Kate Forbes’ Evidence to the UK Covid-19 Inquiry

Module 9 Economic Response 3 December 2025

Kate Forbes, appearing before the UK Covid-19 Inquiry on 3 December 2025, gave detailed evidence regarding Scotland’s funding position, the fiscal constraints of devolution, and the Scottish Government’s attempt to respond to the economic consequences of the pandemic. Her testimony was taken by Mr Richard Wright KC, Lead Counsel to Module 9. Over the course of her evidence, she set out clearly the structural challenges faced by Scotland when attempting to support both businesses and individuals, under a system where financial resources were largely determined by UK Government spending decisions for England. Crucially, her evidence provides insight into the economic detriment experienced in Scotland, and offers particular relevance to Excluded taxpayers who did not benefit from the UK’s main support schemes.

Forbes began by outlining her roles during the pandemic, first as Cabinet Secretary for Finance from February 2020 to May 2021, and then as Cabinet Secretary for Finance and the Economy until March 2023. Her central responsibility was managing Scotland’s budget and allocating the Barnett Consequentials received in response to UK Government spending announcements. She confirmed that she had responsibility for business support and economic interventions throughout the pandemic, and she emphasised at the outset that Scotland’s funding position was entirely shaped by UK Government fiscal events and England-only announcements.

She explained that under normal circumstances the Barnett formula ensures that Scotland receives a population share of any additional England-only spending. The formula does not apply where the UK Government labels the spending as UK-wide, meaning Scotland only received Consequentials when the UK Government decided that England required further support. This distinction became extremely significant during the pandemic. Forbes made clear that Scotland lacked the ability to adjust tax powers in-year, to borrow for resource spending, or to access the Scotland Reserve flexibly, because these tools are tightly restricted and not designed for emergency conditions. These realities formed the backdrop for her repeated requests, throughout 2020 and 2021, for greater predictability, flexibility, and transparency in relation to UK funding decisions.

One of the key themes of Forbes’ evidence was that Scotland’s capacity to take swift or locally targeted action was constrained by uncertainty over when, or whether, Consequentials would arrive. She described the Scottish Government’s funding position in the early months of the pandemic as precarious. Without the guarantee that funding would not later be revised downwards, Scotland had to proceed cautiously. The introduction of the Barnett guarantee in July 2020, she said, was a direct response to concerns that negative Consequentials might be applied at the end of the year. The guarantee provided reassurance that the level of funding would not fall below a set minimum, and allowed Scotland to announce new business schemes with greater confidence. Prior to July, she had only been able to announce business support in direct response to confirmed UK funding. After the guarantee, further funds could be planned with some certainty that Scotland would not face unexpected reductions at the year end.

Forbes indicated that the guarantee enabled Scotland to introduce more targeted local measures when necessary. She referred to the autumn 2020 interventions, which Scotland was able to announce more decisively because the guarantee mitigated the risk of subsequent negative adjustments. Nonetheless, she stressed that the guarantee addressed only predictability, not flexibility. Scotland still had no means to independently increase funding in response to a localised outbreak, a structural limitation that would later prove critical in the context of the Excluded.

Her evidence on the Newly Self-Employed Hardship Fund is particularly relevant. Asked about Scotland’s decision to support the newly self-employed when England did not, Forbes was clear that this arose from a policy commitment to help groups who were falling through the cracks. She confirmed that Scotland delivered a £2,000 grant in April 2020, followed by a £4,000 grant in February 2021. This scheme existed because the Scottish Government believed that the newly self-employed were an excluded category in need of targeted intervention. While the UK Government argued that operational barriers and fraud risks prevented support for those without prior tax returns, Scotland accepted that the fraud risk might be higher but nevertheless decided that supporting excluded groups outweighed those risks.

She fully acknowledged the practical difficulties of administering the fund through local authorities, who relied on tick-box declarations from applicants. She also accepted Audit Scotland’s later observation that light-touch monitoring made detailed tracking of the money difficult. However, she defended the approach as deliberate and proportionate. Local authorities were under extraordinary pressure in the early months of the pandemic, administering billions of pounds of support at pace. She consciously chose not to burden councils with heavy reporting requirements when the priority was to get financial support to those who needed it as quickly as possible. Despite allocating £34 million to the newly self-employed scheme, only £11 million was ultimately spent, which raised questions from Counsel as to whether the need had been overstated. Forbes replied that need did not always correlate with media or parliamentary attention, and that the Scottish Government’s philosophy was to provide support where exclusion was identified, not merely where public pressure was greatest.

Forbes was also questioned closely on fraud and risk, particularly in relation to the Scottish Government’s decision to operate a deliberately light-touch system for the Newly Self-Employed Hardship Fund. She accepted that the absence of detailed verification increased the theoretical risk of fraud, but argued that this was a conscious and proportionate trade-off given the unprecedented pressures faced by local authorities. She emphasised that councils were processing multiple business support schemes simultaneously, often with limited staff, and that requiring documentary evidence from every applicant would have slowed payments to a degree that she believed would have caused greater harm. Counsel noted that the UK Government had cited fraud risk as a key reason for refusing support to the newly self-employed, but Forbes rejected the idea that higher risk justified offering no support at all. Her view was that urgent need outweighed administrative purity, and that Scotland’s approach struck an appropriate balance between speed and accountability

This point is significant for Excluded taxpayers, because it shows that the Scottish Government formally recognised the existence of excluded groups, acknowledged their hardship, and took steps—however limited—to address gaps. It also demonstrates the limitations of Scotland’s capacity. Forbes was unable to replicate support for the wider Excluded population—freelancers, PAYE contractors, small limited company directors, and other irregular workers shut out of UK schemes—because Scotland did not have access to the necessary financial levers. Instead, it relied on UK schemes that did not adequately protect these groups, leaving many taxpayers in Scotland without meaningful support throughout 2020 and 2021.

Another major part of Forbes’ evidence concerned the Job Retention Scheme (CJRS). Scotland could not extend or adapt the scheme because it was entirely controlled by the UK Government, even though Scotland relied on furlough to ensure compliance with public health interventions. Forbes described a repeated pattern: Scotland would introduce restrictions based on rising infection rates, but find itself unable to assure workers or businesses that sufficient support would follow, because only England-only spending decisions could generate the Consequentials Scotland needed.

The example she gave of October 2020 was particularly stark. Scotland and Wales both requested an extension of furlough when they introduced restrictions, but the UK Government refused, only to announce an extension on 31 October when the Prime Minister decided that England required new measures. Forbes’ conclusion was that the funding arrangements forced Scotland and Wales into reactive positions. Despite offering no criticism of UK ministers’ intentions, she emphasised that the effect of the system was that devolved nations did not receive funding when they needed it, but only when England needed it. Her view was that this created damaging delays, leaving workers and businesses unsupported during critical moments.

Similarly, in December 2021, during the Omicron wave, Scotland requested early confirmation of additional funding to support businesses if further protective measures were required. Forbes testified that she was repeatedly told that no further funding would be forthcoming. Scotland therefore identified £100 million internally, by reallocating resources, to fund its own emergency interventions announced on 14 December. Only after that announcement did the UK Government confirm new funding: initially £220 million, later doubled to £440 million, and then supplemented by a further £80 million on 21 December. Forbes described this as part of a pattern where funding clearly existed but was not communicated in time to support devolved decision-making. This lack of early warning put Scotland at a disadvantage, because it forced the Scottish Government to make health-driven decisions without certainty about economic support.

This part of her testimony reinforces the experiences of the Excluded. Many small businesses, contractors, and self-employed individuals in Scotland faced sudden restrictions without corresponding financial support arriving in time. The lag between Scottish public health decisions and UK funding announcements contributed to unnecessary hardship. Excluded workers were already unsupported, and further delays compounded their financial insecurity. Forbes’ evidence makes clear that Scotland’s inability to act independently on furlough or income support had profound consequences for these groups.

Forbes also commented on the broader issue of borrowing powers. She agreed with the analysis provided by economist David Phillips, who concluded that relaxed borrowing rules and funding guarantees should be rapidly introduced in future crises. She recognised that borrowing would be more expensive for the Scottish Government than for the UK Government, because Scotland cannot access the gilt market or benefit from mechanisms like quantitative easing. Nonetheless, she argued that greater flexibility would allow devolved nations to respond more effectively to asymmetric shocks, where Scotland’s circumstances diverge from England’s. This is again relevant to the Excluded, who would have benefited from a Scottish ability to create bespoke income support, similar to the Newly Self-Employed Fund but on a larger scale. Without additional borrowing powers or guaranteed early access to funds, Scotland could not extend that approach.

When asked about funding levels per head, Forbes declined to dispute Phillips’ figures showing that Scotland receives proportionately more than England in baseline block grant funding. However, she reiterated that the Barnett formula simply reflects a population share of England-only spending. She cautioned that Scotland also faces higher structural costs due to geography and rurality, meaning per capita comparisons are not straightforward. More importantly, she did not accept that the issue during the pandemic was one of underfunding. Instead, she maintained throughout her evidence that the real problems were a lack of predictability, flexibility, and timely communication. These limitations prevented Scotland from acting when it needed to, particularly in relation to supporting workers and businesses affected earlier or more severely than counterparts in England.

Her testimony also addressed the issue of data sharing, particularly access to HMRC data. She noted that Scotland had been hampered by limited access to information that would have allowed more refined targeting of support. HMRC indicated in October 2020 that no suitable legal or technical gateway existed for sharing taxpayer data with the Scottish Government. This prevented Scotland from designing or administering income-based support measures similar to furlough or SEISS, even for Scottish taxpayers. As Forbes highlighted, Scottish taxpayers are identifiable within HMRC systems because their records are marked with an “S” prefix, but this did not translate into meaningful access for Scottish ministers. This limitation again disproportionately affected the Excluded, because Scotland lacked the granular data required to identify those who were not covered elsewhere and design coherent schemes for them.

Throughout her evidence Forbes consistently reinforced that she had raised these issues repeatedly with UK ministers, had made explicit requests for more flexible funding arrangements, and had highlighted the particular vulnerability of excluded groups. Her performance in the Inquiry was measured, detailed, and supported by specific dates and examples, showing that Scotland’s problems during the pandemic arose not from a lack of will but from structural constraints embedded in the fiscal framework. She was clear, however, that she did not attribute malicious intent to the UK Government. Instead, she argued that the funding system itself prevented timely support when conditions in Scotland required earlier intervention than in England.

From the perspective of Excluded taxpayers, her evidence is highly significant. First, it confirms that the Scottish Government recognised excluded groups early in the pandemic and attempted to tailor support where possible. The Newly Self-Employed Hardship Fund, introduced in April 2020, was a direct response to one such gap. Second, the evidence confirms that Scotland lacked the ability to replicate this approach for other excluded groups, such as PAYE freelancers, small company directors, seasonal workers, and those with mixed income. These groups remained dependent on UK schemes that offered no meaningful support, and Scotland had neither the fiscal autonomy nor the data access required to design alternatives.

Third, and perhaps most importantly, Forbes’ evidence shows that Excluded taxpayers in Scotland suffered from a double disadvantage. They were excluded by the UK Government from the main income support schemes, and they were constrained by the structural limitations of devolution from receiving additional direct support from Scotland. When Scotland tried to act in circumstances unique to its own public health needs, it was delayed by UK Government decision-making that was tied to England’s situation. As a result, those Scottish taxpayers who already had no access to furlough or SEISS were further exposed each time Scotland was forced to introduce restrictions without guaranteed associated economic support.

In conclusion, Kate Forbes’ evidence on 3 December 2025 painted a detailed and coherent picture of Scotland’s economic response during the pandemic. She demonstrated consistent advocacy on behalf of Scotland, raising issues of flexibility, predictability, and funding system constraints repeatedly with the UK Government. Her testimony confirms that Scotland sought to support excluded groups, but was ultimately prevented from doing so on the necessary scale by structural limitations in the fiscal framework and by the UK Government’s control over major income support initiatives. The cumulative effect of delayed Consequentials, lack of early funding warnings, and absence of access to HMRC data significantly harmed Scotland’s capacity to protect its most vulnerable taxpayers.

For the Excluded in Scotland, her evidence is a formal acknowledgment of their experience. It confirms that their exclusion was recognised, that it was understood, and that Scotland’s inability to compensate them was itself an outcome of systemic shortcomings in the UK fiscal structure. Her testimony therefore contributes an important part of the historical record of the pandemic response, one that highlights the need for substantial reform if excluded groups in Scotland are to be protected in any future crisis.