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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 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.
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.
That the Committee has considered the draft Financial Assistance for Industry (Increase of Limit) Order 2009.
9.42 am
Committee rose.
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