Asked by
To ask Her Majesty’s Government what lessons they have learned
from the experience of Switzerland, Germany and the United States
in ensuring that businesses have easy and speedy access to
Coronavirus Business Interruption Loans.
The Question was considered in a Virtual Proceeding via video
call.
The Parliamentary Under-Secretary of State, Department for
Business, Energy and Industrial Strategy () (Con)
My Lords, we are constantly reviewing the Coronavirus Business
Interruption Loan Scheme to make sure that businesses can access
loans quickly and easily. This includes looking at what other
countries are doing in order to inform our own scheme’s design.
Changes that we have made to eligibility tests mean that even
more UK businesses are able to apply to the CBILS and we are
working with the British Business Bank and lenders to ensure that
we are doing what we can to speed up lending. As of 15 April,
6,020 loans, worth a total of £1.1 billion, have been given out
to SMEs. We expect to see this increase substantially when weekly
figures are published tomorrow.
(Con)
My Lords, I draw attention to my interests in the register. Given
that there are more than 5 million SMEs in this country and fewer
than 1% have formal applications being considered or approved
under the Coronavirus Business Interruption Loan Scheme,
amounting to just over £2 billion, how many businesses do the
Government expect to fail as a result of the lockdown? Given the
Chancellor’s promise to “do whatever it takes” to see the UK
through this crisis, why is he rejecting the advice from the
Governor of the Bank of England, the Bank’s chief economist,
three former Chancellors, a former Bank governor and experienced
bankers to re-engineer the CBILS to provide a 100% guarantee to
ensure the speedy and efficient transfer of cash to desperate
businesses?
I thank my noble friend for his question. Of course, the issue of
100% guarantees has been raised by a number of other
contributors. It is something that we are keeping under review.
However, we think that the structure of the scheme at the moment
is appropriate to its function. We do not believe that it is
right to put all the cost of these loans directly on to
taxpayers. Banks should have some involvement in those loans. As
I say, we are keeping the scheme under review.
(Lab)
My Lords, the Government are to be congratulated on the scale
of—and, indeed, the welcome adaptations to be made to—the CBILS,
but other countries seem to be disbursing more money more quickly
to their struggling SMEs. In addition to the point made already
about the increase needed to guarantee 100% of loans, will the
Government also think of insisting, in the interests of
transparency, that the British Business Bank provide details of
what loans have been delivered by the 47 accredited lenders?
It is important to remember that not all SMEs will want debt
finance. There is a wide range of different support schemes
available to businesses, including the job retention scheme and
various local authority grants. We will be looking to publish, in
the interests of transparency, the full range of offers that have
been made to business in due course.
(LD)
My Lords, I join the noble Lord, Lord Stevenson, in
congratulating BEIS, the Treasury and HMRC on the work that they
done but, looking at the point in a different way, of those 47
accredited lenders, only the banks have the liquidity to lend at
scale. Those banks are generally sticking to their current
customers and, today, only six banks are offering CBILS loans to
new customers. This is a really important issue. Furthermore,
many are not lending below £25,000; about 90% of applications are
pitched at that level and below. I was pleased that the Minister
said that this was a work in progress. Can he confirm that
further modifications are now under consideration and also
undertake to ensure that the lack of access for new customers and
the exclusion of lower-value applicants are addressed really
quickly?
The noble Lord makes a very good point. As I have said, we have
already introduced a number of technical changes to the
scheme—obviously it was introduced very rapidly. We are keeping
all aspects of it under review. The one that he has mentioned is
important; we are looking at bringing in new lenders as soon as
possible, including Funding Circle, which specialises in smaller
loans for companies such as those he talks about. To answer his
question: yes, we are keeping this under review, we are seeking
to get new lenders accredited as quickly as possible, and we are
keeping all other aspects of the scheme under review as well.
(Con)
My Lords, no one can doubt the Government’s commitment to
bridging and helping SMEs bridge these particular unprecedented
circumstances but, to follow on from the question from the noble
Lord, , what are the Government
doing to work closely with the British Business Bank and
encourage it to dramatically widen the circle of lenders and, in
particular, to embrace the UK’s fintech sector, which can offer
so much in these circumstances?
My noble friend makes a very good point. As I said in response to
an earlier question, we are looking to expand the pool of lenders
as quickly as possible and at Funding Circle. We are working
closely with the British Business Bank to make sure that all
aspects of the SME market are serviced. The BBB has put in place
substantial additional resource to assist with processing
applications from new lenders as quickly as possible. On 11 April
four new lenders were accredited, and we are looking to get the
circle expanded as quickly as possible.
(GP)
As the Minister said, many businesses do not want to rely on debt
or are unable to do so. Some of them are small businesses, such
as an independent café whose owner I have been talking to in
Sheffield. He had all-risks business insurance. He thought that
he was covered for business disruption yet has found that the
insurance company refuses to pay. This seems a widespread, almost
universal, problem and there seems to be a particular issue
around the definition of physical damage and whether Covid-19 is
included in it. A couple of US states are taking action to ensure
that businesses are paid out. What action are the Government
planning to make sure that people with all-risks insurance, in
particular, get the cover they reasonably thought they had?
We are aware of the issue that the noble Baroness raises. Typical
insurance policies offer cover against business interruption due
to specific or notifiable diseases listed in the policy. An
optional extension was available in many policies to cover
pandemics, but unfortunately the majority of businesses did not
choose to take up that option. We do not believe that it is right
or feasible to require insurers to pay out retrospectively
against a risk that was not covered in their original policy, but
there are a number of other support packages available to those
businesses at this difficult time.
(Con)
I welcome the match funding which has been made available to our
most innovative start-ups through the Future Fund, but can the
Minister clarify how the scheme is going to operate? For example,
will companies have a reasonable veto over to whom these loans
could be sold on? Investors and executives will have an eye on
their cap table, and will private investor capital lent alongside
the Government funding qualify for EIS relief?
My noble friend asked two good questions. We are aware of her
first point about vetoes, and are considering it closely as we
work out the further details of the scheme. As regards her second
point, private investor capital lent alongside the government
capital will not qualify for EIS relief.
(Con)
My Lords, I declare my interests as set out in the register. I
regret that the Government’s intention to rescue sound businesses
whose income has suddenly and completely dried up through the
provision of CBILS loans has been less effective than intended as
a result of the 20% personal guarantee requirement of some
lenders, as pointed out by my noble friend Lord Forsyth. Does the
Minister agree that a reduction of the personal guarantee
requirement to 10% might make a considerable difference to the
conversion rate of loan applications to lifelines extended?
We have made some changes to the scheme so that no personal
guarantees are permitted for loans of below £250,000. For loans
above that level, lenders are permitted, at their discretion, to
require personal guarantees for up to 20% of the remaining loan
value. They are never permitted to use directors’ primary
personal residences as security, and of course lenders may turn
to personal guarantees only post the recovery of business assets.
That is a balanced approach which protects CBILS borrowers but,
like many other aspects of these schemes, this is something that
we will keep under constant review.
