Coronavirus Business Interruption Loan Scheme

Baroness Winterton of Doncaster Excerpts

Thursday 5th November 2020 Commons Chamber

[Madam Deputy Speaker (Dame Rosie Winterton)]

We are running a bit behind schedule on account of the debate starting slightly later than anticipated. On the assumption that everyone turns up, I think speeches should probably last for about seven minutes.

--- Later in debate ---

[Liz Saville Roberts (Dwyfor Meirionnydd) (PC)]

I congratulate my hon. Friend the Member for Midlothian (Owen Thompson) on securing this debate. I was extremely interested to hear some of the contribution of the hon. Member for Thirsk and Malton (Kevin Hollinrake), particularly the idea of increasing the local stake and interest of banks in communities. It would be really useful to take that forward.

Covid-19 continues to cast a dark shadow over all four nations of the UK, blighting lives and businesses. This debate is an important moment to consider the ramifications, legacy and lessons from one of the key economic measures that have been our response to the virus. Nearly 1,700 coronavirus business interruption loans have been provided to businesses in Wales, totalling approximately £374 million in much-needed support to our economy. This represents one aspect of a broader intervention by not only the UK Government but the Welsh Government and local authorities, who have directed more than £1.6 billion of public support in the form of grants and reliefs to Welsh businesses. Indeed, the resilience and effectiveness of the devolved Governments can perhaps be compared with the Westminster record, which has shown itself on occasion to be prioritising headlines over competency. Westminster has exacerbated rather than eased confusion among businesses, and I refer to the furlough scheme and the lack of transparency in Government contracts as stand-out examples.

I want to make a point about the furlough scheme. I have spoken to businesses in the community that are carrying hundreds of thousands of pounds of debt, which is relevant to what we are discussing today. Because they were unsure what was going to happen with the furlough scheme, they put in place the necessary steps to start making staff redundant, and those processes have started. So there is an effect when these decisions are made late in the day.

It is increasingly clear that covid-19 is no equaliser, either as a deadly disease or in its wider socioeconomic ramifications. This has created a potent economic legacy, in which the CBIL scheme plays a part. A concern throughout the programme has been accessibility. Unlike in later schemes, CBILS applicants had to certify that they had been adversely affected and, more importantly, were still required to present a borrowing proposal to lenders. That posed a significant challenge for many businesses in Wales, particularly in rural areas such as my constituency of Dwyfor Meirionnydd and in post-industrial communities, particularly across Wales, a country that last year topped the UK table for bank closures.

After 43% of Welsh bank branches were closed between 2015 and 2019, businesses face an uphill challenge, even before covid restrictions, simply to find a financial adviser to inform them on loan applications. The banks’ local knowledge, as well as their stake in local communities, has been eroded, even as they reach out with their digital capacities. Banks had that local interest and local stake in our communities, and we should be looking at the way in which they now operate in the United Kingdom. We have welcomed the improvements in the later schemes, but the Government need to go further and work with lenders to continue to improve accessibility to all covid-19 support schemes for households and businesses in rural and poor communities.

Westminster presumes that the UK is a healthy, mixed economy, but the reality is that in many areas, single industries dominate the local economy. This is particularly true in north and west Wales, where the strongly seasonal tourism, hospitality and leisure sectors dominate. This is the reality of where we are now, and I am not criticising it. I accept it, but if we want to make a difference to those communities in future, we have to realise the implications of covid and how the support measures will work their way through. We had a harsh winter last winter, and we are going into winter now. In the meantime, many businesses in the sector had no choice but to pursue UK and Welsh Government support schemes. They banked on a strong summer season’s earnings that never materialised sufficiently for them to pay off their debts. That was their usual business model. They are usually viable businesses, but this summer they did not have time to make that up. These businesses, and now the whole communities in which they operate, face a bleak future.

It is therefore vital that CBILS should be part of our effort to rebuild, rather than being employed as a stopgap in the immediate crisis. That is why I urge the UK Government to work with lenders and the Welsh Government to lighten the mounting debt burden facing UK businesses. This should include measures such as debt relief for viable Welsh businesses, particularly in badly affected industries such as hospitality. The effect of such an action would be immediate and direct. It would immediately improve businesses’ balance sheets and outlook, give certainty on employment and free up capital that could be set aside to ultimately fund our economic recovery. Although bold, such an intervention on the back of historically low interest rates for Government borrowing would recognise that debt is an economic and political problem, not a health one.

Time is ticking. TheCityUK’s recapitalisation report estimates that, without action now, UK businesses will have £100 billion-worth of toxic debt by March next year, leading to further unemployment and ending in permanent economic scarring in areas that can least afford it. We have a golden opportunity to turn this debt crisis into a vote of confidence in our economy, freeing businesses of an avoidable debt crisis to reinvest in their livelihoods and workers. I urge the Chancellor to seize this opportunity.

[Madam Deputy Speaker (Dame Rosie Winterton)]

As all our speakers are now here, I remind Members that I would like to start the winding-up speeches at about 3.25 pm, and speeches of between six and seven minutes should make that possible. I call Virginia Crosbie.