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The hon. Gentleman also asked about another matter that I mentioned in my statement—about how we can reach agreements with the individual banks that are taking advantage of the recapitalisation fund to ensure that they continue to lend to small businesses. We do want to monitor that closely; we will be in discussion with the banks about it and we have been very clear that we want them to continue marketing actively. We want to talk to them about ensuring that they make competitive
rates available. As I said, it is not for the Government to make individual lending decisions, but we need to understand the principles by which they operate. That is the right thing to do.
Lastly, the hon. Gentleman mentioned the small firms loan guarantee scheme. We always want to see whether we can make that administratively simpler, so I shall take his comments into account. We also want to ensure that the scheme is actively marketed to SMEs by the banks, which have not always done as much as they should have. I hope that we will see significant change over the coming months.
Mr. David Hamilton (Midlothian) (Lab): On Monday, I met the chamber of commerce chief executive, who is also chief executive of the enterprise trust, and it became apparent to us that although we wanted to achieve things through HMRC, and, indeed, the Treasury, it is the Scottish Administration who have the power. Will the Minister agree to meet me, and a number of other Scottish MPs, to discuss how we can overcome that problem, because it is imperative that the changes are implemented in Scotland as quickly as possible?
Ian Pearson: As the House will be aware, enterprise policy is a devolved matter, so today’s statement applies only to England. However, I would be happy to meet my hon. Friend to discuss these issues further, because supporting small businesses is important to this Government, wherever those small businesses are located.
Peter Luff (Mid-Worcestershire) (Con): I intend no criticism of the Minister, who is an able and decent man, when I say that he has said nothing to this House today that his noble Friend the Secretary of State did not tell the Select Committee that I chair at yesterday’s sitting. That raises important questions about the accountability of the Department for Business, Enterprise and Regulatory Reform to this House, but those are questions for another day.
Let me press the Minister on one issue that we also raised with the Secretary of State yesterday—the question of business rates, particularly void rates. Small businesses face a huge burden when they cannot let property in the current commercial downturn. That urgently needs to be relieved, and the Government should also drop their plans for business rate supplements, which pose another huge challenge to the cash flow and finances of businesses in very difficult times.
Ian Pearson: I acknowledge the hon. Gentleman’s points. As Chair of the Select Committee on Business, Enterprise and Regulatory Reform, he speaks with considerable experience. I believe that the package is an important one, which will be welcomed by business because it offers practical measures that will make a difference, but it should not be seen as the last word on Government support. It builds on the already impressive programme of business support that we, as a Government, have provided. Over the coming months, we will be looking to see what more we can do to help businesses through these very difficult economic times.
Mr. Eddie McGrady (South Down) (SDLP):
I welcome the Minister’s statement and his commitment to SMEs, on which the economy and community of Northern Ireland are very dependent. On the policy of flexibility for HMRC, will he give further indication of what that
means, so that we can interpret it on the ground and help our constituents to avail themselves of that opportunity?
I endorse the point in the previous question about the rates on vacant properties. Apart from the spectre of vacancies, we now have genuine vacancies brought about by the economic recession. As the Minister is probably aware, transport, gas and electricity costs in Northern Ireland are far above the UK average, so will he provide some help through equalisation or rationalisation?
Lastly, I would like to ask the Minister, even though he has no jurisdiction in the matter, whether he is aware that the failure of the Executive to meet in Northern Ireland has frustrated the issue of Government contracts for public utilities and public works, so could either he, if he has personal knowledge, or, if not, his right hon. Friend the Prime Minister, encourage the Executive—
Mr. Speaker: Order. I am always interested to hear the hon. Gentleman’s questions, and I am, as he knows, very fond of Northern Ireland. Perhaps one day, however, I will get just one supplementary question from him.
Ian Pearson: My hon. Friend raises a number of points, most of which are the responsibility of the Northern Ireland Administration and their Department of Enterprise, Trade and Investment. I cannot reply to those questions, but in response to his question about his desire for HMRC to show more flexibility, I can be pretty clear. We do not want HMRC to be first in the queue to put companies into bankruptcy in order to get their money. We want it to be flexible, to recognise companies that are in difficulty and to discuss issues with them on a case-by-case basis—and I hope that that is what HMRC will do.
Mr. Brian Binley (Northampton, South) (Con): The Minister says that the Government are keen to do all that they can to help small business, yet this year they are increasing capital gains tax by £300 million and small business corporation tax by £370 million, and charging £900 million on empty properties. Will the Minister now tell us that those increases will not be implemented and that he will change the rating arrangements to provide relief—or are his words fine, but not very meaningful?
Ian Pearson: What I can tell the hon. Gentleman is that, in my view, the measures we have announced can help to make a real difference and are attuned to the difficult times that we face. I am sure he will welcome the entrepreneurs’ relief on the first £1 million of capital gains, and also the effective tax rate of 17.2 per cent. on a £10 million capital gain. I do not think that 17.2 per cent. on a £10 million capital gain is an unreasonable price to pay.
Paddy Tipping (Sherwood) (Lab): Small businesses are vital to the health of the rural economy. Will the Minister continue to work to ensure that high-quality broadband services are available even in the least populated areas?
Ian Pearson:
My hon. Friend is a doughty champion of rural areas, and he is right to raise the issue of broadband connectivity. We want to ensure that broadband is available in rural as well as in urban areas, and we have been very good at achieving the targets that we
have set for broadband access, but there is more that we can do. I should be more than happy to discuss the issues with my hon. Friend, and also to put him in touch with Lord Carter, who has direct responsibility for them.
Adam Price (Carmarthen, East and Dinefwr) (PC): The Minister says that he expects the rest of the banking sector to follow the lead of the recapitalised banks—HBOS and the rest—in reopening lines of credit. I wish that I shared his faith in market mechanisms after all that has happened over the past few weeks. Surely a better approach would be to insist that all banks—not just those that participated in the recapitalisation scheme, but those that availed themselves of the £250 billion of Government guarantee for new debt—agreed to lend responsibly to small businesses.
Ian Pearson: We all want to see responsible lending, but, as I said earlier, the banks that have taken advantage of the recapitalisation currently constitute more than 50 per cent. of the market. There is still a competitive market out there when it comes to loan finance, and our priority must be to ensure that competitive products are available to SMEs.
I do not share the hon. Gentleman’s fear that banks that do not take advantage of the recapitalisation scheme will still not want to lend to good SMEs. What we must do is ensure that the many excellent companies that we have in the United Kingdom still have access to finance when they require it, on reasonable and acceptable terms, so that they can invest for the future.
Harry Cohen (Leyton and Wanstead) (Lab): The Prime Minister has said that, at the European summit, he put pressure on the European Investment Bank to release millions of pounds for small businesses in this country. How will that money filter through to small businesses in, for example, Leyton and Wanstead?
Ian Pearson: As I said earlier, the banks have expressed an initial interest in making £1 billion available to small and medium-sized businesses through the European Investment Bank. That has not yet been completely sorted out, but it is potentially a significant package which, if we can get it right, will benefit companies in areas all over the country, including my hon. Friend’s constituency.
Mr. Gregory Campbell (East Londonderry) (DUP): The Minister has outlined a number of measures which we hope will go some small way towards assisting small businesses, although we must wait to assess their efficacy. He said that banks should not pass on unreasonable costs. Given the recapitalisation that was mentioned a few moments ago, what steps will the Government take to ensure that small businesses do not face the unreasonably high costs that have faced them heretofore?
Ian Pearson:
I also said earlier that conditions had been applied to the banks involved in the recapitalisation scheme in regard to lending to small businesses, and also in regard to the provision of mortgages. We will
continue to engage in a dialogue with the banks and monitor their actions, to ensure that companies are given fair access to loans at competitive prices.
Nigel Griffiths (Edinburgh, South) (Lab): Will my hon. Friend avoid returning to the woeful Conservative record on small businesses, which experienced a doubling of VAT, the imposition of a tax of more than 30 per cent., and a 25 per cent. interest rate which crippled them? Will he also ensure that the banks’ stampede to withdraw credit facilities and claw back their loans is halted, that the process is properly monitored, and that, at the appropriate time, the effectiveness of that action is reported to the House?
Ian Pearson: My hon. Friend is right to point out that the Opposition have form in this regard. The fact that they have wanted greater financial deregulation, the fact that they did not support us on Northern Rock and Bradford & Bingley, and the fact that they seem to have completely lost faith with the City of London give great cause for concern about whether they are acting as a responsible Opposition.
As I said earlier, during this difficult economic time we want to ensure that banks lend responsibly, but also to ensure that they do not profiteer and try to restore their balance sheets at the expense of good British businesses. That is something that not just the Government but, I am sure, the whole business community will want to watch very closely.
Mr. John Baron (Billericay) (Con): May I return the Minister to the issue of small business rate relief? Many businesses across south Essex are eligible for the relief, but do not access it because of the paperwork and bureaucracy involved. Why will the Government not make it automatic?
Ian Pearson: I understand that there is a two-page form for the claiming of small business rate relief, and that it needs to be filled up only once every five years. It has been suggested that it might be possible to automate the relief, and we will consider that possibility, but I do not think it is as difficult to apply for it at present as the hon. Gentleman seems to suggest.
Anne Snelgrove (South Swindon) (Lab): Last year, Swindon and Bristol jointly topped the league for the biggest growth in the number of small businesses. I welcome the announcement of practical measures to help our SMEs in the south-west, but what can my hon. Friend do to encourage more local councils to put business their way, and to persuade councils to follow central Government’s lead in respect of payment within 10 days?
Ian Pearson: My hon. Friend has made some good points. We certainly want to encourage local authorities to pay promptly, and a number of them already do. During these difficult times, however, we should consider how we can use public money most effectively to support our small businesses. As my hon. Friend says, Swindon and Bristol contain many very successful small businesses, and over the years I have visited a number of them.
Mr. Rob Wilson (Reading, East) (Con):
I, too, congratulate the Minister on his new post. Does he agree that SMEs need proper and detailed macro-economic
as well as micro-economic information? Will he confirm two facts: first, that we are now entering a recession, and secondly that we have not seen an end to boom and bust in the economic cycle?
Ian Pearson: I thank the hon. Gentleman for his opening remarks. As somebody who used to run a small business, I always wanted to understand the global competitive environment, so what he says about SMEs is right. The Government do not make it their practice to provide a running commentary on the state of the economy, but, as the hon. Gentleman is aware, Government forecasts will be updated in the pre-Budget report.
Mr. David Kidney (Stafford) (Lab): The Government cannot make banks lend money to small businesses under the small firms loan guarantee, but given worrying reports of banks refusing to take any part in the scheme at the present time, can the Economic Secretary, at least for the duration of this serious global economic downturn, make the word “guarantee” refer to access to capital for those small businesses that need it?
Ian Pearson: It is important that we have a properly effective small firms loan guarantee scheme that is actively marketed. The Government will want to make sure of that, so I hope I can give my hon. Friend the assurance he seeks.
Sir Robert Smith (West Aberdeenshire and Kincardine) (LD): It is all too timely that we are recognising the real consequences for real people of this recession, with the news yesterday of the proposed closure of a paper mill in Inverurie, with the loss of 400 jobs. The recession will, therefore, hurt real people in the economy. To return to the Economic Secretary’s announcement about the HMRC and its policy to adopt an understanding approach to business and the collection of tax, I understand that it is also under an incentive to maximise its revenue collection. Will the Minister therefore place in the Library the revised guidance that will go out to the HMRC putting into effect what he has announced in his statement?
Ian Pearson: I cannot guarantee to do that at this point in time, but let me take that request away and see whether it is possible to do so. The redundancies in the hon. Gentleman’s constituency are regrettable, and they reinforce that we are facing difficult times and that we need a Government who are active and decisive in taking practical measures that will help businesses.
Alison Seabeck (Plymouth, Devonport) (Lab): I welcome the package my hon. Friend has announced, but he will be aware that many small businesses have earmarked for their January 2009 tax bill money that is currently invested in Icelandic banks. While they may get some of that money back under the guarantee scheme, that could take months. Is there any scope for the HMRC to defer payments in the same way as happened when the foot and mouth crisis hit us?
Ian Pearson:
The situation involving the Icelandic banks is complicated, and people’s circumstances depend on whether they are creditors in an Icelandic branch that is regulated by the Icelandic authorities or in a subsidiary of an Icelandic bank that is regulated through the Financial Services Authority. I hope that we can make very quick progress in the administration of the Icelandic banks’ subsidiaries in the United Kingdom.
We have also been strongly pressing the Icelandic authorities for a quick and fair administration in Iceland, so I hope we can give companies with investments in those banks some early reassurance—although I do not know the scale of the problem. We will continue to do all that we can to press the Icelandic authorities to ensure that the UK creditors are treated fairly.
Anne Main (St. Albans) (Con): For about eight to 10 days now, I have been asking the Government one simple question, and I would like to give them another bite at the cherry. Last Monday, I said there was concern among small businesses about the £300 million raid on their funding through the regional development agencies. On Monday, I was told by an official that it was a difficult decision, taken with reluctance, and that the Prime Minister and other Ministers had been involved in it. I would like to know what evaluation was made of the impact of that decision on small businesses. I asked on Monday, and got no answer. Yesterday, I asked the Minister of State, Department for Business, Enterprise and Regulatory Reform, the hon. Member for Wolverhampton, South-East (Mr. McFadden)—he is sitting next to the Economic Secretary now—and got no answer, and in my speech I requested an answer but got none, and nor was there any mention of it whatever in the summing up. I give the Economic Secretary another bite at the cherry: what evaluation was made of the impact on small businesses?
Ian Pearson: RDAs are important economic agents in their regional and local economies, and it is right that the Government provide support to them. Of course, decisions will from time to time be taken on different matters when there are changing priorities—and I would like to think that the hon. Lady would have welcomed the housing package we announced on 2 September this year.
Mr. Adrian Sanders (Torbay) (LD): The Government are right to focus on cash flow and improving credit, but what more can be done to help local authorities as, at the end of the day, it is they who are asked to give an—often discretionary—concession to small businesses, and they frequently say they do not have the funds to do that?
Ian Pearson: The hon. Gentleman is right that cash flow is one of the first priorities for businesses during economic downturns. That is why the Government have taken the action we have taken and why getting in good, top-quality business advice is crucial. Many big businesses have a range of support available to them, but small companies often feel left on their own, and we as a Government want to say very clearly that we are on their side, and, in turn, we are providing practical advice and support to them. I believe that responsible local authorities also want to do that. Local authorities are independent in these matters, but I want to encourage them to work with Business Link and to ensure that we have a co-ordinated programme of support in local areas, as that is important.
Mr. Henry Bellingham (North-West Norfolk) (Con):
Does the Economic Secretary agree that sub-post offices are among the most important family-run businesses in both urban and rural areas? Does he also agree that as
many of our constituents are currently moving money into safe post office and national savings accounts, now is not the time to scrap the Post Office card account, and will he give a guarantee today that it will remain in place?
Ian Pearson: That matter, which is clearly one for the Department for Work and Pensions, does not relate to the statement before the House. However, in answer to the hon. Gentleman, there are many small businesses in his constituency and the region that are the backbone of that local economy. It is right that this package of support is being made available to them. I hope he will welcome it, and I also hope he will appreciate that if his Front-Bench colleagues got their way and cut lending, it would not be possible to introduce such packages and small businesses in his constituency would be unable to get the support to which I think they are entitled.
Mr. Speaker: Order. We must move on.
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