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The Governments assertion that they will do everything they can to help would be risible if the matter were not so serious. An economic typhoon is coming. To all but Ministers, our paltry defences appear inadequate. So say many outside observers, led by the Governor of the Bank of England. Like the Minister, I believe that our job is to maintain confidence at this critical time, but the current situation demands action, not spin. I list, for example, the prompt payment from central and local government; the deferral of VAT; a cut to national insurance; a reduction in corporation tax for small businesses; and a concerted promotion of the small business rate relief to which many are entitled but for which not all apply.
What about the £1 billion that the European Investment Bank is discussing with larger banks, which Mr Pearson said is not yet sorted out? When will it be sorted out? I believe that the Minister has just attended a meeting of the National Economic Council, where other solutions will have been considered. Will he share those solutions with the House?
Lord Hunt of Wirral: My Lords, of course I welcome any Statement that offers hope to the hard-pressed business community in the UK; but what we have heard today is too little and too late. In parliamentary terms, this Statement came a day later than it should, but, for our economy, it has come a decade too late.
Lord Cotter: My Lords, I thank the Minister for his welcome Statementalthough I agree that it would have been better if it had been presented yesterdayand I welcome him to his new role. We look forward with great expectation and anticipation to the Governments actions. We have had Statements on the financial crisis
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It is good that the Government have made this commitment on payment within 10 days. However, that still needs to be monitored. Will we receive a report, and receive it soon, on how this is being achieved in practice and whether all departments are taking part rather than just some? Does the commitment definitely extend to all government agencies and not only to the government departments themselves? Will it extend to local authorities? I appreciate that that is a little more difficult because local authorities have their own problems, some of which might be considered self-initiated. However, many small businesses do work for local authorities and the authorities record on payment is variable.
Reference was made to health checks through the Business Link service. Surveys have shown that many SMEsvery often those which need assistancedo not even know about the Business Link service. There are also concerns about the Business Link service itself. It is very variable throughout the country: in some parts, it operates quite well; in others, not so well. Will extra money and resources be provided to the Business Link service to enable it to carry out the new work that it is expected to do?
Skills and training are most important. It is therefore welcome that the Government are putting emphasis on apprenticeships. But even before this crisis small firms were going to find it extremely difficult to provide apprenticeship places; now they will find it more difficult than ever. Will the Minister consider what can be done to help the small business sector, which is so important to apprenticeships and skills, to be able financially to take on those who need skills and whom we need to be skilled?
I understand that Ministers will meet the banks tomorrow. Will they agree a memorandum of understanding to ensure availability of finance, competitive interest rates and no increase in fees? I look forward to the Ministers response.
One of the many problems that all businesses have to deal with is bureaucracy and over-burdensome regulation. It is easy to make general statements about this sort of thing but I hope that the Government have it very much in mind. As I learnt in a seminar just last weekend, there is a curve showing that without some sort of regulation, there is chaos; with minor regulation, the chaos is reduced or disappears; but with excessive regulation, the chaos returns. Regulation is very important.
Lord Mandelson: My Lords, first I say to the noble Lord, Lord Hunt, that I would not have wanted to cause any offence to him or to this House by making the Statement when I have. As I have a particular interest in the survival of small and medium-sized Secretaries of State, I do not want to fall foul of your Lordships so early on in my career. I realise that the importance of the issue concerns the whole House and it is important that I should report personally to your
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On the noble Lords individual questions, I think that the £350 million that we have announced for training indicates that SMEs have risen up the Governments priority list and agenda and of our training agencies. They are now the top priority. He asked specifically about the availability of lending to SMEs. We need to be clear: availability is not a requirement to lend at 2007 volume levels. We cannot and should not, first of all, pre-empt the banks judgment. We cannot anticipate what demand there will be. All we are saying is that, as a condition for our stake in the recapitalisation, we are asking the banks to make available the resources at 2007 levels and to offer a wide range of products at competitive rates to be made available to the customers they judge to be creditworthy. We are not pre-empting or second-guessing the banks but asking them to maintain the availability of funds for lending to SMEs and to publicise this availability to SMEs.
I am grateful for what I think was the noble Lords support for the Governments action on prompt payment. I refer to the remarks of the noble Lord, Lord Cotter, on this as well. We were very quick to give a lead. I hope that it is not only the rest of the public sector that follows the lead of central government departments in adopting a 10-day payment period. Obviously we have to be mindful of our responsibility to taxpayersinvoices have to be properly prepared; we are not skipping stagesbut we think that it is very important that, as far as possible, this 10-day payment period is respected not only by central government departments but across the public sector. On the noble Lords questions on tax changes, I think that any answer by me concerning VAT, national insurance or corporation tax would be a career-shortening move; so I shall leave any matters to do with taxation to my right honourable friend the Chancellor of the Exchequer.
In response to the noble Lords question on the EIB, we have now received an indication that the EIB is prepared to commit to that additional funding. I look forward to further discussions taking place in the coming weeks so that that can be nailed down.
I have two last points to make, in response to the remarks of the noble Lord, Lord Cotter. Business Link, and the services that it provides, is very important. It is well resourced by central governmentand I shall satisfy myself that it is receiving all the resources that it needs in the coming economic climate to discharge its functions.
On apprenticeships and skills, when I was on my away-day yesterday, in Sittingbourne in Kent, with the Prime Minister, I was very struck by the SME employers and managers who said that they wanted flexibility in training modules. They did not want the whole works;
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Lord Barnett: My Lords, I declare an interest, which is on the register, as an investor and a chairman of an SME AIM-listed company. My noble friend is absolutely right to talk about cash flow and payments by all kinds of people that are due to SMEs. He talked, too, of the flexibility that will be used by organisations such as HMRC, and I was very glad to hear it. Is he saying, for example, that on the large VAT payments that are frequently due by SMEs, HMRC would not be too offended if those payments were delayed somewhat?
My noble friend also spoke of the 10-day effective rule. I do not know how far that goes down the line, but can he confirm that it will go well down the line to other government-controlled organisations? Very often, I can tell him, it does not apply.
Can my noble friend give us some clarification on the banking situation in relation to loans in 2007, as it is still not totally clear? If the banks are to be as commercial as the Chancellor has suggested, whether part-owned by the public or not, and if banks are to continue with their normal method of businessalthough I am bound to say that they are not always marvellous at thatI take it that we are not asking banks to continue lending at 2007 levels to SMEs that clearly should not be lent any more money, even though it might mean them going into administration. That is rightand they should.
Lord Barnett: My Lords, on one small matter, most SMEs are concerned about having to find replacement staff when senior key staff in a small organisation go on maternity or paternity leave. Have the Government considered what action they might take on that?
Lord Mandelson: My Lords, I cannot speak on behalf of HMRC in indicating that large back payments could be delayed, let alone waived. However, I made the statement that I did about the sensitivity that the Revenue is displaying towards businesses. Obviously, there will be all the greater need for that sensitivity in the economic climate that we are moving into.
On the noble Lords second questionif I may, I shall come back to him subsequently on his last question concerning replacement staff, because I do not have the informationas part of the recapitalisation, RBS, HBOS and Lloyds TSB committed to,
That is not to say that the volume of lending will be the same because, as I said, that depends as much on the quality and quantity of demand as it does on the supply of lending. We expect that banks accessing the scheme will need to review their business strategies in order to take account of the recapitalisations and the commitments that they have made. We look forward to the outcomes of this work.
Lord Bilimoria: My Lords, I welcome the Ministers Statement, in that the Government are seen to be trying to do something to help small business, but I do not accept his statement that taxation is the Chancellors responsibilitybecause I think that he can speak up for small business. How can small businesses accept that corporation tax for large companies has been reduced while it has been increased for them? It just does not sound fair.
I started a business from scratch at the beginning of the last recession and, having been both a small business and a medium business, I know that the most important thing for small business is the ability to raise finance. What extension to the Small Firms Loan Guarantee scheme is being given? How much do the Government lend under the scheme? Let us put that into the context of the United States Governments Small Business Administration, which has lent more than $50 billion supporting millions of American businesses. Why do we not learn from them and really support our small businesses? The Government have been bold in supporting banks, to the tune of £500 billion. If they put even £50 billion into supporting SMEs, they would get real results. The Prime Minister said that we are better when we are bold. May I request that the Government be bold in relation to small businesses?
Lord Mandelson: My Lords, I think that the Prime Minister is being bold. He is certainly quick off the mark in making help to SMEs, as well as to home owners, a major priority for the Government. I do not think that he has been backward in coming forward.
On the noble Lords specific question on the Small Firms Loan Guarantee, earlier this year the Government strengthened the scheme by increasing the amount of lending available by 20 per cent, up to £60 million. That means that a £360 million pot is available for small firms to access. We have also extended the scheme so that businesses that are more than five years old can apply for funding. I believe that that reform is very welcome among small businesses. We have signed a joint statement with six major banks committing them to promote the Small Firms Loan Guarantee to their customers. My department will be looking closely at the use of the scheme. It has met with all six lenders to review how the scheme is working. I have heard that there is some criticism among some about the administration of the Small Firms Loan Guarantee; I heard that only yesterday from small firm representatives and I intend to look into it. However, I can confirm that up to £800 million is currently out on loan to small and medium-sized businesses under this scheme. We have guaranteed more than 100,000 loans valued at £5 billion since its inception in 1981. I think that that is a very good record.
The noble Lords second question was on corporation tax and the small company rate. I must insist that this is a matter for the Treasury and my right honourable friend the Chancellor. However, I would say that we see a number of potential issuesnot least the unintended consequence of businesses incorporating solely for tax reasonswere we to reduce further the small companies rate. That would make the tax system unfair for those not incorporating for tax reasons. One always has to look round the corner when making these changes to
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Lord Cope of Berkeley: My Lords, will Her Majestys Government support at ECOFIN in a few days time the proposal of the European Commissionwhich, for all I know, the Minister may have initiated in his previous existenceto reduce VAT on repairs to buildings, particularly homes and listed properties? That would be an immense advantage to small businesses. If it is duly passed at ECOFIN, will the Minister encourage his right honourable friend the Chancellor of the Exchequer to implement it?
Lord Campbell-Savours: My Lords, I take my noble friend back to the intervention of the noble Lord, Lord Hunt, who referred to real-life costs of credit, which is an extremely important issue. My noble friend referred to competitively priced credit as part of this agreement. What happens if the banks simply do not deliver? Do we have some influence over what will happen in this area, given that it is so important to small businesses?
Lord Mandelson: My Lords, this issue is not simply the availability but the pricing of the lending available, as well as the additional costs that banks introduce to the lending facility and any rearrangement of a previous lending facility. I met 25 or 30 SME organisation representatives last Thursday. The point they made to me again and again was that banks are calling in loans, reorganising and rearranging lending facilities, imposing outcomes which are more expensive, and then adding administrative charges into the bargain for the privilege of having your lending facility reorganised on your behalf.
I shall raise this issue with my right honourable friend the Chancellor when we meet the banks chief executives tomorrow. They must understand that while we welcome the sensitive and generous statements that are made oftentimes at board level, or from CEOs, when you get down to branch level there is rather a different pattern of behaviour emerging on SMEs. We want to capture the behaviour at branch level and put it more in line with the sentiments expressed at board level.
Baroness Miller of Hendon: My Lords, I remind the Minister of the first question that my noble friend asked him. It has obviously slipped his mind, so I know that he will be pleased for me to do so. Is the £350 million he was talking about for training new money? Where is it coming from? What is the position? I am sorry to have to press him, but he did forget to answer.
Lord Mandelson: Well, a reasonable but disappointing answer, my Lords. The Governments commitment demonstrates that SMEs are rising up the priorities. Train to Gain, as noble Lords will know, is a service for employers, giving them better access to a wider range of opportunities for improving the skills of their employees. Noble Lords will therefore be interested to know that funding for Train to Gain will rise to over £1 billion by 2010-11 which, by any measure, is new money.
Lord Borrie: My Lords, I hope that I may come back to prompt payment. We have heard warm words. I have no doubt that the Government, and those public bodies which can most easily be influenced by the Government, will do as suggested and pay up by 10 days at the latest. But what about all the other organisations? Some private organisations pride themselves on the dilatoriness with which they pay their debts to suppliers. My noble friend may well recall, as I do, that in 1997-98, right at the beginning of the Labour Governments term, legislation was introduced into this House to impose statutory interest on late payments. That went through this House but got caught up in some difficulties that I do not fully remember in the other place. I wonder whether that sort of thing, although not necessarily the same type of legislation, might have some useful legs in ensuring prompt payment, which is a matter of such concern to small businesses.
Lord Mandelson: My Lords, my noble friend has put forward an interesting idea, which it would be appropriate for us to examine further. However, we should recognise that the Government are not underperforming in this area, even though they and the public sector as a whole could perform better and deliver more. Of the 10 government departments we investigated, 88 per cent of payments, totalling £58 billion, are now made within 10 days. I think that is a good record and a good performance. However, we want to do better because we recognise how important cash flow is to business survival. We want this performance to be reflected not only right across the public sector but among large firms as well, many of which have supply chains consisting of thousands of small firms, all of whose payments are dependent on the hub, the main company at the lead of that supply chain.
Lord Wade of Chorlton: My Lords, I declare an interest as chairman of a venture capital fund, Rising Stars Growth Fund Ltd, which was started specifically for early-stage technology companies. Does the noble Lord agree with me that venture capital fund companies generally throughout the country are a very good source for getting money into companies, particularly early stage and follow-on funding? I was surprised that the Statement did not include any reference to the role of venture capital companies. Will the noble Lord look into how more use might be made of venture capital companies throughout the country to get money into the right companies at the right stage?
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