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A number of Members of this House have rightly raised the subject of the automotive industry, which has often been at the heart of the question about financial
support. Car registrations have been falling for many months. In February, they fell again, by another 22 per cent. I had to double-check whether there was meant to be a decimal point in the middle of that, but the figure really is 22 per cent. for a single month. Meanwhile, in response, manufacturers have reduced production; indeed, many have suspended it. Thousands of people have either lost their job or face redundancy in the coming months. We should not forget the long supply chains in this sector that serve manufacturers here and abroad; the Minister rightly mentioned them. What they all need is clear and decisive action.
In January, Ministers set out their plans for the sector. SadlyI draw no comfort from thisthe industry said that the plans were incomplete, had not even been authorised by the European Commission, and often completely failed to address the question of car sales. Quite rightly, the industry has continued to press Ministers to get them to spell out exactly what their package means in real money.
As the Minister mentioned, last Wednesday he hosted a summit at which we were offered more details of the £2.3 billion automotive loan schemes. We welcome the news that Jaguar Land Rover is to get up to £27 million in support of a new, lighter vehicle. However, even that modicum of good news was overshadowed by a spat between Lord Mandelson and the Bank of England about who was, or was not, to blame for the long delays. How frustrating that must be for the junior Minister; he was able to push forward an initiative, but it was completely driven off the front pages by his own boss.
While some Ministers are passing the buck, the car sector is becoming ever more frustrated. On a recent visit to the midlands, I talked to representatives of the industry there, and I have to say that in their responses, they were overwhelmingly negative towards the Government. Why, they asked, did they not even get a statement of aid until January, when car sales had been plummeting for at least four months before that? Why, in January, were the schemes not worked through, as they were in France and Germany? Why did it then take another month for basic EU approval to be sought and secured? Their concerns did not end there. In January, instead of being promised a package to aid the credit arms of car firms, we were promised that a junior Minister had beenI will get the phrase right
tasked to draw up a plan.
It seems that the same Minister doubts the need for such a plan. Lord Davies was reported in the Financial Times last week as saying that credit insurance problems would solve themselves as corporate lending picked up. That is not the view of the CBI or the FSB. Indeed, the federation said that Lord Davies was unrealistically bullish. The British Chambers of Commerce went further, and highlighted industry-wide difficulties with credit insurance. It said of the Minister for Trade and Investment:
Its very complacent to say that everything will sort itself out.
That is not the message that should come from the Dispatch Box. Perhaps in his reply to the debate, the Minister can put things straight. Will he specifically tell us, either now or in his reply, whether the Government will introduce a plan to tackle credit problems, or is the Governments plan on this issue simply to do nothing?
Mr. Geoffrey Robinson: May I just return for a second to what the hon. Gentleman was saying about the German guarantees that have been put up of about €2 billion? He may be more up to date than I am, but the last time I heard about that, at least half that amount, although allocated by the German Government in their interest, and probably quite rightly, still had not been cleared by the European Commission?
Mr. Prisk: My understanding is that most of that sum has been cleared and delivered, certainly according to the reports that I have read. That represents a sharp difference in that our Government have only just obtained permission from the European Commission to propose guarantees.
Mr. Robinson: That is the whole point. The Germans have made the allocation, have said that they are going to do it, and have guaranteed it. Months ago, they did that for Opel, and announced €1 billion before the end of last year. It certainly had not been agreed at that point, but they went ahead, and they have done so again. I still do not think that the position is clear. We have rightly announced it, and we will be ahead of them in getting clearance this month.
The Bill seeks to provide the Government with the ability to extend financial support for industry to up to £16 billion. In such difficult economic times, we recognise the need for such additional powers and while, quite rightly, we shall scrutinise each policy, we will not oppose the measure today. Our concern, as I have tried to explain, is about how Ministers implement their powers, as their record is one of press releases, not practical action. It is a tale of dither and delay, of bold promises and timid deeds. I have no doubt that Ministers mean well and wish to help, but my fear is that the gap between their rhetoric and reality is one through which hundreds of firms, and thousands of jobs, could yet be lost.
Lorely Burt (Solihull) (LD): The Bill is the most recent in a long line of attempts by Government to give industry a shot in the arm. Unfortunately, the well-meaning but incompetent doctor has yet again missed the vein, plunging the hypodermic containing life-giving fluid into a part of the economy where it will do no harm, but from which it will fail to flow through to the main body of the ailing economy, where it is most needed.
We have a problem, because while the Government are applying a poultice to the sick body of the economy, the banks have applied a tourniquet, preventing the flow of cash through the economy that would nourish and enrich it, and enable it to stagger back to its feet again. The Liberal Democrats will not oppose the Bill today, because we recognise that it includes measures that will help, but we regard it as a wasted opportunity. It is not as if not enough people are trying to tell the Government what they could and should be doing. Over the past few weeks, I have been doing a bit of research in my constituency. I have been talking to
businesses big and small, and trying to find out how they are faring and what the Government could do to improve the environment to enable them to survive.
The first thing that the Government should introduce in the Bill is some form of support or regulation of trade credit insurance. Withdrawal of trade credit insurance is what eventually did for Woolworths. Trade credit insurance insures a company when it has extended credit to another against the risk of not getting paid. If a company has its trade credit insurance withdrawn, other companies become nervous about trading with it because the message given out is that that company is risky to trade with.
A profitable retail company in my constituency has had its trade credit insurance severely reduced just at the time it wants and needs to expand. Its suppliers right down the supply chain are having their trade credit insurance cover reduced or even withdrawn, sounding a death knell for many. When a successful company that has no record of financial problems is growing, why would anyone want to reduce its trade credit insurance? The insurer told that company, Oh, its not you personally; youre just operating in the wrong sector.
Trade credit insurers have been described as organisations that are willing to lend an umbrella only when the sun is shining. I would not go quite that far, but it is clear to me that something needs to be done, and fast, to stop perfectly good companies going to the wall for no reason.
Mr. Drew: Will the hon. Lady confirm that the problem with trade credit insurance is that it is a private monopoly? There are so few companies operating in the field that once a firm has lost trade credit insurance with one insurer, it is virtually impossible to get it from some other company. That is at the root of all the problems.
Lorely Burt: Indeed. I am grateful to the hon. Gentleman for that intervention. He is right. Once a company has lost trade credit insurance, the possibility of gaining it from another organisation is very low indeed. For months, hon. Members in all parts of the House have been asking for Government action on trade credit insurers. When will the Government take action to ensure that such insurers stop turning the tourniquet even tighter on business?
Regulation is another issue of great concern to business. As with taxes, everybody moans about it, but most of us recognise it as a necessitymost, that is, except the Conservatives, who have called for less regulation, including of the banking and investment sector. Nevertheless, the imposition of new regulations at a time of economic crisis can be very unhelpful.
John Penrose (Weston-super-Mare) (Con): I am sure that the hon. Lady would want to be accurate. To be clear, the Conservative party has just published a report on banking regulation and believes that a great deal of reform is needed, including much tougher regulation, to prevent systemic risk in banking. Elsewhere in the economy, which is being held back by an awful lot of heavy-handed red tape, we agree with light-touch regulation, as indeed do the Government.
I am delighted to hear that the Conservatives have changed their attitude towards banking regulation. In the past they have done a great deal to try to
introduce lighter-touch regulation of banking. I accept what the hon. Gentleman says about other forms of regulation. In that we share a common approach.
Many companies are focused completely on the day-to-day cash flow management of their businesses. Instead of reviewing their cash flow every quarter or every month, they are now doing so every week or even every day. They do not want to have their eye taken off the ball by having to contend with new regulations. If they do not give all their emotional energy and attention to managing today, there may not be a tomorrow in which such regulations can take effect.
A particular concern to potential investors in this country is the propensity of the Government to make decisions and regulations retrospectively. We saw an example of that on 28 January in the Westminster Hall debate on retrospective business rates, concerning the retrospective levying of business rates on struggling port-based firms. Clearly, more regulation is needed in some sectors, such as banking and trade credit insurance, but in other areas the Government could take their foot off the pedal and delay the introduction of some non-vital regulations. My second question for the Minister is this: will the Government impose a moratorium on the implementation of non-essential regulations until the economic situation improves, and will they give some heart to potential investors in this country by publishing a statement of intent showing that they do not intend to impose any further retrospective legislation?
The Bill will amend section 8(5) of the Industrial Development Act 1982 and section 1(1) of the Export and Investment Guarantees Act 1991. Section 8 of the 1982 Act seems to be the Heineken of industrial financial help, reaching parts that other industrial financial assistance cannot reach. Such assistance has to benefit the UK economy, or any other part or area of the United Kingdom, which is a pretty wide definition. It has to be in the national interestwell, obviouslyand it has to help when assistance cannot be appropriately provided in any other way.
The Bill raises the ceiling under which financial assistance can be given from the current maximum of £6.1 billion to a potential total of £16 billion. That is a lot of money, and I look forward to hearing from the Minister why that amount of taxpayers money was deemed appropriate. Another £10 billion has been added; it is a nice round figure, but what justification is there for it? The figure of £16 billion represents £26,000 for every man, woman and child in this country. The Independent today has done its sums and calculated that, due to the recession, the personal cost of the downturn for every single British citizen is now £40,000, which is a lot of dosh. We must be sure that money is spent wisely where it really will make a difference.
The amendment of the Export and Investment Guarantees Act 1991 will widen the definition under which assistance can be given to exporters under the export credit guarantee scheme. The CBI welcomed that measure because it will support transactions where goods have already been exported, such as where early shipment was required before an export guarantee department decision on cover was made. The CBI says that
enactment on this amendment will assist exporters in a clear and practical way and should assist in retaining jobs in the UK.
How effective has the plethora of Government announcements been so far? The Forum for Private Business says that the Government should not just assume that under the enterprise finance guarantee scheme, the problems of smaller business have been sorted, and that they must consider the looming problems of the cost of finance, business rates and late payment. Can the Minister say just how many companies have benefited from the enterprise finance guarantee scheme, the working capital scheme and the capital enterprise fund? We heard from the hon. Member for Hertford and Stortford that no money has yet come through for the latter two schemes. Will the Minister be able to demonstrate that any of these funds are making a material difference, or with regard to the vast majority of companies are the Government just tantalising and teasing business with promises while little or no real money is flowing through?
The Government have ignored simple, effective and relatively inexpensive Opposition proposals, such as the Small Business Rate Relief (Automatic Payment) Bill, a private Members Bill introduced by the hon. Member for Mid-Worcestershire (Peter Luff) only two weeks ago. I will not rehearse the arguments about that, but the Government have ignored that open-goal opportunity to help the smallest businesses that are least well informed about the help that they are already entitled to.
Some lenders, such as lease financiers, are simply not covered by the enterprise finance guarantee scheme, although 750,000 small businesses rely on lease financing. There is no safety net for those smallest of lenders, which nevertheless play a vital role in helping the smallest businesses as well as larger ones. Will the Government consider providing assistance for lease financing, along the lines of the enterprise finance guarantee scheme?
The opportunity to deal with the nefarious activities of serial liquidators has also been missed. Such parties trade, run up debt and then liquidate a company, leaving suppliers in the lurch, only to set up again the next day under a similar name. Those people cynically drag down good companies, and their activities are downright theft. If any director were required to register in a simple register of administrations, that would enable a quick search to determine how many times an individual had bumped their company. That would protect good companies against directors bent on a course of exploitation of the trust and good will of others. Will the Minister consider the possibility of creating such a register?
In conclusion, I should say that the Bill is a missed opportunity. Industry needs an environment in which it can not only compete, but continue to operate. It needs cash, but despite all the announcements that have been made thick and fast in the past few months in committing billions of pounds of taxpayers money to prop up a banking system so sick that it is haemorrhaging the blood transfusions that we are administering, vital support is still not making its way to the real wealth creatorindustry itself. Taxpayers money is flowing all right; it is flowing into the coffers of the banks and into an interminable black hole.
My hon. Friend the Member for Twickenham (Dr. Cable), the Liberal Democrat shadow Chancellor, has been like a seer; he was sending out warnings to the
Government years before the crisis that we now face finally arrived. He predicted that the grand edifice of the banking economy would turn out to have been built on sand, and that we would need to nationalise Northern Rock. He has watched the Government pandering to the banks like an over-indulgent auntie to spoilt and uncontrollable nephews and nieces, asking them please to share out nicely the pile of sweeties that they have been given and becoming mystified when they are not good children who do as they are told.
We now have a majority shareholding in Lloyds HBOS and the Royal Bank of Scotland. My hon. Friend the Member for Twickenham is saying to the Government that it is time to take firm action and make the children share out the sweeties. It is time to nationalise the failing banks and ensure that cash goes not into the greedy mouths of the banking industry, but right to where it is neededthe hard-working companies that are struggling to survive.
Miss Julie Kirkbride (Bromsgrove) (Con): I am grateful for having been called to speak on the Bill, which is important; it adds a significant amount to public expenditure. It is disappointing that there are so few Members on the Government Benches to speak in support of what the Government are doing.
I tried to listen intently to the Ministers explanation of what the Bill was all about. I recognise that the Minister, who serves in both the Treasury and the Department for Business, Enterprise and Regulatory Reform, must be very overworked at the moment. However, I feel that what the Bill is actually doingin contrast to the warm and good intentions about which we often hear from the Government Dispatch Boxis very limited.
Exactly what will this extra tranche of money be used for, where can it be spent and who will be the beneficiaries? Given the Governments progress on the schemes that they have already announced to a bewildered public, will the money go into the real economy? There is something of a question mark about those issues. Although the help contained in the Bill is desirable, we clearly need to do more to support our manufacturing and industrial sectors. Conservative Members wish the Bill well, but we wish we knew more about exactly what it was going to do. I hope that the Minister who sums up after the contributions of other Members will be able to give the House more of the detail that we would like to hear.
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