Economy: Update

Lord Agnew of Oulton Excerpts

Tuesday 28th April 2020 Lords Chamber

The Statement was made in a Virtual Proceeding via video call.

[The Minister of State, Cabinet Office and the Treasury (Lord Agnew of Oulton) (Con)]

My Lords, I shall now repeat a Statement on coronavirus that was made yesterday in the other place by the Chancellor of the Exchequer. The figures have changed since then, and this Statement contains more up-to-date figures. The Statement is as follows:

“Mr Speaker, thank you for giving me the opportunity to update the House on our economic response to the coronavirus. Let me say at the outset that I am grateful to Members from all sides of this House, including the new Shadow Chancellor, for their contributions to the debate.

We should be in no doubt about the seriousness of the economic situation. The Office for Budget Responsibility has published a scenario showing that the coronavirus will have very significant impacts, both at home and in the global economy. More than 1.5 million new claims have been made to universal credit; over 4 million jobs have now been furloughed. Survey evidence suggests that a quarter of businesses have paused trading. These are already tough times. There will be more to come. While our interventions have saved millions of jobs and businesses, we cannot save every job and every business. I understand, and I share, people’s anxiety but, right now, the most important thing we can do to protect our economy is to protect the health of our people.

As my right honourable friend the Prime Minister said this morning, we are making progress; we are beginning to turn the tide. But if we lose control of the virus again we risk seeing a second spike, which we all want to avoid. So the goal of our economic strategy is to provide a bridge over what will be a sharp and significant crisis by keeping as many people as possible in their existing jobs, supporting viable businesses to stay afloat, and protecting the incomes of the most vulnerable—in other words, to maintain the productive capacity of the British economy, so that once we are able to refine the public health restrictions, we can, as quickly as possible, get people back to work, businesses reopening, the self-employed trading again.

The OBR has been clear that if we had not taken the actions we have, the situation would be much worse. The IMF has said that our approach has been “aggressive” and “right”.

Taken together, I believe our response has been one of the most comprehensive of any country around the world. Working closely with the Bank of England, business groups, trade unions, banks, charities and many others around the country, we have developed a plan to protect public services, people, and businesses. Let me address each of those areas in turn.

Public services like the NHS are on the front line of the fight against coronavirus, and I repeat today that whatever resources our NHS needs, it will get. At the Budget in March, I announced the coronavirus emergency response fund, initially allocating £5 billion. We have now provided over three times that initial amount, with the NHS and other public services receiving £16 billion so far.

We are also providing extensive support for people’s jobs and incomes. Our most important and far-reaching policy is the Coronavirus Job Retention Scheme, to keep people in employment. The scheme launched on schedule last week and I am pleased to report that the first grants have just been paid. Around half a million firms have already applied for help to pay the wages of over 4 million furloughed jobs, jobs that might otherwise have been lost. HMRC are also on track to deliver the self-employed income support scheme, as promised, in early June, and we will publish detailed guidance this week. Alongside these new interventions, we have strengthened our existing safety net, with increases to universal credit, the local housing allowance and statutory sick pay. We have reinforced our social fabric, too, with £750 million for the charity sector.

Of course, the best way to support people is to protect their jobs, and that means supporting businesses. Our plan to help businesses means the following: almost half of all business properties in England will pay no business rates at all this year; almost 1 million business premises can now receive cash grants of between £10,000 and £25,000; 2.3 million businesses have been offered a VAT deferral, saving on average £30,000; another 2.7 million people will be able to defer their self-assessment payments; over 58,000 people and businesses have put new tax deferrals mechanisms, such as the time to pay arrangements, in place with HMRC; up to 2 million employers will be able to access the statutory sick pay rebate, with up to £48,000 per firm; £16 billion of lending has been issued through the Bank of England’s financing facility; and over 20,000 coronavirus business interruption loans have now been approved. Of course, that is on top of our furlough scheme, with payments now arriving.

Taken together, our plans are protecting millions of people and businesses across the country through a set of interventions in the economy on a scale we have never attempted before, and they are working. However, I know that some small businesses are still struggling to access credit. They are, in many ways, the most exposed businesses to the impact of the coronavirus and often find it harder to access credit in the first place. If we want to benefit from their dynamism and entrepreneurial spirit as we recover our economy, they will need more support to get through the crisis.

Some businesses will not want to take on more debt, which is why our focus has been on grants, tax cuts and tax deferrals. However, for others, loans will be part of the answer. Today, we are announcing a new micro loan scheme, providing a simple, quick, easy solution for those in need of smaller loans. Businesses will be able to apply for these new bounce-back loans for 25% of their turnover, up to a maximum of £50,000, with the Government paying the interest for the first 12 months.

My right honourable friend the Economic Secretary and I have been in close talks with the banks and I am pleased to say that these loans will be available from 9 am next Monday. There will be no forward-looking tests of business viability or complex eligibility criteria, just a simple, quick, standard form for businesses to fill in. For most firms, loans should arrive within 24 hours of approval, and I have decided, for this specific scheme, that the Government will support lending by guaranteeing, to the lender, 100% of the loan.

Let me address this point directly. I have heard some calls for the Government to underwrite all our loan schemes with 100% guarantees. I remain unconvinced by the case for doing that universally. We should not ask the taxpayers of today and tomorrow to bear the entire risk of lending almost unlimited sums to businesses that may, in some cases, have very little prospect of paying those loans back, and not necessarily because of the impact of coronavirus. So I am not prepared to provide 100% guarantees on all our schemes. Instead, these new bounce-back loans carefully target that extraordinary level of state support at those who need it most, and the £50,000 cap balances the risk to the taxpayer with the need to support our smallest businesses.

Right now, the most important thing for the health of our economy is the health of our people. We are making progress in our fight against the virus, but we are not there yet, so our strategy is to protect people and businesses through this crisis by backing our public services and NHS with increased funding, strengthening our safety net to support those most in need, and supporting people to stay in work and keep their businesses going. Our response is comprehensive, coherent and co-ordinated. It is, I believe, the right approach. I hope that I can continue to rely on the support and advice of all honourable and right honourable Members as I commend this Statement to the House.”

My Lords, that concludes the Statement.

--- Later in debate ---

[Baroness Kramer (LD)]

My Lords, the bounce-back loans are clearly welcome, but I am going to press for more help for the self-employed who have fallen through the gaps in all the various rescue packages, especially the independent contractors who take much of their income in dividends and the newly self-employed. When we come out of lockdown, self-employment will be critical. It is a path for those who will have lost their jobs because of the pandemic and cannot return to them, and we will need innovation. As the Government know, a lot of innovation is embedded in these self-employed individuals, and I hope they will look again, because they must support this sector.

We all kept a minute’s silence today for key workers who have died, but many such key workers are very low earners with insecure work. Will the Government show their respect for these individuals by reviewing their funding of both social care and local government to ensure that those workers are properly paid, with proper employment rights, in recognition of the vital role they play and the vital contribution they make to all of us?

At the end of lockdown, public sector net debt will be at a historic high—certainly by the end of the pandemic. As the Government grapple with paying that debt down, will the noble Lord take action to tax the digital companies that have so far managed to pay very little tax in the UK though they now dominate large sectors of our economy? Indeed, they are doing well in the pandemic. I do not say that as an insult, but it increases the tax they should be contributing. Indeed, there are others who are, frankly, doing well out of the pandemic. Quite a number of traders have made windfall profits. Does the Minister agree that the Government should look for these companies to pay windfall taxes?

[Lord Agnew of Oulton]

My Lords, first, I will address the questions from the noble Lord, Lord Tunnicliffe, on universal credit. I am not aware of specific IT problems, but if the noble Lord is aware of any and would like to write to me, I will certainly investigate them. However, the point that my right honourable friend made yesterday is that we have responded to this crisis by introducing a number of measures to support those in receipt of universal credit—the £20 increase, the increase in housing allowance rates and the relaxation of the minimum income floor—and they all help. There is additional support for the vulnerable through the hardship fund and things such as the mortgage holiday. Therefore, we are very focused on those at the bottom of the income hierarchy and, as ever, we will keep a careful eye on developments.

Nobody is more concerned than the Chancellor at the speed at which the CBILS loans are going out, but the speed is picking up. As at 24 April, 20,000 were approved, worth £3.3 billion—double the amount of the previous week. As at 17 April, only 10,000 had been approved. Therefore, the pace is increasing and we are confident that that will continue.

The noble Lord is right that it is very easy to get drawn into the day-to-day crisis and to lose focus of what the long term will look like. We have to be honest: at this stage it is impossible to tell. We know that this is the biggest crisis that this country has faced in 80 years, and we also know that the Chancellor’s response to the crisis in economic terms has been a potential 15% of GDP, which is a staggering sum of money. We know, too, that we are likely to come out of this with a debt level higher than that following the Second World War. These are all very important factors. How we go about dealing with that debt will probably depend on a number of factors, such as the speed at which the infection rate comes down and whether we are able to observe social distancing well in an unlocked economy to which people will have to adjust.

One reason for the steep decline in the number of deaths over the last couple of weeks has been the effectiveness of social distancing. I have sat in on a lot of the Prime Minister’s morning meetings over the last few weeks. At the beginning of this process, there was real concern that the population would not be keen to observe social distancing. However, people have done a magnificent job and we know the sacrifices that it has involved. I assure the noble Lord that these things have all been thought about but I do not think that we are yet in a position to set out a detailed plan. We know that in the next few days the Prime Minister will announce more details on exiting the lockdown.

The noble Lord is absolutely right that the entertainment, hospitality and pub sector has been terribly hard hit and is likely to be vulnerable going forward. We have created specific support for the sector, with the business rates relief and a 100% holiday for retail, hospitality and leisure businesses, worth approximately £11 billion. There are also retail, hospitality and leisure grants worth up to about £5 billion. Therefore, we are very much focusing on the sector but I think that it is too early to give a more specific view of the future.

Turning to the questions raised by the noble Baroness, Lady Kramer, I completely agree that the self-employed make up a vital sector. I have been self-employed—or the equivalent—for most of my working life, so I absolutely relate to the pressures that that sector is under. I respectfully do not agree with the noble Baroness about accepting dividend income as a part of people’s earnings. That method of income was chosen by people for the very simple reason that they would not have to pay the national insurance premium. However, they will be eligible for the bounce-back loans, as well as the other layers of support.

I absolutely accept that key workers, particularly those working in care homes, are not well remunerated. Our track record over the last few years of moving the minimum wage upwards as fast as we have done is an indication of our support for this very important group of people. We absolutely recognise—

[The Deputy Speaker (Baroness McIntosh of Hudnall) (Lab)]

We appear to have lost the Minister temporarily. Are you still with us, Lord Agnew? I think that in the circumstances—

[Lord Agnew of Oulton]

My Lords—

[The Deputy Speaker]

Can the Minister confirm that he has concluded his remarks before I move on?

[Lord Agnew of Oulton]

Yes I have, Madam Deputy Speaker.

[The Deputy Speaker]

We now come to the 30 minutes allocated for Back-Bench questions. It would be appreciated if questions and, indeed, answers could be kept concise so that as many people as possible can contribute. I call Lord Vaux of Harrowden.

[Lord Vaux of Harrowden (CB)]

My Lords, while they are obviously very welcome, the bounce-back loans and other measures can be only a short-term fix. Many businesses that are currently allowed to operate are not doing so at the moment and others—garden centres, for example—could operate safely. Does the Minister agree that it would be better if businesses which could operate safely did so to minimise the damage to the economy? What help, financial and practical, can the Government offer to businesses which adapt their operations to enable a safe return to work as soon as possible?

[Lord Agnew of Oulton]

I am afraid the noble Lord rather broke up on me. Madam Deputy Speaker, did you hear the question?

[The Deputy Speaker]

I heard it, but I am not sure that I could repeat it. If the noble Lord, Lord Vaux, could give the salient points very briefly, that would be helpful.

--- Later in debate ---

[Lord Vaux of Harrowden]

Certainly. Many businesses that are currently allowed to operate are not doing so while others that could operate safely are not currently allowed to do so. Does the Minister agree that it would be better if businesses that can operate safely do so? What help can the Government offer to businesses to alter their operations to enable a safe return to work as soon as they do so?

[Lord Agnew of Oulton]

I share the noble Lord’s concerns about businesses that could be operating. I think we are seeing a gradual return to work. Businesses have now worked out how to manage the requirements of social distancing. Putting the health of the nation first is the Prime Minister’s priority, but if we look at the existing rules, a business can ask its employees to come in if they are not able to work at home effectively, if the employee is fit and well and is not living with someone who is self-isolating for fear of infection or who is on the official medically vulnerable list and if they are able to avoid crowded public transport, which may mean more flexible working hours. The key point the noble Lord makes is that businesses can adapt to provide reasonable social distancing measures in the workplace. That is already in the rules; I expect to see further clarification.

[Baroness Neville-Rolfe (Con)]

My Lords, these are troubling times, and I am glad the Government have taken bold steps, including the new bounce-back scheme, to deal with the problems that confront us. One of my major concerns is that companies will have reassessed their strategies over the past few weeks so that when the furloughing scheme comes to an end we could be faced with redundancies and unemployment on a scale probably not seen since the 1930s. Are the Government planning ahead for such devastating prospects?

[Lord Agnew of Oulton]

The noble Baroness is right; we face a very uncertain few months and we do not honestly know how businesses will react as we come out of furlough and lockdown. We are looking at the long-term implications. The early indications are that there is optimism. While I think that an inverted-V bounce is probably too optimistic, I think a lot restricted spending will be unleashed into the economy. It is worth remembering that under the furlough arrangement employees are receiving 80% of their normal earnings without the cost of commuting or eating out in cafes or whatever when they are working. I stress that we are looking at all future scenarios.

[Lord Hain (Lab)]

My Lords, I ask that, after the lockdown is lifted, the Chancellor not impose again the savage cuts in the public sector that we have seen over the last 10 years. These left England short of 10,000 doctors, 40,000 nurses and 110,000 adult social care workers, fatally damaging the battle against the coronavirus, especially in care homes, as we have seen so tragically. After World War II, with much higher levels of debt and borrowing than followed the 2008 banking crisis, both Labour and Conservative Governments built the National Health Service, millions of homes and a welfare state, and saw much higher growth than since 2010. Surely there must be no return to this past disastrous austerity decade.

--- Later in debate ---

[Lord Agnew of Oulton]

I assure the noble Lord that we are looking at all options. He makes a good point about the shortage of doctors. As the Chancellor has repeatedly said, we will give the NHS all the support it needs. Noble Lords might recall that in the Budget a few weeks ago—it seems like another era—substantial additional funding was announced for the public sector, and we will of course have our spending round, albeit delayed, in the next few months.

[Lord Fox (LD)]

I draw attention to my interests as listed in the register. Implicit in the question from the noble Baroness, Lady Neville-Rolfe, is the point that the managers of the 4 million-plus people being furloughed will start to think about whether they have a future in the business as soon as next month. A huge wall of cash will be required when these workers come out of furloughing and go back into work. That cash will endanger jobs. The flexibility that they do not have at the moment in the furloughing scheme will be very important. The furloughing scheme needs to unwrap in stages, rather than hit a brick wall. Will the Minister acknowledge that this cash drain will be potentially catastrophic for jobs? Will the Government take on this issue and do something about it?

[Lord Agnew of Oulton]

The noble Lord broke up a little. I think I got the—

[The Deputy Speaker]

We seem to have some difficulty with the participation of the noble Lord, Lord Agnew. I wonder whether it would be advisable for us to pause for a moment to see whether we can establish a better connection.

[Lord Agnew of Oulton]

Would you like me to dial in?

[The Deputy Speaker]

If that would establish a better connection, it would be very much appreciated, Lord Agnew. We will pause until you are able to do that.

--- Later in debate ---

[The Deputy Speaker]

I will seek clarification on that point, but I anticipate that we will be able to do that. Now we have the noble Lord, Lord Agnew, again—splendid. Would you kindly say a few words so that we can be sure that everyone can hear you?

[Lord Agnew of Oulton]

Yes. I can repeat the bit of the question in which the noble Lord, Lord Fox, was worried about a wall of cash when the furlough ended, but I caught only about a third of what he said.

--- Later in debate ---

[Lord Fox]

I reiterate that I declare my interests as set out in the register. The point at which furloughing ends is of great danger for jobs because it will cause a huge drain on cash in businesses. Those businesses have to decide whether or not they will continue to employ people as soon as next month. They need to know that the Government understand this issue and will set up a more flexible way of unfurloughing workers so that they can do it gradually. Can the Minister acknowledge that this is understood and undertake to tell businesses what will happen very soon? They need to know.

[Lord Agnew of Oulton]

I will try to offer some reassurance to the noble Lord. The most important thing to say is that the Chancellor has demonstrated enormous flexibility and dexterity over the weeks of the crisis. As the saying goes, if the facts change, he will change his mind to deal with the emerging situation. I am perhaps a little more optimistic than the noble Lord on the current position; even in the last 10 days we have seen increasing numbers of people going back to work as businesses have responded to social distancing and worked out simple things, such as how to rearrange offices. We are seeing this in the traffic stats of the volumes of people commuting. While I accept that there could be something of a big bang, I am hopeful that it will be more of a gradual return to work. If the noble Lord is right and we see that as an approaching problem, I am confident that the Government will react accordingly.

[Lord Forsyth of Drumlean (Con)]

My Lords, I draw attention to my interests in the register. I congratulate the Chancellor and Treasury Ministers on the welcome bounce-back scheme, which is a lifeboat to many small enterprises. It shows that we have indeed got a listening Chancellor, in that he has moved very quickly to the representations which have been made. Could my noble friend say what estimate the Government are working on in terms of the numbers of unemployed people they expect to see in the third quarter of this year and how that is related to the length of the lockdown?

[Lord Agnew of Oulton]

My Lords, I do not have that figure as I do not believe that that calculation has been made yet. It will depend very much on the timing and speed of exiting lockdown. The sooner we can exit, the less damage will be done, but we must balance against that the Prime Minister’s overriding concern for the health of the nation, not overwhelming the NHS and the nation’s morale if we were to get a bad second spike of the disease. It is a bit too early, but we will of course keep noble Lords informed of our thinking as it develops.

[Lord Bilimoria (CB)]

My Lords, I am sure the Minister is aware that Germany, as part of its bazooka €1.1 trillion package, is guaranteeing 100% of loans of up to €500,000 to its small and medium-sized companies and of up to €800,000 for those with up to 250 employees. The Swiss have given out 98,000 loans—six times more than the UK, and their economy is one-eighth the size of ours. They guarantee 100% up to 500,000 Swiss francs, delivered within 24 hours. As the Minister just told us, we have granted 20,000 loans under the CBILS, totalling £3.3 billion out of £330 billion. I reiterate what the noble Lord, Lord Forsyth, said; we are really grateful to the Chancellor for what he is doing, acting so swiftly six weeks ago with the vast range of programmes which now include the bounce-back loans. However, does the Minister agree that we desperately need our own 100% guaranteed CBILS loans up to £500,000? Yes, some checks would have to be made, but the Chancellor said in the Statement that he does not agree with that because he thinks the ordinary taxpayer should not bear the entire risk. However, surely it is better to do this now, to have companies existing and surviving now, rather than not having them and having instead the unemployment that will be created. We need to go from bounce-back to bazooka.

[Lord Agnew of Oulton]

I take on board the noble Lord’s point. Comparisons with other countries need to be done carefully so that one is comparing apples with apples. For example, the Swiss have not used a number of the other levers of support that we have used; this has been their main lever. Also, their furlough scheme requires employers to contribute one-fifth of the payments to the scheme, whereas in our country the furlough scheme removes that burden from businesses. In terms of the macro position, as I mentioned earlier, the Chancellor has announced support of up to 15% of GDP, which is a colossal sum of money, and he continues to be open-minded, which he demonstrated yesterday with the bounce-back loans, as to what further help the economy might need.

[Lord Oates (LD)]

My Lords, the unprecedented economic impact of the current crisis means that the recovery will inevitably be a long-term effort. Does the Minister agree that at the heart of that effort must be a green recovery strategy, and in support of such an approach will the Government accelerate plans to decarbonise the economy, focusing on job-rich opportunities such as the replacement of fossil fuel boilers and the installation of home energy measures? Finally, I note that the Minister did not address the key question raised by the noble Lord, Lord Tunnicliffe, about whether the Government supported in principle UC grants instead of loans, and I would be grateful if he would also address that point in his answer.

[Lord Agnew of Oulton]

I thank the noble Lord. Yes, I absolutely agree that the greening of the economy remains an absolute cornerstone of the future. It is worth remembering that we have done a lot more than most G20 countries in the last 10 years and it has become an increasing part of our strategy. I was delighted to discover only a few weeks ago that the contracts for difference prices on electricity generated by offshore wind turbines had reduced the cost over two years by, from memory, something colossal like 15% to 20%. We are moving to a point where this green energy generation is becoming viable in its own right. I am very optimistic about that and confident that decarbonisation will remain at the heart of it.

In terms of the specific question about transferring UC loans to grants, that is not the Government’s position at the moment. In my answer to the noble Lord, Lord Tunnicliffe, I mentioned other areas of support available for vulnerable people such as the mortgage holiday and the hardship fund. We have already allocated £500 million of that fund to support 3 million people. We have moved to protect individuals from eviction and given a lot of support to rough sleepers. I do not want the noble Lord to feel that we are in any way dismissive of the question, but at this stage the policy is to retain the loans system.

[Lord Blencathra (Con)]

My Lords, I warmly welcome the new bounce-back loans scheme, but would my noble friend not agree that these schemes are necessary only because our banks, which were first with their noses in the trough in 2007 for taxpayer bailouts, are adopting the usual position of failing to support British businesses? Will the Chancellor consider a special tax on their profits when all this is over?

[Lord Agnew of Oulton]

The noble Lord is a little harsh on the banks. I accept that there was some bad practice in the lead-up to the crash 12 years ago, but there have been dramatic changes in governance and lending practices since then. There is also a levy on banking profits, which goes some way to deal with the issue that he just raised. I genuinely believe that any slowness in getting these loans processed at the moment is not through any intent on their part but that they have had to completely overhaul their lending systems to react at the speed at which we expect them to. However, I am always open to hear any examples of bad practice, and if my noble friend would like to write to me, I give my assurance that I will follow it up.

[Baroness Falkner of Margravine (Non-Afl)]

My question concerns universities and support for the higher education sector, and I refer to my interests as set out in the register. I accept that, as the noble Lord has said, not every business can be saved, but universities are not traditional businesses. However, they are absolutely fundamental to our long-term recovery as we try to climb out of this deep recession. Universities are going through a short-term demand-side shock due to the collapse in international student numbers. We have been hearing in the media that the Treasury is unconvinced about providing support for them, but I would say to the Minister that it needs to hold urgent talks because they are also fundamental to their location—to their places and to their areas. The impact of universities going bankrupt will be profound across the community. Will he undertake to ensure that the Treasury takes a look at the proposal put forward by Universities UK, that conditional though it might be, that support is essential?

[Lord Agnew of Oulton]

The noble Baroness is right to say that universities play an extremely important part both in our society and in our economy, but it is worth reassuring her that they are eligible in aggregate, as business in their own right, for some £700 million-worth of coronavirus support. That support is available to them now. Very active discussions are going on, particularly about the loss of foreign students, because of course they pay a higher tariff and thus have in the past provided good cash flow for universities. It is worth making the point that universities have always been jealous of their independence, and if they need government support now, I hope that there will be a bit of humility on the part of those vice-chancellors who take very large salaries from their organisations. I would expect there to be some conversation about that if there is to be any support.

[Baroness McIntosh of Pickering]

Perhaps I may I impress upon my noble friend the Minister the plight of small and medium-sized businesses, particularly those in the tourism, hospitality and retail sectors. My noble friend will appreciate that many in the hotel and tourism sectors have already lost what is the main part of their season, from Easter, and in addition they have a great number of staff who are on zero-hour contracts. Many have chosen to take council tax payments in lieu of business rates but are also faced with commercial mortgages, on which they cannot get any form of mortgage payment holiday. Will my noble friend ensure that the Treasury directs some support particularly to those in the hospitality, tourism and retail sectors whose cash flow is at rock bottom?

[Lord Agnew of Oulton]

I share my noble friend’s concern for these particular sectors, and I understand absolutely where she is coming from. It is worth reiterating the specific support which has already been made available. I refer to the 100% holiday for business rates which is estimated to be worth £11 billion just to English businesses, as well as the grant system. Some 203,000 properties are eligible for a £10,000 grant and 120,000 properties are eligible for a £25,000 grant which in aggregate comes to around £5 billion. I also refer to the bounce-back loans which were announced yesterday since they will be some which these businesses can take advantage of. However, I repeat that I share my noble friend’s concerns.

[Lord O’Neill of Gatley (CB)]

My Lords, I would like to thank and congratulate the Chancellor and his advisers in the Treasury for speed and agility of their economic policy response. I recall that in his response to our debate on 18 March, the Minister described my proposal for a version of a people’s QE as the most radical of any that had been proposed that day, yet within two days the Government announced what were essentially half of what I proposed, particularly that which related to the furloughing scheme. I have had, and continue to have, many concerns about aspects of the loan scheme which relate to a couple of questions which have already been asked by other noble Lords. Will the Minister consider taking back to the Chancellor and the Treasury the following idea and question?

Why not, as I proposed specifically that day, link the two together and make the business support conditional on not gaming the furloughing system, and, along with that, further consider replacing aspects of the loan-based system with something more grant or equity related, where the Government could take a secondary type of equity stake, which would allow for small businesses in particular to plan for this uncertain future—especially ones such as those in hospitality. For them, the idea of taking a loan when they read and hear that a vaccine could still be 18 months in the future would, generally speaking, be a completely undesirable option. However, for the Government to directly support them in a way other than encouraging debt would be likely to be much more substantive and less damaging to the long-term outlook for the economy.

[Lord Agnew of Oulton]

I thank the noble Lord for his question and indeed for his perspicacity in the statements he made on 18 March, and on them becoming policy very shortly afterwards. In that light, if the noble Lord would like to write to me with his ideas, I assure him that I will follow that up with the Chancellor of the Exchequer and see what more we can do. I completely agree that we will need a more flexible and nuanced system as we move into the next phase of this crisis.

[Lord Flight (Con)]

May I add my congratulations to the Chancellor and the Treasury team for the dexterity with which they have brought in imaginative measures? My specific question, where I declare an interest as chairman of the EIS Association, is on whether the Government would consider introducing for the short term an increase in the size of the value of EIS tax credits? I believe that this would stimulate substantial private investment in SMEs; indeed, some £20 billion has been invested as a result of these EIS measures in the past. EIS has played a vital role encouraging the SME sector in this country.

[Lord Agnew of Oulton]

I thank my noble friend for his question and I will certainly take it back to the Treasury. It is worth remembering that the combination of the EIS, SEIS and VC schemes are pretty generous for investors, with the tax reliefs that they get. I suspect that, as an experienced investor, my noble friend Lord Flight will know that valuations will fall pretty dramatically for businesses looking for funding if they are early stage. Therefore, there will be a lot of opportunities for the entrepreneurial investor over the next few months. None the less, I will certainly take my noble friend’s suggestions back for further consideration.

[The Earl of Clancarty (CB)]

My Lords, the Chartered Institute of Personnel and Development says that the lack of support for limited companies in the self-employed income support schemes is

“not just a crack: it is a gaping hole in the package.”

It is accepted practice for freelancers to pay themselves through dividends, contrary to what the Minister says. This applies to a wide range of workers, from musicians to builders to cleaners, whose work is particularly important at present. Like the noble Baroness, Lady Kramer, I ask the Government to take another look at this.

[Lord Agnew of Oulton]

I thank the noble Earl for his point; we discussed this in a Question last week. I know that in the Chancellor’s response yesterday, he said that he had been in touch with some of the groups that the noble Earl mentioned—I think he mentioned the Musicians’ Union, and so on. I am not saying that to take income by dividend is wrong; as I said last week, a dividend is defined as a surplus of profit of a business after all its operating costs have been paid, and the tax is paid and retained profits kept for reinvestment. That is my point. But what has happened in the week between our conversation and today is that bounce-back loans are now available, and that is probably the route for those people whom the noble Earl is particularly worried about.

[Baroness Bennett of Manor Castle (GP)]

My Lords, the noble Baroness, Lady McIntosh, referred to the difficulties of the hospitality sector. UKHospitality reports that 71% of its members have had claims for business interruption insurance refused, and that of course is another potential source of income. In answer to my question on small business insurance and coronavirus last week, the noble Lord, Lord Callanan, referred to issues around infectious diseases clauses. I want to ask the Minister today about general business interruption insurance. The New Jersey and Ohio legislatures are bringing through Bills which will basically say that insurance companies have to pay out on business interruption insurance for small companies. Will the Government consider doing likewise?

The noble Baroness, Lady McIntosh, also asked about those businesses paying council tax rather than business rates. Will the Government consider doing something to help them?

[Lord Agnew of Oulton]

I thank the noble Baroness. On insurance, I did not hear my noble friend Lord Callanan’s response, so I do not want to conflict with what he may have said, but the key thing here is that when one takes out a general business policy, one has the option of an extension for pandemic cover. The problem is that I think most businesses did not elect to do that, so it would not be right then to impose that cover on insurers retrospectively through the route suggested by the noble Baroness.

On paying council tax rather than business rates, as I have mentioned before, we have put together a package of some 11 types of support for businesses, ranging from the very smallest to the largest, including such things as the deferral of tax liabilities. I believe that there are 1.3 million self-employed people on self-assessment. Deferring will provide that whole cohort with some £13 billion in cash flow. So a range of measures is there. It is important for noble Lords to look in the round at the support that we are offering.

[Baroness Altmann (Con)]

In light of my noble friend stating that record levels of debt will result from this virus, and in light of the Bank of England purchasing significant amounts of conventional gilts, might he ask his colleagues whether they are considering liaising with the DMO to issue specific gilts for pension funds which have more than £1 trillion? That could be invested in mortality or longevity gilts, CPI-linked gilts and LPI-linked gilts to assist those defined benefit schemes that have significant problems in light of the current circumstances, to match their liabilities more accurately.

[Lord Agnew of Oulton]

My noble friend makes a very good point. It is certainly an idea that I will take back to the Treasury for further discussion. We issued war loans in both of the last world wars and it took a long time to pay them off, but it is a way of ring-fencing the efforts that we will have to deploy to bring the country back from this awful business. So I thank my noble friend for her very sound suggestion.