Scottish Affairs Committee
Oral evidence: Coronavirus and Scotland follow-up, HC 1394
Tuesday 11 July 2023
Ordered by the House of Commons to be published on 11 July 2023.
Members present: Pete Wishart (Chair); Deidre Brock; Wendy Chamberlain; David Duguid; Christine Jardine; Mark Menzies; Douglas Ross; Andrew Western; Dr Philippa Whitford.
Questions 52 - 108
Witness
I: The Lord Offord of Garvel, Parliamentary Under Secretary of State, Office of the Secretary of State for Scotland, and Parliamentary Under Secretary of State (Minister for Exports), Department for Business and Trade.
Witness: The Lord Offord of Garvel.
Q52 Chair: Welcome to the Scottish Affairs Committee for our last session in our short inquiry into coronavirus and Scotland, the follow-up. I am delighted to be joined by the Minister, Lord Offord, who I will now allow to introduce himself and say anything by way of a short introductory statement.
Lord Offord of Garvel: Thank you, Chair. Good afternoon to you and to the members of the Committee. I am pleased to appear before you in my role as Parliamentary Under Secretary of State for Scotland to share the successes of the UK Government’s support in aiding economic recovery from the covid pandemic.
As we know, the economic shocks of the global covid-19 pandemic had an unprecedented impact across the world economy. It is essential to recognise that aside from the pandemic there have been additional international events that have disrupted the recovery of both economies, including, obviously, Russia’s invasion of Ukraine and the weaponisation of the energy markets.
Let us begin by highlighting some of the work the Government have untaken and continue to undertake to mitigate the worst of the economic damage caused by covid and to reduce inflation. The Government reacted to the pandemic using the fiscal levers at their disposal and undertook high levels of public spending. The National Audit Office, which acts as the UK’s independent spending watchdog, estimates the cost of the measures announced in relation to the covid-19 pandemic to be £376 billion, which breaks down into roughly three buckets: £147 billion spent supporting business; £164 billion on health and social care, including the vaccine, and public services and emergency responses; and £65 billion supporting individuals and some other operational expenditure.
As part of that, including over the two years, the Scottish Government received almost £15 billion in Barnett consequentials. That is important, because that money was sent early and immediately to the devolved Administration in Edinburgh and they received that with their own discretion as to how to spend that £15 billion. In addition, they had access to UK-wide spending on the overall support schemes.
Throughout, the success of the schemes is noticeable. The furlough scheme and the self-employment income support scheme protected jobs and provided support to businesses, protecting 14.6 million individuals across the UK. It cannot be underestimated that as a result of this Government’s spending and investment the UK became a world leader, securing millions of doses of the most promising vaccines for all parts of the UK, which was paramount for the early opening of our economy, crucially reigniting the levels of economic activity to save businesses across the UK.
The Scotland Office is also providing evidence to other covid inquiries in addition to this one, including the independent UK covid-19 inquiry led by Baroness Hallett, and we await the outcome of that alongside this Committee’s report. I am happy to take any questions this afternoon, Chair.
Q53 Chair: We are grateful. Thank you for a very concise opening statement. You are absolutely right that there seem to have been a number of issues that have compounded post-covid recovery, and I think you are right to mention the war in Ukraine and the issues around the energy prices and the cost of living. What are the UK Government doing to ensure that they counter the worst impacts and effects of the cost of living crisis that all constituents are currently confronting?
Lord Offord of Garvel: It is like we have had a perfect storm, because what the covid pandemic did for the business world, and it came down to the consumer world, was bring into focus the supply chain we have, after 15 years of globalisation, and how the supply chains became disrupted. That was a major disruption to the world economy and, of course, then the world economy shut down.
Following hard on the heels of that, we then had the Ukraine situation, which has completely disrupted our world supplies of hydrocarbons and lots of agricultural materials. Those things coming together have been a massive disruption.
If you look at the UK Government’s response to both those things, we have mentioned £376 billion for covid, but we should also highlight £94 billion for the overall cost of living and energy crisis. These are record sums of money. Pre-covid the UK Government were borrowing £50 billion a year, to put that into context.
If you take the thick end of £400 billion for covid and £100 billion for the cost of living, in the last three or four years the UK Government have spent £500 billion, whereas ordinarily it would be £50 billion and over two years £100 billion, so it is big numbers.
If you look at what that has meant for the population, the main thing has been helping with energy bills. The UK Government have effectively paid half of domestic energy bills through this period, and then there is some very targeted action, such as cost of living payments, worth hundreds of thousands, certainly in Scotland. Scottish households received 639,000 disability payments. The energy support in Scotland was £7 billion. To put that in context, the Scottish NHS has a budget of £17 billion, education is £8.5 billion, and £7 billion was spent by the UK Government on Scottish energy support bills—big numbers.
Then you can add in the fact that the poorest households in Scotland received effectively two months’ net pay. They received effectively 22% of average household income, so we are trying to be targeted. Then there is the support of a million pensioners, helping them to heat their home, so we are trying to target in addition to the broader things.
The state pension was increased in line with inflation, the uprating of benefits in line with inflation, the national living wage has gone up by a record amount. There have been a package of measures coming with the £94 billion spent across the UK, of which Scotland has very much had its fair share.
Q54 Chair: At the same time, 53% are finding it harder to keep their home warm, 46% are eating lower quality food, 40% feel that they are less prepared to participate in hobbies or pastimes, and 24% have cut back the number of meals they eat. This is a dreadful situation for our constituents and one word we have not heard in the seven minutes since this session has started is Brexit. I think you will know the figures that the LSE has come up with recently, which said that the cost of Brexit has caused something like £7 billion to be added to UK food bills and an average of £250 per household. Surely Brexit has something to do with the difficulties that the UK finds itself in and why we drag behind international competitors when it comes to this recovery.
Lord Offord of Garvel: There is no evidence of this at all. These are selective numbers. If you look at what is happening in Europe, food inflation is running at the same level as in the UK. Energy prices are the same level in Germany and France as they are in the UK. They did not have a Brexit, so I do not see that there is any correlation at all with Brexit. These are world events. These are massive world disruptions that no one could have foreseen, once in a generation—you might even say the biggest disruption to our economy since the second world war, so in 70 years. It does not respect borders. The war and the pandemic do not respect borders and there are the same issues on cost of living in Europe as there are in the UK. I do not accept the Brexit proposition.
Q55 Chair: Why does the UK lag behind the rest of our European partners when it comes to these issues? Why do we have about the lowest GDP growth in the whole of Europe? Why is there a specific difficulty for the UK in Europe? This idea that somehow—
Lord Offord of Garvel: Well, we don’t. Since 2016 when we had that vote our economy has grown at 7% and Germany has grown at 6%, so I do not recognise that. If you look at what we spent in the pandemic, we spent 19% of our GDP on protecting the UK. The only country with a higher spend was the US with 25%. We are equal with New Zealand at 19%. You cannot in any way say, using any objective information and data, that the UK did anything other than throw the full resources, the full weight of the UK Treasury, at this issue to the benefit of us all.
Q56 Chair: I suppose today’s figures and mortgage costs will have absolutely nothing to do with Brexit again.
Lord Offord of Garvel: The mortgage costs are the same in the US.
Chair: The average rate on a deal now is 6.6%, which surpasses the situation as it was in the disastrous mini Budget just a year ago. The latest figure for inflation is 7.9% in the year, but again this will have nothing to do with Brexit. Brexit has nothing to do with any of these figures. Is that the view of the UK Government?
Lord Offord of Garvel: No, because mortgage costs are a fact of the world. These are international markets. You do not have differentials between the UK, Europe and the US. These are basically international markets that trade with each other. The cost of US mortgages is the same and is tracking exactly the same as the UK.
Q57 Chair: The UK is keeping pace with the rest of the major economies in the world—is that what you are saying to us today?
Lord Offord of Garvel: Our trade has bounced back very strongly, with a record trade performance last year. Our trade with the EU went up 24% last year, so we have a big trade bounce-back going on in the UK. There is no question but that interest rates going up is a problem for all the major economies. All the G7 economies have the same issue.
Q58 Chair: No problem here is basically what you are saying to this Committee.
Lord Offord of Garvel: I am not saying there is no problem. Do not conflate what I am saying. These are difficult issues for everyone to deal with. These impact on everyone’s livelihood and households. The UK Government are trying to mitigate that through specific targeted cost of living measures. The Bank of England is charged with getting inflation down, so there is mitigation taking place. I am not belittling in any way the day-to-day impact of that, but the point you are trying to make is that we are a lot worse off than everyone else, and we are not.
Chair: We will let everybody have a look at the figures and see what they make of that. We will have to move on.
Q59 Christine Jardine: Thank you very much, Minister. First, apologies: I will have to leave probably before the end, but I will try to come back.
You have mentioned the amount of money that was spent during the pandemic—a decade’s worth of spending in the space of those two years. It was spent for businesses in Scotland, and it was described by a lot of people as speedy, although I must say that was not always reflected in the comments that I received from businesses in my constituency in Edinburgh West. Many received the support, but sometimes it took time to come through.
What would you say were the lessons that the UK Government have learned and the things that they would not repeat if there was another pandemic?
Lord Offord of Garvel: Obviously, this was being done in real time. The fact that you used the word “speedy” is interesting, because that was, in a way, the most important thing: to get this out fast. Certainly, in terms of how the UK Government dealt with the devolved Administrations, the Barnett consequentials were immediately sent up with a guarantee, so immediately the devolved Administrations had complete control of effectively half of the budget for coronavirus. There might have been one or two differences between Scotland and England, but you would have to examine that from a Scottish Government point of view. As far as the UK Government were concerned, the money was sent in short order.
All these public inquiries will go on. There will be lessons that will have to be learned in that, because within some of that speedy response to try to assuage the need immediately there was some fraud, for example, in some of the business support schemes. We know that perhaps some of the equipment procurement could have been improved. My feeling is that these things will be dealt with quite specifically by the covid inquiries and I am not here to prejudge what my opinion of those is. I think they will be considered and as a nation—as a community—we will then say to ourselves, “How do we get ourselves better prepared for the next time?”
I would say there must be some consideration and credit given to the Treasury. They are not usually the easiest people to get money out of, and they sent it fast, and they sent it fast to the benefit of all our communities. Overall, speedy in this context is a good word, even if it resulted in perhaps some profligate spending in places, or even some fraudulent spending. The emphasis was to get this money fast to the people who needed it the most.
Q60 Christine Jardine: You mentioned fraud and fraudulent activity. Have you noticed any resentment among the public, particularly in Scotland, because nothing appears to have been done to rectify that fraudulent activity?
Lord Offord of Garvel: I have not picked that up as being anything particularly different in Scotland versus England. The 80:20 rule is quite a good rule in life. I was speaking to the British Business Bank about this, and it does work out with early numbers being 80:20—so 80% good loans—which tells you that the population of the UK is a fundamentally trustworthy population and they repay their loans. I think that is a massive tick in the box for us all as a community.
Yes, there is fraud, and what has happened there is that the people who set out to defraud, it is very difficult to stop them, especially when it is done fast. It is our job now to come back to uncover that and punish that. If you are saying we should have done it slower to stop the fraud, my view is that 80% of people are good people who need the immediate support, and we were right to do that, and then we can deal with the 20%.
Q61 Christine Jardine: Okay. Was there anything else that the UK Government would change when it comes to supporting businesses? I am thinking specifically about the excluded—the number of individual businesses, sole traders and so on, who found themselves unable to access the scheme. Is there anything you would change about that?
Lord Offord of Garvel: Yes. That is where I would say—again, this is not a differential in any way between England and Scotland—if there was some grumbling it was from the sole traders. They had to prove X number of years’ average earnings and so on. Not everyone had their books in the right shape to do that. That is probably the most difficult group to lend to, perhaps, because they are sole traders. That I think we could improve.
Q62 Christine Jardine: Would it be fair to characterise what you are saying as that there might have been mistakes, but the important thing was to get the money out quickly?
Lord Offord of Garvel: Yes, to meet the immediate need and keep 15 million jobs alive, and keep businesses alive that otherwise would have gone under.
Q63 Mark Menzies: Minister, the furlough scheme has been recognised by many as being critical in keeping the jobs of ordinary people going at a critical time. Many businesses in Scotland certainly used it during the pandemic. What assessment have you made of the furlough scheme in Scotland, and what do you think the best policy response was for Scotland during the pandemic? Do you think it was a furlough scheme, or with hindsight is there anything else that could have sprung to mind?
Lord Offord of Garvel: No, I think the furlough scheme was the immediate impactful measure. It came fast, so it reassured people immediately that their livelihoods would be protected. It was uniform across the United Kingdom, which I think was important. There was no concept that one area received special treatment versus another area. You might say that would be the strength of a unitary response from the Treasury. Yes, it respected the devolution settlement, and with the Barnett consequentials the devolved Administrations were then able to get their share and do the particular finessing on it, but the overall concept was a unitary concept, just like the vaccine was a unitary concept. I would say the two most important things were the furlough scheme and the vaccine.
Q64 Mark Menzies: Looking back, if the scheme was run again, are there any changes that you would advocate on behalf of Scotland—any tweaks or amendments?
Lord Offord of Garvel: Again, I would say that this is exactly the line of inquiry that these covid inquiries have to go down, and they will. There will be some regional examination presumably with England as well and I think the Scottish inquiry will look at exactly that. There was not intended to be any differentiation. This is the whole point. The point is it was meant to be a UK-wide response and if, in fact, there has been demonstrated some differences, we will need to look at those.
As far as the Scotland Office is concerned, we feel that it was our job in the Scotland Office to make sure that if there were particular Scottish characteristics, they were represented, which we did do. We sat in all the meetings with Treasury in putting this together; we sat in the inter-governmental meetings to ensure that everyone was represented. Our view is that it was done fairly and equally across all the UK.
Q65 Mark Menzies: You worked very closely with Scottish businesses, and part of your role is to act as that champion and voice of Scottish businesses within the United Kingdom. Is there anything that stands out? Is there anything that they have raised with you to say, “Look, all this went well, thanks very much, but I would have liked to have seen some changes”? From the business community, is there anything at this stage that springs out at you as things they would have liked to have seen?
Lord Offord of Garvel: There were little differences. There were some differences put in place between some of the Scottish schemes and the English schemes, but that was because the Scottish Government decided they wanted to do things slightly differently. You must take that up with them. For example, some of the business grants were dependent on the number of premises. It was different in England versus Scotland, and we had complaints and grumbles about that, but that is part of the devolution settlement, which means the Scottish Government have the leeway to decide what is best for Scotland in that scenario. Again, that needs to be looked at through the individual covid inquiries.
Q66 Mark Menzies: What rough number do you have, if any, of the number of jobs in Scotland that were secured or protected because of the furlough scheme?
Lord Offord of Garvel: I can give you an exact number, which is right here. There were 911,900 furloughed jobs in Scotland, against 11.7 million across the UK, and there was £1.7 billion spent on the self-employed scheme. There was £4 billion spent in Scotland on the bounce back loans and coronavirus CBIL loans. There was £8.3 billion on the future fund. The business community in Scotland received 6% of business support, because that represents exactly a proportionate share of our businesses, so it was done very much on population and proportionate and, therefore, Scotland received equal share.
Mark Menzies: Huge numbers, by any measure.
Lord Offord of Garvel: Huge numbers. If Scotland’s support out of the £376 billion is £30 billion or so, and the cost of running Scotland is £90 billion a year, that is one third of that in one year.
Q67 Wendy Chamberlain: Lord Offord, it is good to see you. I want to pick up on a question about the furlough data you just provided. Given that I want to look a little bit at the economically inactive, do you have any detail on those who were on furlough but did not stay in work or return to work?
Lord Offord of Garvel: Yes, I do. The economically inactive number is a number that I am interested in, in my new job as Minister for Exports. The economic inactivity in Scotland is at 22.3%, slightly above the UK average of 20.8%, but it is roughly one in five.
Wendy Chamberlain: In some areas it can be much worse than that.
Lord Offord of Garvel: Yes.
Wendy Chamberlain: My specific question was in terms of the furlough support.
Lord Offord of Garvel: Pre-pandemic is the same, which I was surprised by. It was the same before: for quarter 4 2019, it was 22.2%; for quarter 1 2023, it was 22.2%. It would appear that those who were classified as economically inactive beforehand have remained stubbornly inactive. What has happened is that a number of people have come out of the workforce who were not classified as economically inactive, because they might have taken early retirement and so on, or were doing other things, but in terms of that specific cohort it has remained stubbornly high at one in five.
Q68 Wendy Chamberlain: Do you feel that furlough did keep people in work who could have stayed in work? Are we seeing people who were furloughed who are now not in work and, therefore, the scheme was not successful in that regard?
Lord Offord of Garvel: On the face of the numbers, it looks as if the scheme has done what it was meant to do. On the face of the numbers, we have record low unemployment of around 4% of those who are registered to be looking for work. We have then a similar number of economically inactive before and after; therefore, on the face of the numbers, the workforce that was in place before covid is back in the workplace.
Q69 Wendy Chamberlain: On this economically inactive piece, I know there has been lots of talk about golf courses, and I have lots of golf courses in my constituency, but that is certainly not where economically inactive people tend to be. Certainly, in some parts of Scotland it is almost as high as 50% of people are inactive due to ill health or disability. What conversations do you have with your DWP colleagues in terms of the levers they can utilise in Scotland to bring that number down?
Lord Offord of Garvel: This is a very big conversation, and it is UK-wide, because the number is roughly the same, 20.8% versus 22.3%—call it one in five. Again, this does not respect borders. It is not nationalities. We have a situation where we have 20% of our workforce not working and not required to seek employment, and we know that one third of them are on long-term sickness benefit. We also know when we interview them that certainly a third of them say they want to work, so they want to work but they have lost a pathway to work, to get back to work.
Add to that that we have record labour shortages in our businesses. What is the No. 1 thing that you and I get asked when we go to see businesses? It is about labour shortages. The big opportunity here—and this is potentially a benefit of Brexit now that we control our own immigration policy—is that rather than bringing in Romanian graduates to do manual labour, which is bad for Romania, we have an opportunity now to redesign how we look after our whole community and help people back to work. They are a great resource and are the most resilient people we have in our community, who want to work but are not able to work.
There is now a lot of work going on within DWP around this big question of how we help those people in our society back into jobs when there are jobs available. If we look at the modern economy and what the Chancellor is saying about the five modern growth industries, if you take digital, the whole digital thing, or green energy or life sciences or advanced manufacturing or creative industries, what is interesting is that within each of those pyramids there are different levels of jobs for each individual. There are terrific foundation-level jobs as well as high-end jobs, and if we are going to redesign our economy around these new pyramids and new growth industries, isn’t this a great opportunity now for us to accommodate those who are not working and to bring them into work?
Q70 Wendy Chamberlain: I share your views on employment of the future, but do you share my frustration that we did not see an employment Bill come forward from the Government that might have taken those jobs of the future and lined them up with the most effective employment practices? Obviously, the flexible working Bill has come forward as a private Member’s Bill, and I introduced my Carer’s Leave Act because so many unpaid carers cannot stay in work because of their caring responsibilities. Do you share my frustration that we have not done that in a much more planned and pragmatic way?
Lord Offord of Garvel: Like all these things, there are different stages on this journey, and first stage of the journey has been very much around the whole childcare-parent conundrum. The announcement in the last Budget was very much based on allowing people the flexibility to get back into the workplace and that is a major initiative around this whole thing.
Q71 Wendy Chamberlain: Except that childcare policy in Scotland is devolved.
Lord Offord of Garvel: That is right, but if you look at the Barnett consequentials, it is something like £300 million or so sent up to Scotland, which is not bifurcated. The Scottish Government can do what they want with it, but if you took the equivalent number, they could run a similar scheme. It is up to the Scottish Government to decide what to do, but there is a lot of effort going into one part of the labour force, particularly mothers, to help them back into the workplace. The next piece of this needs to now be about how we get the economically inactive back to work.
Q72 Wendy Chamberlain: As you rightly say, it is over to the Scottish Government as to what they do, but there will be people in the economically inactive category who suffer from long covid. Do you share my concern about the small amount of money in the big round that the Scottish Government are putting into long covid, which averages out at about £17 per head, as opposed to £50 per head in England and £88 in Wales?
Lord Offord of Garvel: Yes, but at the end of the day, under the devolution settlement, which is the most generous settlement of devolution of its kind in the world, it is down to the Scottish Government to decide what their priorities are. It is not for us to dictate to them how they do that, and it is up to the people of Scotland to decide whether they like them or not.
Q73 David Duguid: Thank you for coming along today. Please pass on my regards to Kris in his absence.
A lot of what you are talking about brings back memories to me because I was Minister in the Scotland Office during the first year of covid. In terms of recovery, and following on from Wendy Chamberlain’s questioning on the economically inactive, I am very mindful of my own constituency being in the north-east of Scotland. You have been there, and we have had this conversation about the very low unemployment we have, and there are people, as you have described, looking for work, wanting to work. From a Scotland Office point of view, what is being done, working with other Government Departments, to try to encourage people to move or get to where the work is—where the jobs are?
Lord Offord of Garvel: This is one of the frustrations: how you match the available labour to where the jobs exist. Aberdeenshire, Banff and Buchan, and Moray are some of the most beautiful places to live in Scotland, and there are good, well-paid jobs available. The frustration is how we can persuade some people who are not working to come from the central belt and to go there. One of the major barriers is housing, and then we get into the issue of what is devolved, what is reserved, and how you move the needle on this.
At the end of the day, my view is that Scotland, with a population of 5.5 million, is the best-placed part of the United Kingdom to effect radical change. These are problems that exist in the whole of the United Kingdom and we should be doing what we always do: leading the charge on this and reinventing this. Scotland as a definable entity within the UK, with all the benefit of the UK financing, I think that is the challenge for these two Governments—to work together, devolved and reserved, and ask how Scotland can become an exemplar in this area.
When we are talking about these five new growth industries, this is happening in Orkney, Shetland and the Western Isles. It is happening up in what we used to patronisingly call remote areas. They are not remote; they are central. What is happening in energy around Orkney and Shetland is central to energy. I think we have a great opportunity in Scotland to redesign how we do things and that will be about how we persuade some of our population to move to where the jobs are.
Q74 David Duguid: I could make a bit more of your point about whether the north-east is an energy centre, and Orkney and Shetland have long been oil and gas centres of excellence, but they are rapidly becoming more and more centres of excellence in the renewables sector also. There are loads of exciting opportunities and I must thank you for emphasising the beauty of the locations. Why would people not want to live where I come from? I am sure Douglas Ross would agree.
Going back to what Christine Jardine was asking about the steps taken during covid, you said a lot about what financial support was made. Between Scotland and the rest of the UK there were different levels of lockdown, different timings of lockdowns and different levels of health protection. What assessment, if any, has been done by the Scotland Office on what impact that has had, if any?
Lord Offord of Garvel: If you make that inquiry and go through the statistics, they are quite interesting on this. If you look at coronavirus deaths, Scotland versus the United Kingdom, in terms of how they are recorded in the records they are identical between Scotland and the UK. It is one third of 1% of the population in both the UK and Scotland. Therefore, what that says to me is that we had a uniform result because in the main we had a unitary policy response. We gave a fair and unitary response in terms of funding, vaccines and messaging. There were some points of difference, and maybe that was more cultural than anything, but when you look at the numbers it turns out that the outcomes were identical.
David Duguid: The health outcomes?
Lord Offord of Garvel: The health outcomes.
Q75 David Duguid: What about economic outcomes? Was there any effect in respect of the differences and how much the different areas were affected?
Lord Offord of Garvel: Again, we look at the economic data between the UK and Scotland and we find it is pretty much identical. If anything, Scotland is a little bit ahead in GDP recovery. It is quite interesting that we had different messaging—for example, the UK was hands, face, space and Scotland had FACTS. Do you remember what they were?
David Duguid: Face, wear—I just used hands, face, space, quite frankly. It did the same job.
Lord Offord of Garvel: Maybe the Chair can remember.
David Duguid: FACTS was hard to remember.
Lord Offord of Garvel: What was FACTS in Scotland?
Chair: I think let him get on and ask his questions of you, Minister. It was a good attempt, anyway. Have you finished, David?
David Duguid: That was the end of my questions, since I could not answer the Minister’s question.
Q76 Douglas Ross: Can I start by correcting the Chair? The Chair said this was our final evidence session in this inquiry, but of course we hope it is not, because we have now had three refusals from the Deputy First Minister of Scotland, Shona Robison, to appear before this inquiry. I am very grateful that we have a UK Government Minister here. We all as a Committee have tried to get a member of the Scottish Government in front of us—indeed, the Chair, as an SNP Member, has told us that he has personally tried. It is going to be very difficult for us to do a report on this issue if we only hear from one side, so hopefully your presence here today, Minister, will finally encourage a Scottish Government representative to attend.
That is where I want to start, perhaps following on from David Duguid’s points. There were undoubtedly differences in the way the funding was spent, and you have made it very clear that funding was given by the UK Government to the Scottish Government and they could take their own decisions. You have also done a lot of outreach in Scotland in your ministerial roles. Did you pick up any concerns from businesses about that differentiation? Certainly, what we heard last week from the Federation of Small Businesses was that in many cases they would have liked a UK-wide approach, so businesses in England would have received the same support as businesses in Scotland. Is that something that you have picked up?
Lord Offord of Garvel: Yes, there were grumbles. That is the issue when you have slight differences between regions: some are better and some are worse. I personally would have favoured a completely uniform approach. In the main it was mostly uniform but, yes, there were grumbles from the small business community and the self-employed and from the farming community. That again I think is a very valid level of inquiry for the Scottish covid inquiry, because I think that is where the Scottish covid inquiry needs to drill in, to see if where Scotland did diverge from the UK it was better or worse.
Q77 Douglas Ross: Are you aware of any reasons why the Scottish Government diverged from the UK Government’s decisions, other than to be slightly different? Were the Scotland Office informed of legitimate and good reasons to take a different path? Or were you and everyone else aware that certain businesses would not be covered by something that was covered elsewhere in the UK?
Lord Offord of Garvel: We did not come across any particular reason. Our emphasis at the Scotland Office, given that Scotland, with 8% of the population and 33% of the geography, has a greater number of remote communities, was that we were very focused on making sure that we had uniform treatment wherever people lived in Scotland. We were very focused on that. We did not see any particular evidence as to why a small business in Motherwell was different to a small business in Warrington. We did not see any circumstantial evidence on that.
Q78 Douglas Ross: Another thing that we are looking at, and the Auditor General in Scotland has also looked at, is the full amount of covid support passed from the UK Government to the Scottish Government being spent for covid support in Scotland. Are you concerned that the Auditor General in Scotland has been unable to qualify the entire amount of money that has gone from the UK Government to the Scottish Government and to see whether it was fully spent on covid-related issues? I think the figure is £1.6 billion that he has been unable to attribute to that.
Lord Offord of Garvel: Yes, of course. That is why I say it is the most extraordinary concept of devolution that you would not get in the German federal system or the US federal system. When Washington sends money to individual states, they want an audit of it—they want to know where it was spent. It is extraordinary in the UK that it is a completely devolved scenario and the Barnett consequentials and the block grant goes from London to Edinburgh with no strings attached.
Q79 Douglas Ross: What is the UK Government’s response to that Auditor General report? Do you then follow that up? Do you look at this further? I understand that decisions had to be taken very quickly and that to get money out to support as many people as possible it was the right approach for the UK Government to take, but there are businesses and individuals in Scotland who still feel they should have received that funding and are very upset to find that the Scottish Auditor General is unable to account for all that money.
Lord Offord of Garvel: Yes, and this is a question that is now being asked repeatedly in the Chamber in which I reside.
Q80 Douglas Ross: I think it is slightly different—I do not want to go there because I think that is more generally on spending. On covid spending in particular, if I could ask about an example, I think we have both met Scotland’s Learning Partnership, and they have serious concerns that they were promised by John Swinney, Richard Lochhead and other Ministers that they were going to get money that had been given by the UK Government to the Scottish Government, and they did not and still have not received that funding. Is that your recollection of your meetings with them?
Lord Offord of Garvel: Yes and, in fact, coming back to Wendy Chamberlain’s question about the economically inactive, they are front and centre in this battle to help our most vulnerable back into work, who want to work. It is all to do with adult learning; it is all to do with retraining. That is where we need to put a lot of focus, and we both agree that the best form of welfare one can ever have is a good job. There are people in that adult community who want to get a good job and need help to get there, and that particular community—that particular group—I was so impressed when I met them, that that is what their life’s work is, yet they are starved of funding.
Douglas Ross: But funding that they believe they were entitled to.
Lord Offord of Garvel: That they were promised.
Q81 Douglas Ross: Indeed, I think they have shown me some correspondence—which I am quite happy to share with the Committee—in which they have been given assurances from several Scottish Government Ministers that they would receive that covid funding, and they still have not. That then does beg the question of whether that is part of the £1.6 billion that the Auditor General cannot account for.
Lord Offord of Garvel: This is where I would expect the Scotland covid inquiry to make a full inquiry.
Q82 Douglas Ross: It would also be an opportunity for the Deputy First Minister of Scotland to answer these questions, if she attended this Committee.
Lord Offord of Garvel: I will recommend this Committee to her when I see her later.
Q83 Douglas Ross: Hopefully that will work where other efforts have not.
The Chair mentioned Brexit and was surprised that it had not been raised in the opening seven minutes of this inquiry session. Maybe that is because the inquiry is not about Brexit; it is about coronavirus. I want to look at coronavirus and Europe. You mentioned the vaccine roll-out; is it the UK Government’s view that we would have had as fast and as successful a vaccine roll-out in Scotland and across the UK if we were still part of the EU?
Lord Offord of Garvel: That is not a matter of opinion: it is self-evident that because we had come out of the EU we were able to then plot our own response, which we would not have been able to do. We would have had to go with the EU-wide scheme. If you remember, at one point the French and the Germans were very annoyed with the UK because we had stolen a march on them, and we had put our money down and signed contracts and procured ourselves early supplies of the vaccines, which we would not have been able to do if we had been part of the EU. It is not a matter of opinion; it is a matter of fact that we were able to proceed faster.
Q84 Douglas Ross: That then also allowed us to lift the restrictions across the UK and slightly later in Scotland because more people were protected quicker than other parts of the EU and around the world.
Lord Offord of Garvel: Correct.
Q85 Douglas Ross: Which, therefore, allowed our economy to hopefully get in a better position at an earlier stage, because people were getting out and about more, being able to spend money, and get back to work.
Lord Offord of Garvel: Yes. But if you take the fact that the three high-spending economies were the US, the UK and New Zealand, they are independent countries so they were perhaps able to do their individual responses but act fast, spend the most amount of money and came out perhaps the quickest.
Q86 Douglas Ross: Finally, how do you view the relations between the Scottish and the UK Governments during the pandemic? As you said earlier, there was a time in the pandemic when they worked very closely, and it then started to diverge a bit more as the pandemic continued. Were there opportunities that were missed for better collaboration between the two Governments? Is that a lesson that this Committee can look at in our inquiry report? Could there have been better working relations between the two Governments to provide a more unified response to the pandemic?
Lord Offord of Garvel: As I said, the response financially and from a health point of view was UK-wide, even to the point of the UK armed services being deployed in Scotland as much as, if not more so, than in England. There were inter-governmental l meetings going on and former colleague and former Minister David Duguid would have been involved in that. I personally was not involved at that moment, but the record shows there was a lot of inter-governmental interaction on these decisions.
Ultimately, again through the devolution settlement, the Scottish Government wanted to set their own tone, their own messaging—we are back to FACTS—and wanted to finesse some schemes. All I am observing at the end of it is they were perhaps on the margin. The overall response was uniform, and the outcome was uniform. Scotland’s outcomes ended up being the same as the UK’s.
Q87 Deidre Brock: Good afternoon, Lord Offord. It is interesting to hear Mr Ross raise the issue of covid because I know that in an evidence session recently of the UK covid inquiry, they were told that planning for a no-deal Brexit crowded out efforts of the UK Government to prepare for a pandemic, which was something—[Interruption.] I do not know why I am being interrupted. I stayed quiet during—
Lord Offord of Garvel: Sorry, can you repeat that?
Chair: Order. Let us ask questions and answer questions, please.
Deidre Brock: Can we start the clock again, perhaps, Mr Wishart? Thank you.
The recent first evidence session of the UK covid inquiry heard that planning for a no-deal Brexit crowded out efforts that the UK Government were making to prepare for a pandemic. Preparations for Operation Yellowhammer I think were specifically referenced. That was a point that was echoed by the former First Minister of Scotland when she gave evidence at the same inquiry. As a passionate Brexiteer yourself, did you have regrets? Did you reflect upon that information and then have regrets about how this was handled? Were there ways that the UK Government could have handled this rather more competently?
Lord Offord of Garvel: I do not recognise the premise here. The evidence does not back this up, I am afraid. The evidence is that we had a faster roll-out, and we came out of lockdown faster and our economy has not been damaged any worse than the European economy. I do not understand the premise of the question. I remind you of how angry the French and the Germans were that we had the vaccine deal sewn up months before they did.
Q88 Deidre Brock: Okay, but I think what the inquiry heard was that work that could have been devoted to planning for a pandemic was not possible because everyone had to plan for a no-deal Brexit. Surely that is the point.
Lord Offord of Garvel: The evidence does not bear that out.
Q89 Deidre Brock: Okay. Thank you. Getting on to error and fraud, I notice that the Public Accounts Committee recently came out talking about fraud and error, saying that total fraud and error across covid employment schemes delivered by HMRC was an estimated £4.5 billion, of which the Department expects to recoup just £1.1 billion. It criticised the length of time the Government were taking to recover those taxpayer pounds. Would you like to comment on that?
Lord Offord of Garvel: Is that the business fraud?
Deidre Brock: You are representing the UK Government.
Lord Offord of Garvel: Yes, the £4.5 billion. That is out of £146 billion of business support, so what does that work out at—less than 3%?
Q90 Deidre Brock: It is about 4.6% apparently. I think that is of the total expended in the three schemes—the coronavirus job retention scheme, the self-employment income support scheme and the eat out to help out scheme. Equivalent estimates—
Lord Offord of Garvel: Sorry, your percentage number was how much?
Deidre Brock: It is 4.6%.
Lord Offord of Garvel: Yes—less than 5%.
Q91 Deidre Brock: So is that acceptable?
Lord Offord of Garvel: It is not a case of being acceptable. It is a case of if you run a loan book—for example, if you are a bank and you have bad loans—you are in the same category, at less than 5%. I am not saying it is acceptable and you do not want it to happen, but that is within commercial margins of running a loan book. When you send money to people without them filling out any forms, and without doing any credit checks on them, I would say it is remarkable. The lesson of this is how remarkably honest the British people are.
Q92 Deidre Brock: But that is a considerable amount of money. What concerns is the Scotland Office raising with the UK Government about trying to claw some more of that money back? Is that something that is your responsibility as someone who is responsible for business?
Lord Offord of Garvel: Yes, there is a review of this going on, and it is within the Treasury as well, as they sent the money out. That is under review. It will also be considered in the covid inquiry.
Q93 Deidre Brock: Are you on top of it, though, Lord Offord?
Lord Offord of Garvel: Absolutely we are on top of it. As I just indicated to you, overall that is within the realms of running a loan book in terms of a bad loan position at 5%. It tells you that in the main the money was well targeted, well received and being paid back. That is not to say it should not, therefore, be recovered where it can be.
Q94 Deidre Brock: That does not sound like you are pursuing it yourself. Is this something that concerns you? You seem to accept it as a necessary result of handing out that money as quickly as—
Lord Offord of Garvel: I do not reside in the Department whose responsibility it is to recover the money. Therefore, you need to inquire of that Department what precise steps it is taking to recover that money.
Q95 Deidre Brock: Does the Scotland Office, and you as the representative for business for the Scotland Office, ever feel concerned enough to contact the Department yourselves? For that matter, the Department for Health and Social Care apparently, according to the Public Accounts Committee, wasted an extraordinary £14.9 billion on PPE and related covid expenditure. What are you doing to tackle this?
Lord Offord of Garvel: Again, this is an unfortunate by-product of the speedy response that was required to save 15 million jobs, keep the population in employment and allow our economy to return. There are bad actors unfortunately in this world that we live in, but the lessons that we are learning out of this is that the British people in general are very trustworthy, hardworking and honest people.
Q96 Deidre Brock: Of course, but clearly there were some problems here, so they presumably need to be addressed by the UK Government.
Lord Offord of Garvel: When was the last time you received a loan from a bank where it did not check that you could pay it back? It has never been done before. It is a most extraordinary experiment that we just undertook, to give money to people without working out first if we could get it back. Guess what? It has been returned.
Q97 Deidre Brock: Okay. Back in 2021 admittedly, looking at some of the spending measures made by SNP Ministers since the start of the covid-19 pandemic, the Scottish Government estimated fraud and error in those schemes to be no more than 1% to 2% of payments, which is approximately £16 million—
Chair: Sorry, I am being interrupted by Mr Ross.
Douglas Ross: I am just passing advice.
Deidre Brock: That was approximately £16 million to £32 million, which is a significantly lower amount. I do not have more up-to-date figures than that—
Chair: Order. I am finding it really difficult to concentrate because Mr Ross is constantly and consistently barking into my ear. Would you please be quiet and let Ms Brock ask her questions and the Minister respond to them?
Deidre Brock: It seems that there was 1% to 2% fraud and error—[Interruption.] Do you know, it really is very difficult to ask questions when you are constantly interrupting, Mr Ross?
Chair: Would you please stop interrupting?
Deidre Brock: I did not interrupt you. I was tempted, but I did not interrupt you.
Douglas Ross: I am not speaking to Ms Brock.
Deidre Brock: No, but you are speaking to the Chair and everyone else can hear you.
Getting back to that point, their estimate was something between 1% to 2% in terms of the schemes under discussion back in 2021. It just seems like a very high amount if it is around 4.5% lost to fraud and error. How do you explain that?
Lord Offord of Garvel: What are you trying to say? Are you trying to say that the Scots are lower or higher—
Q98 Deidre Brock: Were the Scottish Government more efficient in handing out that money than the UK Government? I am interested in your opinion on that.
Lord Offord of Garvel: I have not seen any numbers that demonstrate that Scotland was any different from the rest of the United Kingdom. All the numbers that I have inquired about are basically saying that we are in line—that Scotland is in line with the UK.
Q99 Andrew Western: Good afternoon, Lord Offord. One of the challenges that was undoubtedly encountered with the distribution of these funds to businesses was the ability to administer sectoral support, because of a lack of information about exactly what activities businesses were engaged in. What lessons do you feel we can learn from the pandemic in terms of how we improve data collection in Scotland? Would there be a need, for instance, for a business register? Certainly, places such as Belgium have considerably more information on businesses. Do you think that would be helpful moving forward to properly understand what businesses are doing so that that support can be best targeted?
Lord Offord of Garvel: That is a fair question. I think in the UK we always strive to improve the data that we collect, and that will increase as we go more and more digital. We will be able to do that better. We must get the balance right between that and allowing people to maintain their privacy, but there is no question but that we want to get better at data collection and the Government do have the Office for National Statistics doing this. We do want to improve on that.
There are concepts of different schemes being discussed—about whether we have the business register for sectors and so on. We did hear some grumbling, for example, in the agricultural community about differences in how that was administered between England and Scotland. We did hear some differences around retail between Scotland and England. There were some differences employed and yes, on the face of it, if we had better data we would be able to drill down into that.
At the end of the day, we were in a pandemic. It was an emergency situation. We acted fast, and on balance it was a pretty good job.
Q100 Andrew Western: I guess the obvious question then is: have there been any discussions that you are aware of within Government and between the Scottish Government and the UK Government as to what information it might be helpful to collect in future? Is that something that has been discussed?
Lord Offord of Garvel: There are discussions going on. I know that certainly the Fraser of Allander Institute is looking at this and the Federation of Small Businesses has an opinion on this. It is an ongoing discussion.
Q101 Douglas Ross: We heard from the Federation of Small Businesses recently, and now that we have moved beyond the immediate health response of covid and businesses are still trying to get back on their feet, one of the things they were concerned about was the increased level of legislation coming from the Scottish Government to Scottish businesses. What discussion have you had with the business sector in Scotland about legislation? They particularly highlighted, for example, the deposit return scheme, which obviously the UK Government have been involved in as well. Schemes like that, the workplace parking levy and such like are putting businesses off, particularly FSB members in their small business survey that came out. What do you hear from Scottish businesses about the level of legislation coming from the Scottish Government and how that is impacting their businesses?
Lord Offord of Garvel: I speak regularly with the Scottish business community, to stakeholders, and I do detect a frustration that they feel that they are in some ways having to deal with a greater amount of regulation. I think the word is “divergence”. Business does not appreciate additional regulation and divergence from the UK. The market is a UK market. They want a single market for Scotland—60% of our trade in Scotland is with the rest of the United Kingdom, 20% with Europe and 20% international.
Whether it is things like DRS, whether it is things like the gene-editing thing, which is technology invented in Scotland, in the James Hutton Institute, and being adopted everywhere in the UK except in Scotland, which seems slightly odd, or whether you have the issues around the proposed alcohol advertising bans and differences around rent freezes, the message I am getting is, “Why is it different in Scotland? Why are they putting up barriers? We want to trade across all the United Kingdom.” I get that a lot.
Q102 Douglas Ross: In some of these areas—for example DRS—we are told by the Scottish Government that the UK Government are disrespecting devolution by getting involved, but certainly what I hear from businesses is that they welcome the fact that one of Scotland’s Governments—the UK Government—listened to the concerns of business over DRS and they are putting forward suggestions for a UK-wide scheme that they would be happy to work with. Do you agree with the SNP that it was disrespecting devolution? Or do you agree with the businesses that it was vital for the UK Government to get involved and come forward to try to have a scheme that works across the whole of the UK?
Lord Offord of Garvel: The whole point of devolution is that devolution is a settlement within a concept that has existed for 350 years called the United Kingdom. The SNP Government are very familiar with the concept of a single market. They love the European single market, with 27 countries. They want to be part of that single market. What they do not seem to like so much is the concept of a UK single market. Yet for the UK to work properly we need a single market. The whole point of the UK Internal Market Act is basically to say that the presumption should be that in these islands we do everything the same unless there are legitimate reasons for exclusions, to which we set a high bar. Therefore, what the businesses are saying is that they are getting an increasing number of exclusions and diversions. The business community do not like that.
Q103 Dr Philippa Whitford: To follow up on that, waste management has been devolved for almost 25 years and the principle of devolution does allow difference. There was lots of difference when the UK, including Scotland, was in the EU and it did not seem to be a problem. The internal market in Europe allows exemptions for public health and the environment. Why does the internal UK market not allow that?
Lord Offord of Garvel: The issue with the DRS was simply because the product—the bottles—does not respect borders. Having a scheme that works in one part and not in another part is fundamentally not working. The Scottish business response was that certainly a lot of English suppliers would stop supplying the Scottish market—
Dr Philippa Whitford: The original plan was all four nations were planning to do glass.
Lord Offord of Garvel: I think that is where we come to—
Dr Philippa Whitford: It was the UK Government that changed.
Lord Offord of Garvel: I think that is where we got to, which is that we want to do it together.
Q104 Chair: I asked the Prime Minister this in the Liaison Committee last week. Do the UK Government increasingly see their role as to correct and, if necessary, overrule the Scottish Government in schemes and measures that they do not like?
Lord Offord of Garvel: No, quite the opposite.
Chair: But you have. It has been done.
Lord Offord of Garvel: As part of the generous settlement where money is sent from London to Edinburgh with no strings attached comes the responsibility of the Scottish Government to legislate within the rules of the devolution settlement. What the UK Government want the Scottish Government to do is to legislate legitimately within the generous devolution settlement, and we all will get along fine and work together on that. Where the UK Government must get involved is where the Scottish Government either goes across competence or puts a scheme in place that is to the detriment of the rest of the United Kingdom. At that point the UK Government have no choice but to intervene.
Q105 Dr Philippa Whitford: Can you explain why the UK Government changed their mind on glass, the most dangerous litter and one of the most recyclable materials? That is what changed. Scotland and Wales did not change from the start of all four nations planning to do the same thing.
Lord Offord of Garvel: In terms of the outcomes, where we have come out is to find a way that works for everyone in the UK. The best way to do that is to focus on plastics.
Q106 Dr Philippa Whitford: But you are not planning to do anything on glass?
Lord Offord of Garvel: That is going to be the UK scheme. The best way to deal with this is plastic. That is what the public want to see most: plastic recycling.
Chair: The last question is from Wendy Chamberlain.
Q107 Wendy Chamberlain: There has been cross-party consensus on the need for a DRS and, as Dr Whitford said, across all four nations. One of the reasons given for the delay by the Scottish Government is the fact that we want to roll out on a UK basis. Are you confident that the UK Government are moving ahead in line with the timescales for DRS? Are we confident that the UK Government scheme is going to be delivered?
Lord Offord of Garvel: DEFRA is very committed to the whole recycling agenda, absolutely.
Q108 Wendy Chamberlain: There is nothing that would suggest to you that it is not going to meet those timescales?
Lord Offord of Garvel: No.
Chair: We have knocked off at exactly 4 pm, which was the hour that we presumed we would have with the Minister. We are very grateful to you for coming along once again to this Committee. I think there were a couple of things that you said you might follow up on, if you could supply those to the Committee. I am sure your officials will have taken note. For today, thank you once again, Lord Offord, for helping us out in this inquiry.