The spread of coronavirus is rightly a health issue first and foremost, however the role of the Treasury Select Committee (which I chair) is to consider its economic impact and to scrutinise the steps the Government is taking to support businesses here in Devon and across the country.
What's happened so far? The Government has undoubtedly taken bold action and at a considerable pace. Measures such as the Coronavirus Business Interruption Loan Scheme (CBILS) and the Job Retention Scheme (JRS) will help millions of individuals and businesses get through the lockdown. However, the need for quick solutions has inevitably resulted in some hard edges and real challenges around delivery. It is these that the Treasury Committee has been examining and urging the Government to improve where possible.
A record response to the committee's initial call for evidence focussed on the lack of support for self-employed people. We urged the Chancellor to take action, so when he announced a new raft of measures shortly afterwards, this was welcome. Numerous submissions involved CBILS, which helps small and medium-sized businesses access soft loans, with the Government providing 80% guarantees. Initially, some lenders had requested personal guarantees, such as homes. Following pressure from the Treasury Committee, the Government banned lenders from requesting personal guarantees on loans under £250,000. Emergency loans, desperately needed by many businesses struggling to bridge the gap to the other side of this crisis, were initially taking too long to process because of the various checks that lenders had to do. The government has now revised its plans so small firms can access 100% taxpayer-backed loans of up to £50,000 and, crucially, get the money within days of applying.
What still needs to improve? Business owners who pay themselves a relatively small salary and take dividend payments from company profits are finding that only their salary rather than dividends that count towards the assessment for eligibility and payment under the JRS. HMRC told us that this is the case because it has "no way of identifying which dividends people receive are in lieu of wages, and which are simply a return on capital". They must find a practical solution. Delivery of loans must also improve; they need to be issues fast enough to help businesses in their daily struggle for survival. At present, data on the volume and value of loans is published too infrequently. I have written to UK finance and the British Business Bank to request frequent updates on CBILS and I intend to publish this data daily.
Looking ahead, economists are predicting that we will face our deepest recession since the 1920s with a short-term contraction of the UK economy of around 35% and an increase in unemployment of around two million. I am confident that we will come through all this, but every step we take to help businesses stay viable in the meantime will make this less difficult. A lot of support has certainly been provided but there is still more to do.
