An accounting body has asked the Treasury to cancel all legitimate rebound loans paid to small and medium enterprises (SMEs).
The Association of Accounting Technicians (AAT) said these loans to genuine small businesses accounted for two-thirds of the £ 40bn loaned under the Bounce Loan Program (BBLS).
The group said that forgetting the debt on legitimate loans to these SMEs would be more beneficial in the long run for taxpayers given the number of expected defaults.
In November, The Office for Budget Responsibility has warned taxpayers could end up with a £ 29.5bn bill from bad debts caused by failures in government emergency loan programs.
The AAT said that canceling legitimate bounce loans to genuine borrowers would save taxpayers money immediately, as the state will no longer be required to make interest payments for the remainder of the loan. the interest-free period.
The organization said that canceling this debt would save banks from resorting to expensive debt collection agencies and eliminate the risk of small businesses being mistreated, as has often happened when banks sought. to recover funds from SMEs in the past.
It would also give a much needed boost to the SME sector and allow for more investment and growth and therefore a faster recovery, added AAT.
Read more: More details on Pay as You Grow unveiled
AAT has said it accepts that debt cancellation is not an easy approach to take, but given that up to 80 percent could potentially be canceled anyway, canceling the 66 percent paid off to SMEs would seem to be a much more cautious approach than any of the alternatives.
The body said the recommendation had the backing of former Conservative Chancellor George Osborne, Labor MPs and the Scottish National Party and would therefore likely be welcomed by policymakers as well as the business community.
“Given the incredible and growing degree of anticipated losses and the costs and other resources required to attempt to recover these loans over a 10-year period, AAT believes that there is now a very strong case for the UK Treasury to cancel all Legitimate BBLS loans made to genuine SMEs which account for two-thirds of the £ 40 billion loaned through BBLS, ”AAT said.
“It would also meet the commitments made in the 2019 Conservative Party manifesto:” … reduce costs for small businesses “and” … always consider the needs of small businesses. ” “