The
Committee consisted of the following
Members:
Barlow,
Ms Celia
(Hove)
(Lab)
Burt,
Lorely
(Solihull)
(LD)
Fallon,
Mr. Michael
(Sevenoaks)
(Con)
Gardiner,
Barry
(Brent, North)
(Lab)
Hemming,
John
(Birmingham, Yardley)
(LD)
Ingram,
Mr. Adam
(East Kilbride, Strathaven and Lesmahagow)
(Lab)
Jack,
Mr. Michael
(Fylde)
(Con)
Johnson,
Ms Diana R.
(Kingston upon Hull, North)
(Lab)
Kawczynski,
Daniel
(Shrewsbury and Atcham)
(Con)
Linton,
Martin
(Battersea)
(Lab)
McGovern,
Mr. Jim
(Dundee, West)
(Lab)
Prisk,
Mr. Mark
(Hertford and Stortford)
(Con)
Southworth,
Helen
(Warrington, South)
(Lab)
Thomas,
Mr. Gareth
(Minister for Trade, Development and
Consumer
Affairs)
Twigg,
Derek
(Halton) (Lab)
Wright,
Jeremy
(Rugby and Kenilworth)
(Con)
Mick Hillyard, Committee
Clerk
attended the
Committee
Second
Delegated Legislation
Committee
Monday 11 May
2009
[Bob
Russell in the
Chair]
Draft
Financial Assistance for Industry (Increase of Limit) (No. 2) Order
2009
4.30
pm
The
Minister of State, Department for International Development
(Mr. Gareth Thomas): I beg to move,
That the
Committee has considered the draft Financial Assistance for Industry
(Increase of Limit) (No. 2) Order
2009.
The
Chairman: With this it will be convenient to consider the
draft Financial Assistance for Industry (Increase of Limit) (No. 3)
Order
2009.
Mr.
Thomas: It is a pleasure to serve under your chairmanship,
Mr. Russell, and a privilege I have not had before in such a
Committee. I look to you to protect me from the intimidating behaviour
of the Opposition and the Liberal Democrats, but not, I trust on this
occasion, of my own side.
The orders
provide for an increase in the cumulative financial limit on the
exercise of powers set out in section 8 of the Industrial Development
Act 1982, which allows the Government to operate a range of schemes of
direct benefit to business. Schemes such as the enterprise finance
guarantee scheme are delivering real help to businesses now. By 1 May,
nearly £325 million of eligible applications from
more than 2,900 small businesses had been assessed, were being
processed or had been granted under that scheme. The main purpose of
the orders is to allow us to introduce new measures to deal with the
economic downturn, such as the automotive scrappage and trade credit
insurance schemes recently announced in the Budget.
Section 8 of
the 1982 Act is our legal vehicle for providing financial assistance to
industry outside assistance areas. Section 8 does not in itself
authorise any expenditure, as resolutions of the House are generally
needed for financial assistance under that section for any project that
will cost more than £10 million. Much of the support currently
provided under section 8 schemes consists, for example, of loans and/or
equity schemes. The total liabilities need to be counted against the
section 8 limit. Indeed, there has been a ceiling on the total
cumulated expenditure and liabilities that can be incurred under
section 8 since 1982. The orders are the third and fourth orders made
under the 1982 Act and will raise the limit under section 8 to a
current maximum of £6.1 billion. The orders are an important
part of our efforts to give viable businesses the real help they need
now and I commend them to the
Committee.
The
Chairman: We have a time limit of an hour and a half. That
is not necessarily a target to reach, but a time that we must not
exceed.
4.33
pm
Mr.
Mark Prisk (Hertford and Stortford) (Con): I look forward
to your chairing of our deliberations, Mr. Russell. What an
ambition you have just set me with regard to the time limit, but I will
do my best to ensure that I make a reasonable contribution. The
Minister, whom I welcome to the Committee, made concise and
surprisingly short opening remarks, so I would like to tease one or two
facts from him during our 90-minute discussion.
In money
terms, the orders mean a £1.2 billion increase in the limit on
potential financial assistancea point to which the Minister
alluded. I did not hear, however, how much of the existing £4.9
billion has already been committed, and it would be helpful if we could
understand why the two orders have been brought together for
consideration. Clearly, that suggests that the £4.9 billion is
fully committed, but it would be helpful if the Minister would provide
guidance on
that.
Furthermore,
during the debate on the Industry and Exports (Financial Support) Bill,
which will amend the 1982 Act, I requested that the orders, when
presented to us, be accompanied by a summary of each relevant scheme
and of how much has been granted, or loaned, to business. The
Under-Secretary of State for Business, Enterprise and Regulatory
Reform, the hon. Member for Dudley, South (Ian Pearson) agreed to
consider that proposal and promised to write to me with a detailed
breakdown of each of the schemes and to lodge a copy of that letter in
the Library. That promise was made on 21 April, which was nearly three
weeks ago, so why has no letter arrived? It was an important commitment
that would have been particularly helpful for todays
deliberations. Why has no explanation been forthcoming, and why has no
letter been submitted to the
Library?
In
the absence of written information, I will look at some of the schemes
to which the legislation under discussion relates, and try to draw
certain details from the Minister of State. The working capital scheme
was launched on 14 January, and the Secretary of State said that it was
open for business on that date. We were told that the first tranche of
£1 billion would be operational for business on 1 March, but by
25 March, the Government had not even secured European Union state aid
approval, let alone made the scheme operational. When pressed, the
Under-Secretary told us that when he said operational,
he meant the Government securing an agreement with the banks in order
to be able to lend further money. How much of the £1 billion
guarantee under the working capital scheme has actually been confirmed,
and how much money has that released to
business?
The
Minister alluded to the enterprise finance guarantee scheme that
replaced the small firms loan guarantee scheme, with which members of
the Committee will probably be more familiar. The enterprise finance
guarantee scheme was first promised in the pre-Budget report last
November. The Minister has mentioned the number of firms that have been
approved, but how much money has actually been lent, and what
proportion of the £1.3 billion has been handed out
six months on from the schemes
announcement?
The
capital for enterprise fund was also launched in November, and a press
release from the Department informed us that it would
be
ready
to start investing at the end of January 2009.
The funds total
value is £75 million and the intention is to tackle the equity
gap between £250,000 and £2 million, which is an area in
which many small businesses struggle to settle finance. Four months on
from its launch, how many businesses have received money from the fund,
and what proportion of the £75 million has been handed
out?
The
trade credit insurance scheme is a more recent top-up scheme, and is
roughly worth, in terms of notional guarantee value, £5 billion.
While the scheme is welcome in principle, it has attracted some
criticisms. Why is it only a top-up scheme and therefore not available
to those who cannot get any cover? It is all very well saying that
those struggling financially to afford cover should be able to achieve
top-up cover, but what about those who cannot get any cover at all? I
appreciate that there are good economic reasons for not seeking to
support the weakest businesses, because we are dealing with
taxpayers money. It seems harsh, however, to rule out all forms
of businesses that cannot receive, or have been unable to secure, any
cover at present. Furthermore, what are the practical reasons for
limiting the scheme to six months? Why are the many businesses that
will be dealing with nine, 12 or 18-month contracts excluded from the
scheme?
The
Minister mentioned the automotive assistance package. The European
investment guarantee fund is £1.3 billion, but how many
businesses in this country have actually received funds? After all,
that promise was made back in January. I will not ask the Minister to
allude to the details of confidential discussions with Jaguar Land
Rover, but does he understand the frustration in the west midlands that
something that was promised two or three months ago, and which has been
achieved for the industry in Germany, France, Italy and elsewhere, has
dragged on so long that there is a tit-for-tat set of leaks in the
press while Jaguar Land Rover simply does not know where it stands? Why
is the process taking so long here when other countries have been able
to secure moneyparticularly the European Investment
Bank-related moneymuch more quickly? Will he also tell us how
many other businesses are due to receive funding under this particular
scheme?
We welcome
Government action to help British business and British jobs. While
there has been, it is fair to say, progress in delivering support, the
overwhelming view of business is that the Governments approach
is piecemeal, haphazard and far behind our competitors. It is therefore
important that, when the Minister replies to the debate, he answers the
questions I have raisedand I am sure will be raised by other
members of the Committeeso that we know, and those we whom seek
to represent can understand, exactly what progress the
Government are making, rather than how many press releases they are
issuing.
4.40
pm
John
Hemming (Birmingham, Yardley) (LD): I am pleased to serve,
for the first time, Mr. Russell, under your
chairmanship.
This is a
very interesting experience. We have an important issue to consider:
how business is supported by Governmentthe concept of
Real help now, although the word now
does not seem to be understood by the Governmentand the process
for scrutinising that support.
That process has, in essence, resulted in two orders to increase the
limit, with both being introduced on the same day. The first of a total
of four orders was introduced last year, then we have had three orders
in a rush this year. It looks like something where people really do not
know what they are doing. The hon. Member for Hertford and Stortford
raised a number of questions, but I would like the Minister to explain
what the Government intend to do in respect of the primary legislation.
If we hit our limit of four tranches of £600 million,
what happens if we are suddenly crunched up against it and cannot spend
any more money on industry assistance?
Coming from a
manufacturing west midlands constituency that is very much dependent on
the car business, I am concerned about the shortage of finance for the
purchase of vehiclesnot the scrappage scheme itself, but the
shortage of finance for personal vehicles. I am not sure that the
measure goes very far down that route. A sad aspect of how Government
operate in this country is the limited practical scrutiny of the
details of their assistance to industry as it goes along, and not two
years later. One of the big problems in our system of government is
that very often we are trying to avoid a car crash in Government policy
by looking in the mirror at the car crash that happened two years ago.
By the time we get to a stage where we could do something about it,
everything has moved on.
A couple of
business people came to my advice bureau on Saturday, which is unusual.
One, whom I am going to see on Friday, was concerned about working
capital issues. It will be very interesting to work out whether I can
do more for them through my knowledge and experience of finance and
working with financial institutions, or whether we will be able to
achieve more through the Governments schemes. I am generally
sceptical about how Government schemes operate in practice, as they
tend not to deliver. I am interested in an answer, particularly from
the Government, on where we go from here. We are now up against the
buffers. We have got two orders today. What happens if we have to do
something else? Is there a plan for primary
legislation?
4.43
pm
Mr.
Thomas: I will deal first, with respect to the hon. Member
for Hertford and Stortford, who leads for the official Opposition, with
the final question from the Liberal Democrat spokesman, the hon. Member
for Birmingham, Yardley, who will be aware of the primary legislation
that is going through the House. It has completed its stages in the
Commons and is due to be considered in the Lords. The Economic
Secretary to the Treasury and Parliamentary Under-Secretary of State
for Business, Enterprise and Regulatory Reform, my hon. Friend the hon.
Member for Dudley, South (Ian Pearson) is responsible for taking that
legislation through the House. That primary legislation will raise the
capital limit from the $6.1 billion figure, which the 2003 legislation
allowed us to go up tothe two orders will take us to that
limitand virtually double the total sum that Government, if
they wanted and needed to do so, could go up to. I hope that that deals
with the hon. Gentlemans point about primary
legislation.
The
hon. Member for Hertford and Stortford asked a series of questions and
I will try to do justice to them. He asked how much headroom was left
in the existing
schemes. About £480 million of headroom is left, hence our view
that we need to bring these orders forward. Some hon. Members might
wonder why we need them, given that primary legislation is making its
way through the House of Commons and House of Lords at the moment. But,
as hon. Members of all parties want the schemes to be introduced and
real help to be delivered, we felt that it was prudent to introduce the
orders, rather than risk the hold-ups that might have resulted had the
primary legislation not made such good
progress.
I
recognise the hon. Gentlemans concern and that he was promised
a letter, which has not yet materialised. I know that the
Under-Secretary of State for Business, Enterprise and Regulatory
Reform, my hon. Friend the Member for Dudley, South (Ian Pearson) is
busy working on that letter and wants to get it to the hon. Gentleman
and place a copy in the Library. I recognise that it would have been
helpful for this debate, and for the debate which I think the hon.
Gentleman will have later with my hon. Friend. I assure him that we
will get it to him and to the Library so that other hon. Members can
see it as soon as possible. I hope he understands that we are trying to
get him as full and as accurate a response as
possible.
The
hon. Gentleman also asked me about the extent to which the working
capital scheme is working. He will know, for example, that we have
signed some £1 billion worth of guarantees with the Royal Bank
of Scotland and with Lloyds bank for financing for businesses for
increased lending. That lending is beginning to make a difference, as I
suspect he knows.
Mr.
Prisk: My question was not so much about the money that
has been provided to the banks but, given that this is a loan guarantee
scheme that has now been released for businesses beyond them, how much
has been released so
far?
Mr.
Thomas: I am sure that the hon. Gentleman understands that
I cannot give him that information as that is partly a commercial
question. I will see whether we can get further information for him
about how much of the additional lending, which has already come
through from the banks, was helped to be released by the working
capital scheme.
The hon.
Gentleman asked me for a further breakdown of the statistics available
for the enterprise finance guarantee scheme. Some £325 million
of eligible applications from almost 2,900 firms have been granted or
are being processed or assessed. He wanted me to break that down
further. Almost 2,000 businesses have been offered loans totalling more
than £170 million, of which almost 1,100 have drawn down loans
totalling some £92.6 million. Like any scheme, the
scheme inevitably started slowly, but is now building substantially. We
are seeing the pipeline, to use the jargon, of projects and eligible
loans growing steadily, starting from less than £3 million in
the first week to nearly £30 million in recent
weeks.
Mr.
Michael Jack (Fylde) (Con): I remind the Committee of my
entry in the Register of Members Interests.
In making
judgments and decisions on who will receive the type of assistance that
the Minister has just alluded to, do the banks use the same commercial
criteria that they would apply if they were spending their own money
rather than moneys guaranteed by the
Government?
Mr.
Thomas: If the right hon. Gentleman will forgive me,
perhaps it would help both him and the Committee if I wrote to him with
more detail about how banks use the lending that is possible under the
enterprise finance guarantee scheme and how that scheme compares with
other existing lending schemes. In that way, I could give him the
information that he
seeks.
The
hon. Member for Hertford and Stortford also asked about the capital for
enterprise fund. As he knows, we have appointed fund managers, who are
conducting due diligence on companies from which they have received
serious proposals for a total investment of around £60 million.
He also asked about trade credit insurance. The scheme was not designed
to cover all trade credit insurance schemes. It is a targeted,
temporary measure for cases in which insurers have reduced but not
completely removed cover. We believe that we can match the risk that
private sector insurers are willing to take, and that going further and
providing 100 per cent. cover would be too risky for the taxpayer. That
is why the measure is targeted and
temporary.
Mr.
Prisk: The Minister nipped neatly to the question of
top-up credit, and I am sure that he hopes to respond in due course on
the EIB money and Jaguar Land Rover. If I may just press him, as far as
I can see from what he said about the capital for enterprise fund, and
looking at the written question from 28 April, no business is yet to
receive any money for that. Will he confirm that? On that basis, will
he also confirm that, under the schemes he has mentioned so
farwe are now looking at a total package of £6.2
billionthe money given to businesses is, by contrast,
£92 million? Is that a correct assessment of where we
are?
Mr.
Thomas: I will happily write to the hon. Gentleman about
the full range of support that is being made available to businesses. A
huge amount of work is being done, not just on the measures that are
covered under the scheme we are discussing. A range of other support is
available. I will happily write to him with the figures that set out
the full range of support
available.
Mr.
Jack: I am most grateful for the Ministers
courtesy. He mentioned trade credit insurance in response to the
question from my hon. Friend the Member for Hertford and Stortford.
What steps have the Government taken to try to persuade the providers
of that insurance to return to the market in those areas from which
they have withdrawn, so that even a partial resumption of their support
could then trigger support from the scheme to which the Minister
alluded?
Mr.
Thomas: A series of discussions is taking place with
insurers. We have discussed the specifics of trade credit insurance.
There is also insurance that relates to exports, and conversations
about that are under way. A series of efforts is being made to increase
access to the type of insurance that the right hon. Gentleman is
concerned about.
I come,
lastly, to Jaguar Land Rover. I clearly cannot comment on the
negotiations that are under way with Jaguar and Land Rover, but I can
confirm that the EIB has recently approved loans both for Jaguar Land
Rover and for Nissan, partly as a result of the Governments
support in those discussions with the
EIB.
Mr.
Prisk: I appreciate that the Minister is probably standing
in for a colleague and I do not wish to appear churlish, but given the
lackthree weeks laterof a letter, will we receive the
two letters promised before the end of the
week?
Mr.
Thomas: I have made a commitment to give the hon.
Gentleman a letter, which I will seek to get to him quickly, giving as
full and accurate a response as I can. The hon. Gentleman points at the
right hon. Member for Fylde, to whom I give the same commitment. I am
not committing to getting it to him by the end of the
week but I recognise the Houses concerngiven the
commitments we made regarding a previous letterto get it to
hon. Members as quickly as
possible.
Question
put and agreed to.
Resolved,
That
the Committee has considered the draft Financial Assistance for
Industry (Increase of Limit) (No. 2) Order
2009.
DRAFT
FINANCIAL ASSISTANCE FOR INDUSTRY (INCREASE OF LIMIT) (NO. 3) ORDER
2009
Resolved,
That
the Committee has considered the draft Financial Assistance for
Industry (Increase of Limit) (No. 3) Order
2009.(Mr.
Thomas.)
4.55
pm
Committee
rose.