The government is apparently considering advancing 100% loans to small business for sums up to £25,000.
I approve of the idea.
I think the amount of loan available should be much higher.
But the government is petrified that it will be subject to fraud and scam. And of course it will be, to some extent.
And there is also the chance that some will take these loans simply because they are available and do not need them. I recognise that risk as well.
In that case I want to go back to a proposal I have already made. That is that, by law, any company taking one of these loans should be deemed to have issued 25.1% of its shares to the government. A simple form, filed at Companies House, could record the existence of the loan and this claim on its its share capital from now on. No one sells a company without checking at Companies House.
The result is that any business needing this loan to survive can get it, and be free of director guarantees, but that the loan is not costless. The cost will be a quarter of the business.
If the loan is a necessary condition for the business to survive the directors will willingly accept the condition. If it isn't, they won't. That sorts out a great deal of this risk of being taken for a ride.
And all those 25% stakes more than cover the risk in this programme: collectively because as and when they're sold (and some will be) they might well cover the losses in the scheme.
And if a profit is made this becomes a National Wealth Fund.
What could the objection be?
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As some one who has always like these sort of caveats up front, I think its a goer.
It is a pity though that Companies House is such a mess – more effectively managed, it could have been such a real asset at this time – yet another chicken coming home to roost for our ‘hands off’ Government who prefer to spend more of their time persecuting immigrants, the disabled and working people.
This would help a lot
I have a small bar and restaurant franchise i am not able to access government grants because unlike Germany France and Sweden they are being administered through local councils not directly from the government.
there are lots of small businesses like this that do not pay council tax directly we pay via our rent to a landlord.
I suspect that the chancellor is not keen on doing this and will find ways to be as obstructive as possible.
I think you mean “objection”. Unless you have something more fiscal or lethal in mind….
Corrected
Thanks
https://labourlist.org/2020/04/labour-rejects-idea-of-universal-basic-income-during-covid-19-crisis/?fbclid=IwAR2yaRnmtP_mhy2i_9UttE53UNXPcVYouV4ZvE0d3zI6EfLgJJyN7C2YJIU
Starmer seems to be copying the tories a lot and is against UBI for covid 19. So he is supporting a neoliberal consensus.
No he is not
Most supporters of MMT oppose UBI and are emphatically not neoliberal
What’s to stop owners of businesses that were already in trouble before all this, and are no longer viable going forward, availing themselves of what amounts to a state buyout? If the effective value of your business is now zero, why would the government want to give you £25k (or even higher as you advocate) for equity that is and will always remain worthless?
Obviously it’s will never happen under a Tory government, but it would be much fairer and better for the economy if businesses seeking assistance to survive, were supported only if they agreed to convert themselves into worker cooperatives.
It’s a risk
Worth taking
I don’t like how that risk is allotted.
The owners of these businesses, who in many cases will have run them badly, with too much debt, and having used the tax credit system to subsidise the poverty wages they pay, will be offered a benevolent hand at a time of need. Those who work at these companies will be offered nothing in this brave new world, but a pointed instruction to resume their labour.
So you’d rather the employment ended?
Excellent idea – very good.
Sensible suggestion. Whatever plan you will make there will be: (1) Fraudulent take up, (2) take up by those that really need it and (3) those that fail to take it up but do really need it.
Bear down on (1) and (3) will balloon. Getting the balance right is tricky but your idea of selling 25.1% equity is a good one but I would also always allow the remaining owners the option to “buy back” the government’s share at (say) a 10% premium after 1 year, 20% after 2 years and 30% after 3 years or more.
This might reduce the type (3)s in my example.
Fair enough….
I could go with that but not for £25000. To little to survive the still running overheads.
When you compare this proposal to the rapacious demands of vulture capitalists and others in the City when they are funding businesses, they seem eminently reasonable!