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Traffic blocks a road. Drivers shout, honk horns, gesticulate. The road is the Government’s Coronavirus Business Interruption Loans Scheme.  The drivers are Ministers, the banks and businesses.

Ministers alternately blame the banks for not moving and claim that the road will soon be cleared – because the banks really are moving, just not quite fast enough yet.

The banks blame the Government, arguing that they are on the hook not only for 20 per cent of the loan, but 100 per cent of the default; that the criteria set for the scheme by the British Business Bank require them to be cautious, and that piled on top of this requirement is a restrictive EU regulation (though there is argument about whether the Government is misreading it).

And business people are less concerned with who’s to blame than with not going broke.  All they know is that the road is blocked and that they can’t get where they want to go.

Which is why a motley coalition of Andrew Bailey, the Governor of the Bank of England; Ed Miliband; George Osborne and others, including ConservativeHome, have called for the Government to up the proportion of the loan that it guarantees from 80 per cent to 100 per cent.

But what is counting most is pressure from Tory MPs.  One told this site yesterday that “the Chancellor has had repeated bollockings” from backbenchers.  Monday sees Commons consideration of the Finance Bill.  The stage is set for public pressure on Ministers.

One has to feel for Rishi Sunak.  He can point out to his colleagues that the taxpayer is already on the hook for stonking sums as a result of extraordinary measures – the £300 billion package that he announced in was effectively the second of three Budgets since mid-March.

He will be mindful that, one day, a vaccine will have been found for the virus; or the population will have acquired herd immunity, or a track-and-trace scheme of South Korean intensity will have worked, and the country will return to normal, whatever that may then look like.

At which point, if he’s still in place, he and his Treasury team will have to meet the bills run up during the crisis, and that the Government may not be able to, as we hope will be the case, tax-cut-and-deregulate-and-borrow its way back to growth.  And so mid 1970s-style spending cuts, plus big tax rises, will duly kick in.

So the Chancellor would add, as he repeatedly has, that the Government cannot save every firm and every job – adding that some 16,000 businesses have had their loans approved under the scheme and a little over £2 billion has been lent.  All done in almost no time at all by civil servants and others working flat out.

Sunak will not want to be seen to cave in to the pressure on him and his Ministerial colleagues.  But he has little alternative given the political landscape but to take our advice – which was if one can’t untangle one’s way out of a Gordian knot one should simply slice through it.

Or rather, to follow the picture sketched above, if one can’t unblock the highway, the best alternative is to build a relief road.

This seems to be what the Chancellor will do.  There’s already a specific Coranavirus Business Large Business Interruption Loans Scheme, which like the main version has undergone revisions.  (He has barred banks under the main scheme for asking for homes and savings as collateral, and sought to prevent them from steering companies towards standard business loans instead – an illustration of the problems that have dogged it.)

So watch out for some variant specifically designed for small businesses, which Sunak will hope is both effective and less expensive than simply throwing the doors of the present scheme wide open.

The moral of the story is that the longer the lockdown goes on in its present form, the longer the economy can’t move normally, like a man experiencing the trauma of cardiac arrest.

And Doctor Sunak will have to pour in more and more public money in what are essentially forms of emergency surgery. No wonder the institutional Treasury view is to want Britain out of shutdown as fast as possible.

90 comments for: Unblocking the loans scheme traffic jam

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