I believe we need to ease the debt burden on business, secure the economy and help British businesses to rebuild by converting Bounce Back Loans into a ‘student-loan style’ arrangement where businesses only have to make repayments when they are making money.
British businesses have taken on nearly £80 billion of coronavirus debt through Government-backed loans during the crisis, including over £47 billion in Bounce Back Loans. Organisations such as the Federation of Small Businesses have warned of the impact this mountain of debt could have in terms of the destruction of fundamentally viable companies, increased unemployment as the furlough scheme winds down and damage to local communities. It could also end up costing the taxpayer tens of billions in defaulted loans.
In response to questions on this issue, the Government says it has “always been clear that businesses are responsible for repaying any finance they take out”, but that it recognises that “some borrowers will benefit from additional flexibility with regards to their repayments”. It points to its Pay-As-You-Grow measures, which allow businesses to repay their loan over ten years, to make interest-only payments for up to three periods of up to six months and to take a one-time pause on repayments for six months.
However, I do not believe any of these measures do anything to solve the underlying long-term issue of business debt, which means businesses will have to pay whether or not they are making a profit. Instead, they simply delay or spread out loan payments. Indeed, they made little difference to the Office for Budget Responsibility’s forecast for how much COVID-debt will remain unpaid.
If we want to give businesses time to rebuild their trade and build up their resilience, as well as protect jobs and prevent debt from stifling our recovery, we need to introduce a genuinely flexible repayment scheme. I supported calls for such a scheme in Parliament in February – calls which were unfortunately rejected by the Chancellor in the Budget. I can nevertheless assure you that I will continue to support efforts to press the Government for action on this issue.