Subject:
Covid Additional Relief Fund Update
Date of
meeting: 29 July 2022
Report
of:
Chief Finance Officer
Contact
Officer: Name: Paul
Ross-Dale
Email: paul.ross-dale@brighton.hove.gov.uk
Ward(s)
affected: All
For general
release
1.1
The Covid Additional Relief Fund (CARF) is a one-off scheme
designed to support businesses emerging from the pandemic and which
is distributed by Local Authorities on behalf of the
Government.
1.2
The allocation for the Brighton and Hove area was £6.912m, in
respect of the financial year 2021/22. The scheme is intended to
provide support to businesses who are not receiving support from
existing rate relief schemes, nor likely to have been beneficiaries
of business grants schemes, who, nonetheless, have been
detrimentally impacted by the pandemic.
1.3
Whilst a local policy for distributing the fund was approved by
Policy and Resources (Recovery) Sub-Committee on 20 January
2022, the take up has been low in spite of repeated efforts to
promote the scheme. This update reviews the position and recommends
a revised version of the scheme that will ensure all government
funding is issued before the deadline of 30 September 2022.
2
Recommendations
2.1
That the Policy & Resources Committee approves the revised
scheme criteria described in Section 4.
3
Context and background information
3.1
On 25 March 2021 the Government announced a new COVID-19 Additional
Relief Fund (CARF) of £1.5 billion stating that ‘The
fund will be available to support those businesses affected by the
pandemic but that are ineligible for existing support linked to
business rates’. However, the scheme needed parliamentary
approval and the government did not issue
guidance for the design of the
scheme until 15 December 2021. The Brighton and
Hove area was allocated £6.912m funding.
3.2
All allocations of relief must be completed no later than 30
September 2022.
3.3
The intention of the scheme was primarily to enable councils to
support businesses that were not entitled to Extended Retail
Discounts in 2021/22. That relief provided 100% discount from April
to June 2021, and 66% discount from July 2021 to March 2022.
3.4
Local Authorities were empowered to design their own scheme,
subject to certain conditions and exclusions. Policy &
Resources (Recovery) Sub-Committee approved a scheme on 20 January
2022.
3.5
CARF can only be awarded in respect of liability in 2021/22. The
main exclusions are that it cannot be awarded for periods when the
property is unoccupied. In addition, the relief cannot be applied
to businesses in receipt of, or potentially entitled to, Extended
Retail Discount. Therefore, Hospitality, Retail, Leisure and Event
businesses do not benefit from any additional support from this
scheme for premises where there is public access, though they may
benefit in respect of office, workshop or storage space they
operate in support of their public access premises.
3.6
In the original Policy & Resources report from January, 1,852
properties were identified as being potentially eligible for this
relief. The main categories of business that were potentially
eligible were Offices (1252), Workshops (182), Warehouses (125),
Stores (132) and Factories (52).
3.7
It was anticipated that the fund could pay for up to 1,000 awards
of either 75% relief, or 25% relief. 75% would be awarded to
businesses that supply to the Hospitality, Retail, Events and
Tourism sectors and essential health services such as dental
practices, while 25% would be awarded to non-supply businesses
fitting the eligibility criteria.
3.8
As at mid-June, 224 CARF awards had been made, amounting to
£1.213m, leaving £5.698m unallocated. There is no
provision for the council to retain any underspend, so if it is not
distributed, it will effectively be reclaimed by government without
it benefiting local businesses. At the other extreme, any spending
over the maximum allocation would not be reimbursed.
3.9
As soon as the scheme was approved, all of the potentially eligible
businesses were contacted in February 2022 by email and letter, and
invited to make a claim. A reminder was subsequently sent out to
all potentially eligible businesses in March 2022. The council
posted on social media about the scheme and alerted representatives
of the local business community about low take up at a meeting on 3
May 2022.
3.10
Whilst some work was undertaken to talk to eligible businesses
about why they were not replying, there appears to be no definitive
cause for the lack of take-up. However, the following are believed
to be contributory factors:
·
The
CARF applies to 2021/22, and businesses are limited on time and
resource, and are focused on maximising revenue in the current
reviving climate;
·
The
current scheme involves a relatively complicated process, requiring
evidenced details of the extent of loss to each
business;
·
Similarly, it is
a relatively complicated application process via the website
– businesses appear not to be clear if they can
benefit;
·
In
its nature, CARF is a scheme that was intended to help businesses
that had slipped, unaided, through the gaps of previous government
help – the pool of potential applicants was therefore much
more limited.
4.1
It is proposed that a new methodology and distribution matrix
should replace the previous scheme with effect from 30 July 2022 to
maximise distribution of the fund and support those businesses
ineligible for other support or relief.
4.2
In the time since the first scheme was drafted, other Local
Authorities have designed and published their own versions. After
reviewing a broad selection of other CARF schemes, an alternative
distribution method has been identified that will enable the
council to disburse all of the funding to local businesses in a
simpler way that does not rely on encouraging take up.
4.3
Under the proposed new methodology, businesses will no longer have
to make an application, and they will no longer be required to
provide information that demonstrates their material loss.
4.4
Instead, the council will adopt the same local distribution
methodology that the government set out in its guidance for
national distribution. The government estimated the likely numbers
of affected businesses in each Local Authority, broken down by
sector and business type, and this determined the local funding
allocations. However, this could also be applied sector by sector
at a local level by individually assessing and identifying eligible
businesses.
4.5
The list at paragraph 4.6 outlines the likely impact of the
pandemic on each business sector. The government created the list
by analysing the change in Gross Value Added (GVA). GVA measures
the value of goods and services produced in an area, industry or
sector of the economy. The government then linked each entry on the
list to a Standard Industrial Code of Economic Activities
code (SIC code). The
government’s guidance for
CARF contains a detailed description of the
methodology at Annexes A to F.
4.6
Officers in the council’s Business Rates team have identified
the appropriate SIC code for all eligible ratepayers in order to
consider what relief they should be awarded on an individual basis.
The rate of relief awarded in each case will be determined
according to the provisional amounts in the following table:
|
SIC
code
|
Sector
|
GVA
change
|
% of
relief awarded
|
Number
of cases
|
|
I
|
Hospitality
|
-55%
|
85.00%
|
84
|
|
R
|
Arts,
Entertainment and Recreation
|
-34%
|
66.00%
|
51
|
|
S
|
Other
Services
|
-32%
|
66.00%
|
62
|
|
Y
|
Transport
|
-32%
|
66.00%
|
40
|
|
N
|
Administrative
Services
|
-21%
|
50.00%
|
320
|
|
P
|
Education
|
-20%
|
50.00%
|
97
|
|
F
|
Construction
|
-14%
|
35.00%
|
70
|
|
A
|
Agriculture,
Forestry and Fishing
|
-13%
|
35.00%
|
1
|
|
Q
|
Health
|
-10%
|
35.00%
|
200
|
|
C
|
Manufacturing
|
-9%
|
15.00%
|
59
|
|
B
|
Mining
and Quarrying
|
-8%
|
15.00%
|
0
|
|
G
|
Wholesale
and Retail
|
-8%
|
15.00%
|
187
|
|
M
|
Professional
Services
|
-7%
|
15.00%
|
683
|
|
J
|
Information
and Communication
|
-6%
|
15.00%
|
313
|
|
X
|
J-N:
Information, Communication, Financial Intermediation, Real Estate
and Business Services
|
-6%
|
15.00%
|
0
|
|
K
|
Financial
Services
|
-2%
|
0.00%
|
0
|
|
L
|
Real
Estate Activities
|
-2%
|
0.00%
|
0
|
|
D
|
Energy
|
-1%
|
0.00%
|
0
|
|
Z
|
Storage
and Distribution
|
-1%
|
0
|
0
|
|
E
|
Water
and waste management
|
0%
|
0
|
0
|
|
O
|
Public
Administration
|
1%
|
0
|
0
|
4.7
The percentages of relief shown above are closely indicative of the
final awards. However, it will be necessary to calibrate the exact
percentages at the first opportunity after 30 July, the start date
of the new version of the scheme. Awards may continue up until 29
July under the existing rules, and it may therefore be necessary to
make small adjustments to take this into account, along with other
variable factors. Officers will be authorised to make these final
adjustments.
4.8
It is proposed that there will only be one round of relief
allocations and there will be a maximum award of £75,000.
This cap is to ensure that the CARF scheme has a broad reach across
the city and prevents a large proportion of the fund (over
£1.2m) going to just 8 businesses.
4.9
If a business is dissolved or in liquidation, there will be no
entitlement to CARF. This is so that help can be prioritised
towards businesses that are still operating.
4.10
There is a risk that some businesses will have received other
support in excess of the amounts allowable under the Subsidy
Control (formerly State Aid) regime and may return their
allocation, resulting in under-utilisation of the scheme. However,
limiting maximum awards should minimise this risk as far as
practicable.
4.11
Regarding compliance with the government’s guidance, the
Covid-19 Additional Relief Fund is made available to local billing
authorities under Section 31 of the Local Government Act 2003,
which is a general power of government to contribute towards local
authority expenditure. Usually, such grants confer a wide
discretion of the recipient authority as to how the money is
applied. However, in the case of CARF the government published
guidance which is effective to 31st March 2023 and specifies the
types of business eligible for relief and the amount that can be
offered and how that is assessed.
4.12
The intended purpose of the guidance is to support local
authorities in administering the COVID-19 Additional Relief Fund
(CARF). That support comes in the form of guidance on the scope of
CARF and the criteria which local authorities should have regard to
when determining awards from the fund whilst making the point that
the guidance does not replace existing legislation.
4.13
The guidance contains the following fundamental eligibility
points:
·
Firstly, the fund
will be available to support those businesses affected by the
pandemic but that are ineligible for existing support linked to
business rates;
·
Secondly, it will
be for individual billing authorities to adopt a local scheme and
determine in each individual case whether, having regard to this
guidance and their own local scheme, to grant relief under section
47;
·
Thirdly, the
relief is available to reduce chargeable amounts in respect of
2021/22;
·
Fourthly, so as
not to infringe the rules around Subsidy Control (formerly called
State Aid) care will need to be taken to ensure that the recipient
of a payment will not have received more than the maximum allowable
subsidy under the Small Amounts of Financial Assistance Allowance
in a three-year period (consisting of the current financial year
and the two previous financial years).
4.14
Although non-statutory, the incentive for the Council to comply
with the guidance is that Central government will fully reimburse
local authorities for discretionary relief awards which comply with
this guidance up to the maximum level of the allocations. It is
therefore appropriate to adopt this guidance as part of the
Council’s framework for granting relief from business rates
and therefore the recommended revised scheme above offers a fair
and transparent methodology for distribution which follows the
methodology set out in the guidance.
5
The old CARF scheme
5.1
The criteria for the old CARF scheme, as set out at Policy &
Resources Committee on 20 January 2022, will cease to apply from 30
July and will be superseded by the measures set out in this report.
Applications received up to the end of 29 July will be considered
using the old criteria.
5.2
A check will be performed to establish whether any existing CARF
recipients would be better off under the new criteria. If so, their
relief will be topped up accordingly. If there are recipients who,
under the new criteria, are deemed to have received too much CARF,
they will be able to keep the amount they were awarded.
6.1
An alternative option is to top up existing cases that have already
applied and been awarded CARF. However, this would mean focusing
£5.698m on a very small number of recipients, and the
likelihood is that even if they were all awarded 100%, there would
still be a substantial underspend of the fund.
6.2
The other option is to leave the scheme as it is, but continue to
promote it. However, it is not clear what extra measures could be
employed to promote the scheme that have not already been
attempted. The outcome is still likely to be a substantial
underspend.
7
Community engagement and consultation
7.1
The council maintains links with business representative
organisations and has promoted Covid-19 support schemes through
these links and will continue to do so.
8
Conclusion
8.1
The report proposes a new methodology for the distribution of
funding provided under the government’s CARF scheme to ensure
that the fund is maximised and local businesses receive the support
that was intended by the scheme. Not doing so will mean the return
of funds to government to the detriment of local businesses and the
local economy.
9
Financial implications
9.1
The council has been allocated £6.912m Covid-19 Additional
Relief Funding for the Brighton and Hove area. However, due to low
take up, there is £5.698m remaining to be allocated. Section
4 sets out the proposed methodology and criteria for distributing
remaining funds and ensuring they are received by the businesses
they were intended for.
9.2
The key risk to consider is whether or not the council could be
liable for the return of funds if the proposed methodology is not
in accordance with the scheme requirements. This risk is considered
to be very low and is covered in the Legal Implications below.
While the guidance in relation to this scheme is non-statutory and
the scheme design is both compliant and for local members to
approve, to provide additional assurance officers have contacted
government (BEIS) to seek their views but have not received a
response to date.
Finance officer consulted: Nigel
Manvell Date consulted (19/07/22):
10.1
Subsidies are permitted under the current subsidy control regime
when the amount paid to each economic operator is below 325,000
Special Drawing Rights (currently £357,000) over three years.
The awards are limited to £75,000 and officers will take
steps to ensure that this allowance is not exceeded. There are
therefore no subsidy control concerns.
Name of lawyer
consulted: Alice Rowlands Date consulted (20 July
2022):
11.1
There are no direct equalities implications as the scheme is
accessible to all businesses.
12.1
There are no sustainability implications.