| Previous Section | Index | Home Page |
24 Feb 2003 : Column 67—continued
Mr. Lansley: The small firms loan guarantee has of necessity been successful at various times and to varying degrees. After the recessionary effects of the early 1990s, it was clear that the retrenchment of lending by banks without security made that scheme more necessary. However, if the Cruickshank report were implemented in a way that was successful in stimulating genuine competitiveness on the part of banks lending to small businesses, one of the corollaries would be the reduction of the desirability of large-scale funding through the small firms loan guarantee scheme.
Mr. Fallon: My hon. Friend may want to catch your eye, Mr. Deputy Speaker, to advocate the abolition of the small business loan guarantee. Perhaps he is more of a moderniser than I am. It is sometimes hard to keep up with the development of Conservative industrial policy. However, he is right to say that the small firms loan guarantee scheme has performed a useful service at different times. There have been successes and I would not advocate its immediate abolition, but perhaps my hon. Friend will make a case for further revolution so that it is redirected more efficiently into certain parts of the economy.
On the detail of the Bill, the Minister and others have well described what it does. The Industrial Development Act 1982 set a ceiling of £1,900 million which could be raised four times. We only raised it once in 1996 after 14 years in government. When the Minister came into office, he inherited a ceiling of £2,100 million. He and his hon. Friends were soon at the pot. They have increased the limit three times, the third of which we are discussing tonight. As he confessed, the limit is going to be breached shortly when it reaches £2,700 million.
However, the proposed increase is enormous. The individual tranches will increase not by £200 million, but by £600 million, giving the Minister a total of £6,100 million. I know he will forgive us if we take with a pinch of salt his qualification that the final limit might not be reached for another 20 years, because, as he candidly confessed, he was wrong about the last limit. Money seems to trickle out a little faster when Labour Ministers get their hands on it.We must consider where all the money is going. The increase is huge. Given its size, it might have been better for the Government to introduce a new piece of legislation. The original formulation of this Bill is old and no longer appropriate to the ragbag of schemes that it covers. There is nothing in it to increase the parliamentary scrutiny that such large sums warrant. It would be absurd to have only an hour and a half in a Committee Upstairs to authorise another £600 million of industrial assistance, ranging over 15 to 20 different schemes.
It is clear that the Minister and his colleagues are rethinking their policy. As he confessed, the Secretary of State announced that all 183 of her business support schemes are being lumped together under a review and will be administered by an American business woman, Mrs. Fields Wicker-Miurin. I do not doubt her qualifications for the task. She is described in the Department's press release as
- "'having more degrees than a compass'".
When we turn to the detail of the schemes that are covered by the Bill, it is clear that there is a ragbag of schemes that well qualify for the streamlining that the Minister has spoken about. Too many of them are trying to do almost exactly the same thing. There is the help that is given to businesses to start up. There is the business incubation fund. We have the phoenix fund. The community development venture capital fund sits alongside the regional venture capital fund. There is a huge amount of overlap. If the Minister and his colleagues are serious about streamlining all this stuff, with all the separate application procedures and investment committee processes, he will certainly have my support. It seems to me that too many of these schemes are chasing too few worthwhile investment opportunities.
The proposal is a ragbag. There is no binding theme to any of the 15 schemes that are covered by the Bill, nor is there any consistent rationale for them. Some clearly derive from history, such as the steel and coal schemes. Some simply derive from faction—for example, the film scheme. Some have obviously been dumped on the Department of Trade and Industry by the Treasury. I notice that some of the schemes have been rather slow to
show results. Some schemes were announced in 2000 or 2001, but they have yet to make substantial allocations. I share the doubts that have been expressed about the regional venture capital funds in particular. These schemes have been set up by the Government in conjunction with the banks. I suspect that the major banks were rather arm-twisted into providing the equity capital. I remain to be convinced that there is a gap in the market.Ten or 15 years ago there was generally a shortage of venture capital in this country. Now, however, with more sophisticated small business banking and an explosion of private equity, I would need to be convinced that there is a gap that requires a host of Government bureaucrats and others round the regional development agencies to be involved in the venture capital business.
I take the point of my hon. Friend the Member for South Cambridgeshire (Mr. Lansley) that had the Cruickshank report been followed through properly, some seedcorn schemes, including the regional venture capital scheme, might not have been necessary. We know now, of course, that Cruickshank was not followed through. The Government chose the price control route, slapping price controls on the banks and making it more difficult for new banks to enter the small business lending market. The ragbag of often overlapping schemes seems continually to be involved in trying to support the same type of business in different ways. I certainly welcome streamlining.
The Bill does a little more than the Minister made out. It trebles the amount of industrial selective assistance from £2,100 million to £6,100 million. That is a massive amount of money. It will certainly be used quite significantly before 2020. Secondly, this legislation is very out of date—it is almost archaic—and needs revision. Thirdly, as the Minister admitted towards the end of his speech, everything is up for grabs in the sense of the business support review, the idea of which may have been announced in principle. However, the conclusions have yet to be agreed with Ministers. It is a little presumptuous to come forward with the Bill for Second Reading and to ask for another £4,000 million of taxpayers' money before the Minister makes clear exactly how it will be spent and before he makes clear exactly how it will be accountable to Parliament.
6.25 pm
Mr. Mark Field (Cities of London and Westminster): I never cease to be amazed at the fundamental lack of understanding that government in general has of the essential economic engine of wealth creation. I must confess that in Department of Trade and Industry-speak, I suppose I am a keen proponent of initiative underload, if such a thing exists. It is a pleasure to speak after my hon. Friend the Member for North-West Norfolk (Mr. Bellingham) and the hon. Member for Twickenham (Dr. Cable). There was a lot of sense in much that the hon. Gentleman said. It is also a pleasure to speak after my hon. Friend the Member for Sevenoaks (Mr. Fallon), who presented a tour de force of some of the historical underpinnings involving financial assistance.
It is probably the case that the Government have formerly had some hostility towards the engine of wealth creation to which I have referred. However, it is
now recognised that the DTI talks the language, but I suspect that all too often in its actions its ignorance is betrayed.My background before coming to this place was in business. I know that that is increasingly unusual, even on the Opposition Benches. The Bill recognises the importance, in the Government's mind, of regional development outside assisted areas, which are tightly drawn on a geographical basis. Therefore, for example, objective 1 funding areas would not be included in this context.
One or two examples include the British Film Commission, whose affairs have been subject to tightening up within the Finance Act 2002. As my hon. Friend the Member for Sevenoaks rightly said, perhaps all too often there is something of a conflict between the DTI and the Treasury in the operation of much of this type of legislation. Although the film business is primarily based within my constituency, there is a fundamental question to ask: is it really the business of government to interfere in any way in these matters?
As has been mentioned already, the increase in the total budget is more than threefold, from a figure of £1.9 billion rising to £3.7 billion. Thereon, we have the option of four additional tranches of £600 million apiece, up to a total of £6,100 million. As my hon. Friend the Member for North-West Norfolk pointed out, there has to be a large question mark over such expenditure. Where is the accountability for that vast envisaged expenditure?
The tradition of financial assistance has been referred to by my hon. Friend the Member for Sevenoaks. I shall look back even further in history to the chambers of commerce that existed. It all began with the London chamber of commerce in my constituency as long ago as 1882. It was led by my predecessor, Sir Robert Fowler, who lobbied for foreign policy to be geared primarily towards business and the global expansion of trade. That is an important lesson today. There is an understandable fear of parochialism rather than an appreciation of global trade in much of what is put forward regarding the financing and the assistance that is proposed in the Bill.
One only has to look at parochialism within the European Union, for example. It is often said that 57 per cent. of our trade is with the EU, which means by definition that 43 per cent. is outside that area. Very often that trade is with some of the fastest growing global nations. Some of those nations will be the key global trading partners of future decades. We should always remember that.
In my view, there are too many smaller pots of locally oriented government cash assistance, and much of this lacks focus.
Prior to entering this place, I was a local councillor in the Royal Borough of Kensington and Chelsea. In that role, I was the director of a local business centre. There was little doubt, as the hon. Member for Twickenham pointed out, that much good work was done in that micro-context of Government funding, but it was not clear how many businesses funded in that way remained in business over a period of time. Notwithstanding the weekly, monthly and quarterly statistics that were published, one had to ask whether a number of those businesses would have thrived without such aid. I hope
that we will be able to examine the issue of accountability, and that the Minister will take on board the concerns that consideration by a Standing Committee on Statutory Instruments on a variable basis will not provide the sort of accountability that we need to ensure that moneys are not wasted.There is little doubt that the concept of regional aid in this country is based on the historical wealth and political power of London and the south-east, as the hon. Member for Luton, North (Mr. Hopkins) noted. That is partly due to the climatic advantages of the south-east, compared to the far north of Scotland. Since the industrial revolution, political and economic strength has tended to be based in London and the south-east. The political implications of the north-south divide have enabled the Government at times to play to the gallery. They were happy to play to the gallery while in opposition, but now that they are in government, with such a large majority, their marginal seats are no longer in the Lancashire mill towns, but in the southern England new towns, and it is less easy for them to play the deprived northern card.
I am concerned that all the proposals for new layers of government, whether through expanded regional development agencies or more formal regional autonomy, will not be the answer. We wait to see what will happen, and whether we are to have referendums. That may be successful in the north-east of England, but one of the grave concerns is that it will lead to ever more demand for power in the hands of RDAs and for further financial assistance arising from the Bill and through various other means. [Interruption.] The hon. Member for East Carmarthen and Dinefwr (Adam Price) suggests from a sedentary position that the City of London may qualify. It may qualify all too soon for regional development assistance, but that is another matter.
In recent speeches, the Deputy Prime Minister has espoused the cause of sustainable communities. That seems to me to be a superficial absurdity. After decades of Government interference, as my hon. Friend the Member for Sevenoaks rightly said, why will more initiatives now lead to the nirvana of no regional divide in the future? The Deputy Prime Minister's view is that we must tackle the fundamental problem of high demand in the south and the collapse of housing demand in some of our most deprived communities. One is tempted to point out that if central Government relocated to the north, we might see some progress, [Hon. Members: "Hear, hear"] but until that occurs, it is merely words. I am glad to hear that my fan club from Wales and Scotland is present.
Under DTI policy as a whole, regulation is slowly but surely and perceptibly drowning business. Many of the regulations may seem superficially designed to protect consumers and employers, but the risk is that the regulations will be subject to the law of unintended consequences. There have been huge additional costs, which make business uneconomic and kill innovation, creativity and originality. If small businesses are to thrive, innovation must be encouraged, not discouraged. I fear that all too often, aid will have the opposite result to that which was intended.
Regulation of all types leads to a lowest common denominator mentality, which in a global marketplace is potentially fatal. Hon. Members will understand that during the recent constituency week, I would want to escape from my constituency. I escaped briefly to Germany, where I was on a lecture tour. It was very interesting to speak to individuals who were leading lights in political circles or local chambers of commerce in cities in the old East Germany, particularly Leipzig and Schwerin. Notwithstanding the enormous sums that have been pumped into those regions in the 12 years since German reunification, employment opportunities are getting worse, the economy is diminishing, and the young and innovative are voting with their feet by moving from the east to the west, or getting out of Germany all together.
| Next Section
| Index | Home Page |