The requirement for a business bank account to be eligible for the Strategic Framework Business Fund has been withdrawn on the Scottish Government website.
This is very welcome indeed.
Business Bank Account
Month: January 2021
Portfolio Questions: Finance
The following Portfolio Questions were tabled in Parliament yesterday, 14th January 2021:
- Covid-19 (Targeted Business Support)
o 1. Jamie Greene (West Scotland) (Con):
To ask the Scottish Government, further to the Cabinet Secretary for Finance’s announcement on 9 December, how many businesses have received support from the £185 million funding package. (S5O-04905)
o The Cabinet Secretary for Finance (Kate Forbes):
For context, I am sure that Jamie Greene knows this, but we have allocated more than £3 billion to businesses since the beginning of the pandemic. That is more than a third of overall Covid spend, with the vast majority having been paid out to businesses already.
Things have changed, with the changes to the current restrictions on business, so right now just under 50,000 businesses can apply to the open strategic framework business fund to receive their recurring four-weekly grants, which will be paid in January. Those are administered by local authorities.
The December payment was made more than a week early, before Christmas, and we are on track to make the January payment on time. I remind members that all eligible businesses that have been forced to close can apply right now. That is clearly a vast swathe of the business community. Most of them will also a get a top-up of up to £25,000, which will be paid in January and is, obviously, more generous than the top-up that was announced in the December statement. Businesses can apply for that grant right now, but in order to reduce the administrative burden for businesses and local authorities, we have streamlined the schemes, so both payments will be made in one go in January.
I thank the cabinet secretary for her lengthy response, which unfortunately did not answer my question. How much of the £185 million that was announced on 9 January has actually been paid out to businesses? We are halfway through January and businesses are going to the wall. Jobs are being lost every day. It is not good enough to make top-line promises without delivering quickly enough on the ground.
I again ask the cabinet secretary to explain how much of the fund has been physically delivered to real businesses, in cash, on the ground. If the cabinet secretary does not know the answer to that, will she commit to researching and gathering the data from local authorities, and to publishing and reporting it every week so that we know that businesses are getting the money that is announced after top-level announcements?
I thank Jamie Greene and humbly suggest that he should also do research when it comes to gathering the facts because, right now, businesses require information rather than misinformation.
Data on payments that were made in December will be published imminently. On businesses that can receive support, I told the member in my first answer that just under 50,000 businesses can currently apply to the open strategic framework business fund to receive four-weekly recurring grants, which will be paid in January. On our track record, local authorities paid out the grant in December a week early.
The top-up that was announced on Monday means that pubs and restaurants in Scotland that have a rateable value of up to £15,000—in other words, small businesses—will receive more than £2,500 more this month than their equivalents in England will receive under the Tories. Local authorities are working extremely hard to distribute the grants, which will be paid in January as we promised. We recognise the huge pressure on businesses right now.
o Colin Beattie (Midlothian North and Musselburgh) (SNP):
As part of the £185 million package, the cabinet secretary announced that hospitality businesses will receive a very welcome one-off payment of between £2,000 and £3,000. Can she provide detail on how many businesses in Scotland it is expected will be eligible for those payments?
As Colin Beattie rightly said, in December we announced a one-off payment. For the hospitality sector, that has been considerably increased to up to £25,000 for larger businesses. That means that a property such as a pub or a restaurant with a rateable value of more than £51,000 will receive £16,000 more than its equivalent south of the border.
We expect tens of thousands of business premises to be eligible for that top-up, which covers retail, hospitality and leisure. As eligibility is aligned with the strategic framework, businesses need to make only one application. They will receive the four-weekly recurring grant as well as the top-up. In my previous answer, I indicated that a majority of the businesses that apply will receive that top-up.
o Jackie Baillie (Dumbarton) (Lab):
The additional top-up for hospitality, retail and leisure is, of course, very welcome. Unfortunately, the self-catering sector appears to have been missed out. Such businesses are also hospitality businesses. There are hundreds of self-catering businesses in the Loch Lomond and the Trossachs national park area, and there are thousands throughout Scotland, including in the cabinet secretary’s constituency. Those businesses feel that they are being treated very unfairly. Why are there no similar one-off grants for that sector, and will the cabinet secretary urgently review the position?
I will correct the record on one point that Jackie Baillie made. She is quite right to ask about self-catering properties, but I stress that they are already eligible for grants through the strategic framework business fund. All non-domestic-rated businesses that are required by law to close—that includes self-catering businesses in level 4 areas—are eligible. We have not excluded them.
On the member’s question about one-off payments, the self-catering sector is one of the very few that have a bespoke sectoral scheme. Work is at an advanced stage on designing that and making payments. That will be the second sectoral scheme for self-catering businesses; the previous one was launched last summer. All members know from our mailbags that many sectors that would like sectoral schemes do not have that kind of specific support.
I understand the concerns. We have announced a self-catering business specific grant, and we will honour the commitment to deliver it.
- Barnett Consequentials 2020-21 (Allocation)
o 2. Liam Kerr (North East Scotland) (Con):
To ask the Scottish Government how much of the Barnett consequentials announced for 2020-21 it has formally allocated. (S5O-04906)
o The Cabinet Secretary for Finance (Kate Forbes):
To date, £8.2 billion of consequentials have been formally allocated via the summer and autumn budget revisions, as I indicated in my letter of 8 December to the Finance and Constitution Committee. Since then—just hours before Christmas—a further £400 million of funding has been provided in consequentials. That funding will support a range of costs and has already been distributed to cover support for further grants that have been made under the strategic framework and the top-up business grants that were announced on 11January. Those funds are demand led, so—as Liam Kerr will appreciate—sufficient funding must be allocated to cover that demand until the end of the financial year. Final allocations will be set out in the spring budget revision.
I thank the cabinet secretary for that answer, but businesses in Aberdeen and the north-east are on their knees and are desperate to receive the support that the cabinet secretary has promised. Data that were published yesterday show that only seven out of 30 funds have even been launched, and that only £6 million of the new funding that was announced in October has actually reached businesses. Without that money, businesses cannot survive and jobs will be lost.
As the cabinet secretary pointed out, the Scottish National Party has got the money from the UK Government, so what is causing the delay? When will the SNP get its act together and give businesses in the north-east the funds that they have been promised?
Liam Kerr says that data have been published. He might find that what was published was actually a Conservative press release and not data, because those figures are not accurate.
With regard to support for businesses right now, I remind him of what I said to his colleague Jamie Greene, and suggest that the Conservatives, rather than misleading businesses, start to distribute information and facts. That information includes the fact that the strategic framework, which is the main focus for businesses—the main fund that is available right now—is live and open, and payments will be made on a four-weekly basis. The next payment date is at the end of January—if payment in December is anything to go by, we will meet the deadline and might, in fact, try to beat it.
o Ruth Maguire (Cunninghame South) (SNP):
The UK Government recently pledged an additional £4.6 billion to support business across the UK, which included an additional £375 million for Scotland. However, I understand that the UK Government has subsequently backtracked on that commitment and has suggested that Scotland will receive no additional funding at all. Can the cabinet secretary advise members on what the Scottish Government’s latest engagement has been with the UK Government regarding consequentials arising from that announcement?
In the immediate aftermath of that announced change, I wrote to the UK Government to express my disappointment that the announcement of funding for businesses in England did not, despite the initial indications, generate new funding. That is a blow to Scottish businesses, many of which were confused by the announcements.
I had hoped, considering that the Scottish Tories seem to be so certain about what funding is available to the Scottish Government, that that situation might have reminded them of how fluid the situation is, and of how complicated it is in terms of the funding that is allocated to the Scottish Government. We do not wait for the UK Government to get its act together—we make announcements and get funding out the door. That is precisely what we are doing with the strategic framework business fund, from which the next payment will be made at the end of January.
- Level 4 Restrictions (Business Support)
o 3. Clare Adamson (Motherwell and Wishaw) (SNP):
To ask the Scottish Government how much it has allocated to provide financial support for businesses in the Motherwell and Wishaw constituency that have been impacted by level 4 Covid-19 restrictions. (S5O-04907)
o The Cabinet Secretary for Finance (Kate Forbes):
I recognise that businesses in the Motherwell and Wishaw constituency have been badly hit by the level 4 Covid restrictions and will, as are businesses across the country, be struggling.
Since the beginning of the pandemic, we have allocated almost £3 billion in support for businesses. Grants are provided to local authorities, which can distribute them to businesses in their area on a demand-led basis. Those funds are live and are available for application right now. The details of any funding that is available through local authorities is available on the Scottish Government website.
We know that a number of businesses have, for different reasons, been eligible for the various business support schemes that have been implemented since the start of the pandemic. The Scottish Government has stepped in and announced the local authority discretionary scheme, which will allow councils to be flexible in awarding financial support. What guidance has been given to councils in the formulation of that scheme? Can the cabinet secretary give further details on when and how businesses in my constituency may expect to benefit from it?
That is an important question. We recognise that there are gaps in UK Government schemes and, indeed, in our own schemes, and we recognise the challenges that have been faced by businesses that feel that they have been excluded from the beginning. One of the ways in which we have tried to reach them has been by providing discretionary funding to local authorities. I emphasise that that funding is discretionary in nature. Apart from our asking that the funding be spent on businesses, and that local authorities try to reach businesses that have not received funding to date, it is for local authorities to determine themselves how to distribute the funding, and they have been given guidance to that effect.
My officials have engaged with North Lanarkshire Council, and I understand that the details of the council’s discretionary scheme are being considered for approval by its enterprise and growth committee on 4 February, with the scheme being set to go live shortly thereafter. I am sure that the details of the scheme will be published on North Lanarkshire Council’s website.
o The Deputy Presiding Officer:
Question 4 has not been lodged.
- Covid-19 (Business Support)
o 5. Rhoda Grant (Highlands and Islands) (Lab):
To ask the Scottish Government how much it will allocate to support businesses experiencing difficulties due to Covid-19 that do not qualify for current schemes, or for which the assistance is inadequate to meet their needs. (S5O-04909)
o The Cabinet Secretary for Finance (Kate Forbes):
We will continue to do all that we can to support businesses. In addition to the announcement that I made this week about top-up payments in level 4, I have also announced the discretionary payment to island local authorities for businesses that are not required by law to close but are seeing reduced custom and trade. That additional, one-off funding will help island local authorities support businesses in their areas.
That is in addition to the funding that is already available through the £38 million discretionary fund, and it means that support for businesses in island communities can be brought up to the same level as that for businesses that are affected by level 4 restrictions on the mainland. As I said in my previous answer, that discretionary fund is truly discretionary, and it can reach those that have been excluded from current schemes.
I am grateful for that. Many island businesses are impacted in exactly the same way as mainland businesses, because they depend on those areas for their trade.
Laundries and dry cleaners throughout Scotland have been told to remain open as well, because they are an essential service. However, the bulk of their trade is from hospitality, which means that their business has totally disappeared, but they do not qualify for assistance—nor do people who do not pay business rates but have high overheads, because they are not covered by support grants. Many other businesses do not receive support.
Will the cabinet secretary look at making support available to all viable businesses that will otherwise fail due to Covid-19?
Rhoda Grant highlights a number of very important points. The nature of our business community is complicated, so the schemes that are available have to be complex in nature in order to reach all businesses. Blanket schemes leave some out.
I have already answered the point about island communities, in saying that this week we announced funding for our island local authorities to help them provide support on a par with that provided to businesses in level 4 areas.
On the point about other businesses that Rhoda Grant has mentioned, there are two ways of resolving that. The first is discretionary funding for local authorities across Scotland, which, again, can be used at the discretion of local authorities. The second is sector-based grants, which we have moved into providing.
As I said in December, there is a risk of the landscape of grant support becoming quite complicated and complex. However, for the self-employed, businesses that do not owe domestic rates and businesses that are not registered in any way in Scotland but that need support—for example, businesses in the wedding sector, taxi drivers or mobile close-contact businesses such as beauticians—those sectoral schemes will reach them.
o Murdo Fraser (Mid Scotland and Fife) (Con):
I will raise the issue of self-catering accommodation providers, which was referred to earlier. The cabinet secretary had previously announced a £7 million scheme. When will that scheme be open for applications and, given that there are more than 16,000 registered self-catering properties in Scotland, and £7 million averages out at just over £400 each, is that sufficient to compensate the sector for the losses that it is suffering?
The one form of support that Murdo Fraser did not mention but which the self-catering sector is receiving is the on-going strategic framework business fund. Self-catering properties will receive grants of up to £3,000 in January and on top of that, as he mentioned, there is the sectoral scheme, which I announced in December would go live in January—that remains the intention. We are happy to take feedback, which I have heard loud and clear throughout these questions, but at the moment all self-catering properties in level 4 areas will get a grant of up to £3,000 in January and those in our island communities can receive support from the discretionary fund that has been given to our island local authorities.
o Liam McArthur (Orkney Islands) (LD):
Following my discussion with the finance secretary last week, I thank her for accepting the case for additional funding to allow businesses in level 3 areas such as Orkney access to the same support that is available to level 4 businesses from the strategic fund. However, is she able to allay fears among businesses in my constituency by confirming that island councils are free to use the top-up funding to support any business, including self-catering and bed and breakfasts, that would be eligible for support under the framework fund, and that the sector-specific funds that have been announced are in addition and are open to businesses in level 3 and level 4?
We have listened to feedback from people such as Liam McArthur and others in relation to ensuring that there is support available for the island communities. On the specific question, discretionary funding is available to local authorities, including island local authorities, to do whatever they want with as long as it is for businesses and it reaches those who had been excluded. My view is that the top-up funding should mean that businesses in island communities receive the same support at the same level as businesses in level 4 areas.
Supreme Court judgment in FCA’s business interruption insurance test case
News from the FCA:
The Supreme Court has today delivered its judgment in the Financial Conduct Authority’s (FCA)’s business interruption insurance test case.
The Supreme Court has substantially allowed the FCA’s appeal on behalf of policyholders. This completes the legal process for impacted policies and means that many thousands of policyholders will now have their claims for coronavirus-related business interruption losses paid.
Sheldon Mills, Executive Director, Consumers and Competition at the FCA, commented:
‘Coronavirus is causing substantial loss and distress to businesses and many are under immense financial strain to stay afloat. This test case involved complex legal issues. Our aim throughout this test case has been to get clarity for as wide a range of parties as possible, as quickly as possible, and today’s judgment decisively removes many of the roadblocks to claims by policyholders.
‘We will be working with insurers to ensure that they now move quickly to pay claims that the judgment says should be paid, making interim payments wherever possible. Insurers should also communicate directly and quickly with policyholders who have made claims affected by the judgment to explain next steps.
‘As we have recognised from the start of this case, tens of thousands of small firms and potentially hundreds of thousands of jobs are relying on this. We are grateful to the Supreme Court for delivering the judgment quickly. The speed with which it was reached reflects well on all parties.’
Background
Many policyholders whose businesses were affected by the Coronavirus pandemic suffered significant losses, resulting in large numbers of claims under business interruption (BI) policies.
Most SME policies are focused on property damage and only have basic cover for BI as a consequence of property damage. But some policies also cover BI from other causes, in particular infectious or notifiable diseases (‘disease clauses’) and prevention of access and public authority closures or restrictions (‘prevention of access clauses’). In some cases, insurers have accepted liability under these policies. In other cases, insurers have disputed liability while policyholders considered that they had cover leading to widespread concern about the lack of clarity and certainty.
The FCA’s aim in bringing the test case was to urgently clarify key issues of contractual uncertainty for as many policyholders and insurers as possible. The FCA did this by selecting a representative sample of 21 types of policy issued by eight insurers. The FCA’s role was to put forward policyholders’ arguments to their best advantage in the public interest. 370,000 policyholders were identified as holding 700 types of policies issued by 60 insurers that may be affected by the outcome of the test case.
The High Court’s judgment last September resolved most of the key issues but, because we were unable to reach agreement, insurers and the FCA made ‘leapfrog’ appeals to the Supreme Court (without going to the Court of Appeal first).
What today’s judgment decides
Today’s Supreme Court judgment is complex, runs to 112 pages and deals with many issues. A summary of the key points is below. The FCA’s legal team at Herbert Smith Freehills have published a bulletin on their website, which may be referred to for further detail.
The FCA argued for policyholders that the ‘disease’ and ‘prevention of access’ clauses in the representative sample of 21 policy types provide cover in the circumstances of the coronavirus (Covid-19) pandemic, and that the trigger for cover caused policyholders’ losses.
The High Court’s judgment last September said that most of the disease clauses and certain prevention of access clauses (12 policy types from the sample of 21, issued by six insurers) provide cover and that the pandemic and the Government and public response caused the business interruption losses. The six insurers appealed those conclusions for 11 of the policy types, but the Supreme Court has dismissed those appeals, for different reasons from those of the High Court.
On the FCA’s appeal, the Supreme Court ruled that cover may be available for partial closure of premises (as well as full closure) and for mandatory closure orders that were not legally binding; that valid claims should not be reduced because the loss would have resulted in any event from the pandemic; and that two additional policy types from insurer QBE provide cover. This will mean that more policyholders will have valid claims and some pay-outs will be higher.
What today’s judgment means for policyholders
The judgment brings to an end legal arguments under 14 types of policy issued by six insurers, and a substantial number of similar policies in the wider market which will now lead to claims being successful.
The FCA’s decision to bring the test case has removed the need for policyholders to resolve many key issues individually with their insurers. It enabled them to benefit from the expert legal team assembled by the FCA, providing a comparatively quick and cost-effective solution to the legal uncertainty in the business interruption insurance market.
The test case was not intended to encompass all possible disputes, but to resolve some key contractual uncertainties and ‘causation’ issues to provide clarity for policyholders and insurers. Today’s judgment does not determine how much is payable under individual policies, but provides much of the basis for doing so.
Following the High Court’s judgment, insurers decided to pay claims on some policies and we asked insurers to progress claims on other policies that the High Court said provided cover so that they could be settled quickly following the appeals to the Supreme Court.
We will now work with insurers so that they rapidly conclude their claims processes on claims that the Supreme Court has said should be paid, providing interim payments wherever possible.
Each policy needs to be considered against the detailed judgment to work out what it means for that policy. Policyholders with affected claims can expect to hear from their insurer soon. Policyholders with questions should approach their broker, other advisers or insurer. Policyholders who remain unhappy following their insurer’s assessment of their claim may be able to refer their claim to the Financial Ombudsman Service, whose role is to resolve individual disputes.
Next steps
The Supreme Court’s judgment will be distilled into a set of declarations. The FCA and Defendant insurers are working as quickly as possible with the Supreme Court to enable the Court to issue its declarations.
The FCA will publish a set of Q&As for policyholders to assist them and their advisers in understanding the test case. The FCA will also publish a list of BI policy types that potentially respond to the pandemic based on data that we will be gathering from insurers.
The FCA has published draft guidance for policyholders on how to prove the presence of coronavirus, which is a condition in certain types of policy. The consultation closes on 18 January, but the FCA is extending the closing date to 22 January only for any supplemental comments arising from the judgment. The FCA will issue finalised guidance as soon as possible after that.
The FCA will continue to keep policyholders appraised of matters as they progress, through its dedicated webpage. and link to the story Here
Following today’s judgment in the Supreme Court, Steve White, British Insurers Association CEO said:
“The judgement today in the Supreme Court which substantially ruled in favour of the FCA is good news for many businesses.
The application of Covid-19 as a peril in relation to business interruption insurance is highly complex matter which is why, from the outset, we welcomed the FCA intervention in bringing this test case and the ultimate clarity the judgement now brings.
What is needed now is for insurers to act swiftly to settle claims fairly and to clearly communicate the next steps in the process with brokers to allow them to help and advise their customers.
“Though the judgement is welcome, it does not detract from the need for the insurance sector to provide greater clarity about the operation of cover. We will be taking the time to study the judgement in detail and will provide guidance to our members on what it means for them and their customers.
“Looking forwards the UK needs a long-term answer that provides a solution to help businesses and people cope financially with any future pandemic and BIBA is committed to working across industry and Government to help deliver this.”
Read the Supreme Court judgment here.
Read the FCA summary here.