The government should look to alter its coronavirus emergency loan schemes to assist companies that may struggle to pay back their debts, according to a Labour shadow cabinet member.
Shadow chief secretary to the Treasury Bridget Phillipson told City A.M. in a wide-ranging interview that some firms are “are in a much more fragile position than others” and may not be able to pay back debts as they fall due.
UK companies have borrowed £58bn as a part of the government’s package of coronavirus loan schemes, which sees the Treasury underwriting between 80 per cent and 100 per cent of each loan.
Companies will have to start paying back their loans after one year, meaning some businesses will be forced to start making repayments from March.
Some experts, including former chancellor George Osborne, have said the government will eventually have to provide some sort of debt relief to businesses that will not be able to pay back their coronavirus loans.
Phillipson said the government would have to make alterations of some sort to ensure industries in the worst hit sectors by the crisis – hospitality, retail, leisure and tourism – do not get sunk by debt repayments.
“We want the government to look at the situation facing many of our small businesses and design a scheme that meets those circumstances,” Phillipson said.
“For some businesses that haven’t been able to trade, haven’t been able to operate – or operate at a much reduced capacity – their circumstances are very different from those companies that have been able to keep going or have had people working from home.
“If you’re in manufacturing and you haven’t been able to bring people back to work that is a particular challenge and that’s part of our economy that will be central to the future challenges we face.”
Labour’s virtual conference ends tonight, after three days of speeches that largely tried to distance the party from former leader Jeremy Corbyn and his left-wing faction.
Starmer used his first conference speech as leader today to say that Labour would be a more patriotic, family values-orientated party under him in a bid to win back working class voters.
Shadow chancellor Anneliese Dodds yesterday pitched Labour as a party of fiscal responsibility, while painting the government as being “cavalier” with public money.
The change in tone is a large shift away from the big-spending manifesto that Labour brought to the 2019 General Election, which ended in disaster for the party.
When asked what Dodds’ statement meant in real policy terms, Phillipson said: “What people want to hear from us is the direction we will set, both from Keir and Anneliese as our shadow chancellor.
“What Anneliese set out yesterday is that we believe government and business should work closely together in order to build a better, fairer Britain.”
Interestingly, Phillipson also used language that sounded Margaret Thatcher-esque when speaking about fiscal policy.
The former Prime Minister would often sell her monetarist economic platform by appealing to regular families and by invoking their efforts to balance their own household budget.
Echoing these statements, Phillipson said: “I think many of those voters that we lost in 2019 – or haven’t looked at Labour for some time – are people that understand the value of money.
“If you grow up in a community, or live in a community, where there isn’t very much money you know that it’s important that it’s spent wisely.”
Starmer pledged during his victorious Labour leadership campaign that he would maintain 10 key policies from the party’s 2019 manifesto in a bid to placate the left of the party.
These included raising income tax for the highest 5 per cent of earners and nationalising the country’s rail, mail, energy and water.
However, there are already signs that these are beginning to slip.
Foreign secretary Lisa Nandy said today that she “expects” the income tax pledge would be scrapped due to the recesion.
Phillipson, meanwhile, told City A.M. that no policies were set in stone, indicating that Starmer may be willing to break his promise to the party’s Corbynite base.
“We had a devastating result and that means we face a long parliament ahead of us,” she said.
“That gives us an opportunity to develop our policy and look carefuly at the manifesto we’ll be putting to the country in 2024.
“In terms of tax policy right now, what we don’t want to see is demand pulled out of the economy at such a critical moment.
“The recovery is far from guaranteed, we’ve seen this week just how much of a fragile situation we’re all in and we think it would be wrong to be putting forward rax rises at this point within the economy.”