The enterprise finance guarantee, launched on 14 January, is open to businesses with a turnover of up to £25 million. It is too early to predict how many loans will be made under the guarantee to firms with a turnover between £20 million and £25 million.
Mr. Pelling: Initial experience in my constituency suggests that we are encountering a problem that often arises when any public policy limit is set. That is, economies of scale mean that banks are very keen to serve businesses with a turnover of between £20 million and £25 million. If that turns out to be a general trend across the country, what can be done to ensure that businesses with a smaller turnover will also benefit from this policy initiative?
We want all businesses with a turnover of up to £25 million to benefit from the Government’s enterprise finance guarantee and the other schemes and bank lending that are available. Under the enterprise finance guarantee, companies will be able to borrow anything from £1,000 to £1 million. There are generous repayment terms, and loans can be repaid over up to 10 years. The hon. Gentleman may be aware that only today RBS-NatWest has announced £3 billion in extra funding for small and medium-sized enterprises through new regional funds. Significant support packages are available now, which can be accessed though Business Link. The Government are providing real help for business now, and that is what the business community needs to help it through these difficult times.
I know that small and medium-sized businesses in North-West Leicestershire will welcome the launch of the enterprise finance guarantee. However, my constituent Mr. Evans, who has also read the helpful document “Real Help Now”, says that he has been left totally confused. He said:
“My bank (HBOS) has told me they are still in the dark about the government’s plans and have asked me for yet another business plan and projections (I submitted these only in November).”
How confident is the Minister that individual branches of the banks will be informed about the Government’s proposals as rapidly as possible? It does not seem that the information is necessarily percolating down from the top levels of those organisations.
Nineteen banks and financial institutions are already participating in the enterprise finance guarantee, so I would be surprised if lending managers at national and regional levels are not aware of the scheme and of what is on offer. The scheme was launched on 14 January, so it is still relatively new, and I know that the banks are looking at their communication strategies to make sure that the information is available at the lending level. The scheme is clear, it is open for business and doing business now, and it comes on top of the other lending that is also available in the economy. If my hon. Friend gives me the details of the specific problem that his constituent faces, I shall make sure that it is investigated.
Can the Minister say to what extent today’s very welcome announcement from RBS-NatWest depends on the enterprise finance guarantee scheme? I share the reservations expressed by the hon. Member for North-West Leicestershire (David Taylor). The Forum of Private Business says that the scheme is not working effectively and that bank managers do not know about it. In my constituency I have a very worrying case in which a man has been made ineligible for the scheme by the arbitrary behaviour of another bank. There are real questions about the scheme that need to be addressed urgently.
We will investigate any problems that the hon. Gentleman says have been encountered, but I ask him to bear in mind the fact that the scheme was launched on 14 January. It is open for business now and is providing real support. There may be some teething problems at an individual banking level, but that might be expected with any scheme. Some companies will be turned down because they do not meet the criteria, but the business community as a whole has welcomed the flexibility to get a loan of between £1,000 and £1 million, with a 75 per cent. Government guarantee. I am surprised by the hon. Gentleman’s comments about the Federation of Small Businesses; we are happy to work with it to make sure that the scheme is effective. It is properly designed, and it is open for business. It should be welcomed by the Opposition, as it provides support for the business community.
In his reply to my hon. Friend the Member for North-West Leicestershire (David Taylor), the Minister said that the scheme came on top of the finance already available—but does the Minister think that the banks are playing ball? A small business—well, it is not actually that small—contacted me: RBS has found any excuse to restructure its loan, and has charged it 1 per cent. for doing so. It is a profitable business that is looking to expand, but it finds it very difficult to get what would, in normal circumstances, be classed as normal finance. It feels that it is being taken for a ride by the bank.
Obviously, I cannot comment on those individual circumstances. On the general situation, hon. Members will be aware that through the lending panel, we are monitoring lending by the major banks extremely closely. A lot of lending into the banking system by foreign banks has disappeared, so there is a credit crunch affecting the UK economy. Our major banks are continuing to lend, and we continue to push them to make sure that they do, which is why I welcome the announcement by RBS-NatWest today. Obviously, we expect normal commercial loans to have been exhausted as a possibility before companies are eligible for schemes such as the enterprise finance guarantee scheme; that is the right thing to do when providing a taxpayers’ guarantee. The schemes are up and running. They are working, and they are providing real help for business now.
Is the Minister aware of an unintended consequence for leasing and asset finance companies that results from subsuming the small firms loan guarantee scheme within the enterprise finance guarantee loan scheme? As only six banks are offering the guarantees, such companies are no longer able to offer bank loan guarantees to their customers. Will he look into widening the availability of the scheme to leasing and asset finance companies?
More than six banks are offering the scheme. If the hon. Lady contacts me with specific details about finance and leasing companies, I shall be happy to consider them. We have made initial deals with banks to offer the enterprise finance guarantee, and we have brought on board more lending institutions, so the problem that she mentions may already have been solved, but I am happy to look at the detail.
When Lord Mandelson announced the scheme, he said that it was “going live today”, and the Minister has just said that it is open for business—but does he not realise that he is lucky if he has found a small business that is aware of the existence of the scheme, and very lucky if he has found a bank that believes that it is operating the scheme at local level? Instead of producing a series of measures in a panic-stricken way, as the Government have done in recent months, would it not have been better if they had speedily adopted our policy of a £50 billion loan guarantee scheme for businesses of all sizes, and had shown some competence in getting it into practice at the speed required?
No, it would not have been a good idea to implement an uncosted, untargeted scheme. What the Government have done is to introduce the enterprise finance guarantee, which is specifically targeted at companies with a turnover of up to £25 million. The right hon. and learned Gentleman will be aware of the working capital scheme that we are also introducing. It will provide working capital support for businesses in the economy. That will apply to a portfolio of companies with a turnover of up to £500 million. That is real support for business, and it is working. We need to do more to market existing products to the business community. I would like to think that the right hon. and learned Gentleman and I shared an interest in wanting to do that, and in wanting to get the maximum possible publicity for the real support available to companies to help them through the recession.
The Minister has heard from Members in all parts of the House about the concern that banks are failing to provide help for SMEs. Is he really satisfied that the banks have taken on board their duties to help put the scheme into action? All Members have heard evidence from companies: banks have failed to advise them of the scheme, and failed to help them to access it—and those are the very banks that the country now largely owns. When will the Government make the banks undertake what is necessary to make sure that the schemes actually work for small and medium-sized enterprises?
The hon. Gentleman has heard about the RBS-NatWest scheme that has been announced today, and he will be aware of schemes that were announced before Christmas, through which the major banks are continuing to provide finance to small and medium-sized businesses. He also ought to know what we have done as a Government, moving from the small firms loan guarantee scheme, which was a very small scheme targeted at fairly marginal businesses with a turnover of up to £5.6 million, to the enterprise finance guarantee, which takes all companies with a turnover of up to £25 million and provides far bigger and more flexible loans. We need to make sure that that information gets out and is used by companies that want to have discussions with their banks. I know of many cases in my constituency where companies are aware of the scheme and are talking to their banks. I expect that the lending figures for companies participating in the enterprise finance guarantee will quickly start to build strongly. After just over two weeks, we think a good start has been made and we expect to see significant progress in the use of the scheme in the future.