Support for SMEs: Covid-19

John Glen Excerpts

Tuesday 10th November 2020 Westminster Hall

[The Economic Secretary to the Treasury (John Glen)]

May I say what pleasure it is to serve under your chairmanship, Sir Edward? I join the other Members who have congratulated my hon. Friend the Member for Carshalton and Wallington (Elliot Colburn) on securing this important debate. I have listened extremely carefully to every speech, and we have had a wide-ranging discussion of a range of industries that have, obviously, been adversely affected by the experience of covid up and down the country, including the wedding industry and the retail sector in particular, with the impact on the high street. I listened carefully to what the hon. Member for Kingston upon Hull West and Hessle (Emma Hardy) said about the coach industry. I will seek to address as many points as I can. I thank colleagues for their insightful and constructive contributions.

Like everyone in the Chamber this afternoon I share the concerns that hon. Members have expressed for the financial wellbeing of the UK’s SMEs. It is difficult to overstate their place in and contribution to the UK economy. In 2019, the number of SMEs in the UK reached 1.4 million—a 31% increase in five years. As constituency MPs, we all know the contribution that SMEs make to our communities, and they now employ over half of the UK workforce. Given that, it is no wonder that helping them endure and adapt to these trying times has been a cornerstone of the Government’s response to the pandemic. They are at the front and centre of our thinking and, as hon. Members know, our strategy has been to protect jobs, crucially including those in small and medium-sized businesses. Much of the support we have provided has been with them in mind, including our generous wage support schemes; access to finance through millions of Government-backed loans and billions of pounds of grant funding; and targeted measures to help with fixed costs, such as statutory sick pay rebates and tax deferrals.

We have already helped keep millions of people in employment through the coronavirus job retention scheme. As of 18 October, we had helped 1.2 million employers furlough 9.6 million jobs, and paid £41.4 billion in grants. However, importantly, we understand that the economic effects of restrictions to tackle the pandemic outlast the restrictions themselves. That is why, last week, the Chancellor announced that he was extending the coronavirus job retention scheme until the end of March 2021. I respect the point that some have made about the changing nature of the support, but I suggest that is because of the changing nature of covid, which has driven the response of this Government. The Chancellor has moved very quickly when new health interventions have been made. This scheme will help protect millions of jobs in the coming months, and will allow smaller businesses to get back on their feet quicker when the time comes.

We have also supported workers through the self-employment income support scheme, one of the most comprehensive and generous support packages for self-employed people anywhere in the world. On top of the £13.7 billion already claimed by 2.7 million self-employed people through that scheme, a third grant will be available until January, covering 80% of trading profits. A fourth grant will be available from February to April next year, with further details to be provided in due course.

However, the practical issues that prevented us from including company owner-managers—namely, not being able to verify the source of their dividend income—without introducing unacceptable fraud risks still remain. Further, the issues around the newly self-employed in 2019-20—namely, that HMRC will not have access to their self-assessment returns in time to verify their eligible income—also remain. The latest year for which HMRC has tax returns is 2018-19, and the 2019-20 returns are not due until 31 January 2021. Of course, Government and the Treasury continue to look carefully at all the representations made on these matters to seek a way forward, but we have to be cognisant of those facts and how we would meaningfully deal with them. However, we have pulled out the stops to provide businesses with the credit they need at this difficult time.

I will now address some of the points that have been made about the bounce back loans and the coronavirus business interruption loan scheme. As of 20 September, SMEs and other businesses had applied for and received over £50 billion worth of CBILs and bounce back loans. As ever, my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake) is very well informed on these matters, and made a number of suggestions about the challenges that some businesses face when securing loans. We have 28 providers that are accredited for bounce back loans, and 100 that are accredited for CBILs, but in this situation, we have non-bank lenders who are seeking to be part of that scheme and are struggling to access the finance. As he well knows, access to the term funding from the Bank of England is a matter for the Bank of England, and we have tried to look at those matters and see if more can be done.

The bigger issue that we have to learn from during this experience is that we have differentiated regulation between different banks and different entities that are providing finance. It is a challenge both to provide consumer protection universally and to have the right level of capital requirements for different entities, and in extreme times, these are very challenging things to come up with a neat intervention on. However, I will continue to work with my hon. Friend and others across the House to seek ways forward.

The Opposition spokesman, the right hon. Member for Wolverhampton South East (Mr McFadden), asked about the fraud risk. There is a big distinction to be made between fraud in applications and default risk. When we designed those schemes, and the bounce back loans in particular, that self-certification form—where businesses were obliged to make estimates of their turnover and could access a percentage of that—was designed to be as accessible as possible. However, businesses also had to state clearly what the facts were around their situation. The Cabinet Office is leading a piece of work across Whitehall to look at fraud risk and even more collaboration between the banks, sharing data about duplicate applications, and we will continue to work very carefully on that. We are also allowing businesses who have borrowed less than their maximum to top up their bounce back loans and extend their repayment period.

I appreciate that it must sometimes feel as if Government statements in our response to the pandemic are just a long list of measures we have taken or are taking, but this is a consequence of the range of things we are doing. Forgive me, Sir Edward, but I will list a few more ways we are helping businesses, which my hon. Friend the Member for Carshalton and Wallington is right to be concerned about. They include £11.5 billion of grant funding to more than 900,000 business premises, with new grants to come through the winter months, and an additional £1.1 billion of discretionary grant funding for English councils—that is cash grants of up to £3,000 for every four weeks of closure for English businesses forced to close. Backdated grants provide up to £2,100 per month of support in arrears for eligible businesses that have suffered from reduced demand in recent months. Those schemes are available nationwide. As the Chancellor announced last week, the up-front guarantee of funding for the devolved Administrations is increasing from £14 billion to £16 billion.

[Emma Hardy]

Will the Minister give way?

[John Glen]

In the interests of time, I will not. It is for the devolved Administrations to decide how to use that guaranteed funding, irrespective of how the UK Government provide support. However, this uplift will support businesses across the United Kingdom. We are also protecting businesses with extensive tax breaks, deferrals, and repayment flexibility through the time-to-pay scheme. Further Government support mechanisms enjoyed by SMEs include the statutory sick pay rebates and eviction protection for commercial tenants until the end of this year.

I hope I have illustrated that SMEs are at the forefront of our minds through this crisis. Support measures available to those businesses represent a significant part of the £200 billion package of support that the Government have put forward. The IMF recently described the UK’s economic plan as “aggressive”, successful in “holding down unemployment” and business failures, and

“one of the best examples of coordinated action globally”.

However, I accept that it is never going to save every business and every job, and we will continue to engage with colleagues across the House. To the hon. Member for Midlothian (Owen Thompson), I will look into the meeting that has not happened yet and ensure that it does. [Interruption.] I will also engage with the hon. Member for Kingston upon Hull West and Hessle, but I must give my hon. Friend the Member for Carshalton and Wallington a few minutes to respond.

We will continue to listen carefully and we will maintain a flexible approach. As the Chancellor said in the House last week, things need to change when circumstances change. What that means for SME business owners up and down the country is simply this: where and when necessary, we will take swift action to provide the support they need. We will continue to do so as we work through this awful crisis that has befallen our country.