Coronavirus Business Interruption Loan Scheme

Drew Hendry Excerpts

Thursday 5th November 2020 Commons Chamber

[Owen Thompson]

As I say, every business took the decision about why they needed to take a covid loan or a bounce back loan. This is about ensuring that we protect the jobs and security for those businesses going forward, and making sure that our communities are protected.

[Drew Hendry (Inverness, Nairn, Badenoch and Strathspey) (SNP)]

My hon. Friend has been making a powerful speech. Does he agree that when businesses across the nations of the UK have not needed public funds, they have returned the money, in their many millions? Would that not be exactly the same circumstances that he would be calling for here?

[Owen Thompson]

Absolutely; I completely agree with my hon. Friend. This is about ensuring the security and the future of thousands of businesses across these islands. It is a bold move—I accept that—but we are in a crisis and bold action is exactly what is needed.

--- Later in debate ---

[Drew Hendry (Inverness, Nairn, Badenoch and Strathspey) (SNP)]

It is always a great pleasure to follow the hon. Member for Bromley and Chislehurst (Sir Robert Neill) and to hear his pearls of wisdom on this particular subject. It is very difficult to disagree with anything that he said, and I hope that those on the Treasury Bench are listening. I congratulate my hon. Friend the Member for Midlothian (Owen Thompson) and my right hon. Friend the Member for Dwyfor Meirionnydd (Liz Saville Roberts) on securing this debate. It is really important that we get to this issue. For many members of the public, this is one of the drier subjects—around business support—but it is crucial to many businesses, so it is important to speak about the CBIL scheme.

Businesses across Scotland and their employees are working heroically at the moment to keep going through the pandemic. Typically, many are innovating, adapting and defying the odds to do that in the current circumstances, but others simply cannot adapt so quickly, not because they are not viable, but because this has hit them at the worst possible time—particularly, as we heard from various Members, those in the hospitality and tourism trade and the businesses associated with that. This has made it really difficult for them.

I am pleased that today the Chancellor has extended the 80% furlough scheme—after six months of asking, I have to say. Scottish National party Members have been asking for the Chancellor to do that time and again. Eventually this—I think it is the fourth iteration—has been put in place, and that does help, but many jobs have already been lost and businesses have already felt the pain in the meantime. It is crucial as decisions are made in the future that there is clear direction, clear rules and support around them so that businesses can survive. Of course, many are still excluded from any support, and I want to speak about them briefly later.

A lot of businesses have found themselves simply locked out of these loans, unable to access them because of the fact that the banks are not allowing customers, even those with really good credit ratings previously, to open new accounts in order to access them. Of course, the Chancellor has form on ignoring people who have been excluded for support and this is no different. Seven months into the pandemic, and as a result of the Government’s failure to listen and to act, many small businesses remain empty-handed. As we heard, the all-party group on fair business banking estimates that 250,000—a quarter of a million—small businesses are locked out of support simply because they were with the wrong bank, as it were. Of the 20 accredited lenders, almost all are not processing applications from non-customers, so extending the scheme without widening access to other lenders is wrong-headed, and the Government need to make it conditional that banks offer loans to non-customers. Failure to act just exacerbates the lockdown lock-out.

It is also unhelpful that non-bank lenders are blocked from accessing funding from the Bank of England and therefore cannot offer that to their customers. I have had call after call, email after email from constituents—I know I am not alone among MPs—who are absolutely desperate and increasingly bitter about being locked out of help. They can see that they are not being listened to and they must be listened to.

There are then those who did qualify. Their reward is that they can top up their loans and borrowing as part of the new rules meant to keep businesses afloat during England’s second lockdown. It is absolutely understandable that many of these bruised and battered business owners are nervous about taking on new debt at this time of great uncertainty. They have great justification for those feelings at the moment. They need a better safety net. They deserve to be able to protect their businesses that in any other time would not only be viable, but thriving.

There is a sensible move the Government could make, given that it is clear that many firms will be unable to repay: convert the loans to equity, or, even better, as we heard from my hon. Friend the Member for Midlothian, to grants. As he said, in May the OBR forecast a likely 10% default rate on those loans. By July, that had risen to 40%. Earlier, a report in May by the British Bankers’ Association, the body responsible for debt collection, was, as we have heard, predicting a 40% to 50% default. In September, the Department for Business, Energy and Industrial Strategy annual report went even further, revealing likely losses estimated at September 2020 to be in the range of 35% to 60%. Let us never forget that this is against the background of 3 million freelancers, newly self-employed, contractors on PAYE and company directors who have been abandoned, given no help whatever since the pandemic began. They continue to be ignored by this Government.

The Association of Accounting Technicians is calling for bounce back loans to be written off for SMEs, who took two-thirds—that is, £40 billion—of all bounce back loans. In addition to writing off SME debt, the Government should listen to TheCityUK on coronavirus business interruption loans. Its recapitalisation report suggests converting the debt to equity or contingent tax liability options for firms, so they can avoid being held back and adding to the UK debt crisis. In its report, TheCityUK estimates that UK businesses will have £100 billion of toxic debt—this is why writing off and doing something about this debt is so important—by March 2021, with £35 billion of that related to Government schemes. It makes absolutely no sense. It is dead weight. Writing off the debt could provide a much needed boost for the economies of all four nations. As their own former Tory Chancellor, George Osborne, agreed in evidence to the Treasury Committee, it would be an overall benefit to the taxpayer. With banks now actively working with debt collectors, the UK Government must provide urgent clarity that collections will not be necessary. Specialist debt collectors have no place in this system. It is akin to placing a noose around the necks of employers and wealth creators.

Urgency can be found in this Tory Government for business. They can do it when they want to. For example, they bypassed tendering processes to rush out contracts for over £1 billion to certain businesses, such as PA Consulting Services, Meller Designs, Hanbury Strategy, Public First, PPE Medpro and others. We have all seen this Government moving at pace. Of course, the common factor there is that they are all major donors to the Tory party.

The continued failure of the Government to listen to those affected is leading to job losses, frustration and squandered opportunity. While this affects businesses and jobs across the nations of the UK, the failure to empathise and to act is driving citizens of those nations to look to their future options. In Scotland, the path is clear. We need a different path to be a normal independent country that makes choices that are right and suitable for our people and businesses.