The devolved administrations should have the flexibility to launch their own furlough schemes as part of new funding arrangements with the 海角视频 Treasury, says a new report
The report, from the Institute of Fiscal Studies, the Fraser of Allander Institute at Strathclyde University, and University of Stirling Management School, says that Scottish, Welsh and Northern Irish governments should be either given minimum funding guarantees by Westminster or enhanced borrowing powers, if stringent health measures and additional economic support is needed.
It also said there could be a regional furlough scheme under certain circumstances.
And the report’s authors also say that good communication and coordination across both the 海角视频 and devolved Governments was essential.
David Bell, professor of economics at the University of Stirling, said: “Effective communication and coordination between the 海角视频 and devolved Governments is vital for effective policy-making given the interactions between funding and policy decisions taken by these two levels of government.
“There were improvements during the early stages of the Covid-19 pandemic but stakeholders have told us these have not been sustained.”
Prof Bell, as well as David Phillips and David Eiser, said that while their report did not take a view on how serious the threat of the Omicron variant was, the rise of the mutant virus or other future outbreak, affected some parts of the 海角视频 much harder than others.
They said HMRC should examine the feasibility of making the furlough and self-employment income support schemes available on a geographical basis, and if it is practical without the risk of significant fraud or error, devolved Governments could be given the option of paying for furlough and income support schemes to be reinstated if they want to tighten public health restrictions significantly.
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Thresholds for hospitalisation, for example, could also agreed above which the 海角视频 Government would pay for the schemes, the report funded by the Economic and Social Research Council said, to provide extra support in areas facing the most serious situations.
Mr Phillips, an associate director at the IFS, said with surging coronavirus rates it was “vital to lean lessons from earlier waves of the pandemic”.
“If new policy and spending announcements start to come in quick succession, the devolved Governments should swiftly be given some combination of the funding guarantees successfully deployed last year, and/or enhanced borrowing powers, to allow them to respond in a timely and effective way,” he said.
“Without such measures, they could find themselves uncertain about how much funding will be available until announcements are made for England, potentially holding up policy development and implementation.”
The report also examined the case for a number of permanent reforms to funding arrangements, which it said would make them more robust in the future.
The Economic and Social Research Council funded paper said that while minimum funding was useful in times of extreme crisis it was not appropriate in normal times.
Therefore, they said, in the long term, an alternative of automatically allowing the devolved Governments to defer the impact of lower-than-expected funding to later years would provide most of the benefit.
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Mr Eiser, a knowledge exchange fellow at the Fraser of Allander Institute, said: “Currently, the devolved Governments cannot borrow to fund discretionary resource spending.
“There is a strong case to change this on a permanent basis to provide them with additional flexibility to respond to unforeseen events.
“Set at a modest level, such as 1% of their resource budget, this would pose no meaningful risks to the 海角视频 Government’s overall fiscal stance or fiscal targets.
“For similar reasons, there is also a good case for extending the devolved Governments’ existing – and very restrictive – drawdown limits from their reserves.”
And as part of long-term proposals, it said the Scottish Government’s usual annual borrowing limit to address tax and welfare forecast errors should also be doubled to £600m as a starting point."
First Minister Mark Drakeford said: "Our ability to provide and sustain long-term economic support during this new wave of this ongoing public health emergency is severely constrained by the current position of the 海角视频 Treasury."
A Treasury spokesman said the 海角视频 Government had worked closely with devolved administrations, and continued to do so.
He added: "The 海角视频 Government’s £400bn Covid support package has supported people, businesses and public services in all parts of the 海角视频, and we have just made £860m of additional funding available to the devolved administrations to use how they see fit when tackling Covid-19.
“The Statement of Funding Policy for the devolved administrations was updated in October and a review of the Scottish Government’s Fiscal Framework is due to take place next year.”