Finance (No. 2) Bill — House of Commons, 2021-04-13
Topic: Domestic Commerce
Kevin Paul Hollinrake (Conservative, Centre-right): It is a pleasure to follow my right hon. Friend the Member for Wokingham (John Redwood). My comments relate to the small and medium-sized enterprises that he was talking about so passionately. The sage of Omaha, the great Warren Buffett, once said that what we learn from history is that we do not learn from history. I particularly want to look at what happened to the SMEs after the last recession—the global financial crisis. It was the five years following 2008 that were so destructive for SMEs, and I am very keen to ensure that we do not make the same mistakes again. I draw the House’s attention to my entry in the Register of Members’ Financial Interests I was interested in the comments of the shadow Minister, the hon. Member for Ealing North (James Murray). On tax avoidance, he must never have heard about the diverted profits tax or the digital services tax; they are very key measures. One thing about the DST that should be looked at—perhaps he will join the calls for this to be looked at as well—is that direct sales of Amazon are not covered by the digital services tax. That gives Amazon a competitive advantage over the other sellers on its platform, which cannot be right The Government are consulting on business rates reform and have three ideas: a land value tax; an online sales tax; or VAT. I strongly urge the Minister to consider VAT as a replacement for business rates, which I advocated in my ten-minute rule Bill The shadow Minister talked about social care a lot. He mentioned many problems, but did not come up with any solutions. One solution that I have advocated long and hard in this place is a German-style social care premium, which, hopefully, will feature in the Green or White Paper that is due to come forward shortly The Government have included many things in this Bill for SMEs. A typical SME is very grateful for the support that it has received from the Treasury, which has done a tremendous job in concert with its various agencies, introducing the job retention scheme, VAT discounts, and rates grants, particularly rates discount The Government have also introduced some very good loan schemes. I speak as co-chair of the all-party group on fair business banking. A very wise commentator said at the start of those loan schemes that the Government would not lend £1 billion using those loan schemes; some £75 billion later, we can see the success of those schemes. That, of course, has led to an unprecedented level of debt among SMEs in this country, which is what I am particularly worried about. On top of that are the new loan schemes coming from the recovery loans, which will be more difficult for SMEs to access. Unlike the other schemes, there is a forward-looking viability test, which will be challenging. Either way, it will mean that many SMEs are carrying lots of debt, which they will struggle to service over the next few months and years Furthermore, what will happen when the Government pull those schemes and let the banks go on their own in terms of lending? After the last crisis, banks were not very good at lending to the SME community from their own resources—bank lending to SMEs reduced by 25% between 2008 and 2013, just at a time when SMEs needed it. In Germany, where there is a high proliferation of regional mutual banks, which take a much more patient approach to SMEs, lending went up by 20% from those bodies. A policy that we should really push in this country is decentralising our business banking system, so that, rather than 80% of lending coming from large banks, we move towards a more regional, mutual, not-for profit system of banking, which would have a transformative effect in terms of lending to the productive economy The key thing in terms of making sure that SMEs are treated fairly is in the forbearance process. When businesses hit trouble, they need to be treated fairly and consistently. The Government did absolutely the right thing with bounce back loans. They set up a framework for how it would work, which lets SMEs take 12 months interest free, or payment free. They can take another six months of no payments whatsoever, and then another 18 months of interest only. They can also extend the loan to 10 years from the standard six years, which more than halves the payments on bounce back loans, which is great, without getting into any credit problem with their bank Similar measures do not apply to coronavirus business interruption loans or the larger scheme, CLBILS. That leaves businesses on their own. I urge the Government to work with the banking system to ensure that businesses of all shapes and sizes that have accessed these loans to help them through the crisis have these forbearance measures at their disposal without them having to go cap in hand to the bank. We know that banks are not very good in these situations when their money is at risk. Their shareholders need returns. We need support for SMEs Personal guarantees are also an issue, which will come as a surprise to many. I have put personal guarantees up for my business lending most of my life. If someone puts up a personal guarantee, most people think the bank will go to the business first, look at the business assets and realise those before it goes to personal assets. That is not the case—it does not have to do that. It can go straight to personal assets. The Lending Standards Board put in place a policy that banks should look at business assets first before going to personal assets, which has now been dropped from its regulations or guidance. I would very much like to see that brought back in, particularly at this time Thankfully, there is now dispute resolution in the form of the Financial Ombudsman Service and the Business Banking Resolution Service. All businesses with a turnover of up to £10 million will get access to free dispute resolution, which should mitigate some issues, but there are concerns nevertheless. I urge the Treasury to look at this point and make sure that businesses are treated fairly over the next few years in the fallout of this crisis.