Government Assistance to Industry - Business, Innovation and Skills Committee Contents

Examination of Witnesses (Question Number 1-77)

Philip Rutnam Jane Whewell, and Emma Squire

9 November 2010

Q1   Chair: Good morning and welcome to our first session on Government support for industry. I thank you for attending and apologise for being very slightly late in starting the questioning. Before we open with the questions, could you just introduce yourselves so that we can get voice levels for recording and so on.

Philip Rutnam: Yes, thank you Chairman. I am Philip Rutnam; I am the Director General for Business within the Department for Business, Innovation and Skills and my group's responsible for industrial policy, business sectors and in general trying to create an environment for business success.

Emma Squire: My name is Emma Squire; I head the SME Finance team at BIS in the Enterprise Directorate.

Jane Whewell: My name is Jane Whewell; I am head of the team in BIS that deals with the automotive industry.

Q2   Chair: Thank you. I will start with some very general questions. First of all, how would you define the role of BIS in supporting industry and how do you think the events—and I am talking particularly of the recession—in the last two years, not the political events, have changed this role?

Philip Rutnam: I think first of all it is important to see that BIS is the department for growth. It has identified a very clear responsibility for creating the best possible environment for economic growth in the economy. As part of that, a large part of that, it is our job to try to make sure that across Government we are creating the conditions for business success. Now that involves a whole range of things. It involves, for example, working closely with the Treasury on issues around business taxation. It involves working closely with other Government departments right across Whitehall on trying to create the right regulatory environment for business issues such as planning, issues such as infrastructure—a whole range of things that go into creating a positive environment for business. In addition, many things within BIS's own responsibilities—the skills system, higher education, funding for science—bear heavily on whether or not we manage to create a positive environment for business and conditions in which business in the UK can start and flourish.

We also have a role, and I think this is the particular focus of the Committee, in relation to a variety of interventions that Government makes: schemes and other sorts of interventions that involve support directly or very closely to business themselves; a variety of different interventions. I can obviously talk at some length about that but I think it is very important to see that our role as a department goes much wider than individual schemes and interventions and it really is focused on trying to create this environment for business in which business can succeed.

Q3   Chair: Thanks. You touched on a problem which I think the Department has, and that is to achieve so many of its objectives it has to have other Government departments signed up to agree with them as well. Given that other departments will have conflicting priorities, how do you go about influencing other departments to, in effect, potentially realign their priorities to conform with BIS's?

Philip Rutnam: Well, I think you are absolutely right that BIS in many ways is only going to be successful in creating the right environment for business if we work with other parts of Government and that is a major, major focus of our time and effort. There is obviously a political dimension to trying to make sure there is the right alignment across Government, and this Government has been very clear that right at the top of its agenda is creating a positive environment for business; the Prime Minister's talked about making clear that Britain is open for business, and the structural reform plans published yesterday talked at length about a whole variety of things Government can do to create the right environment for business. So there is clearly a responsibility that Ministers have for defining the agenda of the Government and taking it forward.

So far as the officials within the department are concerned, I would point in particular to the importance of really high-quality analysis and a strong collaborative style of working with other departments. My experience is that in fact other departments are, in general, very keenly interested in economic growth. They recognise its importance, its central nature in the Government's agenda, and they want to find ways in which their objectives, which—you are right—may not be focussed solely on growth, can be aligned with the broad goal of economic growth. So in general I find that if you do the hard work of identifying what the key issues are, analysing the extent to which there is a gap in the UK—an issue that we need to address—and then you go about it in a collaborative and persuasive style, you can get a very high level of cooperation and collaboration with other Government departments. There are many, many examples of that we can talk about.

Q4   Chair: Thanks. Just perhaps a little more specifically, the Prime Minister has suggested that the role of Government in getting growth is to create "a stable environment for private sector growth". Looking over the next, shall we say, year or so and then the life of Parliament and perhaps the next 20 years, how do you think you will implement this?

Philip Rutnam: Sorry, is your question about the next year or about the lifetime of Parliament?

  Chair: Well, both. In effect, what do you feel that you can achieve in getting to this point within the next year, then, if you like, the life of the Department and then sort of to the long term?

Philip Rutnam: I think in the next year, the things that are uppermost in our minds are, first of all, making the best possible use of the resources that we have from the spending review and taking the right approach to persuading other departments, indeed other parts of BIS, to make sure that we are using the resources that we have available across Government to support growth. So that is one very important agenda.

Creating and taking forward the multiple different points on which Government impacts on growth, so the regulatory agenda, for example, that I touched on earlier—there is a great deal of work going on on that—making a manifest success of that in terms of creating the right environment for growth. I would say that there's a huge implementation challenge, if you like, over the next several months; we have had a very busy period in Government since the election; we have now had major resource decisions made in the spending review. There is a big task to turning that into the details and specifics needed to create the best possible environment for growth.

I would say if you look over a longer timescale, the Government has been very clear about a number of things that it thinks are very important in terms of creating the right environment for growth. I would pick out creating the right environment for small firms in particular—the SME agenda, the enterprise agenda. A lot of that revolves around access to finance, but there are also many other issues that small firms face when they are starting up and trying to grow, so that's a major priority. I would also pick out innovation—helping to turn the excellence of science in the UK into really high quality and globally successful products and services. That's another clear priority which we need to realise over the next several years. The Green Agenda is important, too: we have a major opportunity in the UK to be a global leader in the supply of environmentally effective goods and services. Again we have a series of decisions that would help us to realise that; we now need to turn those into practice, for example the Green Investment Bank.

The Government has also been very clear about the need to look across the things that it does at rebalancing the economy both regionally and sectorally, and on the first of those, the spatial dimension of policy, to try to make sure that every place can realise its economic potential. Again, I think there is a big task in front of us around implementation, which realistically will take—it's not just something that's going to be done over the next 12 months, it is more likely that the lifetime of the Parliament or at least the next two or three years, is needed to realise that. The final point is sectoral; the Government has talked about the importance of moving away from overdependence on a narrow range of sectors. We have a whole set of ideas, a whole set of actions in train, but I think the realisation of that, the full implementation, is going to take longer than just the next 12 months.

Q5   Chair: And how do you think you will be judged on the success of your policies?

Philip Rutnam: Well, I think in part we are going to be judged by whether or not we do what we say. That, I think, is a large part of what the structural reform plans are about— setting out very clearly what Government is going to do and then holding us to account for whether or not we deliver. That is something we are acutely conscious of, but it is not just about doing what we say. We'll also want to see signs in the economy of realising the things that Ministers have been identifying, have been talking about, and you will see that there are also indicators in the structural reform plan, for example, GDP per head, so I think that will provide one sign of whether or not BIS is making an impact over the next several years.

Q6   Chair: Would you include measures like employment, the relative growth of the private sector, growth of regional economies?

Philip Rutnam: Well, the Government has been quite careful to move away from setting targets for things like that. But if one is talking about whether or not the economy is ultimately becoming better balanced, sectorally and regionally, you obviously have to look, for example, at moving away from excessive dependence on the public sector in parts of the UK, or at least the English economy, which is my main responsibility.

  Chair: Okay. Can I now bring in Paul Blomfield?

Q7   Paul Blomfield: Thank you Chair. At the CBI Conference in October, the Prime Minister suggested that the role of Government was to get behind those industries where Britain already enjoys a competitive advantage. The Secretary of State, I think at the same conference, said it was not the business of the Government to pick winners. How do you reconcile those goals and what is the role of the Department going to be in delivering that aspiration?

Philip Rutnam: The phrase "picking winners" is one that carries certain connotations, most of them usually negative. What Government can do can be defined on several different levels. First of all, there are many things which influence long­term economic growth and whether businesses succeed or fail in the UK that run across the economy, or almost all the economy: issues such as access to finance, for example. They may have particular salience, particular relevance to small firms, but actually they are relevant to firms of all different scales. It is really important that we have a good flow of finance into the economy, which allows firms to start and grow, and to realise economic opportunities. Regulation is important: a strong regulatory environment, which is proportionate and puts as few barriers as possible in the way of businesses succeeding. That is another thing that, if you like, runs right across the economy.

Many of things that we do in this Department, and many of the things that Government does that affect business, really operate at that level, which I would call horizontal; things that tend to run across the economy. There are also particular areas of economic activity where the UK has real strengths now or could realistically acquire and maintain great strengths. Those tend to be talked about in terms of comparative advantage, which may reflect deep pools of skill within the economy and deep areas of expertise. Specialised manufacturing is an area that could be cited. You can look at all sorts of examples of manufacturing where the UK has world­leading strengths, but so too in areas of business and professional services. You can identify, and you can do this quite robustly and analytically by looking at the import and export ratios, for example, whether or not the UK has a comparative advantage in a particular area, as realised in the real world.

You can also, by looking ahead a few years and looking at global trends and looking at what you can understand about what's happening in particular sectors, see whether or not the UK is likely to maintain or develop comparative advantage in particular areas. Our view is that Government certainly has a role in understanding where the UK does or does not have comparative advantage or plausibly can maintain and develop comparative advantage, and we need to do that on a forward­looking basis.

We also have a view that Government cannot be completely sector neutral in the way in which we go about designing policy. We need to understand the different circumstances that different sectors face and be able to adapt policy, in particular for sectors where there are potentially large economic gains to be had, to help those sectors to succeed. So, that is rather a long answer, apologies, but the way we think about it is in terms, first of all, of horizontals, directions of policy which tend to run across the economy, but also secondly, this kind of vertical dimension: where is it that the UK has real strengths or real opportunities and what can we do as policy makers to help those opportunities and strengths be maintained and realised?

That requires a good understanding of different sectors and a good understanding of how policy can sensibly be adapted. It is not, however, picking winners, which is a phrase, as I say, that carries some connotations, but particularly of picking individual firms in the past as potential champions of national industry.

Q8   Paul Blomfield: It was a long answer, but it was very helpful, and I wonder if you could develop it further, I think, by talking a little bit more specifically about having identified those sectors where we have comparative advantage, what the Department's thinking is in terms of what can be done specifically to support them.

Philip Rutnam: I am actually going to ask Ms Whewell to comment on this, because she's head of our automotive unit and this is a prime example of how we try to do this in practice.

Jane Whewell: Okay, well I can give you a specific example of that. For those who do not know the Automotive Council, it's a body jointly chaired by the Secretary of State and a key industry figure, and all of the major automotive companies in the UK are represented on it, and the supply chain, trade unions and other key people such as the Technology Strategy Board. A piece of work was done a little while ago on the low carbon agenda for the industry and what was everybody's best estimate of what technology would be required and roughly when, so that people at universities could actually be ready to see that "in five years time this problem is probably going to need to be cracked". Having worked out and agreed and published what everybody agreed was the road map, we then needed to apply that to the UK and where could the UK capitalise upon this.

So a piece of work was done looking at the key technologies that had been identified as necessary, and we worked out where did the UK have real strength, world­leading capacity, good companies, real ability to do strong work here. Where did the UK have potential—maybe not world­leading yet, but real nuggets that we could build on—and where were the areas where, realistically, we were not going to be able to make progress, maybe very high entry costs, existing massive overcapacity in European countries; things where it simply did not make sense to concentrate effort, because it would be wasted effort.

Having now got that knowledge of the key areas where we had capacity, we then worked with the Technology Strategy Board, who used that research to inform exactly where they targeted their next proposals for investment and research and development, so that we built on the capacity where we really had the capacity to be world leading. So we were not picking winners as such; we weren't saying, "That is the company we are going to favour," but we had a real, solid evidence base, based on our knowledge of the industry and of the sector, of the key technologies that are going to be needed and the areas where we have real capacity for growth, and now we are bringing the rest of Government policy behind that. So that is a specific example of how we would use our knowledge to get behind parts of sectors that really matter, but not pick winners.

  Paul Blomfield: Thank you.

  Chair: Can I bring in Nadhim Zahawi?

Q9   Nadhim Zahawi: Thank you Chairman. Mr Rutnam, I think I am correct in saying that your focus at the moment is the regulatory agenda, the SMEs, the enterprise agenda, access to finance, innovation and the green agenda. In your written evidence to us you suggest that BIS has given itself three main roles in encouraging growth and those roles are to promote the efficient operation of markets, create a highly skilled workforce and encourage entrepreneurialism. How do you think BIS is going to essentially achieve those three roles? Do you want me to repeat them?

Philip Rutnam: No, I am—

Nadhim Zahawi: Promote the efficient operation of markets, create a highly skilled workforce and encourage entrepreneurialism.

Philip Rutnam: Yes, I think that was actually a quote from the document we produced back in the summer, the Strategy for Sustainable Growth, so the reason I paused is that the reference to highly skilled workforce was in a wider context about smarter public and private investment in the economy. Investment is the heading rather than just the skilled workforce, though obviously human capital and the skilled workforce are absolutely part of it.

There are different ways of cutting what we do and the Strategy for Sustainable Growth was really relating to the activities of the Department as a whole whereas my comments earlier were focused a little bit more on the priorities that I see in relation to support for business; things that we are actually doing for business. So technology and support for the commercialisation of technology are an example. That is why I picked that out. You could fit it under the investment heading as well. That explains why there is a slightly different categorisation.

To answer your question, I think there is a huge amount that BIS can do and is doing towards those goals set out in the Strategy for Sustainable Growth. So, promoting the efficient operation of markets to support growth for example, which goes wider than my own brief in the Department—quite a lot wider—the whole agenda of making sure that we have one of the best competition regimes fits exactly into that territory and, as you know, the Government has identified plans to bring together the Office of Fair Trading and Competition Commission, but to do that in a way that, if anything, enhances the quality of the UK's competition regime. So that is just one example.

The skilled workforce: well, in the spending review that has just been announced, that includes the whole agenda of investment in and support for skills and the development of the higher education system in the UK. All those agendas go beyond my own brief in the Department but fit exactly into this area of how we make sure that we maintain and develop a highly skilled workforce in the UK, given that ultimately it will be the skills of the people who work in the UK that will determine our economic future. So there is a huge amount, I am sure.

Q10   Nadhim Zahawi: I would counsel that cutting things in several different ways is a recipe for lack of focus and if you give evidence saying, "These are our three main roles," then a bit more meat on the bone would be useful for this Committee, i.e. saying if they are the three areas, what are we going to do in each one of those. Now do I take it from your answer, what you are actually saying is these aims are really beyond your own Department anyway?

Philip Rutnam: Not at all. I am sorry, I have tried to draw a distinction between the role of BIS, which is a wide role which goes, into for example, as the Committee will know, financing the higher education system in the UK, and what I would understand to be the focus of this inquiry, and our response to the inquiry, which is around government support for business. So yes, having a successful HE system is part of the background to a very successful economy in the UK, but it is not, as I had understood it, the focus of the inquiry into support for business.

Q11   Nadhim Zahawi: I am a bit confused here. Can we just go again: you have said in your evidence to us that you have given yourself three main roles, and I have outlined them to you.

Philip Rutnam: Yes.

Nadhim Zahawi: They are encouraging entrepreneurialism, creating a highly skilled workforce, and promoting the efficient operation of markets, which are all in the evidence that you have given to us for this inquiry for what we are talking about here. So are you now saying that is not relevant or that goes beyond what we are talking about here, which is why you gave the earlier answer?

Philip Rutnam: Well, let me try again, because obviously I am not making myself clear. My understanding of this inquiry is that it was around Government assistance to and Government support for business and industry. So the focus of my remarks earlier was on what Government can do to create the best possible environment for business and industry, and, as I was explaining to Mr Blomfield, there is a range of things. There are things that you can describe as running across the economy, which include, for example, trying to make sure we have a strong supply of skills running into the economy, and there are things that are more sectoral in nature, focussed on particular areas of business.

My understanding of the Committee's focus in talking about Government support for business and industry was on things that touched on business and industry reasonably directly, so that you were not, for example, looking at our funding of the higher education system. So the evidence that we have supplied is around things that impact on business and industry reasonably directly: schemes and interventions that we have had over a number of years and are planning to have that involve the provision of finance to business or improving the supply of finance through the banks, things like that, rather than, for example the way in which we fund higher education, even though higher education is obviously very important for business because it provides a flow of highly skilled people.

That is the focus of my remarks, but I think it is really important to understand that getting the conditions right for business success in the UK is not all about Government schemes for business. In fact, Government schemes for business are a relatively small part of getting the conditions right. Getting the broader environment for business right does touch on higher education; it touches on investment in transport infrastructure; it touches on investment in energy infrastructure; it touches on regulation, for example, and it is really important, but it is a very, very wide topic and some elements of that certainly go beyond my own personal brief. So, again, that is rather a long answer. Has it clarified matters?

Nadhim Zahawi: Sadly not.

Philip Rutnam: Oh dear.

  Nadhim Zahawi: But never mind; we will keep going.

Q12   Chair: If I can just quote, in the submission to the inquiry in your section on investment in our productive capacity to drive growth, you have put, "Investment in higher education and skills is also integral to supporting the economy and driving sustainable growth," so I would have thought it was fairly central to the Departmental responsibilities and I would welcome further redefinition of that.

Philip Rutnam: You are absolutely right, Chairman; it is very important for getting the right environment for business. We had not understood that this Committee's inquiry was quite as broad in its focus as that, as we had understood that your main interest was, as I say, on things that bear reasonably directly on businesses, so things like the Automotive Assistance Programme, the Strategic Investment Fund, the access to finance schemes that we operate, the working capital guarantee scheme which were mentioned and other schemes and interventions that we make which work pretty directly with business.

I am sure we would be happy to talk to the Committee further about higher education and its impact on business, but that is quite a wide topic and we have not tried to cover that in all its dimensions in our evidence. We have principally alluded to it as part of this point about how important it is to get the wider environment right for business.

  Chair: Yes. I will point out that the terms of reference spoke of Government policy as set out in a strategy for sustainable growth and the Green Paper on business finance. Certainly business finance is very important and obviously we will devote a lot of time to it, but the other issues are particularly relevant as well.

Q13   Mr Ward: We have done very well to avoid all football analogies so far, but is there a distinction between ensuring that the pitch is fit for quality football, which is the environment, and the direct interventions to make sure the team has the kit and the training required to enable it to play on that pitch.

Philip Rutnam: That is a possible way of describing it. I am just slightly cautious about where that analogy might take us.

Mr Ward: I can do cricket.

Philip Rutnam: No, that is fine. Football's fine. Soccer's fine.

Mr Ward: There is a difference between the right environment in which it can be played and then there's obviously the—

Philip Rutnam: Let me say first of all: I think we are very happy to try to answer the Committee's questions on any issue that you would like to cover; we are very happy to try to answer your questions.

Let me go back to what I was trying to describe earlier about our overall role. I used the phrase "create conditions for business success", which is one that appears in our structural reform plan. Creating conditions for business success involves those things identified in the Strategy for Sustainable Growth. A lot of those relate to things that may only affect businesses very indirectly. So, the decisions that the Government has announced recently in relation to the future of the financing of higher education, for example, will have an effect on business and on the environment for economic growth over the next several years, but we have seen that those are rather indirect influences, and as I say, in our response to this Committee we had thought you wanted to focus on things that affect business more directly, because there are so many different things Government does that affect business indirectly. They are really important in terms of creating the conditions for business success, but will take the scope of what we are talking about very, very wide indeed, into transport investment, for example, or investment in schools.

Q14   Chair: I am going to bring Brian Binley in in a moment. I would just make the point that, in effect, if you are defining your remit as being things that affect business directly, I would emphasise that you have just mentioned transport is a big issue that also affects business directly. Skills are also a big issue. If I had to write down the issues that local SMEs complain to me about, transport and schools would be very high on that list, and whereas I do accept that it goes beyond the BIS departmental responsibilities, I would wish to emphasise that influencing those departments to conform to BIS departmental responsibilities is very important indeed and you cannot just say, "Well, not my department, guv'."

Q15   Mr Binley: Yes, I am very confused, because the terms of reference are really quite clear. There are four of them and you, no doubt, will have had a copy of those terms of reference. One of them is Government policy as set out in the Strategy for Sustainable Growth, and yet you talk about areas that only directly impact upon business. Now, I just wonder where this growth is going to come from in terms of that particular policy if it does not come from business. I do not understand what we are talking about now.

Philip Rutnam: Let me repeat my—

Mr Binley: No, try and explain in a different way, because I understood what you said before, I just do not understand what you said. I understand the words.

Philip Rutnam: Okay. Can I just say two things: first of all we are very happy to try to answer the Committee's questions on any issues that you wish to raise. If we do not know the answers we will say, but we are very happy to try to answer questions on any issues you raise. My second comment is just to absolutely endorse what you and the Chairman have said, that the role that BIS has in seeking to influence what other Government departments do is of enormous importance in creating the conditions for business success and creating sustainable growth. So, perhaps rather than discussing too much the definition of scope and so on, we will try to answer the questions, and we could perhaps see whether that helps us to be more helpful.

Q16   Mr Binley: But I am saying to you you are not helping me, because to my mind you are not answering the questions, which are about the terms of reference this Committee has set. That is what I am saying to you. I just find an argument that somehow the other things do not have a direct effect on business—the Strategy for Sustainable Growth is all about the wealth­producing sector and I just do not understand your view in that respect.

Philip Rutnam: Well, I am sorry if I have confused matters, but I was hoping, to be very clear, that we are happy to try to answer whatever questions the Committee has. So what are the questions and then perhaps we can see if we can answer. We can offer many practical examples, as I was saying in my earlier comments, of where we do work collaboratively with other Government departments to try to make sure that across Government we are creating the best possible environment for business. If you want to talk about those we are happy to talk about those. If you would like to talk about the things I was describing, the schemes and interventions, we are happy to talk about those. Between us I am sure we can do our very best to cover the scope of whatever you would like to talk about.

Chair: Some of them we will perhaps deal with in a moment.

Q17   Nadhim Zahawi: Can I just come back on that? Maybe I can be helpful, Mr Rutnam. I think, a bit like a corporate organisation, we thought your evidence suggested that you have got three main roles—one, two, three—which I asked you about. The confusion was your first answer was, "Here are the things that we are focusing on at the moment," which bear little relation to the three main roles. So we were expecting to hear the meat on the bone of, "Right, here is our mission statement. These are the three things we are focusing on and here is how we are delivering on those." Whereas there was a slight sort of confusion because it was almost, "Oh, well, that is not what we were expecting to talk about here today," or "This is a different cut from the other cut." I think that is where the confusion has arisen. I am sure you will have those answers somewhere; it is that sort of clarity of, "Here are our targets; these are the three roles," because we got those from your own evidence.

Philip Rutnam: Yes.

  Nadhim Zahawi: We did not make those up and therefore we would expect you as an organisation to be able to articulate everything around those three main roles.

Philip Rutnam: Shall I try answering that question then?

Nadhim Zahawi: That would be useful.

Philip Rutnam: Okay, if we go up a level to the entire Strategy for Sustainable Growth, I think the things that we would pick out on promoting the efficient operation of markets are the huge importance of competition in a dynamic market economy; the importance of best practice in regulation, minimising regulatory burdens so that we keep to minimum the barriers in the way of businesses starting and succeeding; and the third thing I would pick out under the efficient operation of markets is a more global perspective to do with trade and inward investment and the huge importance of advancing the trade agenda, continuing to make sure that the UK is very clearly a place in which to come, to do business, to invest, whether you are based in China, India, the US or any of the other major markets that we deal with. So those would be the three things I would pick out.

On smarter public and private investment in the economy, on public investment, we are clearly in a time where public resources are very constrained. We therefore have to use the resources that we have, and which other Government departments have, absolutely to best effect to try to create the right environment for economic growth. The things I would pick out in terms of a cross-Government perspective are things recognised in the spending review, for example, the importance of trying to support investment in infrastructure. Transport infrastructure, as I have already mentioned, is of enormous importance to business, not just the business we have now, but also the businesses that might come into existence and businesses that are looking to come into the UK. Dealing with potential inward investors, as we do, one of the major issues that they raise is the quality of infrastructure, particularly transport infrastructure, so there is a relative priority for that.

Moving to private investment, I would say that there is a huge importance attached to the regulatory environments that we create, particularly for the regulated utility sectors. We have very large investment needs in energy but also in telecommunications—other areas as well, water and sewerage for example. There is a whole array of sectors where we have major investment needs so there is huge importance in getting the regulatory environment right, which often can involve some quite tricky decisions and trade offs between the importance you are going to attach to investment certainty versus other goals.

I have not touched on skills. The reality is that most of the investment in skills in the economy takes place in the private sector. What we do by way of Government funding, whether for higher education or further education is a critically important but smaller part of it. I think from memory, business spends something like £35 billion to £40 billion a year in investment in skills, so we need to continue to create an environment in which businesses have the confidence to invest in skills, and we have a high quality dialogue with them about the importance of investment in skills—and we are talking about everything here, from the BPs of this world down to the SMEs.

When you are talking about public investment in skills, that goes back to some of the points I was making earlier—we are obviously in a very difficult, tight, public spending situation. The Government has had to make some tough decisions about investment in this area, but it has put a particular focus on trying to maintain levels of what I would describe as levels of activity. So to keep broadly the same the number of students going into higher education, but to look for ways of adjusting the need to cut public resources by looking for a greater graduate contribution. So that would be about the investment piece.

Can I just say a word, and sorry this is another long answer, about encouraging entrepreneurialism and individual engagement, which is again of huge importance? We have, I would say, in general an enterprising society in the UK, as shown by global entrepreneurship data, but we have some areas of the country where entrepreneurialism and the enterprising spirit are perhaps not quite as strong as they should be and that goes again to the agenda that Government has of trying to reduce reliance on the public sector and to create the greatest possible encouragement for enterprise and the energy that unleashes in parts of the country where maybe it has not been so strong historically. So that is a whistle-stop tour.

Nadhim Zahawi: Perfect.

Philip Rutnam: Okay.

Chair: Okay. I would like to move on now. Paul Blomfield.

Q18   Paul Blomfield: Thank you Chairman. In the Department's recent submission, you suggested that securing improvements in productive capacity could be delivered through direct support to industry and industrial projects with grants, loans, and loan guarantees. In the light of recent budget cuts, how much money is available for that support?

Philip Rutnam: I am just summoning to mind the figures. Just to be clear about scope, this is the funding available to support industrial investment—business investment—so relatively direct engagement by Government in what businesses are seeking to invest in. Things that in the past used to be called things like Regional Selective Assistance, and are now called Grant for Business Investment—schemes of that kind.

The two major sources of funding that we have going forward that I would point to include the Regional Growth Fund, which is £1.4 billion over three years. Not all of that will necessarily be available for that purpose, let us be clear; it has got a wider remit. However, its focus is on supporting private sector growth, helping to make sure private sector growth proceeds, particularly in parts of the country that have in the past been, we could say, overly dependent on the public sector. So that is one major source of funding.

The second is that in the spending review we were successful in getting the Treasury's agreement to funding for what is described as economic development, which could include some activities like that, which runs up to about £200 million a year over the next four years. Now, I am just going to ask my colleague, Ms Squire, whether there is anything she would like to add to that.

Emma Squire: Yes, on SME access to finance we got sufficient budget cover to meet all our legally binding commitments under the Enterprise Finance Guarantee, the Small Firms Loan Guarantee and all of our existing venture capital funds. We also got sufficient budgets to continue those programmes for the duration of the Parliament, so that will make available up to £200 million of Government funding for venture capital in the equity gap as well as more than £2 billion, subject to demand, for the Enterprise Finance Guarantee over the next four years.

Philip Rutnam: So a variety of sources of funding for things that we do to help ensure businesses' access to finance, both equity and debt, which in turn should help improve finance for projects. Ms Whewell has reminded me of one important omission, which is the Green Investment Bank, for which £1 billion of, in the jargon, DEL—Departmental Expenditure Limit—provision has been included, and there is also the scope to access more resources in connection with asset sales. So looking across the piece, we have significant amounts of funding in the Regional Growth Fund, in our economic development funding stream, the Green Investment Bank and then also through enhanced Government support for businesses' access to finance.

Q19   Paul Blomfield: What I was trying to get to is the impact that the budget cuts have had on those strands of funding. So you have cited, for example, the Regional Growth Fund; I think I am right in saying that that is equivalent to about 50% of what was previously available through RDAs. I wonder if you can elaborate further on the impact of the cuts on those strands of funding.

Philip Rutnam: I think at the overall level—we are looking at this overall—there is no doubt that we are going to be under a great pressure to make every pound that we have tell— make maximum impact—because we are facing really very considerable funding constraints going forward. The same is true across the whole of Government.

If you are making a comparison with the level of funding that was available in the past to the Regional Development Agencies, I think it would be true if you added those pots up it would be less. However, it is important to understand that the RDAs had a wider agenda, of course. They were responsible for funding many physical regeneration projects, public realm projects, for the funding of which we are not responsible going forward. So there is a tighter focus around the things that we are going to be funding in the future. I have just been reminded there is also the European Regional Development Fund, which continues to be available of course. So, I think overall it is a tighter position going forward than it has been in the past, but I think we have a very strong recognition that with the resources we have, we have a task to make sure we get really the best value from very focused prioritisation from the resources available.

Q20   Paul Blomfield: Can I push you on that point then? What sort of paradigm shift is there going to be in the Department specifically to be getting the sort of value that you talk about from substantially reduced resources?

Philip Rutnam: Well, I think it is very important to get across—and this goes back to some of the points I was trying to make earlier, but perhaps I made them in a rather confused way—that it is not all about money. In fact, often, it is not about money in order to help particular sectors, small firms or particular parts of the country to realise their potential. The Government's role, BIS's role, sometimes involves money, but often it does not and there are many things we can do that are very powerful that do not involve money. I am going to ask Ms Whewell in a moment to give an example of that.

I think you asked about paradigm shifts. I think I am not sure I would talk about paradigm shifts so much as really focused minds. It focuses our attention, our time and energy, when we know that resources are tight, to make sure, as I say, we get absolutely the last value for every pound we do have and that we are using other instruments, including the power of persuasion and influence—the power Government has to convene people—to maximum effect. Now Jane is going to give us an example of how this works in practice.

Jane Whewell: Yes, I think we have found, and this is something the Secretary of State has mentioned, the power of Government as a facilitator and a convener. So, for example, we did a bit of work with the big automotive manufacturers because we had heard various comments that they wished to source more from the UK. The issue was that for various reasons—competition, legal or just, frankly, not wanting to be nice to a competitor—they were not necessarily sharing this information. So we did a piece of work and said, "Okay, you're telling us you actually want to source a lot more in the UK, but we do not know what." We did a confidential survey and we asked them to share with us what they wanted to source locally that they were currently sourcing abroad, what were these items, how many were there, and then we put it together collectively. We have identified over £1 billion worth of business that these manufacturers actively do not want to source abroad and really want to source here.

Collectively, that is a much more powerful figure if we are trying to bring in an inward investor here. 200,000 bits here; 10,000 bits—it is too fragmented. If you can say, "There is a collective demand in the UK for product x across the industry of y," that suddenly becomes very powerful and makes people sit up and think, "Well, perhaps I should come to the UK." Similarly, now we have got that information, we can drill down into, "Well, there is a perfectly good supplier in the West Midlands, why is nobody using them? Do they know they are there? Is there a key skills issue we can help with?" So in fact you can identify very, very significant growth opportunities through the convening power of Government, our impartiality and our confidentiality, to give you a huge piece of information that gives you real growth opportunities that do not necessarily cost anything other than staff time.

  Paul Blomfield: Thank you.

  Chair: I want to bring Brian Binley in and then I think Katy wishes to ask you a question.

Q21   Mr Binley: I want to widen the picture out, because you have already admitted there is a very limited role you can play in creating working capital for small and medium­sized businesses, which is the massive need at the moment. FSB tell us 125,000 businesses are imminently on the verge of going bust. There was £400 million less lending to business in August this year than the same time last year, yet the whole total of the Loan Guarantee Scheme has only hit 12,460 SMEs. There are 4.2 million out there. You cannot do it. You are absolutely right; whether it's 50% less or 50% more, you are still scratching at the surface. Vince Cable tells us that there is a real need to get the banks lending. What are you doing from BIS to tell the Treasury to get its act together and get the banks lending?

Philip Rutnam: Well, just to clarify one point, you are quite right that interventions by Government like the Enterprise Finance Guarantee cannot turn the markets for business lending round. However, just to be clear, we are very clear that they can play a very useful role at the margins.

Mr Binley: I understand.

Philip Rutnam: Your broader point is quite right: we cannot turn the market around on our own with interventions like that. The role that we play—and it is not just through the Treasury; we talk to the Treasury every day about this, at every level of seniority—in also talking to the banks directly, again, at ministerial level and official level, about this is really, really important. I am just going to ask Emma Squire who is responsible for the range of things that we do to try and improve SMEs' access to finance to give examples of things that we have been doing and will continue to do.

Emma Squire: The first thing to say is that the Coalition Agreement is clear that ensuring the flow of credit to viable SMEs is a top priority.

Q22   Mr Binley: Can I stop you there, because it is failing. It is not working. Less lending this August than last August.

Emma Squire: I will run through what we are doing. So firstly we do work very closely with the Treasury. The consultation that we launched in July on financing a private sector recovery, which was around business finance, was joint BIS and Treasury. One of the things that we have started to do is to collect data on the demand for and availability of lending. Those data show that over two thirds of the smallest firms who seek a loan receive one, and upwards of 85% of mid­sized, small firms, so £1 million to £25 million turnover, but that really does not resonate with what we are hearing from the FSB and from businesses. So we consulted over the summer. What is clear is that one of the key issues that SMEs see is that they want better relationships with their banks, so communication, support, transparency on processes like risk assessment, better redress if they feel they have been unfairly turned down for lending.

In addition to the lending agreements in place with RBS and Lloyds, which are £50 billion and £44 billion, respectively, for business up to February next year, the Government is continuing to call on banks to lend to SMEs. That led to the banks coming together through a British Bankers Association taskforce over the summer and committing to 17 new commitments and recommendations to help. One of the big recommendations or commitments is that they will set up a £1.5 billion business growth fund that will help established businesses that are slightly too risky to receive senior debt, who are seeking between about £2 million and £10 million to grow, and that will also unlock additional debt finance, because if you get an equity investment into your business it can strengthen your balance sheet and enable you to get more finance.

Another key area is around data. The British Banking Association and banks have committed to produce more transparent data. We will receive that on a consistent basis over time at regional and sectoral level, so it will be easier to hold banks to account. They have also committed to undertake and fund a quarterly survey. Business rep bodies and Government will be involved in designing a methodology and questions for that survey so that for the first time we will be singing from the same hymn sheet and understanding what the problems are for businesses accessing finance from the same agreed basis point. Importantly, the banks have agreed to revise their lending code for the smallest micro businesses, and they have agreed to introduce lending principles for larger SMEs and a new appeals process. If you feel that you have been unfairly turned down for finance, you have a form of redress, and we will hold the banks to account over that.

Then there is a whole range of other commitments around improved customer information, better signposting of alternatives, setting up a mentoring network and so on to help businesses equip themselves to be successful when they apply for finance and know which sources of finance are appropriate for them. Then of course we have the Enterprise Finance Guarantee, which is only designed to operate at the margins of commercial lending. It is there for SMEs who are viable, and the banks want to lend to them, but they have insufficient security collateral track records, so they are not able to access a normal commercial loan. So it will only ever be a small proportion of the overall lending book that's supported by EFG.

Q23   Mr Binley: That was a very long list and I am grateful for it, but the fact of the matter is it is not working. We have heard all this talk for a very long time now. Let me put a point to you. The banks tell us that they have to build up capital assets; the regulators tell us they have to build up capital assets. I am told that if banks lend to Government it still remains capital reserve. That is what I am told. There are other ways of releasing that capital reserve in that way, providing the Government guarantees that release. Is there some way of working on that with the Treasury to ensure we get proper working capital to these businesses that need the money to sustain growth? It is as simple as that.

Emma Squire: Schemes set up shortly after the financial crisis, like the Working Capital Scheme, which was a BIS-led scheme, and the Asset Protection Scheme, a Treasury-led scheme, were designed exactly to improve banks' capital ratios and enable them to lend. Those are now coming to an end. New regulations—UK, EU, international—that are designed to promote stability in the financial services sector are important for that, because a stable market is important for businesses to be able to plan, but may have, as we set out in our consultation document, some impact on the availability and price of credit. We have been working with partners internationally to phase in new financial services regulations and address the potential short­term impact that the transition to new regulatory rules will have.

Philip Rutnam: Can I just comment a little bit there? I think that for the Government to take more on its own balance sheet by way of schemes that involve lending to small firms runs into a very significant and obvious problem, which is that we are ourselves very constrained in terms of how much Government can spend, and what sort of Government liabilities we can take on. One of the reasons why the Enterprise Finance Guarantee is necessarily a scheme at the margin is we are under a constraint on how much we can afford. We cannot just keep growing schemes like that as interventions. We have, to go back to the point I was making earlier, to be very focussed on every pound at the margin of Government support, whether direct or indirect.

There is one other very important dimension of what the Government is doing in relation to the banking system that I should bring out, which is the Independent Commission on Banking which Vince Cable and the Chancellor have established, chaired by Sir John Vickers, which is looking—and it is an eminent panel of great expertise—in depth at some quite far­reaching, deep­seated issues about the nature of the banking system we have in the UK, and looking at both structural and non­structural approaches to seek to improve matters. Well within the scope of its terms of reference, the scope of the work the Independent Commission is doing, are issues around competition of the banking system and how—and this no doubt will take some time—

Mr Binley: That is the problem.

Philip Rutnam: Indeed. How we can improve the diversity of the sources of finance available to businesses. Now, I understand these things do take time and I absolutely hear what you say about the experience of businesses here and now. We hear the same things of course, and I can assure you we are putting absolutely the maximum pressure we can, together with our colleagues in the Treasury, on the banks and the banking system to be doing the best job possible by our SMEs in this country.

Q24   Chair: I am conscious of the fact that we are getting behind time and we could be here for a long time. For the Committee, if you could make your questions brief, but also, witnesses, if you could make your answers as concise as you can while fully responding to the points that are being made. Could I ask you just very briefly before we move on, is the Department pressing to get, shall we say, Departmental representation on the board of the bankers' New Business Growth Fund?

Emma Squire: The Department is considering how we best want to influence the New Business Growth Fund. Potentially that would be through representation on the board, through nominating a non­executive director from outside Government to represent our interests on the board, or just through more informal channels. What is clear is that new fund will explicitly target the market failure that we identified in the independent Rowlands Review last year, which is for growth capital for established SMEs. So as long as the fund will target that gap, I think we will be content.

Q25   Chair: You have options that would preclude you actually having representation on it?

Emma Squire: There is a range of options and no decision has been made yet on whether or not we will take a seat on the board.

Chair: Katy Clark.

Q26   Katy Clark: Yes, I was wanting to pick up on the issues you were raising about areas that have a high dependence on the public sector. I represent an area like that. In fact there was a report a couple of weeks ago, an Experian report, that said North Ayrshire was the least best placed in Scotland to recover from the recession because of the high dependency on the public sector and the poor industrial and economic mix. There are many other parts of the country like that. Now, you have said that there is going to be less money overall in terms of the various growth funds that you have, but how are you going to quantify it and monitor how your policies work, particularly in areas that are currently highly dependent on the public sector and therefore are going to be disproportionately affected by the public spending cuts that we are about to see. Also, how is that feeding into your strategy: if you do not have regional targets, how are you going to make sure that the strategies work for these areas also?

Philip Rutnam: I will focus my comments on England if I may, because obviously our responsibilities in relation to economic development are principally England-related. I mentioned a couple of things that we have; I mentioned one in particular, the Regional Growth Fund, as a fund that we have in fact now launched. It is open for business and we are going to be going through several rounds of receiving and reviewing applications, and then Ministers will be making decisions on how those funds should be used. We have of course other important policy developments in England. With the abolition of the Regional Development Agencies, the Government has invited local authorities and business leaders in each part of England to come forward with proposals for Local Enterprise Partnerships, and 24 of those have now got to the point where we've said, "Yes, we think you can go ahead and form a board for the LEP."

To focus on those two dimensions of what we are doing. In relation to the Regional Growth Fund, which is focused exactly on the sort of circumstances you are talking about, we have first of all high-level objectives which will help us to assess the quality of the bids that come forward. We are obviously not in control of the quality of those bids, but we know there is a huge amount of appetite and enthusiasm out there to come forward with proposals. We will translate the proposals for each of the projects we support into a set of impact indicators and measures by which we can evaluate whether or not the project is delivering what it set out to deliver better or worse in that area, in that part of the country, over the following years. We have lots of experience of doing that with other things that we have run; I am very confident we can do that in that case.

In relation to Local Enterprise Partnerships, the Government has been very clear that it wants to take a very clear that it wants to take a much more devolved, decentralised approach to responding to economic conditions than some of its predecessors, and it will be very much a matter for the local communities—local authorities and local business leaders—to identify what they want that LEP to focus on under the broad goals that the Government has set of sustainable growth. So I do not envisage that we are going to be setting lots of indicators and metrics for how those LEPs are doing, because that is not really the way in which this Government seeks to go about essentially enhancing and engaging people across the country.

Q27   Chair: I want to move on because we have just done an inquiry into RDAs and LEPs and I do not want to rerun it. We will be concentrating on specific Government programmes in a moment, but before I do so, can I bring in Margot James?

Q28   Margot James: Chairman, thank you very much. I think my question about the cuts to the Department's budget and what levers the Department now has to support industrial development has been answered, so I will not plague you with a second rerun. I would like to just go back to the subject of access to credit if I may, because I have a slightly different take on the issue. I would like to probe one of the answers Mr Rutnam gave about the need—I would like you to expand what you said—for the development of more diverse sources of finance. One thing that we did not raise in the early discussion was the definition of an SME, and it may be that the problems that my colleague, Brian, were alluding to were at the smaller end of the SME market.

That is a particular problem I think, because I had a meeting with RBS last week and I was told, and I probed them, that they had granted 85% of loan applications last year. They had a massive amount of credit that had not been drawn down; in other words, overdraft facilities to SMEs had not been drawn down. It may have been, indeed, Brian, that the credit available was on terms too expensive for SMEs, that might have been the issue, but I think there is also an issue in corporate Britain, as there is with households: people are focused on repaying debt where they can. So the picture is not quite as bleak as we were painting it in terms of the lack of access. For many businesses, the access is there.

  This brings me back to probing what you were saying, Mr Rutnam, about the need to develop more diverse sources of business support. We have one such in the Black Country that is a cooperative—it is small stuff, it has a loan book of maybe £1.5 million—but it does reach those very small businesses that have the need for accessing loans between £5,000 and £40,000, that sort of level. What progress is the Department making in exploring this area of greater diversity?

Philip Rutnam: I am going to ask Emma Squire to comment in a moment; she is the real expert. I will just pick out three things. First, I will take a step back and look at the markets for business finance in the UK. As you say, it will vary quite a lot depending on the size of the business. For many SMEs, essentially, the classic form of finance that is available has been bank lending, sometimes even on the basis of overdraft.

I would identify two very interesting areas in which there is a case that the UK could develop much more diverse markets. One is around access to equity finance. This has been the topic of successive Governments' interest—the so-called equity gap; typically modest amounts of equity for businesses with significant growth potential. Governments have done some things in the past that have made real inroads into this. We are at the moment operating a quite successful scheme called Enterprise Capital Funds. There is a question about where we move next on access to equity—modest amounts of equity for businesses with growth potential—and whether we can we institutionalise that or get it a bit more embedded, not just in the system, but also the culture of the way in which small firms approach their financing needs.

The second area is around corporate bonds, probably for slightly larger businesses, but it still could be relevant for businesses much smaller than those that presently access the corporate bond market in the UK. If you look at Germany, there is quite a deep and liquid retail market for investing in corporate bonds for businesses that are good deal smaller than businesses that access the wholesale markets in the UK and other centres of global capital. That is another interesting area.

The final point I was going to make is around what we have called Community Development Finance Institutions. I suspect the Black Country investment organisation you have mentioned would regard itself as one of them. Again, there is real scope for helping that sector—which is going now in the UK in a way that it was not some while ago—really to increase in scale and impact. A number of things that we are doing are looking at how we can essentially adapt our policies to be more helpful to that sector. Now, Emma, what have I missed out?

Emma Squire: I would just very quickly supplement, in looking at diverse sources of finance, equity is obviously key, so the Enterprise Capital Funds programme, but also encouraging more high net worth individuals to become business angels because they can bring money but also advice, networks, mentoring. In addition to equity, as you said, businesses tend to rely on overdraft facilities and term loans. There are all sorts of other kinds of finance out there—supply chain finance, asset based finance, trade finance—so improving businesses' awareness of alternative sources of finance and specialist providers. The competition agenda that Philip referred to in an earlier question is key too, because that will improve consumer choice, and we are seeing some quite interesting new specialist lenders, peer-to-peer lenders online and so on.

In terms of Community Development Finance Institutions, they really do focus on the smallest businesses and those with less ability to access bank finance. We support them through the CITR, Community Investment Tax Relief, which is administered by our department. We announced on 1 November that we are making some changes to the Enterprise Finance Guarantee to encourage more specialist smaller lenders, like CDFIs, to become accredited lenders under EFG. We have been working with the EU on a microfinance facility that will provide wholesale finance for the CDFI sector. We are also working with the Office for Civil Society on the Big Society Bank, which will use funds from dormant bank accounts to support community projects, including providing wholesale finance for CDFIs. There is a whole range of work going on to support the CDFI sector.

Q29   Margot James: Thank you, if I may ask a supplementary to that? You mentioned Enterprise Capital Fund programme—very interesting. What sort of equity are companies expected to release in order to gain access to that fund in a meaningful way?

Mr Binley: Can I just supplement that? What lower level of equity purchase are we talking about? It is easy to get £2.5 million to £3 million. It is very, very difficult to obtain £250,000.

Emma Squire: Business angels are key for those smaller levels. They tend to invest up to about £200,000—more if they syndicate. The Enterprise Capital Fund programme makes investments between £250,000 and £2 million in eligible businesses. How it works is that Government puts in up to two thirds of the fund, appoints fund managers, and decisions are taken at arm's length from the Government. Those fund managers have to raise a third of the fund themselves. They will have their own investment strategies. Again, decisions on those are taken at arm's length from Government, so that they are not taken by civil servants and are not affected by politics, and then they will invest as commercial Venture Capital Funds. The Government's stake offers private investors leverage. We take least risk, but least return; we get 4.5% back and a much smaller profit share of any returns over and above the 4.5%, and that is how we get private investors into the equity gap.

Q30   Margot James: One final question, and then I will back off completely. It is a very quick question. Will the Community Investment Trusts be eligible to bid for Regional Growth Fund money? Would that be a good way of getting support to these very small businesses?

Philip Rutnam: We use the phrase Community Development Financial Institutions, but the answer is: yes, they will be.

Margot James: Good, that's great. Thank you.

Philip Rutnam: Private Sector organisations or public­private partnerships will be eligible to bid.

Q31   Nadhim Zahawi: Automotive industry: how many loan guarantees were provided under the Automotive Assistance Programme? Again, back to your written submission, it only mentions one loan guarantee that has been provided. How much of the £2.3 billion that was provided as a loan guarantee under the AAP has been drawn down?

  Philip Rutnam: I am going to ask Jane Whewell to respond to this.

Jane Whewell: There were four offers made; one was taken up. There has been one loan guarantee issued under the Automotive Assistance Programme. Would you repeat the second half of the question?

Q32   Nadhim Zahawi: How much of the £2.3 billion has been provided as a loan guarantee? How much of that has been drawn down?

Jane Whewell: As of exactly right now, I would need to check how much of the total has been drawn down, but the offer has been made of £378 million. If the company concerned is drawing down portions, it may indeed be commercially confidential how much they have drawn down yet.

Q33   Nadhim Zahawi: So out of the £2.3 billion, we know that £378 million has been committed?

Jane Whewell: Yes.

Q34   Nadhim Zahawi: What plans has the Department to introduce further automotive industry support programmes? In my constituency we have some very good small firms who are in the supply chain for the automotive industry, including ones who designed the new Range Rovers and Bentleys and so on, and produced the prototypes. Would you be looking to introduce similar programmes for that?

Jane Whewell: There are no plans for automotive-specific schemes in the future. The previous schemes were launched in a very particular set of recession circumstances. There would be no plans for auto-specific programmes in future when all of these are wound down, but I would be disappointed in the automotive industry if they did not apply to the Regional Growth Fund.

Q35   Chair: Could I just supplement that? Following the scrappage scheme, or the end of the scrappage scheme, new car registrations have been falling, not just because of the end of the scrappage scheme but for a whole range of factors. We have an increase in VAT coming in January, which is traditionally quite a quiet time, I believe, for new purchases. If there were to be a real strong dip in the purchase of new cars, would the Department be looking to introduce any new schemes to, shall we say, ameliorate these problems?

Jane Whewell: Overall, despite the fact that figures are lower month to month over the last year, the industry is still expecting this year to be an increase on last year in total car sales.

Q36   Chair: But last year was a pretty disastrous year.

Jane Whewell: It was not as disastrous as it could have been, but they are still expecting it to be an improvement. I think you might be inviting me to speculate "what if", which is usually a dangerous area for a civil servant.

Q37   Chair: I appreciate that I am tempting you into territory that perhaps you feel uncomfortable with, but I suppose what I am impressing upon you is that we are not out of the woods yet and potentially the early new year could be very difficult indeed. I would hope that the Department would look at the depth and range of support available to deal with that.

Jane Whewell: We are working extremely closely with the industry and have done for some time and we would go on considering how best we could support them growing and being successful in the future.

Chair: We touched on the Enterprise Finance Guarantee scheme, but Brian Binley has got a number of questions.

Q38   Mr Binley: Four very quick questions which are quite specific really. Can I first of all ask what the expected cost to the Department is of the EFG scheme and, given the low rate of default—it has been quite successful actually—is it possible that you might make a profit?

Emma Squire: The Enterprise Finance Guarantee scheme will not make a profit. We cap our liability at 9.75% of the total amount of EFG loans offered, so for a £600 million scheme, for example, the maximum cost to Government is just shy of £60 million. The premium we collect from businesses who enjoy an EFG back loan covers about 70% of the costs, so the premium deliberately subsidises the scheme.

Q39   Mr Binley: Pity you do not make a profit. Why have a two-stage application process? People have come to me and found that difficult. If firms are eligible for lending under EFG, why make them reapply for finance? Was an automatic application process for eligible firms not considered?

Emma Squire: Firms should not have to apply separately for EFG. The way it is set up is that you walk into a bank or another lender and ask for a loan. You will be assessed, and if the lender thinks you are viable but you do not have sufficient collateral or track record, then they can choose to use the EFG. So businesses do not ask for an EFG; they ask for a loan and the bank tells them.

Q40   Mr Binley: But they are leaning back on bureaucracy and we need some shake-up there. That is really the point that I am trying to make to you. Could you do that?

Emma Squire: Yes, in June we introduced a 20-day processing target for any lending under EFG, and because EFG is only a small proportion of overall lending, we worked with the banks. One of their new commitments, under the lending principles, is to give absolute clarity to SMEs on how long it will be before they get a decision on their loan application at the outset, as soon as they provide all the documentation.

Q41   Mr Binley: So we have reason to be hopeful there?

Emma Squire: Yes, I think so.

Q42   Mr Binley: I am very grateful. If the EFG was set up to address the long­term market failure in the provision of debt finance to credit-worthy SMEs, why have a time limit on the scheme?

Emma Squire: We have had a scheme akin to the EFG ever since 1981, originally the Small Firm Loan Guarantee, and every OECD country has one. The time limit is because we will want to assess what size and design of scheme is appropriate, depending on the economic conditions and how the market is operating, and it reflects our budgetary planning process.

Q43   Mr Binley: It sounds a bit bureaucratic to me, could you get rid of it? From what you are telling me, it sounds to be "jobs for the boys" almost.

Emma Squire: What we have tried to do with the EFG in this spending review period is we have committed that it will be around for every single year of the spending review period, but we have only announced the size of the facility for year one. That gives banks and borrowers the certainty that the scheme will be there, but it gives us the flexibility to ratchet it up or down, depending on demand and need.

Q44   Mr Binley: Final question, one of the problems with Government is that it fails to remember that you have to manage something right down to the coal face, and it rarely monitors that that is happening to the point where many, many companies that could benefit from the scheme do not even know about it. In fact many of the bank workers at the coal face do not know anything about it. I just wonder what you're doing to improve that scenario and particularly with regard to small businesses? Because if the bankers do not know about it, they are not telling it small businesses—the thing is a mess.

Emma Squire: That is absolutely key. So there are two things that we are doing, the first is that Capital For Enterprise Ltd, our arm's length body that delivers the EFG for us, has made available guidance and training programmes for relationship managers in banks, and is working with the banks to make sure that all of their relationship managers in every branch in the country know about EFG and know how to use it. The second thing that we are doing is offering certainty, so guaranteeing that the EFG will be there for every year of this Government, and that gives banks the certainty that they need to make the effort to train their relationship managers in how it works.

Q45   Mr Binley: But how are you monitoring the fact that the coal face is working in the way it should?

Emma Squire: Capital For Enterprise Ltd has regular meetings with the biggest lenders. The six big banks lend 95% of EFG bank loans. There are regular meetings to look at everything from time taken to process EFG loans; the size of loans being made; the whole works. You specifically asked how we're making sure that businesses are aware of EFG. I think on that I would say, referring to my earlier answer, a business should go into a lender asking for a loan. It should not be asking for an EFG­backed loan. The lender needs to know about EFG to take a view on whether or not it is working.

Q46   Mr Binley: Can you send us figures to show how that monitoring is working and what the results of that monitoring are?

Emma Squire: We can certainly send you some more information on monitoring.

  Mr Binley: That would be helpful.

Q47   Mr Ward: That covers EFG, but on the broader issue of business advice and support with the demise of the business links, what do you see as being the way of filling that particular gap? I do not just mean the referral system; I do mean holding hands, free starts, set ups and the support for businesses. What do you see as filling the gap?

Emma Squire: On Business Link, as you said, the regional business links offer will close. There are four or five main ways that the Government plans to fill that gap. The first is through the businesslink.gov.uk website which is available universally 24 hours a day; we are really trying to make sure that is up-to-date and uses all the latest gadgets, gizmos and mobile applications so it is really user-friendly. The second is a national call centre available in England for businesses that perhaps do not have internet access. The third area is growth hubs, so targeting face-to-face advice—which is costly—on businesses that are looking to grow and stand the best chance of growth. We estimate that there are about 140,000 of those high­growth potential businesses in England.

The fourth area is mentoring, so not trying to replace or duplicate mentoring undertaken by the private sector or voluntary organisations, but to raise awareness of the benefits of mentoring, improve accessibility for mentors and mentees, quality assurance and so on. So the approach is to improve the universal offer to all SMEs through the web, and then target costly face-to-face on high grade businesses.

Q48   Mr Ward: Bradford has one of the highest rates of new start-up businesses in the country as a result of the funding from the Local Enterprise Growth Initiative, which has now been stopped. So we are not talking about the big high-growth businesses that you have talked about, but we are talking about the unemployed person who wants to set up their own window cleaning business or plumbing business. Where is the support for those sorts of new start-ups?

Emma Squire: Well we talked about Community Development Finance Institutions earlier and they tend to provide advice as well as funding for start-ups. There is also the new DWP scheme to support self-employment as an alternative to unemployment, the Enterprise Allowance, where unemployed people looking to start their own business can enjoy the equivalent of Jobseeker's Allowance, plus mentoring, plus a small loan to start a business.

Q49   Mr Ward: Do you know how awful that scheme is, that service, through the Job Centres?

Emma Squire: Lord Young has been appointed to look at all parts of Government interaction with SMEs. One of those things will be looking to remove the institutional bias of organisations like Job Centre Plus towards employment rather than self-employment as an option.

Q50   Chair: Can I just supplement: on the Enterprise Finance Guarantee scheme, complaints that I have received and were reflected in the evidence submitted to the Committee were first of all that some sectors seemed to be excluded entirely in the creative industries, which, while they are often mocked, actually provide more employment in this country than the finance industry. Secondly, for exporters, and I recognise that that there is a tangential issues about export credit insurance here, but why in particularly have these areas been excluded?

Emma Squire: Starting with exporters, the Enterprise Finance Guarantee operates under EU State Aid de minimis, which explicitly rules out using the EFG for exporting purposes, but what we are doing is working with the banks to explore designing a commercial scheme, similar to the EFG, for SMEs that share the problems that EFG firms face.

Q51   Chair: Can I just supplement that: do you know of any comparative scheme in other EU countries where they seem to be able to do this despite EU rules?

Emma Squire: Lots of countries, have schemes in place to support exporting. We are looking at a scheme akin to the EFG for exporters that is commercial and covers its costs. We are planning to publish a trade White Paper shortly and that will look not only at a scheme equivalent to the EFG, but also the Export Guarantee Department is considering how a bond support scheme might work; we are looking to improve business awareness of trade finance options and ensure the Export Credit Guarantee Department has capacity to meet demand. All of that is being explored for the Trade White Paper.

Q52   Chair: I suppose the question is, and you quite rightly pointed to the Export Guarantee Department yourself, basically other European countries seem to have got round this particular problem. We have not. Why are we only exploring it now, when really we should have implemented it 18 months ago?

Emma Squire: I obviously cannot comment on other EU Member States and their compliance with state aid rules. We have been thinking about trade credit. The trade credit insurance top-up scheme was introduced shortly after concerns were raised over the winter of 2008/09.

Q53   Chair: And this was a flop

Emma Squire: It underwrote 109 policies and has been phased out, but we saw businesses responding flexibly, adapting to the changing availability of trade credit insurance by getting closer to their customers, and we are assured that there is no shortage of trade credit insurance capacity at the moment to underwrite a good risk.

Q54   Chair: I can assure you that it is a huge issue in my area, and I can provide chapter and verse on companies that have lost export trade as a result of this. This is not a party political point, because this took place under the previous Government, but I do feel there is almost a cultural response that this is EU—we cannot do it—whereas in fact other EU countries seem to be getting a scheme down. We seem to have been way behind in developing the necessary scheme to do so.

  Margot James: So true. So true.

Emma Squire: Creative industries are eligible for loans backed by the Enterprise Finance Guarantee. We have received the same representation that I expect you have from representatives of the creative industries, and as a result we are commissioning some analysis jointly with the Department for Culture, Media and Sport to understand whether there are specific market failures that are unique to that sector. We need to understand whether there is something particular about that sector that means that they have been less able to take advantage of commercial sources of finance and publically backed sources of finance, and then consider our response.

Chair: But this scheme has been going for some time now and we are only now looking at devising a model; how many jobs have been lost in the meantime? I do not expect you to be able to answer that point, but I make the point again that we seem to be behind the curve in developing models that are extremely important and strategic to creating employment in the country. Can I bring in Ian Murray?

Q55   Ian Murray: Just a comment on the EFG, first of all, before I ask my question, there is evidence out there that I have seen, particularly from the banks, that organisations have been turned down for funding. When a query has been raised as to why they were not pointed towards EFG, the banks have said, "Well, they did not ask," rather than the banks offering that as a particular choice. The analysis that David, Margot and Brian have been trying to tease out of what is actually happening when people are looking for the finance, I think some banks have the attitude that unless you ask for that particular route, they will not offer it. I do not if that is to do with the way the EFG is set up, in terms of the total lending capital requirements, and so on.

I suppose the success of the scheme has to do with employment and Small Firms Loan Guarantee scheme was very successful, according to your own figures, in creating jobs, upwards of 6,000, in the two years in which it was in operation. Will you be generating similar estimates for the EFG, and over the piece of the last period, is it actually generating jobs or is it just protecting the jobs that there are at the moment in terms of SMEs being able to access funding to support what they're currently doing, rather than growing?

Emma Squire: Yes we will be doing an impact assessment of the EFG. We did an early-stage assessment about six months in, so October of last year, which was interviewing firms that had received EFG backing, and it was clear that they had both safeguarded and created jobs as a result, expanded their activities and so on. I would be happy to send the Committee a copy of that early assessment. So, yes, we will be doing a review. On your point around businesses being told that they were turned down for a loan because they did not ask for an EFG, that is certainly not how the scheme is supposed to work. In most cases, if a business is turned down for finance, it is because the bank does not think it is going to be able to service the debt repayments. If it thinks it can service the debt payments, but they do not have sufficient security or track record, then the bank should be offering EFG, so case studies like that are always useful for us to have so that we can hold the Banks to account on how they are using EFG.

Q56   Margot James: Coming back, Mrs Squire, to what you were saying about the cap of 9.75% of the total lending. Is this not an artificial brake on lending—this is what some bank chief executives have called it—and what was the background to the introduction of that rule, and what has been the effect of it? There seem to be some confusion between people who initially think that the Government is backing 75% of a loan to then find out that it is only exposed to less than 10%.

Emma Squire: The cap is driven by EU State Aid rules, so that is the level that we are allowed to offer under EU State Aid. That is new; that rule was not there when we had the Small Firms Loan Guarantee. Actually, we think it is appropriate because it both means we can offer a larger facility, because in straitened fiscal times, our money will go further, and it represents value for money. It creates the right incentives for banks not to pull the plug on fundamentally viable businesses that they have lent money to, knowing that they can rely on a 75% guarantee, and it also creates incentives for them to lend only to businesses that they believe are viable and not take large amounts of risk on businesses that are not viable. The 9.75% default rate is probably high for a bank loan book, higher than banks would look to for their own commercial loan books, so that is the rationale.

Chair: Right, can we just move on to the Strategic Investment Fund now. Katy Clark.

Q57   Katy Clark: The Strategic Investment Fund is scheduled to close next April. How much of the £1 billion that is allocated to it has been spent and will it all be allocated by next April?

Philip Rutnam: £200 million was spent in the last financial year, not precisely, but in that order of—about £200 million. It was actually £950 million that was initially identified by the previous Government. That was reduced by the previous Government during the course of the last financial year in order to meet a number of financing needs; so, for example, the automotive scrappage scheme was extended during the course of the last financial year to close in March 2010, and in order to met the cost of an extra £100 million, £100 million was taken from the Strategic Investment Fund. Also in the last Budget of the previous Government, £121 million was taken from the Strategic Investment Fund in order to fund other growth projects that the Treasury had identified. The reason for explaining all that is that the Strategic Investment Fund does not now stand at £950 million, but at £670 million, of which about £200 million was spent in the last financial year and we are currently projecting the remaining £470 million will be spent this financial year.

Q58   Katy Clark: So you think all the money available will be allocated?

Philip Rutnam: All or very close to, very close to that. We are very busy delivering a whole range of different projects.

Q59   Katy Clark: Why was it set up as a time-limited fund? What was the thinking behind that?

Philip Rutnam: It is a good question. If you remember at the time, under the previous Government, there had not been a spending review since 2007, and the 2007 spending review ran to March 2011. So I think that when the decisions were made in relation to the Strategic Investment Fund, which was in the Budget in April 2009, there were only two financial years in relation to which the Government then felt it could make decisions. At the time, in early 2009, the country was in recession and there was a major concern about making sure that the country had plans for how it would not just exit from recession but lay the foundations for growth thereafter. This was an element of the policy background.

Q60   Katy Clark: According to your written submission, the projects that have been funded will return many times the initial investment. I am just wondering whether there is consideration as to whether there should be an extension of the scheme or a similar scheme introduced next April if it has been a success. And if not, why not? Is it because it is felt that it will be dealt with in other ways? What is the thinking in terms of the discussion that are taking place?

Philip Rutnam: This Government is not intending to have a further Strategic Investment Fund. There was no decision to have a Strategic Investment Fund in the spending review that was published the other week, but many of the key goals of the Strategic Investment Fund you can see being taken forward in things that we are doing in other ways. So I mentioned earlier, replying to Mr Blomfield, both the Regional Growth Fund, £1.4 billion over three years, and also the funding that we have secured from the Treasury for what is described as economic development, running at about £200 million a year. In the latter, to give an example, is funding for technology and innovation centres, which are designed to help make sure that we capitalise on our underpinning scientific strengths in the way in which we go about commercialising products and technologies.

If you look at what the Strategic Investment Fund did, often it was funding projects exactly like that. There are centres such as PETEC, the Centre for Plastic Electronics for the UK up in the North East, and a new national composites centre in Bristol. These are very much the sort of projects that are now being described as technology and innovation centres.

Q61   Katy Clark: But presumably the overall level of funding is going to be less than it has been in the last couple of years?

Philip Rutnam: As I indicated earlier, the overall amount of funding that we have available to support activities like this, yes, is less, and we are very focussed on making the greatest possible value we can from the resources we have. There are still significant resources available. There is £200 million a year approximately of Economic Development Funding; the Regional Growth Fund, which I mentioned earlier, £1.4 billion over three years; as well as other sources of funding such as the European Regional Development funds.

Q62   Ian Murray: If we turn to the Working Capital Guarantee Scheme and its successor, the Asset Protection Scheme. We have heard a lot about banks not being able to lend to businesses on the basis of having to rebalance their balance sheets in terms of capital requirements and legal capital requirements. Are you surprised, therefore, that the take-up of the Working Capital Guarantee Scheme was not higher on that basis, and would a higher take-up of this scheme allow greater lending to businesses?

Philip Rutnam: The Working Capital Guarantee Scheme, which was announced in January 2009 very shortly after the worst shocks to the banking system, was announced in a period when policy was still moving very fast. It was a policy with very good goals, but, to be frank, it was shortly overtaken by the much larger, more systemic approach taken through the Asset Protection Scheme, which was the responsibility of the Treasury. So to be honest, some of the purposes of the Working Capital Guarantee Scheme soon got overtaken. That said, I think it has had a positive impact. I think £4.4 billion of bank lending has been underpinned thorough the Working Capital Guarantee Scheme; to date, it has performed very satisfactorily. It is just that the Asset Protection Scheme essentially was doing the same kind of thing on a much, much larger scale.

Q63   Ian Murray: We are still at the stage of there being no defaults in that particular scheme?

Philip Rutnam: That's correct and the scheme runs—I think the guarantees expire at the end of March 2011.

Q64   Simon Kirby: Mrs Whewell, you explained earlier about the successes of the automotive council. Have you been approached by other industries to set up similar bodies?

Jane Whewell: There is a range of bodies; some of their titles will change, but there is a range of bodies broadly similar in other sectors. I think the needs of sectors will vary from sector to sector in the issues that they face, but certainly this is a model which many people find useful.

Q65   Simon Kirby: What I am trying to establish is are the other industries equally well served by these bodies?

Jane Whewell: I think there is a range of issues here. The industry has to be ready to act together, and has to be ready and willing to take on this sort of role. It took a while for the Automotive Council to gel. It started more on the basis of research and did they have things in common. I do not think you can just walk in and set up one of these and expect it to work; the industry has to be willing to work together. It has to have a coherent picture of what it wants to achieve, it needs to be things that are achievable, and it needs to be things that Government alone can help with, so there is some work that needs to be done in advance before it can actually achieve the levels of things that the Automotive Council can.

So it is not just about Government saying, "I will give you a council and it will all be fine." It actually has to be a real partnership or you are not going to get anywhere. There is certainly the potential for more of these, but the industry has to be willing to work together and to have a consistent view on what it wants to achieve, because if one group wants this, and one group wants that, and they cannot agree, then it is not going to get anywhere.

  Philip Rutnam: Could I just add a comment on that, if I may? We have experience of doing similar things very successfully in sectors like aerospace and electronics. There is no one-size-fits-all approach. We have experience of using other approaches and working with business very successfully in some other sectors. A favourite model of ours, which can work very well in some circumstances, is what is called an innovation and growth team, which is more like a project for a defined period that brings together really high-level people from business, Government and perhaps some academics to focus on a particular theme. We are running one of those at the moment: here is huge interest in the industry and Government around construction and how that will make its way to a low-carbon future. We use a variety of different tools. Sometimes they are a kind of council and sometimes an IGT, and there are other models as well.

Chair: I want to move on. One of the more successful services provided at RDA level was the Manufacturing Advisory Service. David has a couple of questions on this.

Q66   Mr Ward: Part of the role you mentioned at the very beginning was to carry out a number of rebalancing agendas, one of which was finance to the manufacturing sector. I just wonder where MAS fitted into that and how you see its future in the short, medium and long term.

Philip Rutnam: We think MAS is a very good scheme and we are very committed to its future. We see it remaining as part of the BIS offering, if you like, and one of the particular interventions that we fund and develop. It gets very good response from business and seems a very practical, action-oriented approach that engages with manufacturers and fits very well, to be honest, with the Government's agenda that I outlined earlier. We have funding to continue MAS but what we have not yet done is define the precise level. It is within an envelope that we need to review in the round, but I am sure that MAS will continue to prosper.

Q67   Mr Ward: Will that be centralised, rather than be on a regional basis?

Philip Rutnam: MAS has been run by the regional development agencies but it has had a national brand and has been operated within a national framework. With the disappearance of the regional development agencies, we will take more direct responsibility at the centre of BIS for making sure it happens up and down the country. So, rather than delegating tasks to the RDAs, we will be making sure from the centre that it happens.

Q68   Mr Ward: As an interesting aside, on Monday morning I was in a manufacturing business in my constituency. I asked whether they had any links with MAS, and the response was that they were not looking for external money at the moment. Despite what it says on the tin, they did not see it as being a support or advisory service. They had prepared their own investment plans and did not require it. They seemed to regard it as a funding body as opposed to an advisory service.

Philip Rutnam: I would not see it as a funding mechanism. People often see things that Government does as being about providing funding, but they are not. It is really about the impact that MAS advisers can have on manufacturing businesses in helping them to develop their business, which is really about their business plans and strategies and the way in which they can turn those into action. I think that is the real added value that MAS tends to provide.

Q69   Chair: Perhaps I may follow up a couple of points you have made. First, you said that MAS had got funding, but effectively you did not know how much, which is a rather strange response. Is that because the money is tied up with the current funding for the RDAs, which is being tapered off? Secondly, you said that effectively it would be centrally delivered, but essentially it is an advice service that needs to be locally delivered. How will you do that under the new sub-regional growth structures?

Philip Rutnam: First, on funding we have about £200 million a year from the Treasury for a variety of economic development activities. The reason I know we have funding but cannot say exactly how much is that Ministers have not yet taken decisions on how to break out that funding between the different elements. You will understand that the spending review was announced only the other week. There is a bit of process involved.

Q70   Chair: How much did MAS have previously?

Philip Rutnam: From memory, it has been running at about £15 million to £20 million a year, but perhaps we can confirm that to the Committee. As a department we need to go through a bit of process to decide exactly how much is to go towards MAS in future. On the second point, I do not think it will be centrally delivered. What I meant was that BIS would take responsibility for making sure it is delivered. I suspect that will be by taking over or replacing the contracts that RDAs have had with a variety of experts to deliver the service in their areas and we will be taking on responsibility for contracting at the centre, but again, to be honest, we have not yet worked through the fine details of it.

Q71   Chair: Will that be LEPs or whatever?

Philip Rutnam: No. LEPs may play a role but I do not think it is likely to be central to this. We need to make sure that the right experts up and down the country are available to deliver MAS. We have a whole group of experts—essentially, they are people with senior manufacturing backgrounds—employed or used by the RDAs at the moment to do it. We need to ensure broadly that they, or people very similar to them, continue to be available to deliver MAS to individual businesses up and down the country in future. Therefore, for something like MAS, which is a key part of our broader strategy for manufacturing, BIS will be taking on more responsibility in future than it had in a world where we had RDAs.

Q72   Chair: I understand the principle; I just do not see how it will work at local level. This is very much demand-driven at local level. I do not see how by employing a number of experts who previously were employed by the RDAs, BIS will get local sensitivity and flexibility to deliver that service in the way it has been delivered quite successfully over the past few years.

Philip Rutnam: I understand the concern. How we do it in detail so we absolutely get local understanding and recognition is something about which we are definitely thinking as an issue. We are not just thinking about it but developing plans for how we will do it in practice. What I cannot say to the Committee now is how we will do it in detail, because it is still something we are working on. MAS is a great success; we really like it. The last thing we want to do is damage it. We will be bringing together the resources we need to make sure that it continues to be a success.

Chair: I suspect that we will revisit this at some stage. Can I bring in Nadhim Zahawi on high-tech innovation centres?

Q73   Nadhim Zahawi: In the evidence session on 26 October, David Willetts, Minister of State, confirmed that the £200 million set aside for these new high-tech innovation centres would be only part of the funding and they would be able to leverage private sector funding into that, but also that some of them would just be taking over and rebranding existing facilities. He could not tell us how many are existing facilities and how many would be new. Can you shed any light on that? When do you expect the new ones to open, if they are new?

Philip Rutnam: I am afraid I cannot give you more specifics than David Willetts, but the basic propositions are exactly as he described. We now have the funding to take forward a significant programme of technology and innovation centres. We think that the first priority is to stabilise and secure the existing really good practice in a number of areas up and down the country. I mentioned earlier just a few examples of things that are in practice technology and innovation centres; it is just that they have not been called that to date. They focus on really important technologies like composites, plastic electronics or industrial biotechnology, for example. In the past, many of those have received significant funding from the RDAs as part of the transition work we are doing. Following the decision to abolish the RDAs, we will be looking at how we can make sure that that sort of very valuable activity can continue, and I am confident that we have the funding to secure the most important and valuable parts of it. You will understand that quite a lot of detailed work is needed to go through that process and we are only part-way through it.

Q74   Simon Kirby: I understand that the repayable launch investment programme deals with the aeronautics industry—high-tech, high-risk and long return on money invested. Have you considered expanding the scheme to other high-end industries, for instance, developing electric cars?

Philip Rutnam: It has been considered from time to time in the past. We look at all sorts of things and ideas. While the scheme operates successfully in the aerospace sector, we do not believe it is the right answer for other sectors. It is worth bearing in mind the scale of the financing that it involves and therefore the cost to the public purse. That will tend to raise issues of affordability. That scale is partly to do with the finance; it is loan and investment finance, whereas if you are thinking of supporting a sector like electric cars, the key issues may be better addressed through some form of technology-related support, such as support for R&D or indeed consumer incentives. Ms Whewell can talk about the example of low-carbon vehicles where the Government has been doing a great deal of work, but has not favoured a repayable launch investment-type mechanism.

Jane Whewell: At the moment, there is a range of things available to support ultra-low carbon cars. We have ongoing probably the biggest and most diverse demonstration project that attracts manufacturers across the world. We have R&D programmes that support ultra-low carbon vehicles, and, coming at the start of next year, there will be a consumer incentive of up to £5,000 per vehicle for those who want to buy ultra-low carbon cars. Therefore, that is something that is being addressed.

Q75   Simon Kirby: When I go back to my Brighton, Kemptown constituency and people ask me when the Government will produce their White Paper on banking, what answer can I give them?

Emma Squire: I am not sure to which White Paper you are referring.

Q76   Simon Kirby: The Banking White Paper.

Emma Squire: We consulted on business finance over the summer and responded on 1 November, and separately the Independent Commission on Banking produced an issues paper. Next spring, it will produce an options paper, and it will report finally by next September, but that is an independent commission separate from us. You are perhaps thinking of the response to the Business Finance Green Paper on 1 November.

Philip Rutnam: I am not aware of any plans for a White Paper on banking.

Q77   Chair: Thank you for your attendance. I should like to finish off with one point. You were asked a lot of questions about the level of Government financial support for industry under different programmes. I appreciate that given the change of programmes it is very difficult to make like-for-like comparisons off the top of your head, but could you provide us with a summary of Government support that hitherto has been available to industry and Government support that will be available to industry over the next two or three years under different schemes?

Philip Rutnam: We will certainly provide what we can. You will understand that the written evidence was before the outcome of the spending review. Now we have the outcome I think there is more information we can provide.

Chair: Thank you very much.

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Prepared 18 February 2011