My Lords, the Government have announced unprecedented support for public services, workers and businesses to protect them against the current economic emergency. Our interventions have been targeted to protect UK jobs while also protecting the taxpayer. Our aim is to protect the productive capacity of our economy and to enable a strong and sustainable recovery from this crisis. As we move through this crisis, the Government will continue to keep our economic response under review.
To rebuild our economy, the Government should listen to the many calling for our recovery through investment instead of paying down debt, which is where they seem to be concentrating. These are debts which some may never repay. Since I tabled my Question, investment ideas such as Project Birch have been floated, but will the Government make it clear that, in return for equity, firms should work towards our social objectives of responsible company behaviour, local levelling up and ensuring that all benefit?
My Lords, bold and ambitious schemes, such as a public wealth fund, will be necessary to support businesses in the medium term. However, we are seeing an immediate surge in insolvencies and job losses, and action is needed before such schemes can be established. What targeted help can the Minister offer the hardest-hit sectors of the economy, such as hospitality and tourism, which will take longer to reopen and recover?
Our first priority as a Government has been to try to protect the productive capacity of the economy, which is why we have one of the most generous furlough schemes in Europe. On the hospitality side, we have provided cash grants of £10,000 for properties with small rateable values of under £15,000, and cash grants of £25,000 for those with a rateable value of between £15,000 and £51,000. We will continue to monitor how the leisure sector recovers from this crisis.
At the time of the Budget, the OBR forecast that taxpayer losses in the RBS had increased to £4.7 billion compared to the Government’s estimate of just two years ago. Would it not be better for British businesses across the UK to think more creatively about the use of our shares in RBS and to expand the role of the British Business Bank, established by Sir Vince Cable during the coalition, so that we can see the early stages of a genuine UK-wide investment wealth fund?
I agree with the noble Lord on the role of the British Business Bank, which has played an extremely important part in the economy over the last few years. It has given some £7 billion of finance to almost 95,000 SMEs and has been part of the distribution for much of the support over the last few months. We will continue to review the greater part that it can play.
My Lords, I refer to my register of interests. There is no question that we need some sort of public wealth investment bank to replace CBILS—perhaps using the old model that 3i had. However, the BBB is not the answer. It does not have the mechanics, the experience or the expertise to make the direct investments in SMEs that are badly needed. Would my noble friend meet me and other practitioners to discuss the mechanics of how we can get relatively small equity investments into SMEs in the very near future?
I am very happy to meet my noble friend to discuss that, but I stress that we expect the private sector to step up to the mark in investing in these small businesses in future. We have the EIS and the SEIS, and we will continue to review them.
My Lords, given the heightened and highly appropriate focus on justice and opportunity for black and minority communities, what considerations has the Treasury given to working with existing black business finance networks, such as the number one black lending and investment agency, Lendoe, led by Mr Demi Ariyo? Will the Minister chase a reply, due a month ago, to Mr Ariyo’s letter to the Chancellor of 12 May, setting out practical and detailed advice on how to boost black business recovery?
My Lords, I want to press the Minister on the key point of principle in my noble friend Lord Haskel’s excellent Question. Do the Government accept the need to set up a mechanism whereby the state can take equity stakes in overindebted companies? Do they accept that this is vital to what the Minister describes as safeguarding our productive capacity and to a strong and sustainable recovery? Does the Minister accept that the debate is not about whether this should happen but about how it should happen? The sooner we start talking about this, the better.
There are two parts to that question. First, on 20 May, we announced the future fund of an initial £250 million for co-investment with businesses. There has been enormous interest in that; some 460 applications have been made up to the end of May. On the noble Lord’s reference to overindebted companies, we have to deal with the issue that the shareholders and management of those companies have contributed to that problem. They need to resolve the substantial concessions that they will have to make to their own equity, and to the lenders who have lent—and possibly overlent—to these businesses. There are two separate strands to this, but both will be active in future.
Infrastructure is a vital part of rebuilding from this crisis. I am unsure at this stage whether it will be done through the mechanism of a sovereign wealth fund. At the moment, we have the opportunity as a national Government to borrow cheaply, which, if invested well in infrastructure, could be a simpler approach than a sovereign wealth fund.
My Lords, we have a tremendous challenge but a real opportunity for an economic bounce out of Covid. It needs a whole-government, whole-economy approach. Will my noble friend salute the consultation currently being undertaken by the Bank of England around a central bank digital currency, and note the positive impact that this potentially could have for the whole of the country and the economy?
I certainly agree with the noble Lord that it is an extremely important consultation. As he implies, any serious crisis such as this gives the country a chance to look beyond the normal way of dealing with problems. I am very hopeful that initiatives such as he has mentioned will be much more evident over the next few months.
My Lords, I declare my interests and congratulate the Government on the establishment of the future fund. Would my noble friend consider encouraging the use of pension funds, as well as expanding the EIS and the SEIS, so that we can boost investment in smaller companies via equity, rather than debt, and increase the emphasis on social values?
I agree with the noble Baroness that pension funds in this country could play a much greater role in investing in early days businesses. The noble Baroness will know better than I that how we change the investment allocations that pension funds are allowed to take is a very complicated business, but I hope that we will continue to push the boundaries on that, because there is enormous potential.