Welsh government’s Covid response brings benefit to small businesses

The Welsh government saved hundreds of millions of pounds by using the public sector to run coronavirus response programmes and then channelled the extra money to help small businesses survive the pandemic.

Spending per head on the test and trace programme and personal protective equipment (PPE) during the last financial year was half that in England, analysis of government figures shows.

Cardiff invested in local authority tracing teams while UK prime minister Boris Johnson’s Westminster government paid billions of pounds to private companies such as Serco to administer contact tracing in England.

The Welsh government also continued to use trusted suppliers to procure PPE while the UK Department of Health turned to companies without experience, including several with ties to Conservative MPs and ministers. 

A report by the public spending watchdog, the National Audit Office, found the UK paid £10bn above pre-pandemic market prices to secure stock. Wales also gave more to other UK nations than it received.

“The fact we were able to run a more successful and more efficient test and trace system meant we had more latitude, the same on PPE. We didn’t give ‘contracts for the boys’, there was no VIP lane,” Vaughan Gething, the Welsh government’s economy minister, told the Financial Times.

Vaughan Gething. the Welsh economy minister,
Vaughan Gething. the Welsh economy minister, says Wales needs more support from London to ‘level up’ prosperity © Chris Fairweather/Huw Evans/Shutterstock

“That has meant we have been able to support businesses in a more generous way.” About 160,000 jobs had been saved with £2.5bn of funds, he said. 

Under the Barnett formula, used by the UK Treasury to calculate the annual block grants distributed to Wales, Northern Ireland and Scotland, extra spending in areas such as health in England is also given proportionally to the devolved nations to spend as they choose. 

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Wales’s Labour administration received almost £1.1bn for test and trace and PPE in 2020/21. Cardiff University’s Wales Governance Centre estimated that the government actually spent £533m on those areas. That was £158 per person, 48 per cent lower than in England. 

Using the saved money, Wales has exempted small and medium-sized companies in the leisure and hospitality sector from business rates until next April, while those in England are paying one-third of their usual rates from July 1 and full rates from April 1 2022.

Grants are also more generous, up to £25,000. In England “restart grants” of up to £6,000 are being paid to non-essential retail business premises. Grants of up to £18,000 are being allocated to hospitality, accommodation, leisure, personal care and gym businesses with premises, which were closed for longer and more affected by restrictions when they did reopen.

“If the English restart grant was applied in Wales, 85 per cent of businesses here would receive between £2,000 and £8,000. The minimum an eligible business in Wales with a property of any size will have received is £10,000,” the Welsh government said.

In Wales, a café with four staff and a rateable value of £12,001 would have been eligible for £21,000 since December 2020. The equivalent business in England would have received a maximum of £18,000.

Wales has also given up to £7,500 to self-employed people who had not received any national government support.

Gething said the economy was bouncing back strongly. Wales was the only UK nation to increase the number of foreign direct investment projects in 2020-21. It attracted 72 projects, up 16 per cent on the year before. Overall, the UK attracted 17 per cent fewer compared with the previous year.

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Gething’s economic strategy includes a “Young Person’s Guarantee” giving everyone under 25 the offer of work, education, training, or self-employment, and 25,000 all-age apprenticeships over five years.

But he said Wales, the UK’s poorest region, needed more support from London to meet Johnson’s pledge to “level up” prosperity across the country.

The UK government should work with the nations and grant them more powers, he said. “You cannot level up from the top down.”

London has defended its package of business support as one of the best in the world, including paying 80 per cent of staff wages through the furlough scheme, which is winding down.

Lucy Frazer, solicitor general for England and Wales, told BBC Radio 4’s Today programme on Friday: “There has been a significant amount of support. We have spent more than £400bn. As we open up again, as business revives, and start to trade again we need to ensure that they start to pay again.”



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