Rishi Sunak is reluctant to subject taxpayers to 100% state backing of Covid loans, and for good reason.
While there have been delays getting money to SMEs through the existing programme, moving from 80% to 100% would make little difference.
The banks may no longer be on the hook for 20% of the money, but they will still be expected to process the loans on the taxpayers’ behalf. That means making sure borrowers have viable businesses, pass anti-money-laundering checks and won’t be damaged by taking on too much debt.
Believe it or not, in an era of unprecedented economic uncertainty, that takes time.
While banks would no longer have to worry about losing their 20% of the money, they would still fret about being sued for negligence by the Government when the borrowers don’t pay them back. So, moving to 100% state cover only speeds the process if the Number 11 specifically tells the banks not to bother running proper checks.
Given that the average CBILS loan is £170,000 and can go up to £5 million, that is a huge risk to be taking with taxpayers’ money.
Sunak is right, then, to be only considering 100% backing for the smallest loans to the smallest businesses.
A Swiss-style one-page application form, with scant checking by the banks and no liability for them when the loans go bad, will get the money out fast.
But let’s not kid ourselves. We taxpayers won’t see much of it again; this is a grant in loans’ clothing.
