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Peter Luff (Mid-Worcestershire) (Con): I think I must give at least one cheer for the package, because I am sure that it represents the first step on the Government’s journey to adopting the more ambitious proposals of
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my party, when the Minister will be forced to eat the unfortunate words he said about our proposals, which I fear misrepresent those proposals.

May I ask about the targeting of this scheme and existing schemes? Before my Select Committee this morning, the Secretary of State for Business, Enterprise and Regulatory Reform suggested that press reports that the funding would be targeted on specific sectors were wrong and that it would be available to all sectors. As the existing loan guarantee scheme is not available for the farming, transport, pub and post office sectors, for example, can the Minister clarify what the targeting—if any—of the scheme will actually be?

Ian Pearson: If the Conservative party wants to clarify its proposals I am more than happy to provide further commentary on them. At the moment they look to me to be uncosted, unfocused and poorly targeted and that remains my view, but until we see more detail, it is very difficult to say.

The working capital scheme is open to the non-financial sector and any companies with a turnover of less than £500 million. Details of eligibility for the enterprise finance guarantee scheme are on the Business Link website. It is a broader scheme than the small firms loan guarantee scheme, with which I know the hon. Gentleman is very familiar. I am sure that as Chair of the Select Committee on Business and Enterprise he will appreciate the fact that with the enterprise finance guarantee we are targeting companies with turnover of up to £25 million, which will bring in a lot more companies that badly need that loan assistance at the moment.

Mr. Mike Weir (Angus) (SNP): Could the Minister clarify when the funds will be available? I think he said that the £1.3 billion working capital scheme would be available from today, but can he tell us how long he expects that money to be available, given the number of firms that are likely to want to take advantage of it? Can he clarify when the enterprise finance guarantee fund will be available to business, and also the trade credit insurance scheme? It has come up in evidence to the Select Committee that many companies are concerned about trade credit insurance.

Ian Pearson: The enterprise finance guarantee scheme goes live today. We hope the working capital scheme will be up and running by 1 March. What is happening now is a process of detailed negotiation with the banks. They will be submitting portfolios of companies on which we will then provide the 50 per cent. guarantee. It is intended to last until 31 March 2010. We see it as a temporary measure to address the current global credit crisis. Of course, we will continue to monitor the situation and to see whether further measures need to be taken. Let us be very clear: we are providing a major Government intervention in the United Kingdom credit markets, as well as a major upgrade to the UK loan guarantee scheme. I am sure that businesses up and down the country will welcome that, and many will benefit from it.

Mr. Jim Cunningham (Coventry, South) (Lab): Given the announcement by Jaguar Land Rover today, and the ongoing problem, will the Minister talk to the
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Secretary of State, and will they arrange to meet a small delegation to discuss the situation? There is a lot of concern in the west midlands, and in Coventry in particular, where the local newspaper has been running a campaign to give assistance to the Jag.

Ian Pearson: I am certainly happy to meet a delegation, and I will pass on my hon. Friend’s representations to the Secretary of State, who I know is a strong supporter of the car industry in the United Kingdom, and fully recognises its strategic importance to the UK economy. We have been in discussions with Jaguar Land Rover, and of course the redundancies announced today are regrettable. We see a major problem in the car industry right across Europe, and indeed worldwide. People simply are not buying cars, and that is threatening many car companies, not just Jaguar Land Rover. We need to look at what more we can do sensibly to support our car industry through this difficult economic time. Certainly, the package of measures that we announced today will be of benefit to the supply chain in the automotive industry.

Mr. James Paice (South-East Cambridgeshire) (Con): In and around Cambridge, and in my constituency, there are a large number of biotech and high-tech research companies that need several years of up-front investment before a product is fit for the marketplace. That investment is, of course, now drying up—it has been doing so for some months. I am perplexed as to whether anything in the Minister’s package will help those businesses. If it does not, years of research and development, which in many cases could lead to health improvements or even life-saving products, will be completely lost. Will the package help?

Ian Pearson: I agree with the hon. Gentleman about the importance of the biotech industry to the United Kingdom. It has been going through difficult times. There are specific issues within that industry because of the long lead times before products get to market. Certainly, the biotech industry, along with other sectors of the economy, will be eligible for the working credit guarantee scheme. In addition, small companies that have a turnover of less than £25 million and meet the relevant criteria could benefit from the enterprise finance guarantee; that will obviously have to be decided on a case-by-case basis, after proper assessment. There is no reason why biotech businesses, and indeed businesses in other sectors of the economy, should not be able to take advantage of some of the support that the Government are making available as a result of these announcements.

Joan Walley (Stoke-on-Trent, North) (Lab): May I say how much businesses in north Staffordshire will welcome the statement? It is important to get the overall policy, and the detail, right. The Minister says that the help will be given on a first come, first served basis, but will he accept that particular areas of the country, such as north Staffordshire, have a disproportionate number of job losses as a result of the economic downturn? Will he hold an urgent meeting with north Staffordshire MPs, the North Staffordshire chamber of commerce and industry, and the ceramics industry, so we can make sure that we take full advantage of this part of the Government’s overall package of available measures?

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Ian Pearson: I am always happy to meet my hon. Friend and representatives from north Staffordshire. I am certainly aware of the issues affecting what might be called the A50 corridor, given the recent announcement of redundancies at JCB, the issues affecting companies at the other end of the A50 corridor, and the problems at Waterford Wedgwood, which were in the press recently, and in the ceramics industry in general. She will obviously want to advise companies in her constituency to look carefully at what is on offer as a result of the Government guarantees and the loan scheme. I am sure that there are companies in her constituency that would directly benefit from the measures that we are announcing—this is real help for businesses now. We need to get that message across, so that businesses apply for the real help that is available.

Mr. Brian Binley (Northampton, South) (Con): Small businesses have heard many fine words from this Government with regard to credit but have seen very little action, and frankly they are beginning to distrust whether anything will ever happen to help them. Will the Minister therefore tell us, in some detail, how he will assess and monitor the schemes, and how he will regularly report back to the House and the sector, to restore a little faith?

Ian Pearson: We will, of course, make sure that the schemes are fully monitored; the Government do that as a matter of routine, just as we are monitoring the lending of the banks, particularly the recapitalised banks. It is important to recognise that real help is being provided now. We should not forget that. That message needs to go out loud and clear to the business community. We will make sure that we report back to the House in the appropriate ways, through the normal channels, on the effectiveness of the programmes.

Nigel Griffiths (Edinburgh, South) (Lab): When I was the Minister responsible for small businesses, I successfully resisted attempts within Whitehall to wind up the small firms loan guarantee scheme, but I deplore the lack of basic understanding of how the scheme works shown by both Opposition Front-Bench spokespersons today. Will my hon. Friend point out to business and the public that while the extension will be welcome, and will help many companies, some of those companies—even those that, in other circumstances, would be successful—will go to the wall, and it will mean that tens of millions of pounds of Government money will have to underwrite loans when they are defaulted on? Will he ensure that his Department’s budget continues to have that money, and will he warn people that defending his Department’s budget is not one of the four priorities of the Conservative party?

Ian Pearson: My hon. Friend makes his points very well. Of course, he knows in detail how the small firms loan guarantee scheme works. It has been an effective policy instrument over a number of years. It was retargeted, in better economic times, on particularly small companies in a particular, small part of the market. It is wholly right that we should now focus on companies with a turnover of up to £25million, which significantly increases the number of companies that could benefit from the guarantees. Let there be no mistake: there are companies out there that will welcome the measures, because they need additional loan finance. We need to make sure that
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the Government get the marketing right, so that we can put those companies that need that finance together with the banks that can provide it, with the guarantees that are available from the banks themselves.

Sammy Wilson (East Antrim) (DUP): I, too, welcome the statement. The measure may be copied from the Conservative party, but that will not matter a great deal to the people who will benefit from it or to firms that find themselves in trouble because of an inability to borrow. There are three points that companies would make to me. First, any scheme should be simple, and companies should know who is and is not eligible. Secondly, it should be speedily applied when firms find themselves in trouble. Thirdly, it should be targeted at firms that are in genuine need as a result of short-term working capital difficulties.

Will the Minister give us an assurance about the eligibility criteria for the scheme? Will he assure us first, that it will be simple and transparent, and that firms will know when they are eligible; secondly, that it will be available quickly to firms when they find themselves in trouble; and lastly, that banks will not be able to use the scheme simply to replace their lending, rather than extending the money that is freed up to other firms?

Ian Pearson: The hon. Gentleman offers some good principles about how schemes should be designed. The enterprise finance guarantee and the working capital scheme are simple, transparent and targeted, and we believe that they will be effective policy instruments. It is important that businesses know that there is real help from today from the Government, through the banks, for those that have particular difficulties with access to loans and access to credit in the future.

The Government cannot help all businesses. What we can sensibly do is to consider what interventions we can make when we see major problems in the credit market and how interventions can be effectively targeted and costed. That is exactly what we are doing today. Over time we will see the measures producing significant benefit to many companies. We should not get hung up about where ideas come from. I would say that the Conservative proposals look very similar to the proposals that we announced in our pre-Budget report, but I do not want to play silly, party political games about this. People are interested in whether the measures will help companies and jobs for the future. People who are worried about their jobs and about the future of their business will welcome these steps, rather than get into some puerile debate about who thought up the idea first.

Ms Sally Keeble (Northampton, North) (Lab): I warmly welcome the announcements that my hon. Friend has made today. My county has a large number of small and medium-sized enterprises. What will my hon. Friend do to ensure even access to and take-up of the schemes across the regions? How will he ensure that companies outside the south-east can get proper information and advice not just through a website but face to face, so that they know how to access schemes and which one is best tailored to suit their individual needs?

Ian Pearson: That is an important issue. We want to ensure equal access to the schemes right across the regions. It will be up to Business Link and the regional development agencies to help to promote the schemes.
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Chambers of commerce throughout the country will no doubt want to promote what is on offer, as will the CBI in the regions. Business Link will be one of the key means whereby companies can access information. A portal is available on the Business Link website, and most companies these days have access to the internet and will quickly be able to understand what is on offer. We need to monitor that regionally as well as nationally as we go forward, to ensure that companies that need support throughout the country are able to access it.

Mr. Greg Hands (Hammersmith and Fulham) (Con): We heard mention of the German stimulus package. I have a copy of that document, “Entschlossen in der Krise, stark fĂ1/4r den nächsten Aufschwung”, which details a €100 billion loan guarantee scheme, including, crucially, for large businesses. The document states that such a large scheme is possible because a large balance budget was built in the good years, unlike the situation in this country. The Germans really did fix the roof while the sun was shining. Can the Minister explain why his package is so small, compared with that on offer in Germany and compared with that offered by the Opposition?

Mr. Speaker: Order. This may be an opportune time, at the start of the new year, to remind hon. Gentlemen, and hon. Ladies, of course, that brief questions often lead to brief replies. I can then call Members more quickly.

Ian Pearson: By way of a brief reply, my understanding is that the German scheme has a turnover limit of €500 million. I could be wrong about that, and if so, I apologise, but £500 million sterling for the working credit guarantee scheme covers pretty much 99 per cent. of companies in the United Kingdom that are potentially eligible for the scheme. The hon. Gentleman should welcome it as an important measure.

John Hemming (Birmingham, Yardley) (LD): The Minister rightly recognises the redundancies announced today by Jaguar Land Rover as a result of reduced car sales. The Society of Motor Manufacturers and Traders has said that one of the reasons for the reduction in car sales is the absence of credit with which to buy cars. The announcement appears not to give people any hope that that credit will be available. Will the Government offer people any hope in that regard?

Ian Pearson: The hon. Gentleman knows that as a fellow west midlands MP, I have tremendous sympathy for those at Jaguar Land Rover who will hear today that they are being made redundant. We need to do all we can as a Government to make sure that they find jobs in the labour market again as quickly as possible. On trade credit insurance more generally or specifically for the motor industry, my right hon. Friend the Secretary of State has been actively involved in discussions about that. Officials are talking to the trade credit insurers and, as I indicated in my original comments, we hope to make a further announcement as things move forward.

Mr. Michael Fallon (Sevenoaks) (Con): Given that a significant proportion of previous lending volumes in 2006-07 was made by foreign banks and by non-bank
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lenders, how can we judge whether a £10 billion or a £20 billion scheme will be sufficient, when the Minister has not given us his assessment of the lending gap? Can he give us that figure?

Ian Pearson: The hon. Gentleman makes a key point when he refers to foreign banks and foreign bank lending. One of the significant things that has happened over recent months is that foreign bank lending in the UK has declined significantly. Domestic banks continue to show quite strong figures for lending, but overall there is a credit shortage. The hon. Gentleman will have seen some of the figures published by the Bank of England in its recent lending panel report. I do not need to elaborate as those are a matter of public record. It is important to recognise that this is a key issue. One of the features of our working capital scheme is that by providing bank guarantees as it does, it frees up some capital that will be reinvested in lending, providing additional capital to UK companies in the marketplace. That is important and it is something that the Conservative scheme, to the extent that I understand it, does not do.

Sir Robert Smith (West Aberdeenshire and Kincardine) (LD): Many small businesses in my constituency have always been frustrated by the fact that a lot of public money is being poured into the banks but that does not seem to result in a better credit situation for small businesses. Anything that the Minister can do to monitor what is going on and ensure that the scheme delivers extra money will be welcome. Specifically for the north-east of Scotland, will he work with the Department of Energy and Climate Change and the Treasury to see what else can be done for the North sea, where large investors have relied on the credit market? The Government’s policy is to bring in new entrants who have to borrow to invest in the North sea, and that market is drying up. If the small businesses do not have the custom of the large company, they are in just as much trouble as if they cannot borrow from the bank.

Ian Pearson: I take the hon. Gentleman’s point entirely. Other parts of Government are aware of the issues and are actively discussing them. If he wishes to talk to officials or other Members about that, I shall be happy to facilitate meetings.

Mr. William Cash (Stone) (Con): The Minister may know that many hundreds of my constituents work for JCB and Wedgwood. It is therefore a matter of grave concern that the customers of JCB should have credit available in order to buy its superb machinery—the same applies, of course, to companies such as Wedgwood. Will the Minister guarantee—he is offering a lot of guarantees—that that credit will be made available to enable those incredibly good pieces of equipment to be produced and purchased? Will he also give me an assurance that I can come to any meetings that he holds with the Members representing Stoke-on-Trent or any other Members of Parliament whose constituents are equally affected?

Ian Pearson: I should like to place on the record my belief that JCB is a tremendous, well organised and well run company that is going through difficult economic times at the moment. It has done all it can to maintain employment among its work force, but the demand for
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its products is not there at the moment. One of the reasons for that has been a lack of credit, and I hope that some of the measures that we have announced today will help the potential purchasers of JCB machines in future.

The Government cannot run businesses; it is up to businesses themselves to make decisions about how they should right-size their business according to the economic conditions and their views about the future. Business people at JCB and in the automotive industry, the construction industry and other sectors of the economy have to make those sorts of decisions. We can, however, provide a sensible framework of support for viable businesses, to help them through difficult times. That is what we are doing today.

Mr. Hugo Swire (East Devon) (Con): When will the Government wise up to the fact that the banking system is simply not working? Very often, larger companies’ deals are reneged on and banks are trying to foreclose on them. I do not know what world the Minister is living in, but it seems to me to be a parallel universe. What leverage do the Government have left over the banks to get them banking and lending properly again?

Ian Pearson: We are in regular discussions with the banks. The hon. Gentleman will be aware that through UK Financial Investments Ltd we manage an arm’s length interest in the banks that took advantage of the recapitalisation announced on 8 October. We monitor bank lending very regularly, and we have good dialogue and co-operation through the lending panel. He has to accept that the issue is not only about UK banks—banks worldwide have major credit issues. An adjustment is going on in our economy and the global economy. As a Government, we can take sensible measures to help companies and individuals through these difficult economic times—measures such as those announced today and those on home buyer support and other areas, to help people through difficult times.

Mr. Michael Moore (Berwickshire, Roxburgh and Selkirk) (LD): In recent weeks, hundreds of my constituents have lost their jobs, and many more who work for perfectly good companies fear the same fate, because the businesses for which they work are effectively being throttled by the attitudes and approaches of the banks. In many instances, the basic trust between banks and businesses has broken down. Will the Minister assure us that he will do more than carefully monitor the situation, and actively manage things so that businesses that need the cash, get it?

Ian Pearson: We are actively intervening, and the measures announced today are major steps forward in providing credit support and loan guarantees to companies. We cannot manage every individual transaction—that would be complete nonsense, and neither the hon. Gentleman nor any other Member would sensibly suggest that. However, we are ensuring that there is a sensible framework of support and that a range of policy instruments is available through the banks to help companies facing problems at the moment. That is what we are doing, and we believe that it is the right policy instrument. However, we will continue to consider the situation and discuss matters with the business community. If more can sensibly be done, we will want to do it.

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