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House of Commons

Thursday 5 February 2009

The House met at half-past Ten o’clock


[Mr. Speaker in the Chair]

Business Before Questions

Manchester City Council Bill [ Lords] and Bournemouth Borough Council Bill [ Lords]

Motion made, and Question (15 January) again proposed,

Hon. Members: Object.

The debate stood adjourned; to be resumed on Thursday 12 February.

Canterbury City Council Bill, Leeds City Council Bill, Nottingham City Council Bill and Reading Borough Council Bill

Motion made, and Question (15 January) again proposed,

Hon. Members: Object.

The debate stood adjourned; to be resumed on Thursday 12 February.

Oral Answers to Questions

Business, Enterprise and Regulatory Reform

The Minister of State was asked—

Enterprise Finance Guarantee Scheme

2. Mr. Andrew Pelling (Croydon, Central) (Ind): What percentage of the amount of loans guaranteed under the Government’s enterprise finance guarantee scheme as applied to businesses with an annual turnover of £25 million or less he estimates will be granted to businesses with an annual turnover between £20 million and £25 million in the next 12 months. [254309]

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The Parliamentary Under-Secretary of State for Business, Enterprise and Regulatory Reform (Ian Pearson): The enterprise finance guarantee, launched on 14 January, is open to businesses with a turnover of up to £25 million. It is too early to predict how many loans will be made under the guarantee to firms with a turnover between £20 million and £25 million.

Mr. Pelling: Initial experience in my constituency suggests that we are encountering a problem that often arises when any public policy limit is set. That is, economies of scale mean that banks are very keen to serve businesses with a turnover of between £20 million and £25 million. If that turns out to be a general trend across the country, what can be done to ensure that businesses with a smaller turnover will also benefit from this policy initiative?

Ian Pearson: We want all businesses with a turnover of up to £25 million to benefit from the Government’s enterprise finance guarantee and the other schemes and bank lending that are available. Under the enterprise finance guarantee, companies will be able to borrow anything from £1,000 to £1 million. There are generous repayment terms, and loans can be repaid over up to 10 years. The hon. Gentleman may be aware that only today RBS-NatWest has announced £3 billion in extra funding for small and medium-sized enterprises through new regional funds. Significant support packages are available now, which can be accessed though Business Link. The Government are providing real help for business now, and that is what the business community needs to help it through these difficult times.

David Taylor (North-West Leicestershire) (Lab/Co-op): I know that small and medium-sized businesses in North-West Leicestershire will welcome the launch of the enterprise finance guarantee. However, my constituent Mr. Evans, who has also read the helpful document “Real Help Now”, says that he has been left totally confused. He said:

How confident is the Minister that individual branches of the banks will be informed about the Government’s proposals as rapidly as possible? It does not seem that the information is necessarily percolating down from the top levels of those organisations.

Ian Pearson: Nineteen banks and financial institutions are already participating in the enterprise finance guarantee, so I would be surprised if lending managers at national and regional levels are not aware of the scheme and of what is on offer. The scheme was launched on 14 January, so it is still relatively new, and I know that the banks are looking at their communication strategies to make sure that the information is available at the lending level. The scheme is clear, it is open for business and doing business now, and it comes on top of the other lending that is also available in the economy. If my hon. Friend gives me the details of the specific problem that his constituent faces, I shall make sure that it is investigated.

Peter Luff (Mid-Worcestershire) (Con): Can the Minister say to what extent today’s very welcome announcement from RBS-NatWest depends on the enterprise finance
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guarantee scheme? I share the reservations expressed by the hon. Member for North-West Leicestershire (David Taylor). The Forum of Private Business says that the scheme is not working effectively and that bank managers do not know about it. In my constituency I have a very worrying case in which a man has been made ineligible for the scheme by the arbitrary behaviour of another bank. There are real questions about the scheme that need to be addressed urgently.

Ian Pearson: We will investigate any problems that the hon. Gentleman says have been encountered, but I ask him to bear in mind the fact that the scheme was launched on 14 January. It is open for business now and is providing real support. There may be some teething problems at an individual banking level, but that might be expected with any scheme. Some companies will be turned down because they do not meet the criteria, but the business community as a whole has welcomed the flexibility to get a loan of between £1,000 and £1 million, with a 75 per cent. Government guarantee. I am surprised by the hon. Gentleman’s comments about the Federation of Small Businesses; we are happy to work with it to make sure that the scheme is effective. It is properly designed, and it is open for business. It should be welcomed by the Opposition, as it provides support for the business community.

Miss Anne Begg (Aberdeen, South) (Lab): In his reply to my hon. Friend the Member for North-West Leicestershire (David Taylor), the Minister said that the scheme came on top of the finance already available—but does the Minister think that the banks are playing ball? A small business—well, it is not actually that small—contacted me: RBS has found any excuse to restructure its loan, and has charged it 1 per cent. for doing so. It is a profitable business that is looking to expand, but it finds it very difficult to get what would, in normal circumstances, be classed as normal finance. It feels that it is being taken for a ride by the bank.

Ian Pearson: Obviously, I cannot comment on those individual circumstances. On the general situation, hon. Members will be aware that through the lending panel, we are monitoring lending by the major banks extremely closely. A lot of lending into the banking system by foreign banks has disappeared, so there is a credit crunch affecting the UK economy. Our major banks are continuing to lend, and we continue to push them to make sure that they do, which is why I welcome the announcement by RBS-NatWest today. Obviously, we expect normal commercial loans to have been exhausted as a possibility before companies are eligible for schemes such as the enterprise finance guarantee scheme; that is the right thing to do when providing a taxpayers’ guarantee. The schemes are up and running. They are working, and they are providing real help for business now.

Lorely Burt (Solihull) (LD): Is the Minister aware of an unintended consequence for leasing and asset finance companies that results from subsuming the small firms loan guarantee scheme within the enterprise finance guarantee loan scheme? As only six banks are offering the guarantees, such companies are no longer able to offer bank loan guarantees to their customers. Will he look into widening the availability of the scheme to leasing and asset finance companies?

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Ian Pearson: More than six banks are offering the scheme. If the hon. Lady contacts me with specific details about finance and leasing companies, I shall be happy to consider them. We have made initial deals with banks to offer the enterprise finance guarantee, and we have brought on board more lending institutions, so the problem that she mentions may already have been solved, but I am happy to look at the detail.

Mr. Kenneth Clarke (Rushcliffe) (Con): When Lord Mandelson announced the scheme, he said that it was “going live today”, and the Minister has just said that it is open for business—but does he not realise that he is lucky if he has found a small business that is aware of the existence of the scheme, and very lucky if he has found a bank that believes that it is operating the scheme at local level? Instead of producing a series of measures in a panic-stricken way, as the Government have done in recent months, would it not have been better if they had speedily adopted our policy of a £50 billion loan guarantee scheme for businesses of all sizes, and had shown some competence in getting it into practice at the speed required?

Ian Pearson: No, it would not have been a good idea to implement an uncosted, untargeted scheme. What the Government have done is to introduce the enterprise finance guarantee, which is specifically targeted at companies with a turnover of up to £25 million. The right hon. and learned Gentleman will be aware of the working capital scheme that we are also introducing. It will provide working capital support for businesses in the economy. That will apply to a portfolio of companies with a turnover of up to £500 million. That is real support for business, and it is working. We need to do more to market existing products to the business community. I would like to think that the right hon. and learned Gentleman and I shared an interest in wanting to do that, and in wanting to get the maximum possible publicity for the real support available to companies to help them through the recession.

John Thurso (Caithness, Sutherland and Easter Ross) (LD): The Minister has heard from Members in all parts of the House about the concern that banks are failing to provide help for SMEs. Is he really satisfied that the banks have taken on board their duties to help put the scheme into action? All Members have heard evidence from companies: banks have failed to advise them of the scheme, and failed to help them to access it—and those are the very banks that the country now largely owns. When will the Government make the banks undertake what is necessary to make sure that the schemes actually work for small and medium-sized enterprises?

Ian Pearson: The hon. Gentleman has heard about the RBS-NatWest scheme that has been announced today, and he will be aware of schemes that were announced before Christmas, through which the major banks are continuing to provide finance to small and medium-sized businesses. He also ought to know what we have done as a Government, moving from the small firms loan guarantee scheme, which was a very small scheme targeted at fairly marginal businesses with a turnover of up to £5.6 million, to the enterprise finance guarantee, which takes all companies with a turnover of
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up to £25 million and provides far bigger and more flexible loans. We need to make sure that that information gets out and is used by companies that want to have discussions with their banks. I know of many cases in my constituency where companies are aware of the scheme and are talking to their banks. I expect that the lending figures for companies participating in the enterprise finance guarantee will quickly start to build strongly. After just over two weeks, we think a good start has been made and we expect to see significant progress in the use of the scheme in the future.

UK Workers

3. John Robertson (Glasgow, North-West) (Lab): If he will take steps at EU level to secure greater employment opportunities for UK workers when contracts for work in the UK are awarded to companies registered overseas; and if he will make a statement. [254310]

The Minister for Employment Relations and Postal Affairs (Mr. Pat McFadden): The Government support the rights of labour mobility that go with European Union membership. We supported the European Commission’s proposals to ask its group of experts to examine the operation of the posted workers directive and to ask social partners at European level to discuss the implications of recent European Court judgments. The posted workers directive operates throughout the EU and the recent report from the European Commission showed that there were 47,000 UK posted workers in the rest of the EU—three times more than the 15,000 posted workers from the rest of the EU working here in the UK.

John Robertson: The posted workers directive is, of course, the problem. The court ruling has brought it into disrepute, with subcontracting companies playing worker against worker, which is why we ended up with the strikes this week. Is it not time the UK put workers rights in the EU as No. 1 on the agenda, and made sure that we lead the field in ensuring that the rights of those workers are looked after?

Mr. McFadden: I understand what my hon. Friend says, but I am not sure that the recent court judgments are relevant to the unofficial strike action over the past weeks. Those judgments are essentially about pay and about the capacity of trade unions to take industrial action in support of collective agreements. We have been told that all subcontractors on the site at the Lindsey oil refinery are required to pay according to the industry agreed rates. ACAS will test the veracity of that claim, but that is what we have been told, so whatever this week’s dispute was about, it does not seem, on the face of it, to have been about a race to the bottom in terms of pay.

Mr. David Heathcoat-Amory (Wells) (Con): Is not the recent industrial unrest a direct result of the Prime Minister’s call, from weakness, for “British jobs for British workers”? In answering the hon. Member for Glasgow, North-West (John Robertson), would it not be more honest for the Government to admit that the Prime Minister could never deliver on that promise? He is legally bound by EU law, which the European
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Commission has no intention of amending at all. What other way is the Minister finding through this terrible dilemma of serious industrial unrest, up against a legal prohibition on anything serious being done to remedy it?

Mr. McFadden: I do not accept the right hon. Gentleman’s premise. Everyone in the House wants to see British workers having jobs, and we want them to have the skills and training necessary for that. However, we do not want to forsake a relationship whereby half our exports go to the rest of the EU, half of our inward investment comes from the rest of the EU, and 3 million to 3.5 million—one in 10—of the jobs in this country are in some way associated with trade with the rest of the EU. It is not inconsistent to support that and also to support skills and training for British workers for the jobs and industries of the future.

Shona McIsaac (Cleethorpes) (Lab): Given that the dispute at the Lindsey oil refinery seems to have been resolved, I would like Ministers to consider some of the wider issues underlying it. If terms and conditions are equal and there are no differences in pay, will the Minister and his ministerial colleagues look into why British firms are losing contracts, and why they are not winning the contracts when they compete against European firms? We need to establish that if we are to get to the real reason why the dispute occurred.

Mr. McFadden: My hon. Friend raises an important question, and I know that she has been very close to this issue and taken time to establish the facts. The question that she poses is a good one. If the issue was not about pay, what, in the competition for the contracts, may sometimes mean that UK firms lose out? That does not mean that every time a non-UK firm wins a contract some rule has been broken or we need a change in the law. There could be other reasons. My hon. Friend has asked an important and pertinent question.

Mr. William Cash (Stone) (Con): The Minister will be aware of the Bill that I introduced a couple of days ago on this issue. It supports, of course, the notion of fair movement, but it also supports free movement and fair provision for services and workers. Is he aware that in several other member states, parallel legislation already prevents social dumping, precisely because there are circumstances in which a correction is needed? Will the Minister be good enough to answer the question that I now have on the Order Paper? It is about ensuring that we bring in domestic legislation to ensure fair and free movement, and that we look after British workers as well.

Mr. McFadden: I believe in fair and free movement, and the Government have introduced many important employment rights for UK workers in the past decade. I hope that the hon. Gentleman will agree that it was a step forward for the employers in this situation to agree on guidance, which states:

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Two important things were required to end the dispute. One was that there should be a fair chance for UK workers. The other was that no Italian worker who was here legally should have to be sent home; I am glad that that too was supported by the trade unions in this situation.

Mr. Dennis Skinner (Bolsover) (Lab): If the Government want to ensure that we do not have another situation such as that at Lindsey or anywhere else, the truth is that we need, among other things, to enact the Temporary and Agency Workers (Equal Treatment) Bill in total. That would ensure that middlemen and agency operators were not allowed to pick up about 25 per cent. of the earnings from foreign labour. Once we do that, we can stop the Lindseys of the future and deal with the matter in the Common Market as well.

Mr. McFadden: I do not believe that agency workers were a factor in the Lindsey dispute. My understanding is that in that particular part of the construction industry the workers are directly employed by the subcontractors on the site. I have also been told that the subcontractors all have to pay the agreed rates. However, I agree with my hon. Friend that it was right to reach an agreement on the agency workers directive which suited the UK labour market. We did that on the basis of an agreement between the TUC and the CBI which was then reflected in the text of the agreed directive. The Government will bring forward a consultation on the implementation of the directive here in the UK.

Jo Swinson (East Dunbartonshire) (LD): More than 16 jobs will be lost as a result of the recent awarding of a specialist vessel requirement Navy contract in the Falklands to a Dutch company with a Filipino crew, instead of to the Scottish company that has provided the service successfully for 27 years. As there are serious questions about the tendering process, with correct procedure not having been followed, will the Minister ask his colleagues in the Ministry of Defence to investigate the circumstances of this case?

Mr. McFadden: I am not aware of the individual circumstances of that case, but I am happy to ask the relevant Department to look into the issues that the hon. Lady has raised.

Tony Lloyd (Manchester, Central) (Lab): Does my hon. Friend accept that it is not protectionist to insist on minimum pay and working conditions for British workers in competition with foreign workers? In that context, and in terms of the posted workers directive, can he insist that the European Commission gets a move on with its review? Will he also look at the British angle of this, which is that the current minimum standard is the minimum wage, but that we could move the standard up to nationally agreed collective bargaining regulation?

Mr. McFadden: I believe—or at least, I have been informed—that the agreed collective bargaining rate applies in this case, and that therefore pay was not an issue in this dispute. As for the European Commission’s proposal to examine the operation of the posted workers directive, the UK Government supported that when it was discussed in December.

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