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All this bears the signs of pure, blind panic. We have seen a bank recapitalisation which is failing to get money moving and to establish the necessary conditions. Other Members have already spoken of the confusion and difficulty facing, in particular, small and medium-sized enterprises. That was brought home to me on Thursday evening when, in my constituency, I hosted a recession networking event. I brought together businesses and local providers of services, in both the public and private sectors, to help companies in recession. Making sense of the help being offered by the 20 or so representatives had been an impossible task for many businesses—and why should they have to do it themselves anyway? Why should things not be in clear English and easy to understand?
I must tell the Minister that the event was a great success. I believe that it was attended by just under 150 people, and I think that they all benefited from talking to the providers as well as to each other. But is it not an indictment of the situation we are in, which the Government have made no real effort to improve, that 150 people felt the need to attend such an event because they could not work out what to do by themselves?
5.47 pm
John Penrose (Weston-super-Mare) (Con): This has been a short debate. That may be simply because this is a relatively uncontroversial Bill, but I am saddened to note that the Minister has sat in pretty much solitary splendour on the Labour Benches. No Labour Back Benchers have spoken, although one or two are present and their presence has been much appreciated. It strikes me as incredible that at a time of some of the worst economic conditions that we have experienced for not just one generation but probably several, not a single, solitary Labour Back Bencher thought it important enough and could care enough to turn up and add his or her tuppence-worth. Labour Members apparently did not think it important not only to support their Minister in what he is trying to do, but to try to ensure that their constituents and people around the country understood that they really care about the parlous economic conditions in which businesses are trying to operate.
However, a number of Members did speak—most, but not all, were Conservative Members, although there were contributions from Liberal Democrats as well—and a number of common themes featured in their speeches. My hon. Friend the Member for Bromsgrove (Miss Kirkbride) in particular, but others as well, asked for more details about the schemes that the Bill is supposed to support. The Minister did his level best. He is a decent man, and he tried to ensure that we all understood the various Government-announced schemes for which the funds would be used. I am sure that that was deeply appreciated, but it is clear from what was said by others today that he needs to say a bit more, if possible, in his response to the debate.
Let me pick up a couple of the points made by my hon. Friend the Member for Bromsgrove. It seems that neither the 1982 Act nor the Bill provides for assistance to either banks or insurance companies, but a number of the loan guarantee schemes that we have discussed today involve banks in one way or another. If they do not involve banks, they involve finance arms of car companies and others which—if not outright banks and holders of banking licences—are near-banks, and
are certainly the subject of much thought on the part of the Financial Services Authority at present. Will they be excluded from the Bill’s provisions, in which case will the Government need to come up with funding through some other route, or will it be possible to use the financing under the Bill to support such various different schemes?
I understand that the provisions of the Bill are not allowed to apply to areas that have been granted assisted area status. The principal areas with such status at present are Cornwall, the west coast of Wales, the north-west coast of Scotland and the whole of Northern Ireland. If the measures under discussion cannot apply to firms that are based in, or operate in, those areas, how will the Minister be able to make sure that the money raised is directed towards, for example, a car company that has dealerships in districts with assisted area status? Will he offer clarification on that, so that it is put on the record not only for Members of this House, but for the many rather confused members of the business community? This afternoon, we have heard many examples of the incredibly complicated plethora of schemes.
It is not just the number of schemes that is the problem, large and numerous though they are—and they were read out with careful diction by my hon. Friend the Member for Hertford and Stortford (Mr. Prisk). As he also pointed out, each one of them has not only its own scheme, but its own application forms and terms and conditions. Therefore, if anybody trying to make an honest living by running a business wants to apply for one of these schemes, they almost have to hold a PhD in Government finance before they can hope to access it. That inevitably means that they are being distracted from the vital day-to-day business of adding value and creating wealth, and making and preserving jobs, and instead are having to focus on the best way to navigate their way through labyrinthine Government bureaucracy, which is clearly not an intelligent or productive use of anybody’s time.
It is also worth while surveying the history behind the Bill. The Minister correctly pointed out in his opening remarks that this all started back in 1982 with a relatively modest amount of money: £1.9 billion. That was still a significant amount of money, however, particularly in those days; it was far from small potatoes. It is instructive to note how that cumulative total limit has grown. In the first 20 or so years, it grew very slowly—from £1.9 billion to just under £4 billion. However, since then—from shortly after the turn of the millennium—we have experienced, as a result of this Government’s hyperactivity and the debt-fuelled boom in the country’s economy, what is described in business terms as a hockey-stick increase. If we were to graph the rise in the cumulative limit, we would see that it increased very slowly for a long time, and in the past five or six years shot up. As a result, whereas the sum was £1.9 billion in 1982, we are now asked to agree an increase from about £6.1 billion to, in theory, a maximum total of £16 billion. I am afraid that if we ever needed an illustration of the speed with which the wheels have fallen off the Government’s economic carriage, that is it.
The most frequently made and most damning point has been about the problem of implementation and delivery. That point has been made in various parts
of the House—I was going to say in “all parts” of the House, but I am afraid there have not been any contributions from the Labour Back Benches. Many people would agree with the principles that the Government are trying to pursue, particularly in their various different loan guarantee schemes, but they have been woefully inadequate in turning their fine words into action—into something practical that business people can get their teeth into and their hands on—by making sure that the banks are starting to lend and that the various different loan guarantee schemes actually function.
As my hon. Friend the Member for Hertford and Stortford pointed out, the working capital scheme was supposed to be the Government’s flagship scheme for getting credit moving in the economy. It was announced way back in January, but as of last week it had not guaranteed a single loan. The enterprise finance guarantee scheme was supposed to help small firms. It was announced in January, but the Federation of Small Businesses says that only 8 per cent. of its members can find a bank that is actually offering it. The loan guarantee scheme for car manufacturers—much discussed this afternoon—was announced in January, but the Government have only just asked for applications from firms needing help, and they have not disbursed a single penny so far. To be fair, Lord Mandelson realised that the scheme was not moving fast enough. He saw it was in trouble and he said that he would “investigate” why it was not getting under way. But as far as anyone can see, the investigation involved sending a junior Minister round to No. 11 Downing street to knock timidly on the Chancellor’s door and ask him—“Please, if he wouldn’t mind awfully and it wasn’t too much trouble”—to pull his finger out.
That serves to illustrate the problem. We did not need an investigation into the difficulties. The problem was plain for everyone to see: dithering and spin instead of decisive, practical action. We did not need investigations or inquiries; we needed action—we needed Lord Mandelson to sit down with the Chancellor and have what is known in the Foreign Office as a full and frank exchange of views. We need the two of them to put the needs of the country ahead of party rivalries and personal wrangling over who is supporting whom in the running to become the next leader of the Labour party.
That, however, was not what happened. Britain’s businesses did not get the prompt action they needed. Instead, what we got was weeks and months of bureaucratic constipation where nothing happened at all, and then, last week, Lord Mandelson lost his temper and started blaming people. He blamed the Treasury. He blamed the Bank of England. He blamed pretty much anyone he could think of. But the people of Great Britain knew exactly who was really to blame: him, and this Government.
The tragedy is that this is not just an internal Whitehall squabble where the only winners and losers are a few politicians and bureaucrats. This is deadly serious, because for every day of ministerial indecision, inaction and incompetence, more people lose their jobs, more companies go bust, and more investors lose faith in Great Britain. Rather than losing his temper and lashing out at his colleagues in Government, the Secretary of State needs to buckle down, as should his Ministers. They need to realise that they may have announced something and got a few headlines, but it will not happen unless they roll up their sleeves and get personally involved.
They need to forget about the press releases and glossy announcements and get stuck in to the grubby, messy business of implementation.
The trouble is that that is not likely to happen with this Secretary of State and this Government. They are creatures of PR and spin. They have spent the past 15 years doing it, and it is too late to expect them to change now. Leopards cannot change their spots. That is the tragedy of this recession. If they had moved faster and more effectively, they could have made it shorter and easier for all of us, but they did not, and now the whole country is paying for their dithering and delay. Every community in every part of Britain is feeling it: lost jobs, ruined companies, broken hopes. That is why people are increasingly coming to the same conclusion: it is time for a change.
5.58 pm
Ian Pearson: Let me say at the outset that I am glad that the official Opposition recognise the need for these additional powers. They are necessary, as they cover expenditure that may need to be incurred in the future to provide support for industry, and we all want that support to be provided.
The key points made in the debate fall into several categories. The first point I want to reply to is whether there are too many Government schemes and programmes. I recognise that there has been significant growth in the number of schemes over the years, which is why the Government, with the support of the CBI and others, introduced the business support simplification programme. That is also why we now have a programme of support called Solutions for Business, which works alongside the real help for business initiatives we have announced.
I reject entirely the over-exaggerations that are sometimes made by Opposition Members. I do not believe that one needs a PhD in Government finance to understand the programmes of support out there. I suggest that the hon. Member for Weston-super-Mare (John Penrose) and others who find the schemes confusing should visit the Directgov website or the real help section of the Business Link website, where they will be able to see the wide range of assistance that is available.
Secondly, may I say something about the enterprise finance guarantee scheme, which links to the points made by a number of hon. Members, before I move on to discuss the issues to do with delivery? The scheme covers more than 95 per cent. of all businesses in the UK. It is available to businesses with a turnover of up to £25 million and can provide Government loan guarantees at a rate of 75 per cent. for loans from £1,000 to £1 million. It has been welcomed by industry and, in terms of delivery, it is making progress. I recognise that when companies are facing financial difficulties in a world of 24-hour news, expectations are rightly high. More than 1,100 businesses have now been registered by lenders as eligible for support with potential lending values of more than £110 million. In the past week alone, potential lending of more than £30 million has been registered. That shows that real progress has been made.
I would say to hon. Members who might be interested in examining the facts that when one is in effect launching a new product, it takes some time to be established in the marketplace. That is the case with the enterprise
finance guarantee and it probably explains some of the survey findings from the Federation of Small Businesses. All the major banks that have been participating in the scheme—I think there are 19 active lenders now, so those banks participating in the scheme include more than just the major lenders—have been training their staff at a variety of levels on the enterprise finance guarantee and how it operates. Banks are reporting approval rates in line with commercial lending approval rates of about 70 per cent. As the product becomes more established in the marketplace, we will see it continuing to spend. The fact that more than 1,100 businesses have to date shown themselves to be eligible and the fact that they are being considered by banks show that there is some significant take-up.
In some cases, having considered an application from a company, banks will decide even under the terms of the enterprise finance guarantee that they do not want to make the loan. Typically, that would be because a bank believed that the business could not service the loan. Clearly, we cannot support banks providing irresponsible lending. The enterprise finance guarantee has to be there for viable businesses, but it is right that the banks have to make the final decisions based on the lending criteria. We are making progress with the enterprise finance guarantee scheme and I hope that I have shown that.
Mr. Prisk: My argument was that Business Link and Ministers advised that the ability to convert an overdraft was specifically included in the scheme, yet the bank in question excluded the business on that very point, and not on a wider issue. I am not trying to ask the Minister to investigate an individual business but, whatever he may have been told, all the advice that we are getting from businesses suggests that the training on the ground in the high street banks simply is not there. When the Minister says that we are making progress, that rather contradicts what the noble Lord Mandelson loves to do, which is to go on ITN, as he did on 14 January, and say, “The scheme is open for business.” Of course, the scheme he mentioned has not even started.
Ian Pearson: As I have just explained to the hon. Gentleman, the major lending banks have all been training their staff. There is no doubt that as the scheme is a new product, some people will not have received the training that they might need in the future, but it is important to recognise that the scheme has only been up and running relatively recently.
With lots of these programmes, one cannot suddenly say, “Rustle me up a spending programme that will get £1 billion of taxpayers’ money out of the door within a week.” I do not think that our taxpayers would expect the Government to do that. We need to ensure that we are effective in what we do by ensuring that the taxpayer gets value for money and that our programmes are properly monitored and evaluated. I can assure the hon. Gentleman that that is the case with the enterprise finance guarantee.
I also want to cover the points made about the working capital scheme. The scheme is not open to businesses to apply to, and I think that there has been some confusion about that on the Opposition Benches. We are in advanced negotiations with the banks on guaranteeing some extensive loan portfolios under the
working capital scheme, which will help to secure the working capital that is available to many companies in the country. It will also free up additional capital in the process. When we make announcements on the scheme, as we will, hon. Members will be able to see the scale of the activity, but the scheme is not available to businesses.
Let me explain the automotive assistance programme. Whereas businesses with a turnover of up to £25 million, regardless of their sector, can be eligible under the enterprise finance guarantee, we have introduced a scheme through the automotive assistance programme for businesses with a turnover of more than £25 million whereby they can access up to £2.3 billion in loan guarantees and, exceptionally, loans. A number of hon. Members talked about Government support for the car sector, and the programme is a key initiative. The hon. Members for Bromsgrove (Miss Kirkbride) and for Henley (John Howell) mentioned it, and I want to tell the hon. Member for Henley that the criteria for the scheme have been made publicly available. As it is relevant to companies in the automotive sector with a turnover of more than £25 million, we are talking about a relatively small number of companies—probably fewer than 200. I have written to most of them to explain the details of the scheme. That scheme is open for business.
As I mentioned, we had a seminar last Wednesday when we went through some of the nuts and bolts of the scheme with the banks and with companies in the automotive supply chain, as well as with the major manufacturers. We want to see early applications and there is no reason why companies should not apply to us right now. We will endeavour to assess the applications as quickly as possible, because I recognise the need to support the automotive sector at this crucial time.
Mr. Prisk: The working capital scheme was announced in January and we were told that it would be open on 1 March, if not before. When will it be operational?
Ian Pearson: As I said to the hon. Gentleman, it is operational now, in the sense that we are at the stage of advanced discussions with the banks on the packages that will be made available. I remind him that we are providing £10 billion in guarantees to support £20 billion in working capital lines continuing to be made available, freeing up additional working capital, as well. That is on top of the additional lending being made available to the economy as a result of the commitments we have secured from the banks participating in the asset protection scheme. RBS is committed to providing an additional £16 billion in lending to the business sector this year and, potentially, next; as for Lloyds Banking Group, the figure is £11 billion this year and next. That is significant additional lending, which we all recognise as important.
Frankly, the points made by the Opposition would have a lot more credibility if they did not try to rewrite history every few months. At first they were in favour of recapitalising the banks; now they say they are going through a major lesson in humility, which seems to be born of an attempt to criticise the Government, when in fact they have no credible alternative plans whatsoever. I have sat on the Front Bench over the past months waiting to hear from the Conservatives a credible alternative policy or a suggestion about what should be done. It is
one thing being in opposition and wanting to oppose the Government and, rightly, scrutinise what we do; but sometimes, it would be nice to have some constructive opposition and to hear a proposal.
Let me deal with some of the other Government programmes that have been available. The hon. Member for Hertford and Stortford (Mr. Prisk) mentioned the capital for enterprise fund. It is important to note that, as he well knows, this is an investment fund—it is about equity and businesses seeking long-term investment, so it is not a quick fix. Some 231 businesses have already registered their interest in the scheme and, as with any other investment fund, we will need to undertake due diligence before making investments. It is a relatively small fund, but the provision of equity capital at this point in the economic cycle is needed by many businesses. The hon. Gentleman ought to be welcoming what we are doing. If he has different proposals and suggestions that he wants to make about what we should be doing to address the equity gap, let us hear them and hear how he is going to fund them. The Government are very clear and transparent about what we are doing and why.
Mr. Prisk: Last November, we set out a national loan guarantee scheme—£50 billion, clear and simple. Have it, take it—why will the Government not act?
Ian Pearson: I notice that the hon. Gentleman said absolutely nothing about equity, which we were just discussing. His party has not costed his proposal for a national loan guarantee scheme. It looks very similar to the working capital scheme that we have introduced, but I do not want to play party politics with who thought the idea up first. However, it is clear that the working capital scheme will provide support for existing credit lines of companies. It is providing real help for business, and the hon. Gentleman ought to welcome it.
The hon. Gentleman also asked about the scheme announced in the pre-Budget report on support for credit. As I hoped he would recognise, given that we have made this clear on a number of occasions, the £1 billion scheme that we announced then was turned into the £10 billion working capital scheme support programme that we have now announced, so we are getting on with delivering on that commitment.
The hon. Member for Solihull (Lorely Burt) made a number of points. Let me pick up on what she had to say about trade credit insurance. I appreciate the financial problems that a number of companies have as a result of the withdrawal of that insurance. As she knows, we are looking into these issues, because we are determined to do all we can to ensure that healthy and viable businesses survive. It is a complex area and it is essential that any intervention that might be designed is able to make a real difference. We should not be opening the taxpayer up to unacceptable risk, so there are some important issues there.
The hon. Lady also mentioned regulation on business more generally. As she knows, we look very carefully at any plans for further regulations. We have a small business impact test, and common commencement dates for any regulations that need to be introduced, but she is right to say that we should be looking at regulation on business particularly closely during these difficult economic times.
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