Mr.
Prisk: Welcome to the Chair, Mr. Williams. I
think that this is the first time that you have guided a Committee on
which I have served, and I look forward to your
steerage. The
two motions stem from section 8 of the 1982 Act. I will
follow the order of play that the Minister has begun by looking at the
UK innovation investment fund first. The fund was in fact based on an
announcement by the Chancellor in his Budget in April. You will recall,
Mr. Williams, that in that Budget it was set out that the
noble Lord Mandelson was to have “a strategic investment
fund” of £750 million, to be spent on a wide variety of
activities. Some less kind than I might suggest that that was some form
of slush fund for the noble Lord Mandelson, but it clearly has been
spent on a number of different activities, many of which, I must say,
have some merit. I understand from the Minister that this fund is to be
a 10-year fund of funds costing £150 million, and that money
will indeed be drawn from the strategic investment
fund. We
welcome the Government’s conversion to the need for equity
funding alongside long-term debt finance, and note and support the
principle that the fund operates on a pari passu basis. However, it is
fair to say that the Government do not exactly have an unblemished
record on such matters. Take, for example, the capital for enterprise
fund, which was announced in January. It had—it still
has—a notional value of £75 million, yet 10 months later
only five businesses had received any money. Why have just five
businesses been helped in that time? Why did Ministers decide to
complicate the matter by splitting the capital for enterprise fund
three ways after its
launch? I
also have some practical questions relating to the operation of the
fund and its principles. Will the fund managers be appointed by
Christmas? There is some doubt about that, and it would help businesses
to know if that is the timetable. Given that the Minister named a
number of Departments that are contributing to the fund, will the fund
remain as one or will it, too, be split into different elements? When
does he expect the fund to be “open for business”, to
employ the overused phrase of this spring? It would be helpful for
businesses, whether in Walsall or elsewhere, to know when they can
start
applying. Turning
to the scrappage scheme, the motion seeks to extend the scheme by
increasing the current budget of £300 million to £400
million. Let me say right from the start that when the scheme was
launched, we made it clear that we had no wish to oppose it, if it
could be shown to provide short-term respite for what the Minister has
rightly described as a struggling automotive sector. Our concern then,
as it is today, was that the scheme
was not really a serious long-term answer to the sector’s
problems, whether they be global oversupply, competitiveness, or the
need to switch to low-carbon technologies. Although the pace of decline
of production has slowed, as the Minister suggested, car production
this September is still more than 40 per cent. lower than it was a year
before. The danger here, to which the Minister alluded with
his glorious phrase about the potential for an “offsetting
adjustment”, is that the scheme may merely be pushing the
problems in the industry forward by six or nine months, rather than
dealing with them. The French had a similar scheme in the 1990s. That
scheme stopped abruptly, and for a number of years thereafter car
production and sales dropped by 20 per cent., and stayed low. There is
a danger, therefore, that the scheme distorts investment and purchases
and does not alleviate the long-term problem. One problem in assessing
the scheme, and particularly its effectiveness, has been the lack of
information. It is, after all, less then six months since the scheme
began. Given that the Government now intend to extend the scheme,
perhaps the Minister will provide us with more information to help us
to understand its true
effect. First,
the cost of £100 million is said to be counterbalanced by higher
VAT receipts from sales. Indeed, the Society of Motor Manufacturers and
Traders suggests that the 15 per cent. VAT receipt on a car worth
£7,560 will match the £1,000 Government subsidy. What is
the net cost of the scheme to the Government? The Treasury must have
asked for estimates, so what are they? Secondly, why did Lord Mandelson
announce the extension of the scheme—at the Labour party
conference on 28 September, I believe—seven days after No. 10
went on record as saying that there were no such plans? Did No. 10 not
know, or was it a panic measure?
Thirdly,
what percentage of the sales was of cars made and assembled in the UK?
The Treasury Committee estimates the cost to the taxpayer at
£24,000 per UK vehicle, as most of the sales are of small,
imported vehicles. Is it right? Finally, for how many weeks will the
extension last? In what month does the Minister expect the scheme to
end? He said that the final deadline was February next year, but given
that the extension was introduced rather rapidly, we need to be clear,
and the industry and consumers need to know, when the Minister expects
the scheme finally to finish.
I have
mentioned the need for long-term plans and a solution for the car
industry. Under the 1982 Act, the Government’s automotive
assistance programme is meant to play that longer-term role. The
programme was announced, as hon. Members will recall, on 27 January,
and it has a total value of £2.3 billion in loan guarantee
provisions. Yet the evidence, gleaned from my questions to the
Minister, suggests that only one loan worth just £10 million has
been made since January. In the same period, the European Investment
Bank had managed to lend £340 million to UK businesses in this
sector. The German Government had already managed to offer
€2 billion loans before last Christmas, while the
French have offered €6 billion. Why do British car makers have
to be the last to get the help that was
promised? When
those issues were debated in April on the Floor of the House during our
proceedings on the Bill that became the Industry and Exports (Financial
Support) Act 2009, the then Minister undertook to
consider
submitting regular updates on the progress of this and similar schemes
and putting them in the Library. Six months on, what progress has there
been, and if none has been made, why
not? 2.53
pm Lorely
Burt (Solihull) (LD): It is a pleasure to serve under your
chairmanship, Mr. Williams—I think it is the first
time for me, too. The Conservative spokesman has stolen most of my
thunder, so I will try to be
brief. I
was looking for details on the two motions that we are discussing, and
this copy of the motions was all that I was provided with. Why were we
not extended the usual courtesy of being provided with explanatory
notes to further explain what the motions are about? None the less, we
have done our research.
It seems
that the Government have recently gone into overdrive in their
announcement of initiatives, funds and stimulus packages for business,
without delivering a great deal of money. As of October, the trade
credit insurance scheme had invested £13 million since May,
although it was said that it would provide between £3
billion and £5 billion. The hon. Member for Hertford and
Stortford has already referred to the automotive assistance programme,
which took months to invest anything. As of 12 October, a grand total
of £10 million was given to Tata for research, and as far as I
am aware, that is the only thing that has been released. As for the
capital for enterprise fund, as of 9 September, £36
million of offers had been made, but only two companies had accepted
the funding terms and received investment totalling just £3
million. Regardless of whether it is two companies or five, the
sentiment is the same. It is disappointing that so little money has
filtered through to the people who needed it
most. How
will the Government appoint the fund manager and what stage is this at?
Will they be able to get the necessary people in place to get
investments moving? For example, as part of the Government’s
2008 manufacturing strategy, they announced the creation of an
independent body called Manufacturing Insight to help build support for
the sector. It only appointed a director on 2 September 2009, over a
year after the post was created.
This fund
was announced on 29 June, so I am slightly worried that we are now in
November and only just dealing with the motions to put it in place.
Industry needed that help in June. Why has it taken five months to
bring us to this stage and how long will it take to get the fund
manager into place? I welcome the commitment to business but I have
strong concerns about the operation of the fund and the
Government’s capacity to deliver on their promises and invest
the money that they say they will, rather than just announcing it and
then forgetting about
it. How
will the Government get the investment that they need from the private
sector? Has there been anything more than simply expressions of
interests? There is a real concern that the huge sums of private
investment that they expect are over-optimistic. As of last week, the
Government were still just saying that they expected significant
investment. The scrappage scheme appears to have been very successful.
Industry had been calling for it, and I am glad to welcome it.
However, can the Minister confirm, on the basis of tax receipts from
sales, that no costs have been incurred to the taxpayer as a result of
the
scheme? 2.57
pm
Ian
Lucas: I am not sure whether the two Opposition
spokespeople support the motions. If they do, they do not seem to be
too pleased about it. I hope to be able to cheer them with my
response.
These
investments by the Government are clear expressions of our commitment
to industry. They are not just words, but finance being invested in the
future of British industry. It is all very well for Opposition Members,
particularly those who suggest we should cut public investment now, to
support motions before the House, but they are not prepared to put
their money where their mouth is when that money is required and when
money is so desperately needed. In my time in post, from June this
year, few individuals from British industry have come to see me to ask
for less money to be invested in UK industry and for the budgets in the
Department to be reduced. Both motions will contribute in the short
term to assisting UK industry and to planning and assisting UK industry
in the longer
term.
Lorely
Burt: I am delighted to assist the Minister. The Liberal
Democrats welcome both measures, but we share a concern with the
Conservatives about their feasibility and their implementation on the
back of the other initiatives that we have already
mentioned.
Ian
Lucas: I know that the Liberal Democrats and Conservatives
work closely together in opposing the Government, particularly in the
hon. Lady’s constituency. I am pleased that she has cheered
up. In
his comments, the official Opposition spokesman focused on funds that
are not specifically relevant to the two funds we are discussing today.
The hon. Gentleman referred to the capital for enterprise scheme. I am
not sure where the figures he used came from, but I am advised that the
number of businesses that have benefited is now certainly more than
five. He did not refer to the enterprise finance guarantee scheme,
which has been extremely successful.
Whenever we
have these debates there is often, regrettably, a great deal of
cherry-picking from the many initiatives that the Government have
undertaken—for example, the deferral of VAT, which has helped
businesses considerably, and the reduction of VAT, which was opposed by
the Opposition but which has proved very successful. Indeed, I have
recently received representations from business about its extension.
That is a matter for the Chancellor, but it seems to have had a
positive effect on the overall economy.
Mr.
Prisk: I refer to column 611 of Hansard on
12 October for the five businesses figure. I am grateful for
the Minister’s update that it is now more than five. How many is
it?
Ian
Lucas: I regret that I cannot give the hon. Gentleman that
figure now, but I will write to him with the information.
Lorely
Burt: Given the Minister’s comments on the success
of the VAT reduction, is he aware that a survey of the Federation of
Small Businesses revealed that—I am speaking from memory, so I
hope that I will be
forgiven if the figure is not entirely accurate—at least
93 per cent. of small businesses found that the VAT reduction had made
no difference at all, or had made things
worse?
Ian
Lucas: I note what the hon. Lady says, but as I have
indicated, businesses have made representations to me about the
proposed increase back to 17.5 per cent., saying that it should be
deferred. They would not do so unless they thought the present rate had
been having some effect.
The closing
date for the appointment of fund managers was September 18—my
birthday, incidentally—and a number of applications have been
received. They are now being considered and we anticipate that
appointments will be made
shortly.
Mr.
Prisk: Before Christmas?
Ian
Lucas: I shall not enter into a dialogue about whether an
appointment will be made before Christmas; however, the appointment
process is continuing as we speak. The closing date for applications
has passed, and I will advise the hon. Gentleman as soon as an
appointment is
made. The
fund involves a contribution from three different Departments, as the
hon. Gentleman observed. The idea behind the fund is to spread risk
across different sectors. In those circumstances, splitting it up as he
suggested does not provide assistance, as it is going to be viewed as
an overall
fund. The
scrappage scheme was introduced with the initial intention of assisting
the automotive sector in the short term—for a limited
period—at a particularly difficult time. It was always envisaged
that the scheme would be time-limited. It was very successful and a
great deal of money was paid out relatively quickly. It was in that
context that the request came from the industry—from business
generally—to extend it. Strong representations were made
throughout the summer and into September. When the Government announced
the scheme, it was always the intention that it would be time-limited.
When the Prime Minister and the Secretary of State for Business,
Innovation and Skills discussed at various times whether it might be
extended, they said that there were no plans to extend it. That was
their consistent view. However, we had additional representations at
different times, which we were duty bound to consider, and at the time
of the announcement the decision was made that we would agree with the
representations from the motor industry, from industry generally and
from business organisations to extend the scheme. In that context, the
announcement was made on 28
September.
Mr.
Prisk: I am just trying to clarify the issue. On
19 September, when it was reported in a number of newspapers that No.
10 said that there were no plans to extend the scheme, did No. 10 not
know that nine days later the Secretary of State would make a statement
that there was a plan, or was it instead a last-minute, panic measure,
cobbled together in the last few days?
Ian
Lucas: As is so often the case, I do not adopt
the language presented by the hon. Gentleman. On 19 September,
there were no plans to extend the scheme. We are a fast-moving
Government and we make wise decisions, such as the introduction of the
scrappage scheme. I am interested that the scheme is now supported by
the Conservative party, because it was criticised strongly by leading
Front Benchers at the Conservative party
conference.
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