Business and Planning Bill

Baroness Falkner of Margravine Excerpts

2nd reading & 2nd reading (Hansard) & 2nd reading (Hansard): House of Lords
Monday 6th July 2020 Lords Chamber

[Baroness Falkner of Margravine (Non-Afl) [V]]

My Lords, I welcome most of the measures in this Bill, which I can see are a necessary step to get the economy moving again. However, I have two concerns. The first has to do with the missing element in these measures, regarding the Government instructing the public to avoid using public transport. We know that private traffic levels have risen sharply since lockdown was eased. However, the use of public transport is very low, as the noble Lord, Lord Adonis, noted—about 16% of normal usage for the London Underground and 33% for buses in London, and less for buses outside London.

This government guidance is clearly a deterrent for people who do not have a car to return to work, yet who are being told not to use public transport, thereby contradicting efforts to get the economy moving again. When will the Government change that guidance to advise people to avoid travelling during peak periods—in order words, to be more flexible in their travel times—rather than not using public transport at all?

My other concern is to do with business bounce-back loans. While I can see and welcome the speed and agility needed to keep SMEs viable during this crisis, I am not sure about the long-term consequences of these measures. The Minister told us in his opening remarks that some £29 billion of overall business lending has been to small business. The lending institutions estimate that about 50% of these businesses are likely to default on the loans. They have been instructed by the Treasury and the British Business Bank that they will have to resort to their normal approach on the collection of the loans. This normal approach does not apply to the granting of the loans, in terms of the due diligence and creditworthiness checks, as would have been normal, and self-certification is the chosen route, along with people’s private assets not being able to be held as collateral. Therefore, we could end up in a situation in which the lending institutions are in what has been described as a toxic relationship with borrowers, which is not a fair creation. They will have to massively scale up their arrears handling, particularly as mortgage holidays will also be unpayable by some borrowers.

What assessment of losses, and the viability of some of these small businesses, underpinned the Government’s modelling of the default rates on these loans, given that the Government, and ultimately the taxpayer, are the lenders of last resort? What conversations are they having with regulators such as the FCA regarding setting up a dispute resolution scheme, as well as the business banking resolution service, to deal with the volumes that may be affected? Have they contemplated setting up a bad bank-type solution to move these loans off the balance sheets of the high street lenders?

I appreciate that perhaps some of these questions are too complex to be dealt with in this Bill, but I pose them because it is increasingly clear that this health emergency will be with us for some time, thus also prolonging the economic downturn. We need to spell out clearly the consequences of the risks for borrowers and lenders, and plan how they will be mitigated in time before many additional businesses are given a false hope that they can carry on a bit longer and all will be well. If hard choices must be made, they should be made with careful regard for what lies ahead.