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I turn now to the issue of access to funding and credit. Inevitably, instead of being part of a general discussion, this is now the No. 1 issue for everyone, because of the problems that we are all facing. The top issue for businesses in my constituency is their cash flow. It has always been important, but it is now critical. At the top of the list of problems is late payment. Businesses strongly believe that it is up to other businesses, like them, to pay their bills on time. They are also worried about the stories emerging of big players—the larger companies—slowing down their payments to others
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in the supply chain in order to protect their own financial position. They want to hear us say that that is unacceptable, and that organisations large and small should pay their bills on time. I am certainly happy to send that message clearly.

As a result of those problems, an old chestnut has re-emerged: the speed with which banks clear cheques and other payments into people’s accounts. When people see countries such as Sweden clearing payments within 24 hours, they cannot understand why their bank is still telling them to wait for up to five days. Over the years that I have been an MP, I feel that we have been strung along by the banks. They have always said that, tomorrow, with the right technology, they will be able to whizz these payments into people’s accounts. However, I am still hearing that that is not happening. This is something that the banks could quickly get on top of and do something about. Now that the Government are a shareholder in several of our banks, I hope that our representatives on their boards will raise that issue at meetings, so that the banks in which we have a say can start clearing cheques into people’s accounts as quickly as they can. I should like to see the corporate giants of our economy, which pride themselves on their social responsibility, making a point of paying their bills quickly and on time, and doing so in a visible manner. That would set an example to others.

The Government are also an important buyer of goods, services and major contracts. They therefore have many bills to pay. It is pleasing to hear them say that they are committing themselves to paying those bills as quickly as possible and, in any event, within 10 days. I want the Minister to say that we can have regular updates to show that that is happening. In good years, we have accounts from Departments about their performance, and it is fair to say that even with a target of 30 days, they have not always shone with 100 per cent. success in meeting that deadline. In such times, it is crucial that we, the scrutinisers of Government, have the necessary information.

The Government are an important part of the public sector, but there is a big public sector beyond them, and it is important that we urge everyone to adopt the same responsible approach of paying bills as quickly as possible. One thing that we can do as individual Members of Parliament is to chase up the public sector organisations in our constituencies and urge them to pay their bills quickly. I have written to the health trusts, the primary care trust and so on in my constituency to urge them to pay their bills as quickly as possible.

When there are such pressures on access to credit and funding, people are concerned about the apparent drying up of access to funds at banks and banks unilaterally changing conditions of trade with their business customers. People have told us about loans that they thought would be rolled over but will now not be, or of loans that will be rolled over but on higher interest rates. As legislators, we should look at the terms that banks are going to use to do business with small and medium-sized enterprises from now on. The investment that we have made in some banks from public funds means that we should have a say in their performance. At Question Time today, some of us asked the Chancellor and his team about the promise that the banks which have been
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recapitalised using public funds will keep their lending at 2007 levels. We need to understand what that means for businesses.

I can understand issuing a caution about not wanting to repeat the mistakes of the past and have irresponsible lending—the idea that asking banks to hit a target could lead to pressure to make the same mistakes—but lending to businesses has nearly always been responsible in this country. There is no reason to think that there should be any falling off in levels of lending to companies as long as businesses and banks continue the relationship that they had.

On a final point about access to funding, and one that is beyond the Government, we heard an exchange between the Front-Bench spokesmen about making money from the European Investment Bank accessible to businesses as quickly as possible. I join the hon. Member for Hertford and Stortford in urging that we act quickly on that. To reprise the point that I made to the Minister about Advantage West Midlands, there was a huge shock to manufacturing in the region when MG Rover collapsed in 2001. There was a great deal of worry about the supply chain, which was extensive throughout the region, and about huge job losses as a consequence. Advantage West Midlands responsibly stepped up to the plate and made transitional loans available for businesses that were trying to find work to replace what they had lost with the collapse of MG Rover. As a result of that scheme, there were far fewer job losses than any of us had feared would be the case. The scheme was wound up when it had done its job, but because of the current situation, its time has come again. In fact, I can think of an individual case in my constituency which would benefit now, today, from access to similar funding. I certainly urge the Minister to make moves to see whether such money could be made available in the west midlands and across the country.

The public sector as a whole is a huge procurer of services and should not drop its guard when it offers contracts to businesses in this country. I recently chaired an inquiry that produced the report “Sustainable Procurement”. Despite its title, it is not a green document, but is about the sustainability—economical, environmental and social—of the procurement power of the public sector. I recommend it to the Minister. It includes pointers that would help British businesses to secure British contracts.

There is such pressure on businesses that, inevitably, they will look at their skills training budget and ask whether it should be cut in these times of difficulty. That would be a dangerous thing to do and I urge them not to cut back on training now, because in the longer term, when the upturn comes and we need the skills of a better trained work force, they will miss not having made that investment. I hope that they will see the sense in maintaining their skills investment.

1.25 pm

John Thurso (Caithness, Sutherland and Easter Ross) (LD): It is always a pleasure to follow the hon. Member for Stafford (Mr. Kidney) who, as usual, spoke with great common sense. I am tempted to follow him down the route of discussing health and safety regulation,
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because it is important, but I do not think that the time allowed permits me to do so. I shall therefore follow the major thrust of the end of his speech on the availability of finance, which is the critical issue for all businesses throughout all the regions and nations of the United Kingdom.

First, however, I want to comment on the discussion about inward investment and the regional development agencies, and point to the nations as opposed to the regions. Scotland has one body responsible for inward investment, and it operates reasonably well. However, those of us in the more outlying areas find it useful to have our own personnel to go abroad and win business. Thurso is not, perhaps, the first port of call for a Japanese battery manufacturer, but we were successful in winning that business, and an important part of our local business it is. Perhaps that is a lesson for the RDAs.

I have no doubt that when the figures are published early next year, we will find that we are currently in recession. The only questions are how savage it will be and how long. As in any recession, the core question that every business is asking is how to maintain its cash flow and how to survive. In past recessions, frankly, if we are honest, the policy levers available for helping businesses at any level were, to an extent, curtailed, because what was really needed was to get the economy going again. However, one lever is available in this recession that has not been available before. Owing to the financial crisis and the fact that the Government are now owners of some banks and substantial shareholders in others, they have an ability to affect the outcome of how those banks deal with businesses.

We have heard in debates on business over the past week of banks increasing interest rates, increasing fees and curtailing facilities. I have recently had some concrete examples of where loan-to-value covenants have been breached. The bank has called in the facility on the basis of that breach, there has been a requirement to charge more interest, which in turn has breached the interest covenant, and the company is threatened with going into receivership, notwithstanding the fact that it is fully profitable and can carry on. Obviously, I could give details of the company involved, but the point is that sound companies are threatened with being put into administration.

Today, I understand that the Chancellor of the Exchequer and Lord Mandelson, the Secretary of State for Business, Enterprise and Regulatory Reform, are meeting the chiefs of the banks. I again ask the Government to consider having a proper and spelt-out memorandum of understanding, clearly stating not the detail of one particular loan, but how in principle the banks are going to deal with companies. I suggest that that simple memorandum of understanding would cover several things. The first is the ability of banks to withdraw overdraft facilities on demand. They should agree to a 28-day period from notification to when they would put it into effect. The second concerns covenants on capital values and interest to cover the point that I have just made. The third is to agree not to increase the current interest margins and fee charges that sound companies are paying. Another is to cover the point that the Chancellor made in an article that I read this morning, which says that he

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Clearly there must be a way that the problem can be dealt with before the company has gone under, and that needs to be spelt out as well.

I suggest to the Minister that one of the main things that we need is clarification from the Chancellor and Lord Mandelson about precisely what is meant. At present there is merely an open aspiration that credit will be available at 2007 levels, and until clear principles are established demonstrating what that means to businesses, it will not be a great deal of help to them. While I accept that summits, forums and meetings are of some use to businesses, what is really required from the Government at this time is leadership and clear direction, and that means setting out the principles on which the banks will operate over the next two years.

1.30 pm

Anne Main (St. Albans) (Con): I agree with some of what has just been said by the hon. Member for Caithness, Sutherland and Easter Ross (John Thurso). I recently asked my local chamber of commerce what challenges faced businesses in St. Albans. It listed a wide range of problems, but most of them involved cash flow. Banks in my constituency are aware of the problems facing businesses, but there is a domino effect: when Peter does not pay Paul, no one can pay anyone. That is a big problem, and it will become no easier as time goes by. If other Members have not asked their local chambers of commerce the same question, I can tell them that there is a lot of hurt out there, and people in my constituency are certainly letting me know about it.

I listened with interest to the Minister’s praise for regional development agencies, but let me redress the balance somewhat by drawing attention to the concerns that exist. It is true that the RDAs’ statutory purposes are, among other things, to


However, in evidence given to the Select Committee on Business and Enterprise in October, the Institute of Directors expressed the rather different view that

—the work done by the RDAs—

That strikes me as quite a worrying comment.

The RDAs have proved somewhat controversial and somewhat political, and the criticism has often been made that they are spreading themselves far too thinly without making a concentrated effort to tackle underlying problems. Let me say to the Minister again—and I will continue to say it—that the fact that funds that were to be directed towards business via the RDAs have been pinched to prop up the housing market is yet another problem. There will now be even less money for the RDAs to divert to small businesses, especially in my area, which makes me question whether there is any point to RDAs in general.

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The RDAs have also been accused of being too political, not just by the Conservatives but by business representatives. In its evidence to the Select Committee, the Institute of Directors also said that Government were

There are concerns about the operation of the RDAs and about their ever-escalating budget, which has increased steadily since their creation. It stood at £2.44 billion in 2008, but that amount was not divided equally among the regions. Although the east of England is seen as a cash cow by the Government, my area received only £159 million worth of the pie.

It could be asked why the Government have chosen to put the money where they are putting it. There are more small business start-ups in the east of England than anywhere else, and we are seen to be giving a huge amount to the Chancellor, which he redistributes to—I would say—his friends elsewhere; yet we receive very small amounts of the budget. That too causes me to question the role of the RDAs. The position seems bizarre to me, and, as I have said, I keep asking the same question.

I have been told that the decision to take money from the east of England was painful and reluctant, but I do not think that the Minister has addressed it at all. We receive less than any other region, but £300 million has been taken from the RDAs’ budget, and some of that is coming from the east of England. If the decision was indeed painful and reluctant, and if it was made in the knowledge that it would be an issue, may I ask what evaluation was made of the impact on businesses? I should really like an answer to that. It is particularly worrying that we are still feeding the delivery system although our budget has been taken away.

As I said at the outset, businesses in my constituency are hurting. There are huge worries about the economy, and about how the area will fare. We are seen as being wealthy in St. Albans. While I dispute that—there are multiple poverty indices in parts of the area—it must also be said that we are not doing too badly. However, a recent survey by Oxford Economics, the commercial wing of Oxford university, placed St. Albans 16th out of 408 areas in the United Kingdom in terms of how badly it would fare as a result of the possible impact of the credit crunch. If the fact that we are the 16th most vulnerable area in the UK does not worry the Minister and other Government officials who tell us that we are wealthy, it ought to.

We may be wealthy according to certain indicators, but we are also vulnerable when things start going wrong. Our area is very exposed, and particularly vulnerable in an economic downturn. The average credit card debt among St. Albans residents is £1,871, which makes us, in terms of credit cards, the fourth most indebted area in the country as well as the 16th most vulnerable to a credit crunch.

I believe that we need a better form of delivery, enabling investment to go directly to the people who need it most. I was amazed to learn that—as my hon. Friend the Member for Hertford and Stortford (Mr. Prisk) mentioned earlier—the RDAs have cost the taxpayer £13 billion: £600 for every household. We must ask ourselves whether this is the best way of delivering
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money, not only to small businesses but to local people who are struggling economically. I would happily scrap these bloated quangos. I do not believe that we need a regional solution to local problems. That is not to say that there is no role for regions, but all too often we look to people in a distant place to deliver local solutions, and the businesses in my area feel that they do not always get it right.

If we are going to spend so much money on a delivery body, let us make sure that we do get it right. If we believe that this is the right way in which to do things, let us not rob the pot when it is convenient. Surely the money that has been spent in this way could be better spent on reducing small businesses’ national insurance contributions, cutting small-company corporation tax, and tackling all the red tape and bureaucracy to which other Members have referred and which is tying my small businesses in knots.

1.37 pm

Mr. Charles Walker (Broxbourne) (Con): By a process of elimination, I note that it is now my turn to speak.

I feel that the issue of small businesses warrants more than a topical debate lasting an hour and a half, and I do not think that it says a great deal for topical debates that this great amphitheatre of our democracy is so sparsely attended. I hope that the House will consider the future of topical debates, which are about as relevant to this place as a peanut is to a dinner party. They add so little to parliamentary life that the experiment has probably run its course. However, I have listened with great interest to the contributions of Members on both sides of the House. I particularly enjoyed those of my hon. Friend the Member for St. Albans (Anne Main) and the hon. Member for Stafford (Mr. Kidney). Both made very thoughtful speeches.

Let me say gently to the Minister that, while we all accept that the credit crunch is a global problem, we must also accept that the problem with small businesses is that banks in this country are simply not lending them money; or, if they are lending them money, they are raising the interest rates at which the money is to be paid back. I have made that point twice before in the House, and I think that if it is worth making twice, it is probably worth making a third time.

All Members are probably aware that when interest rate periods end, banks are going back to their clients, the small businesses, and renegotiating the rates upwards, often to a significant extent—from, perhaps, 6 or 7 per cent. to 15 per cent. or more. That is putting huge stress on small businesses.

It would be churlish not to welcome the fact that the Chancellor is sitting down with the banks today to try to get them to ease their lending terms. But I am concerned that this is the third or fourth such meeting he has had with the banks, who do not seem to be taking seriously his treaties on the matter. This should be the banks’ last chance. If they do not improve their lending terms to small businesses after today’s meetings, next week the Chancellor should be a little more forceful with them. After all, their balance sheets are being shored up by taxpayers, many of whom own small businesses.

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