The Scottish parliament has voted to block companies based in tax havens from using millions of pounds in coronavirus relief funding, in emergency legislation.
MSPs approved measures on Wednesday night brokered by the Scottish Greens to prohibit firms or individuals who are registered in tax havens, or are a subsidiary of an offshore company, from getting support grants.
The vote follows similar decisions by the Welsh government last week and by other EU member states, including Denmark and France, but ministers have yet to say how much Scottish government spending will be affected or how it will be enforced.
It is thought it could prevent companies with offshore links from applying to a new £120m enterprise resilience fund that provides grants for small- and medium-sized firms, and a £30m creative, tourism and hospitality bailout fund for firms that cannot get business rates relief.
In recent days the UK has seen a sudden sharp increase in Covid-19 infection numbers, leading to fears that a second wave of cases is beginning.
Epidemics of infectious diseases behave in different ways but the 1918 influenza pandemic that killed more than 50 million people is regarded as a key example of a pandemic that occurred in multiple waves, with the latter more severe than the first. It has been replicated – albeit more mildly – in subsequent flu pandemics. Until now that had been what was expected from Covid-19.
How and why multiple-wave outbreaks occur, and how subsequent waves of infection can be prevented, has become a staple of epidemiological modelling studies and pandemic preparation, which have looked at everything from social behaviour and health policy to vaccination and the buildup of community immunity, also known as herd immunity.
Is there evidence of coronavirus coming back in a second wave?
This is being watched very carefully. Without a vaccine, and with no widespread immunity to the new disease, one alarm is being sounded by the experience of Singapore, which has seen a sudden resurgence in infections despite being lauded for its early handling of the outbreak.
Although Singapore instituted a strong contact tracing system for its general population, the disease re-emerged in cramped dormitory accommodation used by thousands of foreign workers with inadequate hygiene facilities and shared canteens.
Singapore’s experience, although very specific, has demonstrated the ability of the disease to come back strongly in places where people are in close proximity and its ability to exploit any weakness in public health regimes set up to counter it.
In June 2020, Beijing suffered from a new cluster of coronavirus cases which caused authorities to re-implement restrictions that China had previously been able to lift. In the UK, the city of Leicester was unable to come out of lockdown because of the development of a new spike of coronavirus cases. Clusters also emerged in Melbourne, requiring a re-imposition of lockdown conditions.
What are experts worried about?
Conventional wisdom among scientists suggests second waves of resistant infections occur after the capacity for treatment and isolation becomes exhausted. In this case the concern is that the social and political consensus supporting lockdowns is being overtaken by public frustration and the urgent need to reopen economies.
However Linda Bauld, professor of public health at the University of Edinburgh, says “‘Second wave’ isn’t a term that we would use at the current time, as the virus hasn’t gone away, it’s in our population, it has spread to 188 countries so far, and what we are seeing now is essentially localised spikes or a localised return of a large number of cases.”
The overall threat declines when susceptibility of the population to the disease falls below a certain threshold or when widespread vaccination becomes available.
In general terms the ratio of susceptible and immune individuals in a population at the end of one wave determines the potential magnitude of a subsequent wave. The worry is that with a vaccine still many months away, and the real rate of infection only being guessed at, populations worldwide remain highly vulnerable to both resurgence and subsequent waves.
The measures, which were also backed by the Conservatives, were supported by the Scottish National party after ministers asked for them to be restricted to grants instead of including loans after advice from government lawyers.
Patrick Harvie, the Scottish Green party co-leader, said: “Any company which avoids its responsibility to contribute to society should not be getting handouts when things go wrong. That’s why many European nations and Wales have already made this commitment.
“I’m delighted that ministers finally saw sense on this basic issue of fairness. This move isn’t the final word, but it marks the beginning of a new approach to tackling the companies which shamelessly avoid paying tax, and we will continue to build on what’s been achieved today.”
In other measures, MSPs were given extra powers to: take over badly run care homes where there was a threat to life; give £19.2m extra for carers; and, in a surprise defeat for the government, extend the life of pop-up cycle lanes and wider pavements to support physical distancing measures.
However, the SNP voted with the Tories against measures to freeze rents for two years to protect those on low wages or in arrears during the post-pandemic economic recovery.
Nicola Sturgeon, the first minister, said the Scottish Green proposals were flawed and could have unintended consequences.
The tax haven vote will renew the focus on the Scottish government’s use of offshore companies, which are set up legally in the UK and pay all the taxes they are expected to pay, in other situations.
An investigation by the Guardian and the Ferret website in 2018 found that companies based in the Channel Islands, Dubai and the Cayman Islands had substantial stakes in 47 private finance schemes to build Scottish motorways, schools, hospitals and colleges.
The analyst Dexter Whitfield found that offshore firms and investors were involved in about 60% of those Scottish government-backed schemes, which will cost £2.7bn to build but will cost taxpayers nearly £8bn in total once the borrowing, interest, management fees and running costs are paid off.
The Welsh government blocked companies with headquarters in a tax haven from accessing its £500m economic resilience fund on 15 May. Ministers in Cardiff said last week it would affect a small number of companies.
Rebecca Evans, the Welsh finance minister, said: “We have put in place the most generous business support package in the whole of the UK. It is only right that businesses which are not contributing tax payments to our economy should not benefit from this scheme.”
