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24 Feb 2003 : Column 83—continued
7. 22 pm
Alan Johnson: With the leave of the House, I shall reply to what has been a thoughtful debate on this short Bill, featuring excellent contributions from Opposition Members—although the best came from our side. What we lacked in quantity, we gained in quality.
I was deeply hurt by the comments of the hon. Member for North-West Norfolk (Mr. Bellingham), and by the lack of a political consensus. I had thought that we would sail through this with a fair amount of agreement between the various parties—only to find that our motives were being questioned, particularly in regard to the formula.
There is no getting away from one aspect. It took 14 years, from 1982 to 1996, to produce just one tranche, and the money has been spent more quickly since 1997. I do not argue with that. The problem is that we are talking about schemes that may have existed in the past, and about the use of taxpayers' money, which should of course be used properly, in the absence of any analysis of the payback for the Government.
We inherited one scheme: the small business loan guarantee scheme. The hon. Gentleman was scathing about some of the schemes that we have introduced, but very complimentary about the one that was left over from past Governments. We have introduced 14 schemes. It was right for hon. Members to question some of them and for me to defend them, but we must look at the Bill on the basis of what is happening now, not what was happening in the 1970s or 1980s.
In fact, it could well be argued that Governments in the 1970s and 1980s should have used such provisions. Especially in the 1980s, constituencies such as mine were
crying out for just a bit of assistance so that one industry could diversify into others. In my case, the problem was the collapse of distant-water fishing, and very little help was forthcoming. That is all in the past, however.The rationale of our formula was to roll forward the existing limit of £2.7 billion—which we have almost reached—in real terms, using 2.5 per cent. as a proxy for the long-term gross domestic product deflator, for 20 years. The figures produced at the time, in co-operation with the Treasury, did not satisfy us: they would have meant a £4.5 billion new ceiling, and our returning four times to ask for £400 million in each tranche. We felt that the first hurdle should be reduced, enabling us to return to Parliament more quickly. We therefore reduced it to £3.7 billion. To reach the £6.1 billion figure, the other tranches were £600 million more than £400 million.
Mr. Lansley: I understand that the Minister has produced an arithmetical approximation to the way in which things were done in 1982, but our point is that the original 14-year period after 1982 at least followed carefully considered legislation setting out a framework of support for industry. Following the meeting of that limit, is it not time for a reconsideration of the framework, and for the framework to be established for a period rather than being rolled forward?
Alan Johnson: In a sense we are doing that, but let me develop the argument.
The accusation, reflected in the amendment, is that we want somehow to avoid parliamentary scrutiny. Let me say in all honesty—I suppose that anyone should speak in all honesty from the Dispatch Box—that we have tried hard to do the opposite. We looked at the figures and said, "No, we want to return to Parliament earlier." We have proposed the same four tranches. There was an argument that we should return to Parliament two or three times rather than four, but we did not accept it. There is no change in the £10 million limit requiring parliamentary scrutiny, despite the argument—given that the limit was set in 1982, if not 1972—that it should change because of the increased cost of living. There is still an annual report, however inadequate it may be. We reached for the Kleenex when we were accused of trying to avoid returning to Parliament, for that was far from being our rationale.
The hon. Member for North-West Norfolk praised the Small Business Service. I was pleased about that, because I had understood that the Conservatives had pledged to abolish it. We may be witnessing the determination of policy here, and I can think of no better shadow Minister for the job.
The Small Business Service administers eight of the current schemes. Those eight schemes—this answers a question raised by, particularly, the hon. Member for South Cambridgeshire (Mr. Lansley)—are the ones that are in the pot for the review of DTI business support, as opposed to the industry-specific schemes relating to coal, steel and the post office network. So eight out of 15 are in the pot, along with another 175—the total number of DTI business support schemes being 183. Only those eight will be carried over from section 8 of the 1982 Act.
Two schemes were criticised by the hon. Member for North-West Norfolk. I pull in also his point about Scotland. There is an issue about Conservative
Members, perhaps because of the constituencies that they represent and because after 1997 they were true one nation Tories—they did not represent anyone in Scotland and Wales; they represented one nation and that was England—not realising how important the Phoenix fund is in deprived areas, particularly among ethnic minorities. The whole basis of this approach is to encourage people to be entrepreneurial and to help them to start up their own businesses. Every bit of feedback that we get from the Phoenix fund shows that it is one of the most beneficial.It is right that no money has been paid out of the incubation fund thus far. I am told that that is because the very nature of the fund means that it takes a while for the applications to be processed. It is hoped that any problems will be ironed out. We are still expecting to spend a projected £65 million by the end of the scheme in 2004–05.
The other point that I make in relation to the contribution by the hon. Member for North-West Norfolk concerns the small firms loan guarantee scheme and what it costs per year. I will write to him, and probably to all hon. Members who will sit on the Committee, before the Committee stage, so that they receive a proper analysis of how the schemes are working. That analysis exists but it is all over the place. It is in documents that are published at different frequencies. I understand that it is not all in the annual report, which surprises me.
I am told that since the small firms loan guarantee scheme began in June 1981, the net cost up to the end of October 2002 has been £460.39 million. In all, over 82,000 loans have been guaranteed. The guarantees provided on loans so far total £3.1 billion, but I will write to the hon. Gentleman on the other points that he raised and on the point raised by the hon. Member for Twickenham (Dr. Cable) about whether there has been any comparison between companies that did not access the loan scheme and those that did. That is a valid question.
I am not going to be drawn into a debate on the economy, particularly as my right hon. Friend the Chancellor of the Exchequer made mincemeat of the Opposition just two weeks ago on that subject.
My hon. Friend the Member for Luton, North (Mr. Hopkins) is a strong supporter of these measures. He seems to have disappeared, but he was the only Labour Member to attend the whole debate and I am grateful for his support, which was welcome.
The hon. Member for Twickenham talked about post office network funding and questioned the use of section 8 for the urban post office network. I do not think that it should be questioned. I mentioned at the beginning the criteria set down originally in the 1972 Act and carried into the 1982 Act, which were about development, modernisation and efficiency. In terms of the post office network, that is necessary. The debate in the House last October threw up a number of issues that need to be addressed, difficult though they are. They probably should have been addressed many years ago.
The hon. Gentleman mentioned the Rover taskforce. The hon. Member for North-West Norfolk was right that most of that money was a regional selective
assistance grant that had already been applied for by BMW Rover when the problems occurred. Nevertheless, £12 million was set aside, as he rightly said. A total of £7.4 million has been paid up to now, but only £1 million of that relates to section 8 and the issue under scrutiny in this debate.The hon. Member for Sevenoaks (Mr. Fallon) made a thoughtful contribution. I was fascinated by the light that it shone on what was happening in the 1970s. I was particularly interested to know that the legislation caused the resignation of a junior DTI Minister. That made me sit up and take close notice of how we should deal with this fresh Bill.
The hon. Gentleman said that we have never helped new and emerging industry. The eight support schemes administered by the Small Business Service—there is an argument about whether there is any duplication there—focus on new emerging businesses, particularly in sectors such as biotechnology, so it is unfair to say that we are sticking to the credo of the 1970s and looking only at failing industries.
Nevertheless, as the hon. Gentleman accepted, the scheme has united all parties. There needs to be assistance when traditional industries come up against problems, in particular iron and steel and coal; there are two specific schemes, one for Selby and one in Scotland. They need that assistance. The question is whether other industries should have had similar assistance. I have mentioned distant-water trawling in my constituency, where 5,000 people lost their jobs and did not receive any help because they were classified as casual workers. There was a case for some assistance under the scheme. It was not provided under the previous Government.
It is important to mention that there is full agreement on the Labour Benches about the rigorous analysis that the hon. Member for Sevenoaks spoke about. We abolished the shipbuilding intervention fund three years ago, with the support of the trade unions and the industry itself, because it was having no effect on our competitiveness or productivity. That was an important point.
The hon. Member for Cities of London and Westminster (Mr. Field) made some important points, particularly about the City of London, which may be next in the queue for financial assistance. We will look at that claim with interest. He mentioned Conservative Members' experience of business and made the rather dated accusation that Labour Members did not really understand business. A back-handed compliment was paid to Labour by a business person whom I met recently. He said that the problem with the previous Government was that, because they had all had a directorship or two and all thought that they knew how to run businesses, they did not listen. He said, "The thing about you lot is that you know absolutely nothing about business and as a result you listen," which I thought was as good a compliment as we can expect in the circumstances.
The hon. Member for Angus (Mr. Weir) made a number of important points. He asked about RSA and in particular about the money that goes to Scotland and Wales. RSA is covered by section 7, not section 8. It is demand driven: companies have to apply for it. In
circumstances where we have the highest number of people in employment ever and the lowest period of unemployment since the Beatles released "Abbey Road", we will probably find that there is less cause for people to apply for RSA than previously. Also, the assisted areas map has changed and reduced. While we fought the good fight in Europe, we were unable to secure all the money we wanted.Another important point was raised about RSA. The Secretary of State has power under the Regional Development Agencies Act 1998 to require the regional development agencies to administer funds under section 8. That power has never been used, but we have asked them to administer powers under section 7 because they now allocate all RDA applications up to £2 million, which is about 95 per cent. of RSA.
The hon. Member for South Cambridgeshire has detailed knowledge of how the DTI works, which may or may not be helpful in his current capacity. His was an important and interesting contribution. He spoke of the need to be remorseless in trying to achieve a root-and-branch examination of the 183 support schemes. That is what we intend to do, and although it may take us a little longer, we will end up with money that is better directed.
In the light of a helpful nudge from the Whips, I conclude by saying that the Government need the legislative means to operate their business support activities. We can debate what those activities should be, but there is little doubt that such support is needed. I commend the Bill to the House, and I look forward to making good progress in Committee.
Question put, That the amendment be made:—
The House divided: Ayes 156, Noes 301.
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