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We recognise that this is a significant increase, so I would like to make three points in relation to it. First, the nature of business support has changed over the past few years. There has been a shift away from programmes based on grant funding, with greater emphasis now placed on support in the form of loans or guarantees. We believe that that form of support provides good value for money for the taxpayer in the long term, given that the loans will be repaid over time and that only a proportion of the guarantees will ultimately need to be met. However, the full amount secured against public finances counts towards the section 8 limit. As a result, headroom is consumed at a higher rate than under grant-based interventions. As loans are paid back and guarantees lapse, pressure on headroom will reduce. None the less, in the current economic climate we need
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to maintain sufficient flexibility to respond to the challenges ahead and we believe that the £12 billion ceiling represents a sensible limit at this time.

Secondly, I can reassure the House that although we are raising the ceiling to £12 billion, that is broadly equivalent as a percentage of GDP to the figure in 1982. My final point in this regard concerns parliamentary oversight and scrutiny of support provided under section 8. Although we are proposing an increase to the ceiling, we are not proposing any changes to the threshold at which individual offers of assistance under section 8 are subject to the approval of the House. That threshold, fixed by section 8(8), remains at £10 million. The aim of the new subsection is to ensure that Parliament has the opportunity to consider larger cases of assistance to industry.

I can also confirm that any future orders to increase the limit would need to be agreed through an affirmative order, as is currently the case. We will also continue to publish the annual report setting out our expenditure under section 8 of the 1982 Act. Aside from the financial limits, all other aspects of section 8 and the wider Act remain the same. I can also confirm that the Bill has no regulatory impact on business and that a copy of the regulatory impact assessment was placed in the Library.

Mr. Mark Prisk (Hertford and Stortford) (Con): The experts in the automotive industry who have been referred to by several right hon. and hon. Members are anxious about the apparent contradiction on whether scrappage is involved in discussions leading up to the Budget. I do not want the final details, but given the importance of vans, can the Minister, as both a Business and Treasury Minister, tell the House whether the Government are considering a scrappage proposal and what progress has been made?

Ian Pearson: The hon. Gentleman has been a Member of this House long enough to know that Ministers do not comment on what will or will not be in the Budget or on discussions leading up to the Budget. He will be aware of the automotive assistance programme, which is a major programme of investment support to the industry. One of my major priorities as a Minister is to ensure that that scheme provides support as quickly as possible. The hon. Gentleman will be aware that we had a seminar with the banking industry and automotive companies last Wednesday that explained in more detail how the scheme operates. It is open for business now and we are encouraging businesses that qualify to make early applications, which we will endeavour to analyse speedily so that we can look to provide support. We recognise that it is important that we provide support to the industry at this time.

Clause 2 proposes a small amendment to the Export and Investment Guarantees Act 1991. The Act governs all of the work of the ECGD—the Export Credits Guarantee Department—which is Britain’s official export credit agency. The vast majority of industrialised countries have export credit agencies. Broadly, their role is to support exports by providing insurance against non-payment, for example, if importers go insolvent and cannot pay their suppliers or if the importing country runs out of foreign exchange and cannot pay its international debts. The situation is the same for ECGD, and I believe that its role is of increasing importance in the current economic climate. It assists the export trade of British suppliers of goods and services.

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ECGD’s remit is to support exports of capital and semi-capital goods and services. That usually means big-ticket exports such as civil aircraft, oil and gas production equipment and services and telecommunications. Often, the buyers of such equipment require medium or long terms of credit. Typically, a civil aircraft is repaid over a 12-year period. Much of ECGD’s business involves its giving guarantees to banks, which make loans available to foreign buyers to purchase UK goods and services. Some Members may recall that ECGD used to support other exports normally sold on short terms of credit. Those exports were raw materials, light manufactured components and consumer durables, which account for the majority of UK trade. That part of ECGD’s business was privatised in 1991 and since then providing trade credit insurance has been the responsibility of the private sector.

ECGD is 90 years old this year. It was set up 1919, after the first world war, to help re-establish trade. It was the first export credit agency in the world, and in these challenging times the support that it can give to industry and exporters underscores its importance for the British economy today. It is an independent Government Department that reports to the Secretary of State for Business, Enterprise and Regulatory Reform, and its role and purpose is established in law. ECGD’s power to support exports is contained in section 1 of the Export and Investment Guarantees Act, and it is that Act that this amendment Bill addresses.

ECGD’s primary power to support exports in section 1 of that Act states:

However, there is a problem with the word “facilitating”. The point is that ECGD cannot be said to have facilitated exports if those exports have already been supplied. However, with changing business practices, ECGD has been increasingly asked to support exports that have, in whole or in part, already been supplied by the time it is able to take a decision on providing its support for the exports in question.

There are a number of reasons for that. First, changes in the way contracts in the high-value capital goods markets are managed often mean that requests for support are simply made later these days. Often, it is buyers or overseas project sponsors who approach ECGD for support, not the exporters. Buyers seek ECGD support after they have procured the exports, and some may already have been supplied.

Secondly, at the same time as these changes were happening across the world, ECGD’s decision-making processes were changing to implement wider Government policy on corruption and on social and environmental impacts. These are mandated by ECGD’s business principles. They involve rigorous due diligence, which can delay ECGD’s ability to make a decision until supply has commenced. This amendment will allow ECGD to provide its support for supplies that have already been made.

Last year the Environmental Audit Committee issued a report on ECGD and sustainable development, which recommended that

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of the project to which the exports are destined.

That referred to ECGD trying to overcome the timing difficulties that I have just explained. ECGD would, before the supply was completed, make an offer to issue a guarantee after completion, conditional on satisfaction of its environmental criteria. The EAC was concerned that these offers of support could weaken ECGD’s environmental scrutiny. I do not agree that they did, but I am happy that the Bill will allow ECGD to give effect to that recommendation, as well as solving the problems for British exporters, without any dilution whatsoever of ECGD’s business principles or the due diligence it undertakes.

Without this change, British exporters will continue to face the risk of being discriminated against by overseas project sponsors because ECGD cannot give the type of support those sponsors want. Other export credit agencies in competitor nations do not have the same difficulties. Few, if any, are bound by state legislation and none of ECGD’s major counterparts has the same difficulty in supporting exports that have already taken place.

In the current economic circumstances, extra support for British exports is highly important. Over recent months, ECGD has, not surprisingly, received a vast increase in interest in its support and in applications for its assistance. Rather than giving extra support, if this amendment to ECGD’s Act is not made, ECGD support will often have to be reduced. ECGD is complaining about the difficulties that ensue when it can give no certainty of its support. The CBI, the British Bankers Association and the British Exporters Association have lobbied intensively. They argue that without the change, the UK’s competitiveness will be adversely affected. I agree with them, and that is why we are introducing this clause, which will help to maximise support for industry through ECGD at this difficult time.

We face a unique set of challenges. Together, the measures proposed in this Bill form an important part of the response needed to ensure that businesses have the help they need. I commend the Bill to the House.

4.44 pm

Mr. Mark Prisk (Hertford and Stortford) (Con): I thank the Minister for his opening remarks. I have some sympathy with him because, as a Minister in both DBERR and the Treasury, he has the unenviable task of defending not one, but two dysfunctional Departments.

The Bill substantially increases the limits of Government financial support for business and exports—first, as we have heard, to £12 billion and then, potentially, to £16 billion. These are substantial provisions, reflecting the severe economic climate. We agree that business urgently needs practical help, but our concern is that these good intentions will not become the practical aid that business seeks. I say that because, to date, this Government’s record of financial support for industry has largely been one of talk, not action; it has been a story of half-baked ideas badly implemented, and it has resulted on numerous occasions in confusion and anger among the very people whom Ministers claim they are trying to help. Ever since the fall of Lehman Brothers in September and the collapse of world markets in the
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autumn, the need for urgent action has been clear, to enable working capital to reach real businesses. That is why last November the Conservatives set out a plan for a national loan guarantee scheme of some £50 billion for viable businesses of all sizes and all sectors—clear, easy to access and simple to understand, it could underpin conventional bank lending.

I wish that the Government had done what they often do in these circumstances—stolen our policy and claimed it as their own. After all, we see that all too often, yet on this occasion the Prime Minister has been deaf to good advice. Despite promises made last November, it was not until January that the Government’s schemes were finally announced and even then—in the opinion of business—it was clear that they were half-baked. Let us consider the capital for enterprise fund, which is worth £75 million and is intended to provide equity funding to small businesses. When it was first announced last November, the Department said that it would

January came and went and the snow fell in February and thawed, yet there was still no news and no investment, so last week, in the middle of March, as spring approached, I inquired exactly how much had been invested. I naturally assumed that the sum might have been £10 million or £15 million, but the people who run the scheme—Capital for Enterprise Ltd—told me that in fact not a single pound has been invested in any business.

What about the working capital scheme, which was announced on 14 January? We were told then by none other than Lord Mandelson that it would be the centrepiece—the linchpin—of the Government’s policies. It was to provide up to £10 billion in Government guarantees to underwrite bank lending and to be available from 1 March. That date came and went, so on 4 March we asked the Leader of the House when the scheme would commence. We thought that if we were lucky, it would be this month, but, who knows, it might begin on 1 April—how appropriate that would be. She could not say, and although I realise that she and Lord Mandelson are not exactly bosom buddies, surely between them they must have some idea when this scheme might actually start.

One scheme is up and running: the enterprise finance guarantee scheme, which is worth £1.3 billion and is intended to underpin lending to small firms. On Friday, the Minister for Employment Relations and Postal Affairs, whom I am delighted to see in his place, gave us a remarkable two-hour oration, during which he confirmed that 26 applications had been approved. There was another hour to go before he finally sat down, but what he did not tell us was how many firms had actually got the money; perhaps the Minister here today could complete that speech in his reply.

Part of the problem is that when Ministers make their announcements, they often have not really worked through the details—indeed, in some cases, they have not even cleared the schemes with the European Commission, as they are meant to do—and meanwhile, our competitors are stealing a march on us. For example, by last Christmas, the Germans, French and Americans were all ready to act. In Germany, some €2 billion has been extended to industry; in France €6 billion; and in America, some $17 billion was on hand for its car industry. The question
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that British businesses put to me—and I hope that the Minister will reply when he responds to the debate—is “Why is it that, under this Government, British businesses are the last to get the help that we need?”

The answer may in part be the fondness that the Prime Minister—who, after all, was once Chancellor—has for tinkering and meddling, and creating myriad complex schemes that prove so confusing in practice. Thus we have the working capital scheme; the enterprise finance guarantee scheme; the capital for enterprise fund; the transition loan fund; the European Investment Bank’s supported loans scheme for growing firms; the EIB-backed automotive industry loan scheme; and the £l billion non-EIB-backed, automotive loan scheme. Each of these schemes has different eligibility criteria and different rules. These in turn need different forms and different sets of business data.

So the problem is that businesses are unclear about what is available, what they can apply for, and which scheme is best for them. They are not the only ones. Most of the banks tell me that they have yet to receive the detailed terms and conditions for many of these schemes, so that they can brief their high street branches—

Ian Pearson indicated dissent.

Mr. Prisk: Well, that is the evidence in at least 100 letters that my office alone has received. When our constituent businesses go to their bank, they are told that it does not have the information and that the staff have not been briefed or trained. We are left at best with confusion and, at worst, with no help at all.

Let us take for example a small touring company based in Suffolk. It applied for help under the enterprise finance guarantee scheme to consolidate its overdraft, to release funds to advertise during the critical winter months. Despite the fact that the business was advised by Business Link that it was eligible—indeed, it was in the statement issued by Ministers—its high street bank turned it down. The result of that conflicting advice is that five staff have lost their jobs and there is real pressure on the firm’s finances. The managing director said

That managing director is not the only one who is rightly upset. The FSB has just conducted a survey of its members. Six weeks on from the launch of the enterprise finance guarantee scheme, the majority of its members say that the banks are still not using it. It is no wonder that three quarters of the FSB members surveyed said they had no confidence in the Government’s economic policies.

The gap between Ministers’ good intentions and their actions has, sadly, been evident for some time. Thus, in the last 12 years they have overseen the creation of some 3,000 business support schemes, only recently realising that that creates waste and is confusing for many businesses. In his opening remarks, the Minister mentioned the regional venture capital funds. When they were established, we were told that they were vital to plug the gap in which the private sector would not invest. I agree that there is a gap in equity funding for smaller enterprises, but what is not clear is why that state-backed scheme, led by the regional development agencies, is the best way forward.

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The latest figures show that some £250 million has been allocated to that scheme alone in the English regions. However, the value of the investments actually made was only £126 million, half of the available total. What happened to the other half? Did the demand that Ministers predict not exist, or were requests simply strangled by the scheme’s red tape?

As the Minister said, the second clause of the Bill specifically seeks to expand the funding provisions for exporters and would make some important technical changes. Something certainly needs to change when it comes to the balance of trade, because under this Government our balance of trade was nearly £40 billion in the red even before the recession.

In more recent months, there was initial hope that the huge drop in the value of the pound—a drop of some 25 per cent.—would have helped to boost exports. However, the latest figures for January show that, while the volume of goods exported to EU countries rose, this was outweighed by a 16 per cent. plunge in exports to non-EU countries. The result that month was a net trade loss of £7.7 billion. It is clear that the UK needs significantly to strengthen the volume, and indeed the value, of its exports.

In November, the Chancellor announced an extra £1 billion in his pre-Budget report to help small and medium-sized UK exporters. It was to be delivered by the Export Credits Guarantee Department in conjunction with the banks. It was to have been a temporary facility providing smaller exporters with better access to short-term working capital. Of course, the intentions sound good, but it has been difficult to find out what progress has been made, although we looked quite carefully. Finally, yesterday I was left to check the latest information from the ECGD. Perhaps I should share with the House what its website says:

Is it really the case that four months after a £1 billion scheme, meant to help people in this recession, was announced by the Chancellor of the Exchequer at the Dispatch Box, no timetable has been set for its implementation? I hope that the Minister who replies to the debate will answer that question directly. If there is a set timetable, why does the Department not know, and if there is not a set timetable, what on earth have Ministers been doing?

Let me turn to the main export credit scheme—the fixed-rate export finance scheme. I apologise for the endless litany of alphabet soup that the schemes seem to generate. That particular scheme is meant to be wound up in eight months’ time, yet despite having planned the scheme’s replacement since December 2007, Ministers are seemingly unable to explain to exporters how the new scheme will work. The Under-Secretary of State for Business, Enterprise and Regulatory Reform, the hon. Member for Dudley, South (Ian Pearson), rightly said that exports are crucial, so can he tell me why it is that, just eight months before the introduction of a new scheme, when companies inquire they are not able to learn the details of the scheme that will replace the current programme? After all, many contracts that are being negotiated now will run way past December. When will businesses have an answer?

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