Coronavirus Business Interruption Loan Scheme

Nadhim Zahawi Excerpts

Thursday 5th November 2020 Commons Chamber

[The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Nadhim Zahawi)]

I thank the hon. Member for Midlothian (Owen Thompson) and the right hon. Member for Dwyfor Meirionnydd (Liz Saville Roberts) for initiating this important debate. We have had some very thoughtful contributions from many colleagues, not least my hon. Friends the Members for Thirsk and Malton (Kevin Hollinrake) and for Ynys Môn (Virginia Crosbie) and, of course, the hon. Member for Strangford (Jim Shannon), as well as my hon. Friend the Member for Broadland (Jerome Mayhew), who gave a detailed and forensic explanation of why CBILS was so important to the business that he was involved in, my hon. Friend the Member for Bromley and Chislehurst (Sir Robert Neill), the Scottish National party spokesman on business and the shadow Minister.

We  know how worried people are about their health, the health of their loved ones, their jobs, their businesses and their financial security. That is why the Government’s economic priority remains the same—to protect jobs. To support this, we have announced the following: an extension to the furlough scheme until March; more generous support to the self-employed and paying that support more quickly to them; cash grants of up to £3,000 per month for businesses that are closed—90% of small and medium-sized businesses’ premises in the closed retail, hospitality and leisure sectors, which have been mentioned several times today, should broadly have their monthly rent covered by these grants—plans to extend existing loan guarantee schemes and the future fund to the end of January next year and an ability to top up the bounce back loans as well; and, although we are debating CBILS, there is an extension to the mortgage payment holiday for home owners. These announcements will give businesses—whether they are open or required to close—the flexibility to adjust and plan over the coming months. That comes on top of what I think is an unprecedented £200 billion package of support that we have committed to since the beginning of the pandemic.

Let me turn to the specific subject of this debate. The coronavirus business interruption loan scheme has delivered finance to a wide range of businesses. As of 18 October, more than 73,000 loans worth £17 billion have been approved. The benefits of the scheme have been seen across the nations and regions of the United Kingdom. In Scotland, more than 3,300 coronavirus business interruption loans, worth £759 million, have been offered. In Wales, more than 1,600 loans, worth more than £374 million, have been offered. In addition, businesses in Scotland have been offered more than 76,000 bounce back loans worth £2 billion and Wales 48,000 loans at £1.3 billion.

Since the start of the coronavirus business interruption loan scheme in March, we have responded to feedback from businesses—I have to say that today’s feedback is equally important—and made changes where we needed to. This includes prohibiting lenders from requesting personal guarantees on loans under £250,000. That has reduced the risk to small businesses taking out loans under the scheme and opened access to those who could not afford to offer personal assets as security.

We extended the scheme to all viable small businesses, not just those unable to access commercial finance. Various technical changes were also made to the application process to speed it up for businesses, and we removed the forward-facing viability test to support firms that faced uncertainty regarding their income.

We also recognised that the scheme could not be the answer for all businesses seeking finance and in April we introduced the large business interruption loan scheme, which provides loans of £200 million, with an 80% guarantee from Government. As of 4 May, recognising that some of our smallest firms were finding it difficult to access CBILS or CLBILS, we introduced the bounce back loans. As of 18 October, we have supported 1 million businesses with £40 billion of bounce back loans. These schemes are not without cost. I know that the SNP are advocating the writing off of the loans. There is no Government money; it is taxpayers’ money, which is why we need to be prudent. We cannot save every business and, inevitably, some of these loans will sadly not be repaid, but, as the OBR has said, the cost of inaction would almost certainly have been much higher.

My colleagues in the Department for Business, Energy and Industrial Strategy and I, as well as ministerial colleagues in the Treasury, continue to engage with businesses and representative bodies on a regular basis. We also engage, of course, with the devolved Administrations and I pay tribute to Fiona Hyslop, Ken Skates and Diane Dodds for the deep engagement that we have had since March.

As the Prime Minister announced on Monday, we will adjust the bounce back loan scheme rules to allow those businesses that have borrowed less than 25% of their turnover to top up their existing loans. Businesses will be able to take up this option from next week. They can make use of this option once.  To help businesses to repay loans that they have taken out during this intensely difficult period, we have also introduced the pay-as-you-grow measures. Under these measures, businesses will be offered more time and greater flexibility to make repayments on their bounce back loans. Loans can be extended for up to 10 years, as my hon. Friend the Member for Broadland quite rightly shared with us. That would almost halve the rate of payback that a business would have to deliver.

The Government acknowledge that access to debt finance is important, but it can only form part of our approach to supporting businesses through this period. We have already provided the devolved Administrations with unprecedented up-front funding guarantees, so that they have the certainty they need to decide how and when to provide support. The funding guarantees to the Scottish Government are worth £7.2 billion, to the Welsh Government £4.4 billion, and to Northern Ireland £2.4 billion.[Official Report, 10 November 2020, Vol. 683, c. 10MC.]

My hon. Friend the Member for Bromley and Chislehurst made an important point, which was also mentioned by the hon. Member for Midlothian, and that was the question of the bad behaviour of banks. If it is determined that a lender is not passing on the economic benefits of the CBILS guarantee to borrowers, the lender will be required to take such action as is required by the British Business Bank to rectify the situation. That could include compensating the borrower and/or remediating their existing book. Ultimately, the British Business Bank could suspend the lender from new lending or remove its accreditation. Any action will take into account the impact on the underlying SME. I wanted to ensure that we put that point about businesses’ relationships with their banks on record for any businesses that may be listening to the debate today.

The Government fully recognise the tremendous impact that the pandemic has had on businesses across the four nations of our country. The response from the four nations is always much better and greater than that of any individual part of our family. The Government have been there to support them and to protect, create and support jobs via the largest package of emergency support in post-war history, of which the loan guarantee schemes are an important and successful part.

The hon. Member for Manchester Central (Lucy Powell) asked how we will repay this debt. We are focusing support on families and businesses through this difficult period. Although both borrowing and debt will rise this year, the cost of servicing that debt is affordable and sustainable because of the dynamic and resilient size of our economy. We will set out further details on our fiscal policy at the next Budget, when the economic and fiscal outlook becomes much clearer.

Madam Deputy Speaker, thank you for your indulgence. We have had a great debate.