Finance Bill

Kim Johnson Excerpts

2nd reading & 2nd reading: House of Commons & Programme motion & Programme motion: House of Commons & Ways and Means resolution
Monday 27th April 2020 Commons Chamber

[Kim Johnson (Liverpool, Riverside) (Lab) [V]]

We are living in unprecedented times. Since the Prime Minister announced the police-enforced lockdown on 23 March, the country has experienced the biggest challenge it has had to face in a long time. During the weeks since the lockdown, I have received a high volume of correspondence from non-essential businesses forced to close and from constituents experiencing financial hardship and uncertainty during this crisis.

The Riverside constituency covers Liverpool city centre, with a large number of leisure and hospitality businesses, hotels, micro-businesses, universities, private dentists’ practices, and freelancers and the self-employed engaged in a variety of enterprises. It is vital that the coronavirus economic schemes are effective so that we can protect people’s incomes, jobs and businesses, and prevent a deeper and longer-lasting recession.

The current guidance states:

“The government will provide additional Small Business Grant Scheme funding for local authorities to support small businesses that already pay little or no business rates because of small business rate relief… This will provide a one-off grant of £10,000 to eligible businesses to help meet their ongoing business costs.”

By tying eligibility for these grants to the business rate relief schemes, there are unintended consequences that will result in legitimate businesses, which are contributing to the economy through the tax system, not being supported through the scheme as was originally envisaged by the Chancellor.

In Liverpool, Riverside there are thousands of community businesses and charities providing essential frontline public health and wellbeing services to our most vulnerable residents that are not eligible for the grant and face closure. It would appear that the criteria being applied by some local authorities are resulting in a large number of small businesses not having their applications approved, and this is specifically the case in a number of circumstances.

Businesses that occupy separate designated office space under their tenancy licence agreement pay a contribution to the shared business rates in managed workspaces where one rateable value is applied to the whole building. This is often advised as the most appropriate method for business rates collection by the business rates officer. Social enterprises can have many structures, and one such is charitable status. It has been suggested that as these small businesses receive mandatory relief for charities, not small business rate relief, they will not be eligible for this grant.

CBILS has been operational since 23 March, but as of Thursday 16 April, only 6,020 loans, worth £1.1 billion, have been made as part of the scheme, with the survey data indicating that just 1% of firms have been able to access it. The Government will provide lenders with a guarantee of 80% on each loan to give lenders further confidence in continuing to provide finance to SMEs. However, the commercial banks are not acting in a consistent way, nor are they operating in the spirit of the guarantee. Banks are pushing their own products and seeking collateral security from the business owners rather than the business interruption product. Not all banks are offering the scheme, and other banks offer it only to their current customers. There is significant variation in the interest rates being charged to small businesses, and the terms and conditions and rates being offered, despite interest rates being so low, can only be described as extortionate.

The Government must act to increase the uptake of CIBLs, including offering a 100% guarantee, as other countries have. Providing 16,000 loans in four weeks in a country with nearly 6 million SMEs is not good enough. The Government must recognise that the scheme is not working adequately and change it urgently. The future of many of our small firms depends on their decisions.

The Government should also act urgently to protect the incomes of those who are falling outside existing schemes and on to universal credit. There are 9,000 self-employed people in Liverpool, Riverside, many of whom are creative freelancers working in our film, theatre and music industries who have seen their income dry up overnight. The self-employment income support scheme is intended to support self-employed individuals who have lost income due to the pandemic. The scheme allows self-employed people to claim a taxable grant worth 80% of trading profit, up to a maximum of £2,500 per month, for the next three months.

But there are anomalies. Newly established businesses that have submitted their first tax return for part of a year will have the self-employment income scheme 80% profit assessed for a whole year on this amount. While waiting for assessment and the release of the self-employed income support grant in June or July, self-employed people with no income are advised to apply for universal credit. This application results in immediate cancellation of any other benefits to which they are currently entitled, such as working tax credit, housing benefit and council tax benefit, leaving them with no income and in some cases destitute. Self-employed people with personal business savings of more than £16,000 are not entitled to universal credit or associated benefits. They are expected to use their savings to subsidise their income. This compares with the larger businesses—

[Mr Deputy Speaker (Mr Nigel Evans)]

Order. I am terribly sorry, but we have run out of time there. I call Miriam Cates.