Covid-19: Support for UK Industries

Jamie Stone Excerpts
Thursday 25th June 2020

(10 months, 2 weeks ago)

Commons Chamber

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Department for Digital, Culture, Media and Sport
Jerome Mayhew Portrait Jerome Mayhew (Broadland) (Con)
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25 Jun 2020, 12:05 a.m.

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.

Jamie Stone Portrait Jamie Stone (Caithness, Sutherland and Easter Ross) (LD)
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25 Jun 2020, 12:08 a.m.

I am going to make two points. The first is one that other Members have touched on. There are 3 million small limited companies, from taxi drivers to people in the creative industries, who still are being excluded from Government rescue measures. Many of those are not eligible for universal credit, so I add my plea to that of others: please, please, can the Government try to help those people?

The second point I want to make is about tourism. It occurs to me that I shall be repeating myself, inasmuch as I talked about this very subject some two or three weeks ago, although, now I think about it, I was up on the screens all around the Chamber—not a very pleasant sight, I fancy, so perhaps I should take the opportunity to apologise for any trauma I caused to right hon. and hon. Members.

It has been an incredibly long winter in the highlands of Scotland, and it is not over yet. We hope that the tourism businesses will go back in business on 15 July, but they are by their very nature seasonal. They make their money during the tourism season to survive the winter. That is the fat that they live on to see them through to the next tourism season, and I fear very much that many of the tourism businesses in my constituency, even starting on 15 July, will not put enough cash in the bank to see them through.

Of course, if they go down and they fail, the following year we have a reduced tourism product to offer people to bring them back to the highlands of Scotland. The same is true of Anglesey; it is true all over the UK. Our tourism product must be safeguarded and garnered and encouraged.

I know from what I have said in the past that I have the support of right hon. and hon. Members in all parts of this House on this issue, and I am grateful for that. My hon. Friend and colleague the Member for Westmorland and Lonsdale (Tim Farron) has indeed been talking about this matter, and I support him. I also know that within the Scottish Government Fergus Ewing, the Minister responsible, is big on this as well.

I guess my plea is this: I believe, as does my hon. Friend, that we will have to have some specially tailored package, based on the measures that the Government have rightly put in place at the moment, to try to help the tourism industry through the longer period. I do not know what the answer is, but there are very many clever people who work in Her Majesty’s Treasury, and perhaps something could be thought up about that.

I hope there will be discussions between the Scottish Government and Fergus Ewing, and Her Majesty’s Treasury and appropriate Ministers. I would be deeply grateful if this issue could be taken seriously, because if tourism goes down the tubes in my constituency, frankly, the economy will be damaged irreparably. That means people will lose their livelihoods and the curse of the highland clearances could come back to haunt us yet again.

Nick Fletcher Portrait Nick Fletcher (Don Valley) (Con)
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25 Jun 2020, 12:03 a.m.

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.