Thread by @EdConwaySky

Why are Britain's banks and officials blaming EU State Aid rules for impeding Britain's economic response to #COVID19, and what does it tell you about the way this country works? A short thread, based on my @thetimes column this morning thetimes.co.uk/article/28d45b…

Govt has various legs to its #COVID19 economic rescue. A crucial part is the Coronavirus Business Interruption Loan Scheme (CBILS).
So far £1.1bn has been lent; 6,016 loans.
In Germany about seven times that has already been lent to small biz
In Switz there have been 100k loans

One early problem with CBILS was that businesses were calling up for emergency support but banks were asking them to fill in forms for regular loans. The kinds with high int rates & where you need to stake your home as collateral. It was v difficult to actually get a CBIL

At the time I spoke to a senior figure involved in advising banks how to apply the scheme. Why couldn't banks just issue CBILS straight off? His answer: EU state aid rules.
I was shocked - after all the EC had just loosened those rules. But he insisted that was the small print

When I spoke to HMT they disavowed knowledge of this. Then a week later they changed the rules to make it clear that banks could "jump" straight to CBILS without having to foist "normal" loans on struggling companies. So I wrote off the whole EU state aid thing as crossed wires

Except a few days ago it cropped up again. This time re ongoing discussions in HMT about whether to extend the government's guarantee on these loans from 80% (as is the case currently) to 100%, as is the case in many other countries. HMT a bit reluctant. I asked a source why.

The source said there are senior figures in HMT who say aside from the fiscal objections to a 100% guarantee (taxpayers wld be on the hook for any loans going belly up, which is prob a lot of them), it would also fall foul of EU state aid rules. I was flabbergasted. Again!

Now, I am SURE there is nothing in EU state aid rules to prevent a country rescuing its economy. Indeed, Germany had extended its SME loan scheme guarantee to 100% anyway. The most charitable interpretation is that the banker and the HMT person had the wrong end of the stick

Still. We're in the biggest economic crisis in centuries.
Millions face unemployment.
Small businesses are going under.
Who in their right mind starts quibbling over the small print at a time like this (esp when the small print isn't really quite as prohibitive as you make out)??

The answer is: the British establishment.
Bankers reach for the small print so they don't have to take risk on loans.
Treasury reaches for the small print so they don't have to take fiscal risks.
Feels a lot like early stages of 2008 when people moaned abt "moral hazard"

Britain has just left the EU.
This is one of the first tests of our policymaking & leadership as a newly independent nation.
Yet our officials still moan abt EU small print (even when it doesn't really apply).
We are following, not leading, when it comes to the economic rescue

Some of the schemes unveiled by HMT are more radical than anything we've done before. But NB many of them are effectively borrowed off other countries - and as I wrote here, there are questions over whether they can be successfully transplanted here edmundconway.com/2020/04/why-is…

There are many heroes in government - just as in the NHS - fighting the economic impact of #COVID19. But there are also worrying signs that the various layers of bureaucracy in both the public and private sector are not serving us well. More in my column: thetimes.co.uk/article/28d45b…