Draft Financial Assistance for Industry (Increase of Limit) Order 2003

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Dr. Vincent Cable (Twickenham): I do not have a great deal to add. We have had an extensive debate on industrial development assistance, which covered the large sums to be provided under the new Bill. I do not want to repeat those arguments, but I would like to raise one question that I raised during that debate, and I hope that the Minister can devote more time to it today. How can we get proper accountability and feedback on the various schemes that are funded? We are talking about large sums—hundreds of millions of pounds in some cases—and a few thousand spent on proper ex post evaluation would be helpful.

Let us consider the few schemes highlighted by the Minister. I am sure that the small firms loan guarantee scheme is admirable—no one is questioning its validity—but we have no evidence on which to base any assessment as to how effective it is, or how many companies it helps to survive or grow that would not do so otherwise. It would not require a great deal of effort to carry out a proper professional evaluation of how the scheme works, its success rate and how it could be adapted or changed. However, there is no point in my making recommendations for extending or contracting it without some evidence base, and we do not have that. The annual report is simply a description, not an analysis, and without some analysis we are flying blind.

Similarly, I am sure that the UK Coal scheme is admirable in many ways and that it achieves what it is designed to achieve, which is to help coal miners to adjust to a painful process of contraction. However,

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the scheme covers not solely adjustment assistance, but some degree of production subsidy. It would be useful to know what the scheme achieves, where money goes and what is the social return on that investment.

The other category that we have debated many times is the post office reinvention scheme. The contraction involved there is far in excess of what would be required to restructure the urban network more efficiently. As all Members, including the Minister, know, we are talking about the fallout from the big losses that the network will suffer as a consequence of the ACT—automated credit transfer—scheme. The DTI has been asked to find funding to pay redundancy and contraction costs in respect of savings to the budget of the Department for Work and Pensions. We shall have plenty more opportunities to debate the future of the Post Office and its scheme, however, and my central question is, how do we create a more informative system of feedback and reporting, including an evaluation of the schemes that the substantial amount to be paid under the order will fund?

2.46 pm

Mr. Mark Field (Cities of London and Westminster): Likewise, I shall speak briefly rather than rehearse the arguments that we heard in the 24 February debate.

I would like guidance from the Minister on the rationale behind maintaining the structure under the order. As he is aware, adding £200 million at this juncture means reaching the ceiling of £2.7 billion. The next time that we discuss these matters in Committee, a further £1 billion will have been spent to reach the £3.7 billion baseline that we debated and agreed to on 24 February. Thereafter, tranches will be paid at £600 million a time. Has thought been given to how that system is structured and how it has operated during the past 21 years?

Mr. Bellingham: My hon. Friend has hit on a good point, which I hope the Minister clarifies. When the legislation is introduced, we will have a new ceiling of £3.7 billion. It is my understanding that there will be no scrutiny when that figure is reached, but that there will be scrutiny when the first tranche of £600 million is reached. Perhaps the Minister will comment on that.

Mr. Field: That is an interesting point. We are talking about additional expenditure of £1.6 billion, which is equivalent to eight separate tranches being spent under current arrangements, before there is further scrutiny by the House. It may have been more fruitful to have had this debate last Monday. Will the Minister tell us whether thought has been given to restructuring the system by which the scheme operates and whether it is felt that the concept of four additional tranches to an initial sum is the right way forward?

The Chairman: Order. Any discussion of expenditure that goes beyond the cap under the order is out of order.

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Mr. Field: I fully appreciate that, Mr. Taylor. I just wanted to say that we have a structure in place that goes back 21 years and which involves initial sums and relatively small additional amounts. However, I suppose that £200 million may be a smaller amount to Cities of London and Westminster than it is to North-West Leicestershire. It will be interesting to learn whether any thought has been given to a different structure, given our experience of the scheme that we are debating.

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Alan Johnson: I welcome the consensus on the order. Such consensus is not unusual, as on the previous three occasions that we have come to take another bucket of water from the well, political consensus has been achieved. It happened once under the previous Government and this is the third time for this Government. I welcome that.

The hon. Member for North-West Norfolk (Mr. Bellingham) asked when the money would run out. As I said in my opening speech, we expect to reach the £2.5 billion limit by the end of this financial year. No matter what fair wind is behind the new Bill, we will not get Royal Assent until the summer. One cannot predict such things, but Royal Assent will probably occur before 17 July, which is the start of the summer recess. We have had to come back to the Committee to avoid leaving ourselves with no legal basis on which to operate the schemes. I do not know precisely when the extra £200 million tranche, which I seek today through the order, will run out, but I know that there is a gap. We can come back for only one tranche of money, and we would be foolish not to seek the Committee's agreement to the order.

The hon. Gentleman also raised an important point about section 8 schemes. There are 15, and 14 of them have been introduced by the Government in the past six years. On Second Reading, I undertook to write to all members of the Bill Committee to set out the schemes and to analyse how they have worked, which will include all the available information on how they have fared. However, it is difficult to write to members of the Committee before I know who they are. That letter, which they will receive before the Bill is discussed in Committee, will go out to them as soon as I know who they are. That point is important, because it relates to the extra £200 million for the section 8 schemes that I am asking the House for.

Mr. Bellingham: Perhaps the Minister can include on the list of recipients of that letter the members of this Committee who are interested.

Alan Johnson: I am happy to do that.

I have a feeling that section 15(1) of the 1982 Act, which was introduced by the previous Government, prevents us from bringing the annual report forward. I understand that we must lay a report before Parliament not later than six months after the end of the financial year to which it relates. That would make it difficult to implement the suggestion of the hon. Member for North-West Norfolk to bring it forward. However, I shall consider the proposal and look at the legislative problems that it might produce.

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The hon. Gentleman asked a specific question about excluded sectors and restrictions in the small firms loan guarantee scheme. On 27 November 2002, we announced the expansion of the scheme's coverage by removing sector exclusions for retailing, catering, coal and hairdressing, some of which he mentioned, as well as house and estate agents, libraries, museums, cultural activities, motor vehicle repair and servicing, steel and travel agents. Those removals will come into effect by April 2003. Some restrictions, including those on retailing and motor vehicle repair, have been removed, but some, such as those on education and medical health services, remain on legal or policy grounds. However, the list of excluded sectors is regularly reviewed to ensure that due account is taken of changes to the relevant law, rules or policy. The announcement was made last November, and I hope that it meets the hon. Gentleman's point.

The hon. Member for Twickenham (Dr. Cable) raised a point, which was also mentioned by the hon. Member for North-West Norfolk, about the scrutiny of those schemes. I told the Committee that agreed the previous order last January that we had independently assessed all the schemes in 2001. The small firms loan guarantee scheme, which we have discussed, was independently studied by KPMG. That study was completed in 1999. The evaluation, which covered 1993–98 and identified a continued need for the scheme, was made available through the House of Commons Library and the DTI. On Second Reading, I made the point that all the information should perhaps be drawn together in the annual report, but there are existing independent evaluations from the National Audit Office or KPMG. I shall make that clear in the letter to members of the Bill Committee and to members of this Committee.

I should point out in passing, due to my long experience of dealing with the post office urban network, that the hon. Member for Twickenham is wrong to say that the need for money under the scheme for the urban post office reinvention programme comes about through the move to ACT. The conclusion of the performance and innovation unit's 2000 report, which all parties in the House supported, was that, irrespective of any changes that would come about through ACT or the creation of

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the universal bank, far too many urban post offices were fighting to make a living and that the issue should be tackled not by the Government, but through the Post Office and the National Federation of Sub-Postmasters. There would have been a need for the scheme with or without the move to ACT.

The hon. Member for Cities of London and Westminster (Mr. Field) talked about restructuring and proper scrutiny of the schemes, and in an intervention the Opposition spokesman asked for confirmation of his understanding of the matter. I can confirm that the ceiling will increase to £2.7 billion if we agree to the order. There is a separate discussion about the new amount, which will consist of a first tranche of £3.7 billion. It will be scrutinised by Parliament only when the Government come back for the next tranche of £600 million. The hon. Member for North-West Norfolk was absolutely right in that respect.

It was explained extensively last week that we will review 183 DTI business support schemes. Eight of the 15 schemes under section 8, which we are debating, will be part of the review. They are not specific to industries such as the steel industry, the post office urban network or the coal industry, but they are like the schemes for small business services, of which there are five. It is important to note that the DTI spends £1 billion every year on business support. The 15 schemes that we are discussing account for 2 per cent. of that, so they are part of a much wider issue. We shall review how we provide business support.

The Government need the legislative means to operate their business support activities, and the order will allow assistance to continue to be offered under the schemes referred to earlier. It will also provide the means for new business support to be introduced using the section 8 power. I hope that the Committee supports it.

Question put and agreed to.


    That the Committee has considered the draft Financial Assistance for Industry (Increase of Limit) Order 2003.

Committee rose at three minutes to Three o'clock.

The following Members attended the Committee:
Taylor, Mr. David (Chairman)
Anderson, Janet
Bellingham, Mr.
Bradley, Mr. Keith
Cable, Dr.
Caton, Mr.
Cotter, Brian
Dobson, Mr.
Field, Mr. Mark
Hughes, Mr. Kevin
Johnson, Alan
Laxton, Mr.
Murphy, Mr. Jim
Robertson, Hugh
Steinberg, Mr.

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