The Minister of State, Department for International Development (Mr. Gareth Thomas): I beg to move,

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.

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 assistance—a 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 today’s 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 scheme’s announcement?

The capital for enterprise fund was also launched in November, and a press release from the Department informed us that it would be

The fund’s 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 money—particularly the European Investment Bank-related money—much 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 Government’s 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 raised—and I am sure will be raised by other members of the Committee—so 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.

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 Government—the concept of “Real help now”, although the word “now” does not seem to be understood by the Government—and 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 vehicles—not 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 Government’s 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?

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 to—the two orders will take us to that limit—and 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. Gentleman’s 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. Gentleman’s 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 far—we are now looking at a total package of £6.2 billion—the 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 Minister’s 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 Government’s 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 lack—three weeks later—of 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 House’s concern—given the commitments we made regarding a previous letter—to get it to hon. Members as quickly as possible.