Evans said:
“We need to see urgent action from the Treasury to help people with rising bills and living costs. Domestic energy prices are of particular concern at the moment with more and more people living in fuel poverty. This winter the Welsh Government invested £51m in our Household Support Fund to help households, but most of the powers and the fiscal resources needed to address the cost-of-living crisis are in the UK Government’s hands. The Treasury must step up. Additional support through targeted UK-wide schemes such as the Warm Home Discount and other winter fuel payments would lessen the burden on hard pressed households.
“Arrangements for Covid funding also need to change. Last month, as the omicron variant took hold, the Treasury hesitated before providing Wales with funding to meet the challenges. When funding did come, we received no guarantee that it would not need to be returned. The Treasury must recognise the importance of fully supporting devolved nations to help protect our businesses and protect our populations.”
Conor Murphy, Minister of Finance, Northern Ireland Executive said:
“As we continue to deal with the challenges posed by Omicron the uncertainty surrounding the Covid funding provided by Treasury is unhelpful. It is also hugely concerning that Treasury may not permit funding to be carried into next year even if additional funding is confirmed at such a late stage that it prevents it being used most effectively. We have been calling on Treasury to reinstate the Self Employed Income Support Scheme and furlough scheme on a targeted basis where necessary. It is disappointing that Treasury is unwilling to provide support to workers and their families. We would ask Treasury to urgently reconsider this position.
“The cost of living crisis is causing hardship for families and businesses. I’ve been calling on Treasury to suspend VAT on energy bills temporarily to provide reprieve during the difficult winter period. It is time for Treasury to act now.”