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The credit guarantee and the special liquidity schemes, which were announced at the same time as the recapitalisation scheme, will help to unfreeze inter-bank lending, which will in turn free up liquidity at the other major banks, too. We are looking to see that that is passed on to businesses and home owners. It is in everyones interest that the financial system unfreezesthat lending unfreezesand we get that vital part of the economy working. It is like oil in an engine. We have to get that in to facilitate the smooth working of the engine again. That is what the recapitalisation, special liquidity and credit guarantee schemes are designed to do.
John Thurso: My question is regarding the small firms loan guarantee scheme, which the Minister has mentioned. I welcome the fact that the Government have put more money in, but the extra money will not be used because last year, according to the annual report, only £270 million was lent. The number of firms availing themselves of that assistance has gone down year on year, and the default rate, which is costing the Government £68 million or £69 million, is running at 13 per cent. The critical difficulty is the way in which the scheme is administered and who is eligible. What will the Government do to make it available to more firms?
Angela Eagle: The hon. Member for Solihull raised that matter. My intention was to go on to deal with some of those issues, but I am more than happy to do so now. The Government are seeking to increase demand for the scheme. We increased the amount available for the scheme by £60 million to a total of £360 million for this financial year, which is a 20 per cent. increase. Ministers are engaged with banks to find ways of ensuring that the banks are promoting the scheme appropriately and that the liquidity that is in it is put where it is needed in the most efficient way and in a timely fashion. It is in everyones interest to ensure that that works.
As the hon. Lady said, a £250,000 limit has been set for the scheme. That was in response to the independent Graham review. The vast majority of loans at the moment are not at the maximum level, but we are considering options for improving the scheme. We want to see whether increases might be an appropriate way of dealing with the issue, but we are also considering outreach to ensure that the money gets where it needs to go. It is not applied for directly, as the hon. Gentleman hinted at in his speech. It is administered by the bank or as part of its portfolio of support available. We are considering means of improving the scheme and increasing uptake of it. Obviously, that will be in collaboration with the banks, but we may be able to do other things to ensure that knowledge of the schemes availability is more widespread.
My right hon. Friend the Member for Makerfield might know one such outlet in the form of the business advice that he talked about. We need to ensure that advice organisations such as Citizens Advice and debt advisers are aware of these programmes. Often, they sound boring and people do not understand or know about them. In the past, perhaps we have relied too much on those who are experts to use them. We need to ensure that knowledge of the programmes is much more widely held than perhaps it has been, and we will ensure that we bring that about.
The hon. Lady, in a series of interesting and important comments, suggested that Business Link should provide advice. It already provides advice to all firms, including on how best to access finance. In these times, we need to ensure that all advice organisations up their game as much as possible, respond quickly to a rapidly changing situation and give good, well-focused advice at just the time when it is needed. I trust that in the current circumstances that will come about.
My right hon. Friend made an extremely good speech, in which he mentioned a range of issues. I think that we were all extremely pleased to hear that the organisation with which he has become involved since he stepped back from manic ministerial life has launched debt advice for business. He is right to point out that the information from the front line about the 60 per cent. increase since September in calls to the helpline from small businesses is an early indicator of what is going on. It gives the Government information and advice about what is happening on the front line far more quickly than official statistics can. An important part of our having feedback mechanisms is so that we can respond quickly to the situation as it is changing. Naturally, I thank him for pointing out that it is Government investment in those advice services that has enabled 135,000 people to be helped this year. The quite sophisticated organisation that is emerging is doing important and pioneering work, offering debt advice not only to individuals but to small businesses. That is part of the financial inclusion fund.
I will pass on to the Chancellor my right hon. Friends request as to whether it is possible to have direct consumer representation on the National Economic Council. I promise that we will get back to him on that in due course. He should take pride in the fact that the announcements today on repossessions have been developed as a policy response partly because of the information that the Money Advice Trust and others feed back to Government to tell us what is going on regionally at the front line.
Mr. McCartney: I thank my hon. Friend for that comment; I will pass it back to colleagues on the ground. The Government have assisted in putting in place a pilot project whereby we give advice in the courts for those who are at risk of losing their property. The Government may want to examine whether we can roll that out further to assist them with the announcement made today at Prime Ministers Question Time, because that type of intervention will give security to the Prime Ministers statement and help to ensure that people do not end up, wrongly, in front of a court having their house repossessed.
Angela Eagle: I could not agree more. I promise that we will continue to see what we can do, using the feedback mechanisms that have developed for debt advisers to respond rapidly to newly emerging problems.
My right hon. Friend mentioned loan sharks, which are an issue in many communities, including mine. I recently attended a conference on that in my constituency. I was happy to see that money from the Department for Business, Enterprise and Regulatory Reform, which has been developing a national response to the problem of loan sharking, has led in the past year to the closing of £6 million-worth of loan shark books. In my own area of the north-west, £100,000-worth of loan shark books were closed. There have also been prosecutions.
What is just as important is that debt advice is being given to those who have fallen into that trap. They are often guided to credit unions and given other advice. In one case, someone was rehoused. Extremely important and very focused work is going on in that area. However, I agree that once the loan shark books have been closed down, they will have to be replaced with other more sensible ways of borrowing, otherwise the same conditions will continue and the next loan shark will deal with the demand.
My right hon. Friend might like to know that, as part of the recapitalisation scheme, the banks have agreed to conditions to support plans that help people struggling with mortgage payments to stay in their homes. The banks also support the expansion of financial capability initiatives, and that is in addition to conditions ensuring the availability of lending.
The hon. Member for Caithness, Sutherland and Easter Ross (John Thurso) made his usual interventions, and, as always, because of his experience, his speech was extremely well targeted. He and I have spent many an interesting hour on the Treasury Select Committee questioning bankers and others, and I look back on that time with great fondness. He was right to emphasise the importance of credit unions, especially for those with small cash needs, but he was also right to talk about the serious issues that face many small businesses. I shall leave information about HMRC instructions in the Library because, although I heard his question, I have not had time to fashion a response.
The hon. Gentleman spoke also of developing memorandums of understanding or protocols. Our relationship with the banks that have recapitalised is obviously slightly different to the one that we have with those that have not yet gone for recapitalisation funds. However, major banks and policy makers recognise that we need to ensure that the economic fallout of the credit crunch and the dramatic events that we have seen over the past few months should impact as little as possible on the real economy. One way to achieve that is to see what we can do to ensure the flow of funding to the SME community. As I said, it is responsible for generating nearly 50 per cent. of our business activity, tax revenues and so on.
The hon. Gentleman also asked how the 10-day aim would be fulfilled, a subject raised also by the hon. Lady. The Government have led by example and agreed to ensure that payment is made within 10 days. That will amount to about £70 billion of procurement. On-time payment will increase cash flow for those who contract with the public sector, and regional development agencies have announced that they will do the same. That represents about £750 million of expenditure. The Secretary of State for Communities and Local Government has written to the Local Government Association to ask if it will follow suit. The chief executive of the NHS has done the same. If everyone gets on board, that will represent £175 billion of procurement.
The hon. Lady was concerned about how that money could be passed down the supply chain so that not only large companies benefited. The Government look to the private sector to follow where the public sector leads. Many private sector firms are already committed to making prompt payment; they are identified as members of the Institute of Credit Management. We expect big businesses to regard the passing on of such payments as
a matter of corporate and social responsibility. Short of legislating, which no one has suggested, it is up to everyone to ensure that laggards and others that put small business in real danger by not passing on payments promptly will get the oxygen of publicity. I would like to see businesses coming forward voluntarily to say that they will follow the Governments lead.
Mr. McCartney: May I invite my hon. Friend to do one more thing for small businesses? They are under a great deal of pressure from energy costs. Looking across Europe, one can see that the UK business community has proportionately greater costs for energy than some businesses on the continent. It is not an anti-European point, but perhaps my hon. Friend, with the help of the Secretary of State for Energy and Climate Change, will consider Ofgems lack of effectiveness as regulator in properly looking after the interests of the small business community, as well as general consumers, given that the cost of energy is fundamentally undermining the stability of business.
Angela Eagle: I thank my right hon. Friend for those observations. He is right, but energy costs for businesses can be improved the more energy efficient they are. There is a great deal of leeway for businesses to improve their energy efficiency and there are quite short payback timesbut that clearly needs investment, which brings us back to the beginning. Many things can be done, and the Government are considering them. I promise to pass my right hon. Friends observations to my right hon. Friend the Secretary of State of the new Ministry.
The hon. Member for Fareham (Mr. Hoban) observed that there have been no debates on small business, and then, just like the buses, three come at once. I suspect that we have many debates on small business, but it is right that hon. Members had the chance, today and yesterday, to reflect on the real worries that people have. I welcome the opportunity to respond to the debate.
I was astonished to discover that the hon. Gentleman could not enlighten us on the cost of the eye-catching Opposition suggestion that VAT payments should be deferred for six months for small and medium-sized enterprises. It is hard to work out what the cost would be. Last year, £80 billion was paid in VAT, and 50 per cent. of business activity can be attributed to SMEs. A six-month holiday could cause the Government cash-flow problems worth billions of pounds, and it could cause some practical problems too. Likewise, I was puzzled that the Conservative party website did not have those costings proudly displayed for all to see. The figures have obviously slipped out of the hon. Gentlemans brief.
It is by no means clear that VAT holidays would apply only to small businesses, and if we had to give them to all businesses, it would put everyone six months in arrears in their VAT payments. Once that period came to an end, how would companies deal with the cash-flow problems that suddenly hit them? There seemed to be some hint about interest payments, but that too could represent a large cost. The Government may have to borrow morewe have been criticised for borrowing by the Conservative partyto make up the cash flow for the six months while no VAT was coming in.
The Opposition have not properly explored a range of issues, which makes me think that that was a PR suggestion rather than a properly worked out policy. I
wait with interest to see what the costings are. My right hon. Friend the Member for Makerfield suggested that the Opposition could circulate a letter outlining the cost. I would certainly be interested to see the contents of such a letter, but I shall not hold my breath.
Again, I congratulate the hon. Member for Solihull on securing this timely debate. I hope that she agrees that it has been interesting, focused and worth while. We have focused on the practicalities of how to assist small businesses to get through in the best possible way.
This has become an extremely important issue in my constituency, which is small, rather overcrowded and close to London. We are protective of our green belt and of the ancient woodlands in Epping Forest, which are important socially and environmentally. I am glad that the Minister has now found his seat.
Let me explain. There have always been Gypsies and Travellers temporarily accommodated in and around Epping Forestthat is part of life and no one objects to it. Sometimes, they have stopped for a while before passing on peacefully to their next place of residence, and sometimes, especially in recent years, some have unfortunately caused trouble by leaving an enormous mess behind. Many hon. Members will be familiar with such a situation in their own parts of the country. Once the Gypsies and Travellers have moved on, they sometimes cause health and safety problems and leave taxpayers an enormous financial cost for clearing up the mess that they have left behind. However, that is an occasional problem that every local authority and every community has to deal with at times. It is not the problem that I wish to address today.
The problem that I want to discuss is entirely of the Governments makingthat is the main point of my debate. With regard to this problem, which is entirely avoidable, I have received countless letters, e-mails and phone calls, and I have held numerous meetings and been visited today at the House of Commons by some of my constituents. The Government are riding roughshod over local democracy and opinion. They are not only insisting, but directing in law, that Epping Forest district council provide 96 additional pitches for Gypsies and Travellers over the next few years.
a relatively solvable problem of providing 4,000 additional pitches, spread throughout the length and breadth of this country, covering about 1 square mile.[Official Report, Westminster Hall, 22 May 2008; Vol. 476, c. 171WH.]
Let me tell the Minister that 1 square mile in one part of the country is not the same as in another. Our little corner of Essex in Epping Forest sits on the London border and is dependent on the green belt, the surrounding countryside and the ancient forest. A little bit of land is very precious. I mean that it is precious not in terms of its monetary value, but rather in how it is used for our environment and communities.
In terms of the whole country, 1 square mile might not seem much. The hon. Member for Caithness, Sutherland and Easter Ross (John Thurso), who was sitting in front of me a moment ago, represents part of Caithness where there are hundreds of square miles with nothing in them. That is not the case in Epping Forest, where 96 pitches would take up a large amount of space.
The issue is not only about the amount of space taken up; it is about precisely where that space might be. I do not understand how the Minister can justify the Governments plans to create 388 new pitches throughout Essex over the next two years. Perhaps he can defend those pitches for Gypsies and Travellers throughout Essex, but I do not see why the Government are saying that we need so many.
To make matters worse, the strict criteria that the Government have laid down for finding what are described as suitable pitches make it difficult in an area such as Epping Forest to find such a pitch. My constituents are rightly concerned about the effect that the development of those 96 pitches would have on our local communities, landscape and the green belt. The effect on individual people who live next to the pitches would be almost indescribable.
Can any of us imagine part of our own garden, or a small field adjacent to our house, being compulsorily purchased and used for Gypsies and Travellers, when for centuries it had been used only by horses or sheep? That would cause indescribable anguish among my constituents and I have every sympathy with them. More than anything, they are rightly indignant about how local democracy is being utterly ignored and disregarded. Local people are not properly consulted, and decisions are forced on our communities by regional and national bodies.
Epping Forest district council is a well-run local authority, regardless of political control. It is under Conservative control, but that has not been the case for most of the last 15 or 20 years. During that time, it has been a responsible, well-run district council that takes its duties seriously. This is not about party politics; it is about protecting our local community and planning for the best use of our scarce land resources.
Because of the way that the Government behave, Epping Forest district council, which is taking the blame for producing a development document on where the 96 pitches might go, simply had no choice in the matter. I find that difficult to explain. There is no democracy and no choice. Epping Forest district council has been directed by the Government office for the east of England to amend the local development scheme. I quote from a letter from that Government office dated 17 September 2007:
In exercise of the powers conferred on her by section 15(4) of the Planning and Compulsory Purchase Act, the Secretary of State for Communities and local government directs that your council make the following amendments to the local development scheme...and to specify that (a) it includes a Gypsy and Traveller site Development Plan Document.
Of course, Epping Forest district council behaves responsibly, and once directed by the Government office for the east of England to produce such a document and local development scheme, it went ahead and did so. However, that was not done urgently enough for the Governments liking, and the workings of responsible local democracy have been cast aside and utterly ignored by this over-powerful, dictatorial Government.
Epping Forest district council, having done as it was told by the Government office for the east of England, found that the MinisterI am delighted that he is herehad written to the council on 23 April 2008:
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