Coronavirus loans: George Osborne calls for future government ‘debt forgiveness’ programme
The government should implement a future “debt forgiveness” programme for companies borrowing through its coroanvirus loan schemes, according to former chancellor George Osborne.
Osborne said small and micro businesses “who are engines of growth” should have their debts written off in several years’ time if they are still carrying debt burdens from the government’s emergency schemes.
Figures released yesterday showed that £31.3bn had been loaned out to UK businesses through its coronavirus business interruption loan scheme (CBILS) and bounce bank loan scheme.
About two-thirds of the total value of loans came through the bounce back loan scheme, which sees the government guarantee 100 per cent of loans of up to £50,000.
The government is guaranteeing 80 per cent of each loan for CBILS loans, which has translated into more stringent loan checks and a slower loan approval process for this type of lending.
Osborne, speaking to Westminster’s Treasury Select Committee today, said writing off some debts would be “for the overall good of the country” in the long-term.
“Even if in a couple years’ time when the corporate sector owes a lot of money – particularly the micro businesses, small businesses who are engines of growth and can be completely held back by large credit burden – I think then the government should look at some sort of debt forgiveness,” he said.
“At some point in the next couple of years you either write them off or, what I expect will happen, is every six months or year the chancellor at the time announces that the lending terms are pushed out, the rates are kept very low and so on.
“But it would be better as a big act of debt forgiveness.”
Osborne was joined at the select committee meeting by fellow former chancellors Lord Alastair Darling and Philip Hammond.
The trio discussed potential ways to handle the government’s bulging deficit and increased level of public debt that will result from the coronavirus crisis.
A leaked document last month showed the Treasury was expecting the deficit to reach at least £300bn this year, which is 12-times more than predicted before the crisis hit.
Darling said the government should aim to carry over public debt over a long period of time, like after World War II, and warned against another round of public spending cuts like under David Cameron and Osborne.
“What I’d be very concerned about is if we got ourself into a situation in the recovery stage where you started clamping down on things prematurely and you stop the growth and you drive the country back into a recession,” he said.
Osborne, meanwhile, indicated that austerity in some form had to happen eventually to cut future deficits.
He said: “If we’re in recovery…and we are running a 15 per cent budget deficit, which we might well be, then how comfortable are we taking that debt forward over the coming years?
“You don’t have to call it austerity, you don’t have to tell the public you’re doing it and try to get away with it as a government and pretend you’re not doing it, but the truth is you are going to have to make judgements about the levels of spending.”