An accountancy trade body has called for the Treasury to write off all legitimate bounce back loans paid to small- and medium-sized enterprises (SMEs).
The Association of Accounting Technicians (AAT) said that these loans to genuine small businesses account for two thirds of the £40bn loaned through the bounce back loan scheme (BBLS).
The group said writing off the debt on legitimate loans to these SMEs would be of greater long-term benefit to taxpayers given the number of defaults predicted.
In November, the Office for Budget Responsibility warned that taxpayers could be left with a £29.5bn bill from bad debts caused by defaults in the government’s emergency lending schemes.
AAT said writing off legitimate bounce back loans to genuine borrowers would immediately save the taxpayer money as the state will no longer be obliged to make the interest payments for the remainder of the interest free period.
The organisation said writing off this debt would avoid the need for banks to utilise costly debt recovery agencies and eliminate the chance of any small businesses being mistreated, as has frequently happened when banks have sought to recover funds from SMEs in the past.
It would also provide a much-needed boost for the SME sector and enable more investment and growth and hence a quicker recovery, AAT added.
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AAT said it accepts that writing off debt is not an easy approach to take but given up to 80 per cent could eventually be written off anyway, writing off the 66 per cent paid to SMEs would appear to be a much more prudent approach than any of the alternatives.
The body said the recommendation has the support of former Conservative Chancellor George Osborne, Labour MPs and the Scottish National Party so would likely be well received by policymakers as well as the business community.
“Given the incredible and rising degree of anticipated losses and the costs and other resources involved in seeking to recover these loans over a 10 year period, AAT believes there is now a very strong argument for HM Treasury to write off all legitimate BBLS loans paid to genuine SMEs who account for two thirds of the £40bn loaned through the BBLS,” AAT said.
“It would also meet the 2019 Conservative Party manifesto commitments to, ‘…keep costs down for small businesses’ and to, ‘…always consider the needs of small businesses’.”