The
Chairman: Order. The Committee has listened, I am sure
with interest, to the right hon. Gentleman’s historical
recollections, which I know he has recounted to the Committee to inform
the debate, but at this point I must ask him to press the fast forward
button and to deal with the present. I know that he will want to focus
narrowly on the instrument in front of us. We must avoid having a
general Second Reading-type
debate.
Mr.
George: I fully accept your advice, Mr. Bercow.
I shall now move on to the next Conservative crisis, beyond 1981 to
1983—no, I will not. I would be ordered out of the building if I
did
that. Yes,
we do have instruments, and instruments were available to previous
Governments who were prepared to loan or give money to companies even
in a non-crisis situation. Now that we are in a deep crisis, the amount
of money available, which cannot be without limit—I wish that it
could be—must be deployed intelligently according to the
criteria that I mentioned.
I hope that my
last point—I am making a rather truncated presentation, although
I could filibuster in the absence of Opposition Members, who cannot
afford to be here—will not be considered to be party political.
You know, Mr. Bercow, that I am not partisan. What really
irritates me are organisations that actually turn money down. One would
have thought that in a crisis like the present one, nobody who is
offered money for building or whatever would follow some moral
principle and say, “Thank you very much, but we don’t
want it.” That happened in my constituency, under Building
Schools for the Future. This has nothing to do with the Minister, but
we are awash with dosh. Money was offered to replenish schools, and it
was turned
down—
The
Chairman: Order. I have listened with great interest and
respect to the right hon. Gentleman’s contribution, but he knows
that Building Schools for the Future and the financing thereof have
absolutely nothing to do with the draft Financial Assistance For
Industry (Increase of Limit) Order 2009. I think that he is probably
bringing his remarks to a close.
Mr.
George: I would have finished if you had not intervened,
Mr. Bercow. If you read Hansard, you will see that I
said that that the matter was nothing to do with the Minister. However,
having been admonished twice, and having done my duty, I think that the
time has come to go back down to breakfast.
I fully
support what the Government are doing. I hope that they spend more and
that the Opposition do not whinge because they have high principles
about borrowing over and above a certain limit. Unless the money is
spent, we will be in a far deeper crisis than we are at present. At
this point, none of us can tell whether the enormous amount being spent
will realise our objectives—they certainly have not achieved our
objectives as regards the banks. However, I hope that the Government
get it right, because if they do not, the consequences will be even
more severe.
I hope that
that satisfies you, Mr. Bercow. Perhaps I can talk
to you later about what I would have said had I not been so
frequently—and quite correctly—stepped
on. 9.26
am Sir
Peter Viggers (Gosport) (Con): Thank you, Mr.
Bercow, for giving me a chance to follow my former Chairman on the
Select Committee on Defence, the right hon. Member for Walsall, South,
as well as the hon. Member for Caithness, Sutherland and Easter
Ross—I would like to call him my noble Friend from the Treasury
Committee, but his preferences, and parliamentary convention, prevent
me from using that expression.
I am quite
shocked by the Government’s lack of grip in approaching the
current crisis. The Prime Minister criticised the Royal Bank of
Scotland for the manner in which it advanced money through its trading
book, and such criticism may be justified, but how much more are we
entitled to criticise the Prime Minister and his Government for
acquiring such a massive stake in RBS without carrying out due
diligence or knowing exactly what we were undertaking? We have advanced
massive amounts to the banks, but we do not know exactly what
we have bought, we have not performed due diligence and we do not know
the extent of our commitment. The amounts are vast and dwarf the
£4.9 billion that is the subject of the order. Hard-earned
taxpayers’ money has been sprayed on the problem without a
proper analysis having been carried out. Many months ago, we should
have conducted the most ruthless analysis of the problems in the banks.
We should have followed the example of Lloyd’s of London, whose
situation several years ago provides the nearest parallel to the
present position. At that time, as the Minister and others will recall,
there was something that Lloyd’s called the
spiral—investments in insurance that went from insurer to
insurer, and from reinsurer to reinsurer. At the end of the day, these
were equivalent to collateralised debt obligations—insurers were
holding the insurance equivalent of CDOs.
The position
was similar to that in which the banks now find themselves, because
firms did not know exactly what their assets were. However,
Lloyd’s undertook the most ruthless and careful analysis, in
which I was involved as a member of its audit committee at the time. It
was a massive operation, but it enabled Lloyd’s to identify and
split off the so-called toxic assets—those assets less capable
of valuation—into a body called Equitas, which was managed
separately.
That is what
the Government should have done in the current situation. It would then
have been possible to ensure that good taxpayers’ money was
invested pound for pound in the good parts of the banks and not just
sprayed over the banks as a whole. It is shocking that we now have
commitments to the Royal Bank of Scotland and Lloyds bank, but do not
know exactly what those investments
comprise.
The
Chairman: Order. Again, I have listened with interest to
the hon. Gentleman’s remarks, but they have focused heavily, if
not exclusively, on banks’ assets—toxic or
otherwise—which are not germane to the order. The hon.
Gentleman is an extremely experienced parliamentarian, and I know that
he will now want to focus his remarks on the
order.
Sir
Peter Viggers: Thank you, Mr. Bercow. Drawing
on my experience as the Minister responsible for economic development
in Northern Ireland, I know that the health of the economy
is very much dependent on the banks. To that extent, Mr.
Bercow, although I certainly do not dispute your judgment, I would
argue that my remarks were relevant.
Let me move
on. The Minister stated correctly that the Government have announced
several measures to assist industry. That is absolutely true—the
Government have done that. They have announced measures, but what have
they done about them?
The working
capital scheme was announced in January and it is not yet working. Is
it really true that that scheme, which was intended to come into effect
in March, was the subject of an application to Brussels for state aid
clearance only last week?
The jobs
recruitment scheme was also announced in January and it has been
delayed until April. The mortgage support scheme was announced in
December, but it has
not yet been worked out in detail. A guarantee scheme for asset-backed
securities also will not start until April. Finally, the Lloyds bank
scheme has not yet been worked out and I would be grateful for a
progress report on it. The Treasury
Committee hears from a range of bodies, including large and small
businesses and people seeking mortgage support. Only this week, we were
in Northern Ireland taking evidence on the subject that we are
discussing today—assistance to industry. We heard that smaller
businesses in particular are crying out for support and yet, somehow or
other, the support is not getting
through. The
Treasury Committee has taken evidence from the Royal Bank of Scotland,
Lloyds bank and others. RBS and Lloyds said that they had fulfilled
their pledge to the Government by increasing lending to smaller
businesses at a level for 2008 that is 10 per cent. higher than that
for 2007. The members of the Select Committee asked, “Well, how
can it possibly be that, if you have increased your lending, we keep
hearing evidence that smaller businesses are crying out for support and
people are unable to get mortgages?” RBS and Lloyds just said,
rather limply, that it must be the foreign banks that are not lending
to business, particularly smaller businesses. I recall that the hon.
Member for Caithness, Sutherland and Easter Ross challenged them and
pointed out that, in his constituency in northern Scotland, foreign
banks are virtually unknown, and that Scottish and other British banks
have failed to make the advances.
How can it
possibly be that, on the one hand, banks say that they have willingly
opened their cupboards to support industry and that they are very happy
to support business, yet, on the other hand, we all know—I think
that every one of us knows from our constituency experience—that
people are finding it difficult to get money for smaller businesses and
for
mortgages? How
much better it would be if, instead of all the vast expenditure on
banks and the numerous schemes that the Government have announced, they
had simply accepted the Conservative proposal for a £50 billion
loan guarantee scheme, and implemented it when the Conservative party
said it should be effected, which is some months ago.
I have no
objection to the draft Financial Assistance for Industry (Increase of
Limit) Order 2009. I think that the concept of increasing the limit by
a further £600 million is, indeed, justified. Let us hope,
however, that the Government can get their act together and that the
money will flow through into
business. 9.33
am
Mr.
McFadden: Several questions have been asked in the debate,
some of them about schemes that are outside the scope of the order,
such as the working capital scheme, the asset protection scheme and so
on. I will try to restrict my response to matters that are within the
scope of the order, Mr. Bercow, having heard your guidance
to
others. Questions
were asked about what is happening on the ground with some of the
schemes. Under the enterprise finance guarantee scheme, for example,
loans are being approved at a rate of around £1 million
a day. Approximately £40 million has been allocated and
the banks report that 70 per cent. of applications are being
approved.
Of course, as
hon. Members have said, in our constituencies we hear reports of banks
that have not been able to access finance. It is important to remember
that the Government have not sought to put themselves in the shoes of a
bank manager, or the head of business for a particular aspect of
business banking by saying that company A should receive a loan but
company B should not. Those are banking decisions to be taken on
banking grounds. Through the scheme, we have tried to accommodate more
of the risk involved in such lending to free up much needed capital.
That scheme is up and running.
On the wider
issue of communication, it is true that businesses are asking how to
find out about the measures that the Government have announced. The key
single vehicle is the Business Link network, which operates throughout
the country. The Business Link website has a good, simple guide to the
measures that have been announced, and we have produced some documents
under the banner of “Real help for businesses now”, with
which I am happy to furnish the Committee. Those documents have all the
details about how the Government measures
operate.
Mr.
Prisk: Having those documents would be welcome, but we are
not the key intermediaries. It is the bank staff who are critical. Have
they received the documentation? Are those on the ground fully
briefed?
Mr.
McFadden: We work closely with the banks to ensure that
that is the case. There have been cases of businesses approaching their
local bank, which has not been as forthcoming as we would hope about
the details of the schemes. We are aware of that, and we are doing
everything possible to ensure that information about the schemes runs
from the top through to the person with whom the business deals. Such
information should not remain at the top.
I was asked
whether all the funds for which we seek permission under the order are
allocated. Yes, they are. However, the future orders that I mentioned,
and the Bill, will give the Government more flexibility in future.
The
hon. Member for Caithness, Sutherland and Easter Ross asked for a
breakdown of what has gone on so far. The provision has been in place
since 1982, so we would have to go back a long way to give him a full
breakdown if that is what he wants. I am happy to try to respond in
some way.
John
Thurso: I certainly do not wish the Minister to go to the
expense and trouble of detailing every transaction over the best part
of two decades. I was after broad guidance about what is in loans, what
is in guarantees and what is in other
instruments.
Mr.
McFadden: I refer the hon. Gentleman to the good
publication from the Department—the annual report on the
Industrial Development Act 1982. It might furnish him with some of the
information that he
requires. However, he raises an important point about the breakdown of
funds into loans and grants. We are taking steps to increase the
authorisation for that kind of expenditure because, when the Act was
passed, most Government support was probably through grants, but there
has been a move over time towards more support through loans and
guarantees. That increases the numbers involved because it exposes
things to a potential risk of default and so on in a way that a direct
grant would not
do. As
I said in my opening remarks, the measures in the package include the
enterprise finance guarantee scheme, the automotive package, capital
for enterprise and so on. I am not surprised at the wise words of
warning from my right hon. Friend the Member for Walsall, South to
others. They turned out to be true. He is right to say that we must get
help to businesses as quickly as possible and, at the same time, be
prudent with taxpayers’ money. That is what we are trying to do,
and is one reason why the decision on which business gets a loan under
the enterprise finance guarantee scheme should stay with the banks, and
not be for Ministers. None the less, we are trying to ensure that such
a scheme is
available. I
was asked specific questions about Lotus. The enterprise finance
guarantee scheme is available for companies with a turnover of up to
£25 million, and the automotive assistance programme is for
companies with a turnover of more than £25 million. At first
glance, it would seem that Lotus should be eligible—at least for
application—under the automotive assistance programme. We are in
touch with Lotus about that, and we will try to give it every help we
can.
The hon.
Member for Gosport made several comments about our approach to the
problems in the banking world. I do not propose to get drawn into such
a debate, which is not the subject of the order. I understand that he
has formed his own judgment. He said that the Treasury Committee was
unconvinced by the argument that the overall lending cake has become
smaller because foreign banks have withdrawn from the field. That is an
argument that UK banks have made. RBS has said that it will increase
its lending by £25 billion above the baseline for 2009, which
includes £16 billion for business lending—something that
we very much want to happen.
We think that
the order is absolutely right. As I said, we cannot will the end
without willing the means. We all want to get more support to industry,
and the order will enable us to do that. It is not the last time that
we will have such a debate under the 1982 Act. There will be similar
orders in the not-too-distant future, and there is also the Bill to
increase the overall limit. With those comments, I ask the Committee to
approve the
order. Question
put and agreed
to. Resolved, That
the Committee has considered the draft Financial Assistance for
Industry (Increase of Limit) Order
2009. 9.42
am Committee
rose.
| 
