How is the government paying for the £350billion coronavirus bailout and how will it be paid back?
- Chancellor Rishi Sunak hailed the massive cash lifeline as ‘unprecedented’
- It is thought the government will foot the hefty bill by going further into debt
- Businesses will be able to ‘walk into their local bank branches’ to request loans
- Coronavirus symptoms: what are they and should you see a doctor?
Rishi Sunak today announced a £350billion bailout package to keep fledgling businesses afloat during the coronavirus pandemic.
He called the massive cash lifeline ‘unprecedented’ as he vowed to do whatever it takes to keep the economy ticking throughout the crisis.
But while the Chancellor and Prime Minister won plaudits for the strong show of support for companies, many questioned how the government intended to foot this eye-watering loan bill.
In his speech, Mr Sunak said that ‘this is not a time for ideology and orthodoxy,’ suggesting he is poised to shrug off the traditional reluctance of Conservatives to plunge deeper into borrowing.
Rishi Sunak today announced a £350billion bailout package to keep fledgling businesses afloat during the coronavirus pandemic
But while the Chancellor and Prime Minister won plaudits for the strong show of support for companies, many questioned how the government intended to foot this eye-watering loan bill
Even before coronavirus hit, the UK’s national debt was due to hit £2trillion by 2024-25.
And the crisis now looks set to force the government to underwrite huge sections of the economy to avoid collapse.
The measures will mean enormous amounts of extra borrowing over the coming years – especially with the economy facing a sharp slowdown.
The head of the Office for Budget Responsibility, the government forecaster, said it was not the time to be ‘squeamish’ about running up debt.
The Bank of England said it would set up a new fund with the Treasury to buy commercial debt with a term of up to one-year issued by investment-grade companies making a ‘material contribution’ to Britain’s economy.
Fortunately – and counter-intuitively – there is high demand to lend to governments at the moment.
With stock markets in freefall, buying gilts from states is seen as a safe haven.
That also means the interest rates government pay are low by historical standards.
The Chancellor (pictured in the Number 10 briefing) also announced a three-month mortgage holiday for homeowners
There is also the possibility of printing more money as a last resort – although that could have disastrous impacts on inflation.
In the aftermath of the Number 10 press briefing, there was also some confusion about how companies can claim the announced business interruption loan of up to £5million.
Speaking in the House of Commons later, Mr Sunak confirmed that the loans would be delivered not by the ‘British business bank’ but by individual retail banks on high streets.
He said businesses will be able to ‘walk into their local branches’ by early next week and request a business interruption loan that has been backed by the government.
The Chancellor also announced a three-month mortgage holiday for homeowners.
Mortgage broker SPF Private Clients said that homeowners should get in touch with their lenders as soon as possible and preferably before missing a mortgage payment.
It said that while lenders may ask for evidence that you are unwell they are usually ‘sympathetic’ to illnesses that affect a borrower’s ability to pay their mortgage.
Tenants may be able to speak to their landlords who can speak to their own buy-to-let provider for their own payment holiday, it added.