Examination of Witnesses (Questions 80-99)|
14 JANUARY 2009
Q80 Chairman: The Financial Times'
report said it would be targeted at particular sectors, that is
not the case, it is a general scheme across all sectors?
Lord Mandelson: No, important
sectors of the economy will benefit. For example, people are rightly
concerned about the automotive sector, which I think we are going
to come to, and the very important and very large supply chain
underpinning the automotive sector will be able to benefit.
Q81 Chairman: There is no deliberate
targeting of that scheme to any one particular sector?
Lord Mandelson: No.
Q82 Mr Hoyle: Chairman, to put the
question the other way around, are there any sectors you will
not be funding?
Lord Mandelson: I am not excluding
Q83 Chairman: The same is true of
the rather modest equity capital fund you have announced as well.
Again, the Financial Times said it will be targeted at
strategically important sectors.
Lord Mandelson: I would describe
them not as strategically important so much as innovative growth
companies. You describe it as modest, I would say from small acorns
great ideas are born. Remember, after the Second World War the
ICFC was created by the post-war Labour Government as part of
its industrial strategy then, I choose to describe my own approach
more as an industrial activist than interventionist. I think it
may well be that from the small acorn of our capital for enterprise
fund a large oak tree might grow.
Q84 Chairman: You are dropping a
very interesting and intriguing hint of precisely what I want
to ask you. I heard that the Government is considering the establishment
of some kind of new equivalent of a 3i organisation. There are
large amounts of private equity capital floating around which
would dwarf the £50 million in this scheme. The private equity
industry had a very benign financial tax environment for years.
Of course, companies do not need more debt. One of the problems
of the British economy is the public sector, the private sector
and the corporate sector are all over-leveraged already. One of
the reasons why the problem here is so serious is the over-leverage
of every sector, so what the private sector needs is more capital.
I am very encouraged by what you are saying about these small
acorns and great oaks. Are you saying there is a germ of an idea
in your mind for a more ambitious equity fund here?
Lord Mandelson: Yes. I do not
want to go too far in advance of Government policy but, yes, I
do have an ambition, I do have a vision for this fund. I would
like to see it grow, I would like to see its extended role, not
because I believe that debt or credit are wrong, of course they
are not, they sustain a modern economy, but the provision of equity
finance, particularly for innovative, higher technology growth
companies, is very important, they need that for their investment.
We will see, I am not going to anticipate where these new ideas
Q85 Chairman: I think it would be
unfair to push you on that, you have been very honest to the Committee.
Can I welcome that suggestion and say how much we look forward
to hearing it develop. I think it is a very important suggestion
Lord Mandelson: If you could pass
that on to the members of your party's front bench!
Q86 Chairman: I do not think they
will be opposed, I could be wrong. Given the way you mis-described
our policies earlier, I could have a lot of discussions with the
Lord Mandelson: Whoever the members
of your frontbench may be!
Mr Hoyle: This week!
Q87 Miss Kirkbride: Minister, I think
it is the Government that normally pinches the Opposition's policies,
but we will leave that aside. What assessment has your department
made of the cost to the British economy of the credit squeeze
on both GDP growth and jobs?
Lord Mandelson: I think it is
unquantifiable, to be honest.
Q88 Miss Kirkbride: You must have
Lord Mandelson: No, I do not.
The ramifications are so huge because credit underpins activity
throughout the economy. If you think of every part of the economy
where credit is essential, you have to conclude that almost no
sector of the economy is going to be untouched by the implications
Q89 Miss Kirkbride: You must have
some idea. Some of the people have made a stab at it, we are told
that 100 businesses were going bankrupt every day because of it
all, so surely your Department has some assessment. If it does
not have an assessment, how are you going to assess how well your
schemes are managing to involve them?
Lord Mandelson: To be honest,
I am less concerned about assessing what is going wrong as devoting
my energy to what we can do to make things go right.
Q90 Miss Kirkbride: How are you going
to know that it is getting better from you schemes if you do not
have some modelling?
Lord Mandelson: I will know where
the loans are going, I will know where the guarantees are having
a positive effect, I will know what additional working capital
is being brought into use in the banks, I will know how the Enterprise
Finance Guarantee is being used and who those loans are going
to, I will know how the capital fund is being used and I will
know all those things in due course.
Q91 Miss Kirkbride: From your very
bureaucratic scheme that you are setting up at the moment.
Lord Mandelson: Is it bureaucratic?
Miss Kirkbride: On the face of it.
Mr Binley: Evidence?
Q92 Miss Kirkbride: On the face of
Lord Mandelson: Sorry, I should
say, the banks with whom we have been talking about this and negotiating
this have expressed all sorts of concerns about how it might operate
and we have been able to smooth out those wrinkles and concerns,
but none of them has said they think it is overly-bureaucratic,
that is not a criticism I have heard.
Q93 Miss Kirkbride: As a member of
the Opposition, I think I am probably allowed to express a view
that in general I find that Labour Government meddles a lot and,
once again, we see the way you are operating these schemes seems
to me to be over-bureaucratic.
Lord Mandelson: With respect,
I know you might expect us to meddle, as you say, or intervene,
as others would say, less, but I do not think that is what the
economy needs just at the moment. They do not need us to sit on
our hands, sit back and do nothing.
Q94 Miss Kirkbride: No, we need a
National Savings loan guarantee scheme in which the banks share
the losses, in which case you can perhaps use them a little bit
more clearly. However, you are talking about a six to eight week
delay before any of this money will be forthcoming. The credit
crunch started last October and, as I have said already, some
people think that 100 companies are going bankrupt every day.
Do you really think you are moving fast enough on all of this?
Lord Mandelson: Yes, I do think
we are moving fast enough. I was struck by the Deputy Director
of the CBI who remarked that monetary measures like this require
careful planning because they have not been used in a generation,
if at all.
Q95 Miss Kirkbride: Six months later.
Lord Mandelson: Not six months
Q96 Miss Kirkbride: By March it will
Lord Mandelson: As John Cridland
was saying, we are in uncharted waters here. We are designing
new financial and monetary instruments which have to, firstly,
meet their target, secondly, cater to the organisation and business
model of the banks because we have not nationalised them, thirdly,
give value for money to the taxpayer and, lastly, enable us to
give a proper account for how these schemes are operating, ie
we have to know what is going on. You do not design an instrument
like that overnight. You do not do it unilaterally and you do
not put it into operation before you get it right. The Chancellor
announced his intention to introduce this scheme at the end of
November. We have had Christmas and New Year intervening, it is
now mid-January and it is going live, I think that is pretty good
Q97 Miss Kirkbride: The money will
be coming through in March.
Lord Mandelson: I am sorry, you
have made a point and I have got to respond to that.
Q98 Miss Kirkbride: You said six
to eight weeks which is now.
Lord Mandelson: You are talking
about very, very large sums of taxpayers' money, you are talking
about £10 billion. Do you expect us to go out and just throw
it into the high street, throw it at the banks and say, "Take
it up and get on with it and do as you will with it", of
course not. This is a transaction between the Government, on behalf
of the taxpayer, and the banks to deliver real benefits to small
and medium sized businesses in our economy and we are going to
get it right.
Q99 Miss Kirkbride: I am sure they
will be very grateful, better late than never; I am sure in that
sense it is a good idea.
Lord Mandelson: Or not at all
as your party would have us do
Mr Hoyle: Do nothing, do nothing!