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Bank Lending

Volume 485: debated on Thursday 11 December 2008

The credit crunch and the global economic downturn are, of course, having a serious effect on small businesses. As well as the measures to increase the availability of credit that have been set out by the Government in the pre-Budget report, my noble Friend the Secretary of State has established the Small Business Finance Forum, which involves all the major high street banks and the main business organisations. That body has drawn up a revised statement of principles covering business lending and is also monitoring the availability of credit to small business.

Some would say that the banks have been treated more than fairly, yet they have not passed on that largesse to their customers. Will the Minister look into a case where the Royal Bank of Scotland, which is one of the banks that has been bailed out, has increased fivefold the repayments required from one of the businesses in my constituency, despite an existing six-month agreement, and the fact it was a long-standing customer? That could, effectively, put 80 jobs at risk. Does he think that is fair and, given such agreements, what will he do to ensure that customers and businesses are treated fairly by the banks?

Ministers will not seek to place themselves in the shoes of bank managers and judge individual credit applications. However, of course, it is also true that many businesses have raised the difficulties of accessing credit with right hon. and hon. Members from all parties. The hon. Lady mentioned the RBS Group, which, with the NatWest Group, announced on 23 November that it would maintain existing overdraft pricing for small businesses until the end of next year. Some measures have been taken, but we are not saying that there is not an issue. That is why the Small Business Finance Forum has been established, and, indeed, why both the Chancellor and the Secretary of State will meet the high-level lending panel later today to pursue the issue further.

My right hon. Friend’s comments will give some comfort, but I draw his attention to one specific group of small firms that, even in easier times, have traditionally found it difficult to obtain finance: those firms involved in research and development. They are at the cutting edge of technology and are vital businesses in terms of the creation of future manufacturing strength and employment. Will he have a particular look at how such firms can gain access to finance in these difficult times?

In the pre-Budget report, my right hon. Friend the Chancellor of the Exchequer set out a number of measures that should help businesses to gain more access to credit. In addition to the existing small firms loan guarantee scheme, those measures included a small business finance scheme to support up to £1 billion of bank lending, a separate £1 billion guarantee facility to support bank lending to small exporters, and a £50 million loan facility based on swapping debt for equity. That is in addition to the measures announced by regional development agencies for transition loan funds. The Government have taken a number of measures to try to ease the problems of access to finance and credit, which small businesses across the country are raising with us.

The Prime Minister boasted yesterday that help has been given to small business, yet all the small businesses that have contacted me say that the banks are not well informed about the scheme, some are reluctant to promote it and many small firms are unaware of it. The Minister talked about monitoring, from which one assumes he has had some results. Will he tell us what results he has had, because my information is that things simply are not working?

I think the hon. Gentleman is referring to the small firms loan guarantee scheme. The measures that I listed in response to my hon. Friend the Member for Manchester, Central (Tony Lloyd) are in addition to that scheme and are coming on stream precisely because we recognise how important access to credit finance is to small businesses. Without such credit, businesses cannot take investment decisions and they cannot operate in the way that they should. That is why we are so active in this matter.

The measures that the Government have announced to help small business are clearly welcome, but there is a problem with small businesses knowing where to go. A plethora of initiatives has been announced, but the Government should take steps to improve one-stop shop access to make it clear to small businesses what initiatives are available. I would be interested to know what the Minister is going to do to address that problem.

My hon. Friend makes a good point. The Government have recognised a need for the simplification of information in business support schemes. Indeed, prior to the pre-Budget report, we announced a large-scale simplification of advice to businesses, collating all the different support schemes into a much smaller number. I hope that the process of obtaining advice about what help is available and where to go will be easier than it is at present. Business Link is the key place to go for businesses looking for advice on what help is available from the Government. I also think that the banks have a role to play in ensuring that an appropriate level of lending is available, so that the economy can work in the way that we all want it to.

Sharp practice by the banks clearly must be exposed and challenged, but Government interference is often not helpful itself. Why is the much-promised European Investment Bank money yet to reach our small businesses? Czech businesses have reportedly received €100 million, Spanish firms have received €200 million and French firms have received €300 million. Could the Minister tell us how much of the EIB money UK small businesses have received? I am talking about the actual businesses, not their banks.

A number of other countries have traditionally used EIB money, and that is precisely why their businesses are already receiving money. The banks in the UK have accessed up to £1 billion from the EIB, which will be channelled to small businesses.