To ask the Secretary of State for Employment if he will make a statement on the workings of the loan guarantee scheme; and what amendments have been made in its operation since it was introduced.
The loan guarantee scheme was introduced to assist viable small firms which are unable to raise conventional finance due to lack of security or track record. By providing a 70 per cent. guarantee—85 per cent. in inner-city task force areas—the scheme encourages banks and other financial institutions to lend where they would normally be unable to do so.In return for the guarantee the Department charges the borrower an annual premium of 2·5 per cent.—2 per cent. in inner-city task force areas—of the guaranteed portion of the outstanding loan.Since the scheme began in June 1981 the major changes affecting the scheme have been:
1984
Premium charge increased from an initial 3 per cent. to 5 per cent. per year on the guaranteed portion of the loan.
1985
Administrative responsibility for the scheme moved from Department of Trade and Industry to Department of Employment.
1986
Premium charge reduced from 5 per cent. to 2·5 per cent. per year on the guaranteed portion of the loan.
1988
Simplified arrangements introduced for loans of £15,000 or less. 85 per cent. guarantee for businesses in Inner City Task Force areas introduced.
1990
Premium percentage reduced to 2 per cent. for those businesses in Inner City Task Force Areas.
Agriculture and horticulture became business activities eligible for Scheme assistance.
To ask the Secretary of State for Employment how many applications there have been under the loan guarantee scheme in each year since its introduction.
The number of applications under the loan guarantee scheme in each year since its introduction in June 1981 has been:
| Number | |
| 1981–82 | 3,351 |
| 1982–83 | 6,045 |
| 1983–84 | 4,889 |
| 1984–85 | 2,081 |
| 1985–86 | 543 |
| 1986–87 | 1,042 |
| 1987–88 | 1,222 |
| 1988–89 | 2,266 |
| 1989–90 | 3,214 |
| 1990–91 | 3,394 |
| 1 1991–92 | 2,155 |
| 1 To 31 December 1991. | |
To ask the Secretary of State for Employment what has been the cost to the Government of underwriting the loan guarantee scheme in each year since its introduction.
Information on scheme expenditure prior to the Department of Employment becoming responsible for the scheme is not available. For subsequent years the net cost to the Government was:
| £ million | |
| 1985–86 | 27·1 |
| 1986–87 | 11·2 |
| 1987–88 | 3·6 |
| 1988–89 | 3·8 |
| 1989–90 | 5·6 |
| 1990–91 | 16·5 |
| 1 1991–92 | 20·6 |
| 1 To 31 December 1992. | |
To ask the Secretary of State for Employment how many failures there have been in the loan guaranteee scheme in each year since its inception.
Figures prior to June 1987 are not available by individual financial year. The numbers of failures by financial year since July 1987 were:
| Numbers | |
| Total up to June 1987 | 6,164 |
| 1987–88 (from July 1987) | 248 |
| 1988–89 | 402 |
| 1989–90 | 656 |
| 1990–91 | 1,310 |
| 1991–92 (to December 1991) | 1,348 |
| Overall total | 10,128 |