Economy: Update

Statement

The Statement was made in a Virtual Proceeding via video call.

My Lords, I shall now repeat a Statement on coronavirus that was made yesterday in the other place by the Chancellor of the Exchequer. The figures have changed since then, and this Statement contains more up-to-date figures. The Statement is as follows:

“Mr Speaker, thank you for giving me the opportunity to update the House on our economic response to the coronavirus. Let me say at the outset that I am grateful to Members from all sides of this House, including the new Shadow Chancellor, for their contributions to the debate.

We should be in no doubt about the seriousness of the economic situation. The Office for Budget Responsibility has published a scenario showing that the coronavirus will have very significant impacts, both at home and in the global economy. More than 1.5 million new claims have been made to universal credit; over 4 million jobs have now been furloughed. Survey evidence suggests that a quarter of businesses have paused trading. These are already tough times. There will be more to come. While our interventions have saved millions of jobs and businesses, we cannot save every job and every business. I understand, and I share, people’s anxiety but, right now, the most important thing we can do to protect our economy is to protect the health of our people.

As my right honourable friend the Prime Minister said this morning, we are making progress; we are beginning to turn the tide. But if we lose control of the virus again we risk seeing a second spike, which we all want to avoid. So the goal of our economic strategy is to provide a bridge over what will be a sharp and significant crisis by keeping as many people as possible in their existing jobs, supporting viable businesses to stay afloat, and protecting the incomes of the most vulnerable—in other words, to maintain the productive capacity of the British economy, so that once we are able to refine the public health restrictions, we can, as quickly as possible, get people back to work, businesses reopening, the self-employed trading again.

The OBR has been clear that if we had not taken the actions we have, the situation would be much worse. The IMF has said that our approach has been “aggressive” and “right”.

Taken together, I believe our response has been one of the most comprehensive of any country around the world. Working closely with the Bank of England, business groups, trade unions, banks, charities and many others around the country, we have developed a plan to protect public services, people, and businesses. Let me address each of those areas in turn.

Public services like the NHS are on the front line of the fight against coronavirus, and I repeat today that whatever resources our NHS needs, it will get. At the Budget in March, I announced the coronavirus emergency response fund, initially allocating £5 billion. We have now provided over three times that initial amount, with the NHS and other public services receiving £16 billion so far.

We are also providing extensive support for people’s jobs and incomes. Our most important and far-reaching policy is the Coronavirus Job Retention Scheme, to keep people in employment. The scheme launched on schedule last week and I am pleased to report that the first grants have just been paid. Around half a million firms have already applied for help to pay the wages of over 4 million furloughed jobs, jobs that might otherwise have been lost. HMRC is also on track to deliver the self-employed income support scheme, as promised, in early June, and we will publish detailed guidance this week. Alongside these new interventions, we have strengthened our existing safety net, with increases to universal credit, the local housing allowance and statutory sick pay. We have reinforced our social fabric, too, with £750 million for the charity sector.

Of course, the best way to support people is to protect their jobs, and that means supporting businesses. Our plan to help businesses means the following: almost half of all business properties in England will pay no business rates at all this year; almost 1 million business premises can now receive cash grants of between £10,000 and £25,000; 2.3 million businesses have been offered a VAT deferral, saving on average £30,000; another 2.7 million people will be able to defer their self-assessment payments; over 58,000 people and businesses have put new tax deferrals mechanisms, such as the time to pay arrangements, in place with HMRC; up to 2 million employers will be able to access the statutory sick pay rebate, with up to £48,000 per firm; £16 billion of lending has been issued through the Bank of England’s financing facility; and over 20,000 coronavirus business interruption loans have now been approved. Of course, that is on top of our furlough scheme, with payments now arriving.

Taken together, our plans are protecting millions of people and businesses across the country through a set of interventions in the economy on a scale we have never attempted before, and they are working. However, I know that some small businesses are still struggling to access credit. They are, in many ways, the most exposed businesses to the impact of the coronavirus and often find it harder to access credit in the first place. If we want to benefit from their dynamism and entrepreneurial spirit as we recover our economy, they will need more support to get through the crisis.

Some businesses will not want to take on more debt, which is why our focus has been on grants, tax cuts and tax deferrals. However, for others, loans will be part of the answer. Today, we are announcing a new micro loan scheme, providing a simple, quick, easy solution for those in need of smaller loans. Businesses will be able to apply for these new bounce-back loans for 25% of their turnover, up to a maximum of £50,000, with the Government paying the interest for the first 12 months.

My right honourable friend the Economic Secretary and I have been in close talks with the banks and I am pleased to say that these loans will be available from 9 am next Monday. There will be no forward-looking tests of business viability or complex eligibility criteria, just a simple, quick, standard form for businesses to fill in. For most firms, loans should arrive within 24 hours of approval, and I have decided, for this specific scheme, that the Government will support lending by guaranteeing, to the lender, 100% of the loan.

Let me address this point directly. I have heard some calls for the Government to underwrite all our loan schemes with 100% guarantees. I remain unconvinced by the case for doing that universally. We should not ask the taxpayers of today and tomorrow to bear the entire risk of lending almost unlimited sums to businesses that may, in some cases, have very little prospect of paying those loans back, and not necessarily because of the impact of coronavirus. So I am not prepared to provide 100% guarantees on all our schemes. Instead, these new bounce-back loans carefully target that extraordinary level of state support at those who need it most, and the £50,000 cap balances the risk to the taxpayer with the need to support our smallest businesses.

Right now, the most important thing for the health of our economy is the health of our people. We are making progress in our fight against the virus, but we are not there yet, so our strategy is to protect people and businesses through this crisis by backing our public services and NHS with increased funding, strengthening our safety net to support those most in need, and supporting people to stay in work and keep their businesses going. Our response is comprehensive, coherent and co-ordinated. It is, I believe, the right approach. I hope that I can continue to rely on the support and advice of all honourable and right honourable Members as I commend this Statement to the House.”

My Lords, that concludes the Statement.

My Lords, I am grateful to the Minister for repeating yesterday’s Statement and to the entire Treasury team, Ministers and officials, for their continued work in response to coronavirus.

As the Chancellor said in his Statement, these are tough times. The Minister read out the number of new universal credit claimants, as well as the staggering figure of 4 million furloughed jobs. He also warned that things are likely to get worse before they get better. Even if the figures do not grow, they are clearly worrying in the economic context. We have seen the projections of the OBR, the statistics in relation to business confidence and the analysis of a variety of economists and think tanks. However, throughout all this we must remember that behind the numbers and statistics are real lives and hard struggles to keep households running and businesses afloat.

Yesterday, the shadow Chancellor asked what steps the Government are taking to convert initial universal credit loans into grants to ease the burden on new claimants. She noted that the issue appears to be with the IT system behind universal credit, rather than a lack of political will. In response, the Chancellor listed a number of benefit reforms introduced by the DWP. However, he failed to answer the particular point on the IT problem, so I hope the Minister can comment. For the avoidance of doubt, do the Government agree that initial universal credit loans should be converted into grants if the IT problems can be overcome? If the answer is yes, what is being done to solve those IT problems?

Turning to the wider economic response, we welcome the many measures announced thus far and have, I hope, played a constructive role on occasions such as these. My honourable friend the shadow Chancellor has had multiple meetings and exchanges of correspondence with the Chancellor; I hope she receives a speedy reply to the questions attached to her latest letter.

My Lords, the bounce-back loans are clearly welcome, but I am going to press for more help for the self-employed who have fallen through the gaps in all the various rescue packages, especially the independent contractors who take much of their income in dividends and the newly self-employed. When we come out of lockdown, self-employment will be critical. It is a path for those who will have lost their jobs because of the pandemic and cannot return to them, and we will need innovation. As the Government know, a lot of innovation is embedded in these self-employed individuals, and I hope they will look again, because they must support this sector.

We all kept a minute’s silence today for key workers who have died, but many such key workers are very low earners with insecure work. Will the Government show their respect for these individuals by reviewing their funding of both social care and local government to ensure that those workers are properly paid, with proper employment rights, in recognition of the vital role they play and the vital contribution they make to all of us?

At the end of lockdown, public sector net debt will be at a historic high—certainly by the end of the pandemic. As the Government grapple with paying that debt down, will the noble Lord take action to tax the digital companies that have so far managed to pay very little tax in the UK though they now dominate large sectors of our economy? Indeed, they are doing well in the pandemic. I do not say that as an insult, but it increases the tax they should be contributing. Indeed, there are others who are, frankly, doing well out of the pandemic. Quite a number of traders have made windfall profits. Does the Minister agree that the Government should look for these companies to pay windfall taxes?

My Lords, first, I will address the questions from the noble Lord, Lord Tunnicliffe, on universal credit. I am not aware of specific IT problems, but if the noble Lord is aware of any and would like to write to me, I will certainly investigate them. However, the point that my right honourable friend made yesterday is that we have responded to this crisis by introducing a number of measures to support those in receipt of universal credit—the £20 increase, the increase in housing allowance rates and the relaxation of the minimum income floor—and they all help. There is additional support for the vulnerable through the hardship fund and things such as the mortgage holiday. Therefore, we are very focused on those at the bottom of the income hierarchy and, as ever, we will keep a careful eye on developments.

Nobody is more concerned than the Chancellor at the speed at which the CBILS loans are going out, but the speed is picking up. As at 24 April, 20,000 were approved, worth £3.3 billion—double the amount of the previous week. As at 17 April, only 10,000 had been approved. Therefore, the pace is increasing and we are confident that that will continue.

The noble Lord is right that it is very easy to get drawn into the day-to-day crisis and to lose focus of what the long term will look like. We have to be honest: at this stage it is impossible to tell. We know that this is the biggest crisis that this country has faced in 80 years, and we also know that the Chancellor’s response to the crisis in economic terms has been a potential 15% of GDP, which is a staggering sum of money. We know, too, that we are likely to come out of this with a debt level higher than that following the Second World War. These are all very important factors. How we go about dealing with that debt will probably depend on a number of factors, such as the speed at which the infection rate comes down and whether we are able to observe social distancing well in an unlocked economy to which people will have to adjust.

We appear to have lost the Minister temporarily. Are you still with us, Lord Agnew? I think that in the circumstances—

My Lords—

Can the Minister confirm that he has concluded his remarks before I move on?

Yes I have, Madam Deputy Speaker.

We now come to the 30 minutes allocated for Back-Bench questions. It would be appreciated if questions and, indeed, answers could be kept concise so that as many people as possible can contribute. I call Lord Vaux of Harrowden.

My Lords, while they are obviously very welcome, the bounce-back loans and other measures can be only a short-term fix. Many businesses that are currently allowed to operate are not doing so at the moment and others—garden centres, for example—could operate safely. Does the Minister agree that it would be better if businesses which could operate safely did so to minimise the damage to the economy? What help, financial and practical, can the Government offer to businesses which adapt their operations to enable a safe return to work as soon as possible?

I am afraid the noble Lord rather broke up on me. Madam Deputy Speaker, did you hear the question?

I heard it, but I am not sure that I could repeat it. If the noble Lord, Lord Vaux, could give the salient points very briefly, that would be helpful.

Certainly. Many businesses that are currently allowed to operate are not doing so while others that could operate safely are not currently allowed to do so. Does the Minister agree that it would be better if businesses that can operate safely do so? What help can the Government offer to businesses to alter their operations to enable a safe return to work as soon as possible?

I share the noble Lord’s concerns about businesses that could be operating. I think we are seeing a gradual return to work. Businesses have now worked out how to manage the requirements of social distancing. Putting the health of the nation first is the Prime Minister’s priority, but if we look at the existing rules, a business can ask its employees to come in if they are not able to work at home effectively, if the employee is fit and well and is not living with someone who is self-isolating for fear of infection or who is on the official medically vulnerable list and if they are able to avoid crowded public transport, which may mean more flexible working hours. The key point the noble Lord makes is that businesses can adapt to provide reasonable social distancing measures in the workplace. That is already in the rules; I expect to see further clarification.