Chancellor Rishi Sunak told MPs at a Treasury committee hearing the justifications for the government's decision to provide loans not grants for businesses and stressed that detailed guidance would be available from the start of next week, reports Zak Jakubowski
The Chancellor was met by a composed yet blunt line of questioning from the Treasury committee, chaired by MP Mel Stride, as MPs said they were ‘very aware of the pressures’ of Sunak’s time.
MPs grilled the Chancellor on why he chose the split of £330bn in loans and £20bn in grants set out in the coronavirus emergency fund.
Sunak said: ‘As helpful as giving a cash grant is, we do not have any control over how that money is spent.
‘How do you know they are going to do something you want them to do and pay people's wages rather than do something else with it.’
The £330bn is built up of guarantees that mean any business which needs access to cash to pay their rent, salaries, suppliers or purchase stock, will be able to access a government-backed loan.
The fast moving nature of the covid-19 crisis means that many of the measures have been announced without technical guidance. The Treasury is aiming to release full details of the various measures week commencing 23 March, the Chancellor told MPs when pressed on the timeline.
MP Felicity Buchan asked: ‘When can you reassure the committee that businesses will be able to access the money quickly and easily?'
Sunak said: ‘I think you are absolutely right in saying there is no point announcing things if they cannot be followed up quickly by delivery so they actually do start making a difference.
‘With regard to the loan programme first of all, so there are two separate loan programmes, one with the Bank of England that is being worked up at pace.
‘Obviously that is novel because it has not been worked up at this pace before but we think it will be very powerful, and that again should be operational by the beginning of next week.
‘Secondly there is the business interruption loan scheme that we are also guaranteeing, that will be provided through banks and financial institutions, vast majority of whom are already on boarded and ready to offer it because they do similar guarantees.
‘We are working at pace with them to make sure that they have all the details for this new loan guarantee scheme with simplifying the eligibility criteria, application process and indeed the speed of approval and again that should be up and running at the start of next week.’
The Chancellor also wanted to iron any out confusion over small business rate reliefs.
He added: ‘Anyone in receipt of small business rate relief currently will get a grant of £10,000.
‘If you are in receipt of the retail, leisure or hospitality discount all the way up to £51,000 of rateable value you will receive a £25,000 grant at a flat rate.’
Both of these discounts are available at a flat rate, unless there is an instance where a business qualifies for multiple grants, in which case particular circumstances will have to be looked at in further detail.
‘Because of the impact particularly on leisure and hospitality, we did not apply the £51,000 cap, we took the entire sector out of paying any business rates whatsoever’, said Sunak.
The Chancellor was joined by Dan York-Smith, director for strategy, planning and budget at the Treasury for the hearing.
York-Smith said: ‘This will result in the business rates intake of around £25bn being effectively halved.’
‘The reason we target support on businesses is because ultimately we need to help businesses preserve cashflow and therefore preserve employment', added the Chancellor said.
‘So it's a way of protecting people's jobs which is ultimately the best long term way to help people by keeping them in work.
‘Everyone inside the Treasury is working around the clock to ensure that we can deliver these things and actually make sure that the support gets to people.’
Treasury factsheet: How to access government financial support if you or your business has been affected by covid-19 Issued 18 March 2020 [subject to change]