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Small Firms Loan Guarantee

3. Mr. Jim Cunningham (Coventry, South) (Lab): If he will make a statement on the small firms loan guarantee. [190539]

The Chancellor of the Exchequer (Mr. Gordon Brown): Following the Graham review, which reported in the past few days, I can report to the House a major change in the scale, quality and speed of small business support throughout the United Kingdom. For firms less than three years old with turnovers of £5.6 million or less, loans now under the small business guarantee scheme will increase from a maximum of £100,000 to £250,000 and will be administered by an independent company at arm's length from the Government.

Based on the successful US model, we are also piloting enterprise capital funds that could invest up to £2 million in small businesses. With low interest rates and small business tax cut from 23p to 19p, all types of small business can get the extra finance that they need.

Mr. Cunningham: I thank my right hon. Friend for that answer. Has he implemented the recommendations on the small firms loan guarantee?

Mr. Brown: The Graham report is into the small firms loan guarantee scheme and is being implemented by the Government. The main change is that instead of being able to borrow only £100,000 for new investment, firms of less than three years' standing can now borrow £250,000. The scheme has helped thousands of companies over the years. Twice as many companies are getting help now. It is as a result of that scheme and others that 400,000 more small businesses are in the economy than there were in 1997, which shows the success of an economic policy based on stability.

Mr. Paul Goodman (Wycombe) (Con): The Chancellor of the Duchy of Lancaster has

"a cross-government role in the co-ordination of government policy."

 
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When did the right hon. Gentleman last meet the Chancellor of the Duchy to discuss small business and co-ordination? If they disagree about the co-ordination, who has the final say? Is it the Chancellor of the Exchequer or the Chancellor of the Duchy?

Mr. Brown: I think I met him at the Cabinet meeting only a few minutes ago.

Chris Bryant (Rhondda) (Lab): What the Chancellor has announced is very good news. In some of the poorest constituencies in the land, such as my own, it is difficult for new start-up businesses to access finance. Will the company have a specific remit to work proactively in some of the poorest constituencies, which have the lowest number of new businesses starting up, to help those companies to set up?

Mr. Brown: We have created enterprise areas in those areas where historically there has been high unemployment. Some 2,000 enterprise areas have greater advantages in terms of the help that can be given to start-ups and the fastest planning permission that can be granted for starting up a business. There is more help for new investment projects in my hon. Friend's constituency and others around the country.

The range of support available to small business starting up is greater than at any time in our history. It is for that reason that we now have 4 million small businesses compared with just over 3.6 million in 1997; that the number of self-employed has risen by more than 100,000 since 1997; and that the number of people employed in small business has risen by two thirds of a million since 1997. We are not complacent and intend to do more, but in every constituency of this country there are more small businesses—in some cases, several hundred more—than there were in 1997.

Mr. Henry Bellingham (North-West Norfolk) (Con): The Chancellor realises that the scheme is excellent, and we support it. It was set up by a former Conservative small business Minister. Is he aware that most of the small firms organisations have been saying for some time that it should be administered by the clearing banks without day to day involvement by civil servants? Will he heed that advice?

Mr. Brown: I announced only a few minutes ago that that is exactly what we are doing. The scheme will be at arm's length from the Government, administered by a company that can make independent decisions, free of interference from the Department of Trade and Industry. Both the Liberal party and the Conservative party had better look at their proposals for the future of small businesses because I understand that both not only want to cut the support that is available, but want to abolish the Department in its entirety.

Science Strategy

4. Ross Cranston (Dudley, North) (Lab): What representations he has received on his Department's measures to support science. [190540]

The Chancellor of the Exchequer (Mr. Gordon Brown): Following 200 representations in support of our 10-year
 
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science strategy and the announcement of an additional £1 billion of funding for science by 2008, I can report that we will have a national conference on science and innovation, in advance of the Budget, with all members of the scientific community and industry. We will discuss with them further ways of building on the successful 10-year strategy that was launched in the summer to improve the quality and quantity of science investment in the United Kingdom.

Ross Cranston: I thank my right hon. Friend for that answer. He will know that we have an excellent science base. The problem is translating that into practical reality, demonstrated by the historical low research and development expenditure. Professor van Reenen recently demonstrated that that was especially low in the 1980s because of a lack of Government support. Van Reenen and his colleagues have also said that tax subsidies have an effect, so the Government's measures on tax credits are to be welcomed. But could the Chancellor ensure that at the conference the separate issue that the Economic and Social Research Council identified in its report on productivity, namely intellectual property rights, will be on the agenda?

Mr. Brown: My hon. Friend is right—the protection of intellectual property is crucial, particularly for a country such as ours, which holds a sizeable number of the new patents that are issued throughout the world. It is also important to recognise that the development of the science base in this country is possible only if there is substantial Government funding for science. The increase of £1 billion from the Government in the next few years, together with the welcome investment by the Wellcome Foundation, which is providing an additional £1 billion, will build up the science base in this country over the next few years in a way that has not happened before. A few minutes ago, I said that we now have the best support in living memory for small businesses to develop, and we also have the best support available, and we want to do more, to aid science and technology in this country, and to help spin-off companies from the universities. Not only will we do what we can to protect intellectual property but we will maintain the growth of incentives available to science-based industries.

Chris Grayling (Epsom and Ewell) (Con): I have to say that what the Chancellor has just said is complete rubbish. Is he not aware that his changes to the rules on venture capital have killed start-up businesses emerging from our universities stone dead? Will he go away, look at the problem and come back with something positive to tell the House? He should stop telling us things that, frankly, are not what universities are experiencing on the ground.

Mr. Brown: I would take the hon. Gentleman's representation seriously if he had been right about the windfall tax, which he opposed, extra spending on the NHS, which he opposed, and the minimum wage, which he opposed. He is factually wrong about what is happening to the venture capital industry in this country. The extra incentives that we have given that
 
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industry have been welcomed by all parts of it, which shows how remote the Conservative party is from business and industry in this country.

Mr. John McFall (Dumbarton) (Lab/Co-op): The Chancellor may be aware that the Treasury Committee is currently conducting an inquiry into regional productivity. On a recent visit to Germany, we were impressed by the nationwide Fraunhofer research institutes, which bridge the gap between higher education research and manufacturing industry. What measures is he taking to ensure that the welcome increase in science spending will secure the linkage between universities, higher education, manufacturing and other industries so that we can increase economic prosperity and productivity throughout the United Kingdom?

Mr. Brown: My right hon. Friend, who is undertaking that investigation as Chairman of the Treasury Committee, is quite right—we want to build modern manufacturing strength in this country, which depends on investment in science and technology and on universities being in a position to produce spin-off companies. However, it also depends on businesses investing in innovation in ways that they did not in previous years. We have set a target to raise innovation expenditure from 1.9 per cent. to 2.5 per cent., and have put in additional money ourselves. The research and development tax credit has been taken up by thousands of small firms—

Mr. Mark Prisk (Hertford and Stortford) (Con): The Chancellor is wrong—it has been taken up by only 5 per cent. of all firms.

Mr. Brown: The hon. Gentleman is quite wrong, as 95 per cent. of the firms eligible for the small business R and D credit have taken it up. I shall write to him today to put him right about the facts. Perhaps the Treasury Committee should undertake an inquiry into the Conservative party's lack of knowledge about what is happening to British industry. We will have to offer a course of education so that its candidates are prepared at the next election.

Mr. Prisk: As the Chancellor wants to talk about innovation, let us do so. Innovation and science, as he knows, rely on good research and development. He mentioned his tax credit scheme, yet it specifically and quite intentionally excludes the smallest partnerships and firms. Given that those are the very entrepreneurs who are at the cutting edge of both science and technology, why is the Chancellor deliberately excluding them from the scheme? Perhaps he should learn that lesson.

Mr. Brown: We are spending £600 million on the small business R and D credit scheme. The hon. Gentleman proposes to extend the scheme to other firms, so presumably he wants to spend more on that credit. Why, therefore, does the shadow Chancellor want to cut the budget for science and research and development? Perhaps the hon. Gentleman should have a seminar with his right hon. Friend to try to square the circle.

Mrs. Anne Campbell (Cambridge) (Lab): Scientists in my constituency appreciate the Chancellor's
 
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championing of science and the vast increase in that budget under this Government. How can we ensure that 2.5 per cent. of publicly funded research and development actually gets to small businesses?

Mr. Brown: Small businesses collect the R and D tax credit themselves. The tax credit is efficient; it works in America; and now it is working in Britain. The Conservatives should understand that thousands of companies' innovation plans depend on the R and D tax credit, which would be abolished under a Conservative Government. Not only the CBI, but all major businesses in this country welcomed our 10-year science document. The Opposition may want to disparage the Royal Society, Microsoft, the Wellcome Trust, the CBI and Qinetiq, which wanted the science strategy. The Conservative party would cut science expenditure, which, like the health service, education, transport and law and order, is another area of public expenditure that is at risk from a Conservative Administration.

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