Covid-19: Support for UK Industries DebateFull Debate: Read Full Debate
Jamie StoneMain Page: Jamie Stone (Liberal Democrat - Caithness, Sutherland and Easter Ross)
I make specific reference to my register of interests; I am associated with a business that has received a CBIL.
Faced with a profound crisis, the Government responded magnificently with a suite of measures of emergency loan schemes to support businesses badly affected by covid-19, in particular CBIL and the bounce back loan scheme. Put together at great speed, the schemes shovelled money from lending banks into viable businesses to support their cash flow in the short term, with capital sums repayable over five or six years—a vital support to large sectors of our economy and one that we will look back on with awe.
As we come out the other side of the initial crisis, the requirement to repay those debts in just five to six years will, in its turn, damage our ability to grow the economy. Just when we need businesses to be investing in growth and creating employment, they will have to focus on repaying their covid debt, in addition to any other pre-crisis leverage repayment plans. Just when we want banks to lend money to support employment-enhancing growth, they will have swollen covid-19 balance sheets and so be less likely to lend more. That is the opposite of what we need to happen.
There is a simple-ish solution: if we take the covid loan books of the banks and place the loans in a special purpose vehicle, turning them into covid loan-backed securities with varying maturities of up to 30 years, we could transform our economic recovery at a stroke and reduce capital repayments by a factor of six. We would free up whole swathes of the economy from zombie status, releasing funds for investment in growth. It would reduce business failures and increase the market for investment debt as effective business debt ratios are reduced.
At the same time, it would increase the banks’ lending appetite, since their current covid loan books would have been sold to institutional investors, so reflating their balance sheets. It would create the long-term, very low-risk, fixed income investment sought after by pension funds, particularly if the coupon were tax-free. The risk, after all, would be made up of businesses that were confident that they could repay sums over five or six years now doing so over 30 years, with individual risk further softened by their amalgamation.
Finally, it would create a whole new sector in finance in which the City could excel. I cannot think of a single policy that could do so much to re-establish our growth businesses so quickly, and all without significant recourse to the taxpayer. Does that sound too good to be true? Well, like any complex financial product, there are risks that will need to be explored both by the Treasury and by the Bank of England, but my earnest hope is that this proposal will be given the serious and immediate consideration it deserves.
I declare an interest as my company has used the furlough scheme.
The furlough scheme and the self-employment income support scheme have been absolute wonders, and the loans of all different sizes and flexibility have been extremely well received. In fact, in my first ever webinar with Doncaster chambers of commerce, which of course I believe is the best in the country, a poll was carried out where all 30 delegates said that the Government had done an excellent job—high praise, but deservedly so. As a businessman, I know full well that it has been a tough time, so much so that even after all the monumental efforts from the Government things will look decidedly different post covid. I have no doubt that that genuinely frightens many people, but the longer we stay off work the harder it is for us to go back.
Let us take the building industry, for example. I have worked in this sector for many years and it is physically tough. When you have not been doing it for a while, it is hard to go back to. My ask is this: I want large firms, with furloughed employees that are waiting for another initiative while sitting on huge bank balances, to make the first move—not to use social distancing as an excuse not to go to work, but now as an excuse to go to work. We need those building companies to start finishing the houses they started pre-covid, get the footings dug for the next phase, press suppliers to make sure materials are there, pay everyone a little earlier and get confidence back in business. We can wait on Government initiatives and we can blame covid, or we can get stuck in and build our way out of this recession. Or we can all wait to see who moves first—by doing that, we will fail. Let us all start today, not on Monday or a week on Monday. Let us start now. It is imperative. I tell the building firms and all the other big companies that their workforces will thank them for it.
I also ask the Treasury to use whatever it has at its disposal to get this country back to work. I urge the Minister to consider how measures, such as reducing VAT, a reduction in national insurance contributions or scrapping stamp duty, would help to get our great businesses moving again. We cannot rely on support schemes for ever. We need to get back to work. I therefore urge every cash-rich company to do its bit and put its best foot forward and do everything it can. I ask the people of this country to do the same and our Government to consider my suggestions. We are all stakeholders in our future. We are all in this together. We will all win together, or we will all lose together. It is going to be tough, but I will do my bit. Will the risk-takers out there do theirs? If they do, our country will take its rightful place as the envy of the world.