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Industry and Exports (Financial Support) Bill

Volume 489: debated on Monday 16 March 2009

Second Reading

I beg to move, That the Bill be now read a Second time.

It is important that the UK emerges from the global downturn rapidly and strongly. The Government have responded and will do whatever it takes to ensure the stability of the financial system and to provide real help to people and businesses during these difficult economic times. However, we cannot secure recovery without willing the means, and this short Bill gives the Government the necessary flexibility to provide further support to industry.

The Bill makes two small but important amendments, to the Industrial Development Act 1982 and to the Export and Investment Guarantees Act 1991 that will help to strengthen the provision of support for businesses.

The first clause proposes to amend the cumulative limit on financial support that may be provided under section 8 of the Industrial Development Act 1982. That provides the legislative power for Government to provide selective financial support to businesses. However, just to avoid any doubt, I would like to make it clear that increasing the section 8 financial ceiling does not in itself authorise any actual expenditure.

The precise purposes for which assistance may be used are set out in the Act. They include promoting the development, modernisation or efficiency of an industry; the creation, expansion or sustaining of productive capacity in an industry; promoting the reconstruction, reorganisation or conversion of an industry; encouraging the growth of an industry; and encouraging the arrangements for ensuring the orderly contraction of an industry.

The Act does not include support that is provided under the auspices of the designated assisted areas, which is covered by section 7 of the same Act, or assistance for certain sectors, notably banking and insurance, which are covered by separate legislation. The scope of the power under section 8 is nevertheless wide, and has been used as the legislative basis for a wide range of programmes of support for businesses that have been introduced since 1982. They include enterprise fund products such as small firms loan guarantee schemes, regional venture capital funds and early growth funding; enterprise capital funding; the Phoenix fund; support for the post office network, such as the urban post office reinvention programme; and the new programmes of assistance that we have announced to give business additional support during the current economic downturn, including the enterprise finance guarantee scheme, capital for enterprise, and support for the automotive sector.

A couple of automotive firms in my constituency are experiencing significant problems. One of the questions arising from the training packages that we have put together is whether there is some form of wage subsidy to help those undergoing training who are already on short-time working. Would the Bill enable us to proceed with such a scheme if the necessary funds were available?

As I have said, a wide range of support for industry is available under this part of the Act. My hon. Friend will be aware that we are already supporting industry by means of new flexibilities in the Train to Gain programme operated through the Department for Innovation, Universities and Skills, and there are separate funding arrangements for training support governed by votes in Parliament.

My hon. Friend will know that the problems of the midlands van company LDV are becoming particularly acute, and may not be covered by the £1.3 billion that he says will be available for green investment in the motor industry. Can he assure Labour Members—indeed, all Members with an interest in the area: I do not think his own constituency is so very far away—that LDV’s case will, if necessary, be treated separately from the £1.3 billion green initiative?

As my hon. Friend will know, we recently announced the provision of £2.3 billion in loan guarantees and exceptional-need loans under the automotive assistance programme to support automotive companies and companies in their supply chain. That potentially includes support for a wide range of companies.

My hon. Friend mentioned the case of LDV in Birmingham. As he knows, the company has been making a loss for a number of years. We understand from discussions between LDV and officials last Wednesday and Thursday that the management buy-out is proceeding. At present the company is owned by a Russian firm called GAZ, which is responsible first and foremost for the workers at Washwood Heath, who have given the company loyal support for many years. It really must be the responsibility of GAZ to give the company enough support to ensure that it is viable in the future. We have given LDV support and encouragement to enable it to proceed with its application for financial assistance through the European Investment Bank.

This is clearly a critical time for the company. We made it very clear that without significant further material support from GAZ, its parent company or from another investor, we would find it difficult to justify providing any further assistance, on top of the £24 million we provided to LDV at the time of the takeover by GAZ.

This is a critical time, and although losses have been made at LDV, I understand that it has a very convincing five-year recovery programme and a plan for a management buy-out that is quite far advanced. Can the Minister at least promise us that before the company is forced into receivership, or some other form of inactivity, he would agree to a meeting with a delegation of west midlands MPs to hear their case—and perhaps we could have such a meeting earlier rather than later?

As I have said, my officials have had a number of meetings with LDV on its financial situation, and I do not think it is as straightforward as my hon. Friend pretends, but I am always happy to meet Members who are representing their constituents’ interests, and I will be happy to meet my hon. Friend and my west midlands colleagues.

While this appears to be a very simple Bill to enable the Government to spend more money on our industrial sector, the details are a little unclear to say the least. Will the Minister therefore tell the House which bits of the financial help to be given specifically to the automotive sector will be coming out of the pot that this Bill provides for, and which bits will come out of the EIB, as encouragement has been given to apply to it for money, too? Where will the money for the £23 million green car initiative come from, for example? If the Government are so minded, could these provisions also be used to help car companies with their loan books by giving a spur to people to take out loans to buy new cars?

I can confirm that guarantees offered by the Government under the automotive assistance programme would have as their legislative authority the increase in spending proposed in this Bill. I hope that things will become clearer to the hon. Lady after I have explained the situation in a little more detail.

The 1982 Act set the cumulative ceiling for support that could be provided under section 8 at £1.9 billion, increasable by up to four affirmative orders not exceeding £200 million each. The overall ceiling in the original Act was therefore £2.7 billion. That was subsequently revised by the Industrial Development (Financial Assistance) Act 2003, which raised the initial limit to £3.7 billion, increasable by up to four affirmative orders not exceeding £600 million each, to an overall limit of £6.1 billion. We have already debated the second order under the 2003 Act, and will shortly be introducing the third and fourth orders. By doing so, we will ensure the necessary legal headroom is in place to ensure the ongoing delivery of existing programmes and the package of new initiatives that we have recently announced to provide real help for businesses in the current economic climate. I can therefore confirm that all existing and recently established schemes can be delivered under the limits established by the 2003 Act.

However, scope to introduce any future support for business will be severely restricted, as we estimate that current schemes covered under section 8 will take us close to the £6.1 billion ceiling. Given the unprecedented global economic conditions we are facing, it is important that we maintain sufficient flexibility to bring forward further support if that is required. The first clause of the Bill therefore seeks to amend the limits in the Act, raising the initial ceiling to £12 billion, increasable by four orders of up to £1 billion each to an overall limit of £16 billion.

We recognise that this is a significant increase, so I would like to make three points in relation to it. First, the nature of business support has changed over the past few years. There has been a shift away from programmes based on grant funding, with greater emphasis now placed on support in the form of loans or guarantees. We believe that that form of support provides good value for money for the taxpayer in the long term, given that the loans will be repaid over time and that only a proportion of the guarantees will ultimately need to be met. However, the full amount secured against public finances counts towards the section 8 limit. As a result, headroom is consumed at a higher rate than under grant-based interventions. As loans are paid back and guarantees lapse, pressure on headroom will reduce. None the less, in the current economic climate we need to maintain sufficient flexibility to respond to the challenges ahead and we believe that the £12 billion ceiling represents a sensible limit at this time.

Secondly, I can reassure the House that although we are raising the ceiling to £12 billion, that is broadly equivalent as a percentage of GDP to the figure in 1982. My final point in this regard concerns parliamentary oversight and scrutiny of support provided under section 8. Although we are proposing an increase to the ceiling, we are not proposing any changes to the threshold at which individual offers of assistance under section 8 are subject to the approval of the House. That threshold, fixed by section 8(8), remains at £10 million. The aim of the new subsection is to ensure that Parliament has the opportunity to consider larger cases of assistance to industry.

I can also confirm that any future orders to increase the limit would need to be agreed through an affirmative order, as is currently the case. We will also continue to publish the annual report setting out our expenditure under section 8 of the 1982 Act. Aside from the financial limits, all other aspects of section 8 and the wider Act remain the same. I can also confirm that the Bill has no regulatory impact on business and that a copy of the regulatory impact assessment was placed in the Library.

The experts in the automotive industry who have been referred to by several right hon. and hon. Members are anxious about the apparent contradiction on whether scrappage is involved in discussions leading up to the Budget. I do not want the final details, but given the importance of vans, can the Minister, as both a Business and Treasury Minister, tell the House whether the Government are considering a scrappage proposal and what progress has been made?

The hon. Gentleman has been a Member of this House long enough to know that Ministers do not comment on what will or will not be in the Budget or on discussions leading up to the Budget. He will be aware of the automotive assistance programme, which is a major programme of investment support to the industry. One of my major priorities as a Minister is to ensure that that scheme provides support as quickly as possible. The hon. Gentleman will be aware that we had a seminar with the banking industry and automotive companies last Wednesday that explained in more detail how the scheme operates. It is open for business now and we are encouraging businesses that qualify to make early applications, which we will endeavour to analyse speedily so that we can look to provide support. We recognise that it is important that we provide support to the industry at this time.

Clause 2 proposes a small amendment to the Export and Investment Guarantees Act 1991. The Act governs all of the work of the ECGD—the Export Credits Guarantee Department—which is Britain’s official export credit agency. The vast majority of industrialised countries have export credit agencies. Broadly, their role is to support exports by providing insurance against non-payment, for example, if importers go insolvent and cannot pay their suppliers or if the importing country runs out of foreign exchange and cannot pay its international debts. The situation is the same for ECGD, and I believe that its role is of increasing importance in the current economic climate. It assists the export trade of British suppliers of goods and services.

ECGD’s remit is to support exports of capital and semi-capital goods and services. That usually means big-ticket exports such as civil aircraft, oil and gas production equipment and services and telecommunications. Often, the buyers of such equipment require medium or long terms of credit. Typically, a civil aircraft is repaid over a 12-year period. Much of ECGD’s business involves its giving guarantees to banks, which make loans available to foreign buyers to purchase UK goods and services. Some Members may recall that ECGD used to support other exports normally sold on short terms of credit. Those exports were raw materials, light manufactured components and consumer durables, which account for the majority of UK trade. That part of ECGD’s business was privatised in 1991 and since then providing trade credit insurance has been the responsibility of the private sector.

ECGD is 90 years old this year. It was set up 1919, after the first world war, to help re-establish trade. It was the first export credit agency in the world, and in these challenging times the support that it can give to industry and exporters underscores its importance for the British economy today. It is an independent Government Department that reports to the Secretary of State for Business, Enterprise and Regulatory Reform, and its role and purpose is established in law. ECGD’s power to support exports is contained in section 1 of the Export and Investment Guarantees Act, and it is that Act that this amendment Bill addresses.

ECGD’s primary power to support exports in section 1 of that Act states:

“The Secretary of State may make arrangements under this section with a view to facilitating, directly or indirectly, supplies by persons carrying on business in the United Kingdom of goods and services to persons carrying on business outside the United Kingdom.”

However, there is a problem with the word “facilitating”. The point is that ECGD cannot be said to have facilitated exports if those exports have already been supplied. However, with changing business practices, ECGD has been increasingly asked to support exports that have, in whole or in part, already been supplied by the time it is able to take a decision on providing its support for the exports in question.

There are a number of reasons for that. First, changes in the way contracts in the high-value capital goods markets are managed often mean that requests for support are simply made later these days. Often, it is buyers or overseas project sponsors who approach ECGD for support, not the exporters. Buyers seek ECGD support after they have procured the exports, and some may already have been supplied.

Secondly, at the same time as these changes were happening across the world, ECGD’s decision-making processes were changing to implement wider Government policy on corruption and on social and environmental impacts. These are mandated by ECGD’s business principles. They involve rigorous due diligence, which can delay ECGD’s ability to make a decision until supply has commenced. This amendment will allow ECGD to provide its support for supplies that have already been made.

Last year the Environmental Audit Committee issued a report on ECGD and sustainable development, which recommended that

“No offer of support should be made, whether actual or provisional, until ECGD’s Business Principles Unit has completed its assessment”

of the project to which the exports are destined.

That referred to ECGD trying to overcome the timing difficulties that I have just explained. ECGD would, before the supply was completed, make an offer to issue a guarantee after completion, conditional on satisfaction of its environmental criteria. The EAC was concerned that these offers of support could weaken ECGD’s environmental scrutiny. I do not agree that they did, but I am happy that the Bill will allow ECGD to give effect to that recommendation, as well as solving the problems for British exporters, without any dilution whatsoever of ECGD’s business principles or the due diligence it undertakes.

Without this change, British exporters will continue to face the risk of being discriminated against by overseas project sponsors because ECGD cannot give the type of support those sponsors want. Other export credit agencies in competitor nations do not have the same difficulties. Few, if any, are bound by state legislation and none of ECGD’s major counterparts has the same difficulty in supporting exports that have already taken place.

In the current economic circumstances, extra support for British exports is highly important. Over recent months, ECGD has, not surprisingly, received a vast increase in interest in its support and in applications for its assistance. Rather than giving extra support, if this amendment to ECGD’s Act is not made, ECGD support will often have to be reduced. ECGD is complaining about the difficulties that ensue when it can give no certainty of its support. The CBI, the British Bankers Association and the British Exporters Association have lobbied intensively. They argue that without the change, the UK’s competitiveness will be adversely affected. I agree with them, and that is why we are introducing this clause, which will help to maximise support for industry through ECGD at this difficult time.

We face a unique set of challenges. Together, the measures proposed in this Bill form an important part of the response needed to ensure that businesses have the help they need. I commend the Bill to the House.

I thank the Minister for his opening remarks. I have some sympathy with him because, as a Minister in both DBERR and the Treasury, he has the unenviable task of defending not one, but two dysfunctional Departments.

The Bill substantially increases the limits of Government financial support for business and exports—first, as we have heard, to £12 billion and then, potentially, to £16 billion. These are substantial provisions, reflecting the severe economic climate. We agree that business urgently needs practical help, but our concern is that these good intentions will not become the practical aid that business seeks. I say that because, to date, this Government’s record of financial support for industry has largely been one of talk, not action; it has been a story of half-baked ideas badly implemented, and it has resulted on numerous occasions in confusion and anger among the very people whom Ministers claim they are trying to help. Ever since the fall of Lehman Brothers in September and the collapse of world markets in the autumn, the need for urgent action has been clear, to enable working capital to reach real businesses. That is why last November the Conservatives set out a plan for a national loan guarantee scheme of some £50 billion for viable businesses of all sizes and all sectors—clear, easy to access and simple to understand, it could underpin conventional bank lending.

I wish that the Government had done what they often do in these circumstances—stolen our policy and claimed it as their own. After all, we see that all too often, yet on this occasion the Prime Minister has been deaf to good advice. Despite promises made last November, it was not until January that the Government’s schemes were finally announced and even then—in the opinion of business—it was clear that they were half-baked. Let us consider the capital for enterprise fund, which is worth £75 million and is intended to provide equity funding to small businesses. When it was first announced last November, the Department said that it would

“be ready to start investing by the end of January 2009”.

January came and went and the snow fell in February and thawed, yet there was still no news and no investment, so last week, in the middle of March, as spring approached, I inquired exactly how much had been invested. I naturally assumed that the sum might have been £10 million or £15 million, but the people who run the scheme—Capital for Enterprise Ltd—told me that in fact not a single pound has been invested in any business.

What about the working capital scheme, which was announced on 14 January? We were told then by none other than Lord Mandelson that it would be the centrepiece—the linchpin—of the Government’s policies. It was to provide up to £10 billion in Government guarantees to underwrite bank lending and to be available from 1 March. That date came and went, so on 4 March we asked the Leader of the House when the scheme would commence. We thought that if we were lucky, it would be this month, but, who knows, it might begin on 1 April—how appropriate that would be. She could not say, and although I realise that she and Lord Mandelson are not exactly bosom buddies, surely between them they must have some idea when this scheme might actually start.

One scheme is up and running: the enterprise finance guarantee scheme, which is worth £1.3 billion and is intended to underpin lending to small firms. On Friday, the Minister for Employment Relations and Postal Affairs, whom I am delighted to see in his place, gave us a remarkable two-hour oration, during which he confirmed that 26 applications had been approved. There was another hour to go before he finally sat down, but what he did not tell us was how many firms had actually got the money; perhaps the Minister here today could complete that speech in his reply.

Part of the problem is that when Ministers make their announcements, they often have not really worked through the details—indeed, in some cases, they have not even cleared the schemes with the European Commission, as they are meant to do—and meanwhile, our competitors are stealing a march on us. For example, by last Christmas, the Germans, French and Americans were all ready to act. In Germany, some €2 billion has been extended to industry; in France €6 billion; and in America, some $17 billion was on hand for its car industry. The question that British businesses put to me—and I hope that the Minister will reply when he responds to the debate—is “Why is it that, under this Government, British businesses are the last to get the help that we need?”

The answer may in part be the fondness that the Prime Minister—who, after all, was once Chancellor—has for tinkering and meddling, and creating myriad complex schemes that prove so confusing in practice. Thus we have the working capital scheme; the enterprise finance guarantee scheme; the capital for enterprise fund; the transition loan fund; the European Investment Bank’s supported loans scheme for growing firms; the EIB-backed automotive industry loan scheme; and the £l billion non-EIB-backed, automotive loan scheme. Each of these schemes has different eligibility criteria and different rules. These in turn need different forms and different sets of business data.

So the problem is that businesses are unclear about what is available, what they can apply for, and which scheme is best for them. They are not the only ones. Most of the banks tell me that they have yet to receive the detailed terms and conditions for many of these schemes, so that they can brief their high street branches—

Well, that is the evidence in at least 100 letters that my office alone has received. When our constituent businesses go to their bank, they are told that it does not have the information and that the staff have not been briefed or trained. We are left at best with confusion and, at worst, with no help at all.

Let us take for example a small touring company based in Suffolk. It applied for help under the enterprise finance guarantee scheme to consolidate its overdraft, to release funds to advertise during the critical winter months. Despite the fact that the business was advised by Business Link that it was eligible—indeed, it was in the statement issued by Ministers—its high street bank turned it down. The result of that conflicting advice is that five staff have lost their jobs and there is real pressure on the firm’s finances. The managing director said

“what a joke this scheme link have no idea what the banks want out of this scheme…all of these big shouts by the Government about placing money out there to help small business is all just’s a disgrace”.

That managing director is not the only one who is rightly upset. The FSB has just conducted a survey of its members. Six weeks on from the launch of the enterprise finance guarantee scheme, the majority of its members say that the banks are still not using it. It is no wonder that three quarters of the FSB members surveyed said they had no confidence in the Government’s economic policies.

The gap between Ministers’ good intentions and their actions has, sadly, been evident for some time. Thus, in the last 12 years they have overseen the creation of some 3,000 business support schemes, only recently realising that that creates waste and is confusing for many businesses. In his opening remarks, the Minister mentioned the regional venture capital funds. When they were established, we were told that they were vital to plug the gap in which the private sector would not invest. I agree that there is a gap in equity funding for smaller enterprises, but what is not clear is why that state-backed scheme, led by the regional development agencies, is the best way forward.

The latest figures show that some £250 million has been allocated to that scheme alone in the English regions. However, the value of the investments actually made was only £126 million, half of the available total. What happened to the other half? Did the demand that Ministers predict not exist, or were requests simply strangled by the scheme’s red tape?

As the Minister said, the second clause of the Bill specifically seeks to expand the funding provisions for exporters and would make some important technical changes. Something certainly needs to change when it comes to the balance of trade, because under this Government our balance of trade was nearly £40 billion in the red even before the recession.

In more recent months, there was initial hope that the huge drop in the value of the pound—a drop of some 25 per cent.—would have helped to boost exports. However, the latest figures for January show that, while the volume of goods exported to EU countries rose, this was outweighed by a 16 per cent. plunge in exports to non-EU countries. The result that month was a net trade loss of £7.7 billion. It is clear that the UK needs significantly to strengthen the volume, and indeed the value, of its exports.

In November, the Chancellor announced an extra £1 billion in his pre-Budget report to help small and medium-sized UK exporters. It was to be delivered by the Export Credits Guarantee Department in conjunction with the banks. It was to have been a temporary facility providing smaller exporters with better access to short-term working capital. Of course, the intentions sound good, but it has been difficult to find out what progress has been made, although we looked quite carefully. Finally, yesterday I was left to check the latest information from the ECGD. Perhaps I should share with the House what its website says:

“The scheme is at an early stage, and there is no set timetable for its implementation.”

Is it really the case that four months after a £1 billion scheme, meant to help people in this recession, was announced by the Chancellor of the Exchequer at the Dispatch Box, no timetable has been set for its implementation? I hope that the Minister who replies to the debate will answer that question directly. If there is a set timetable, why does the Department not know, and if there is not a set timetable, what on earth have Ministers been doing?

Let me turn to the main export credit scheme—the fixed-rate export finance scheme. I apologise for the endless litany of alphabet soup that the schemes seem to generate. That particular scheme is meant to be wound up in eight months’ time, yet despite having planned the scheme’s replacement since December 2007, Ministers are seemingly unable to explain to exporters how the new scheme will work. The Under-Secretary of State for Business, Enterprise and Regulatory Reform, the hon. Member for Dudley, South (Ian Pearson), rightly said that exports are crucial, so can he tell me why it is that, just eight months before the introduction of a new scheme, when companies inquire they are not able to learn the details of the scheme that will replace the current programme? After all, many contracts that are being negotiated now will run way past December. When will businesses have an answer?

A number of Members of this House have rightly raised the subject of the automotive industry, which has often been at the heart of the question about financial support. Car registrations have been falling for many months. In February, they fell again, by another 22 per cent. I had to double-check whether there was meant to be a decimal point in the middle of that, but the figure really is 22 per cent. for a single month. Meanwhile, in response, manufacturers have reduced production; indeed, many have suspended it. Thousands of people have either lost their job or face redundancy in the coming months. We should not forget the long supply chains in this sector that serve manufacturers here and abroad; the Minister rightly mentioned them. What they all need is clear and decisive action.

In January, Ministers set out their plans for the sector. Sadly—I draw no comfort from this—the industry said that the plans were incomplete, had not even been authorised by the European Commission, and often completely failed to address the question of car sales. Quite rightly, the industry has continued to press Ministers to get them to spell out exactly what their package means in real money.

As the Minister mentioned, last Wednesday he hosted a summit at which we were offered more details of the £2.3 billion automotive loan schemes. We welcome the news that Jaguar Land Rover is to get up to £27 million in support of a new, lighter vehicle. However, even that modicum of good news was overshadowed by a spat between Lord Mandelson and the Bank of England about who was, or was not, to blame for the long delays. How frustrating that must be for the junior Minister; he was able to push forward an initiative, but it was completely driven off the front pages by his own boss.

While some Ministers are passing the buck, the car sector is becoming ever more frustrated. On a recent visit to the midlands, I talked to representatives of the industry there, and I have to say that in their responses, they were overwhelmingly negative towards the Government. Why, they asked, did they not even get a statement of aid until January, when car sales had been plummeting for at least four months before that? Why, in January, were the schemes not worked through, as they were in France and Germany? Why did it then take another month for basic EU approval to be sought and secured? Their concerns did not end there. In January, instead of being promised a package to aid the credit arms of car firms, we were promised that a junior Minister had been—I will get the phrase right—

“tasked to draw up a plan”.

It seems that the same Minister doubts the need for such a plan. Lord Davies was reported in the Financial Times last week as saying that credit insurance problems would solve themselves as corporate lending picked up. That is not the view of the CBI or the FSB. Indeed, the federation said that Lord Davies was “unrealistically bullish”. The British Chambers of Commerce went further, and highlighted industry-wide difficulties with credit insurance. It said of the Minister for Trade and Investment:

“It’s very complacent to say that everything will sort itself out”.

That is not the message that should come from the Dispatch Box. Perhaps in his reply to the debate, the Minister can put things straight. Will he specifically tell us, either now or in his reply, whether the Government will introduce a plan to tackle credit problems, or is the Government’s plan on this issue simply to do nothing?

May I just return for a second to what the hon. Gentleman was saying about the German guarantees that have been put up of about €2 billion? He may be more up to date than I am, but the last time I heard about that, at least half that amount, although allocated by the German Government in their interest, and probably quite rightly, still had not been cleared by the European Commission?

My understanding is that most of that sum has been cleared and delivered, certainly according to the reports that I have read. That represents a sharp difference in that our Government have only just obtained permission from the European Commission to propose guarantees.

That is the whole point. The Germans have made the allocation, have said that they are going to do it, and have guaranteed it. Months ago, they did that for Opel, and announced €1 billion before the end of last year. It certainly had not been agreed at that point, but they went ahead, and they have done so again. I still do not think that the position is clear. We have rightly announced it, and we will be ahead of them in getting clearance this month.

Clearance is one thing, but delivering it to businesses’ bank accounts is the critical point. That is the difference between the Government and the French and German Governments.

The Bill seeks to provide the Government with the ability to extend financial support for industry to up to £16 billion. In such difficult economic times, we recognise the need for such additional powers and while, quite rightly, we shall scrutinise each policy, we will not oppose the measure today. Our concern, as I have tried to explain, is about how Ministers implement their powers, as their record is one of press releases, not practical action. It is a tale of dither and delay, of bold promises and timid deeds. I have no doubt that Ministers mean well and wish to help, but my fear is that the gap between their rhetoric and reality is one through which hundreds of firms, and thousands of jobs, could yet be lost.

The Bill is the most recent in a long line of attempts by Government to give industry a shot in the arm. Unfortunately, the well-meaning but incompetent doctor has yet again missed the vein, plunging the hypodermic containing life-giving fluid into a part of the economy where it will do no harm, but from which it will fail to flow through to the main body of the ailing economy, where it is most needed.

We have a problem, because while the Government are applying a poultice to the sick body of the economy, the banks have applied a tourniquet, preventing the flow of cash through the economy that would nourish and enrich it, and enable it to stagger back to its feet again. The Liberal Democrats will not oppose the Bill today, because we recognise that it includes measures that will help, but we regard it as a wasted opportunity. It is not as if not enough people are trying to tell the Government what they could and should be doing. Over the past few weeks, I have been doing a bit of research in my constituency. I have been talking to businesses big and small, and trying to find out how they are faring and what the Government could do to improve the environment to enable them to survive.

The first thing that the Government should introduce in the Bill is some form of support or regulation of trade credit insurance. Withdrawal of trade credit insurance is what eventually did for Woolworths. Trade credit insurance insures a company when it has extended credit to another against the risk of not getting paid. If a company has its trade credit insurance withdrawn, other companies become nervous about trading with it because the message given out is that that company is risky to trade with.

A profitable retail company in my constituency has had its trade credit insurance severely reduced just at the time it wants and needs to expand. Its suppliers right down the supply chain are having their trade credit insurance cover reduced or even withdrawn, sounding a death knell for many. When a successful company that has no record of financial problems is growing, why would anyone want to reduce its trade credit insurance? The insurer told that company, “Oh, it’s not you personally; you’re just operating in the wrong sector.”

Trade credit insurers have been described as organisations that are willing to lend an umbrella only when the sun is shining. I would not go quite that far, but it is clear to me that something needs to be done, and fast, to stop perfectly good companies going to the wall for no reason.

Will the hon. Lady confirm that the problem with trade credit insurance is that it is a private monopoly? There are so few companies operating in the field that once a firm has lost trade credit insurance with one insurer, it is virtually impossible to get it from some other company. That is at the root of all the problems.

Indeed. I am grateful to the hon. Gentleman for that intervention. He is right. Once a company has lost trade credit insurance, the possibility of gaining it from another organisation is very low indeed. For months, hon. Members in all parts of the House have been asking for Government action on trade credit insurers. When will the Government take action to ensure that such insurers stop turning the tourniquet even tighter on business?

Regulation is another issue of great concern to business. As with taxes, everybody moans about it, but most of us recognise it as a necessity—most, that is, except the Conservatives, who have called for less regulation, including of the banking and investment sector. Nevertheless, the imposition of new regulations at a time of economic crisis can be very unhelpful.

I am sure that the hon. Lady would want to be accurate. To be clear, the Conservative party has just published a report on banking regulation and believes that a great deal of reform is needed, including much tougher regulation, to prevent systemic risk in banking. Elsewhere in the economy, which is being held back by an awful lot of heavy-handed red tape, we agree with light-touch regulation, as indeed do the Government.

I am delighted to hear that the Conservatives have changed their attitude towards banking regulation. In the past they have done a great deal to try to introduce lighter-touch regulation of banking. I accept what the hon. Gentleman says about other forms of regulation. In that we share a common approach.

Many companies are focused completely on the day-to-day cash flow management of their businesses. Instead of reviewing their cash flow every quarter or every month, they are now doing so every week or even every day. They do not want to have their eye taken off the ball by having to contend with new regulations. If they do not give all their emotional energy and attention to managing today, there may not be a tomorrow in which such regulations can take effect.

A particular concern to potential investors in this country is the propensity of the Government to make decisions and regulations retrospectively. We saw an example of that on 28 January in the Westminster Hall debate on retrospective business rates, concerning the retrospective levying of business rates on struggling port-based firms. Clearly, more regulation is needed in some sectors, such as banking and trade credit insurance, but in other areas the Government could take their foot off the pedal and delay the introduction of some non-vital regulations. My second question for the Minister is this: will the Government impose a moratorium on the implementation of non-essential regulations until the economic situation improves, and will they give some heart to potential investors in this country by publishing a statement of intent showing that they do not intend to impose any further retrospective legislation?

The Bill will amend section 8(5) of the Industrial Development Act 1982 and section 1(1) of the Export and Investment Guarantees Act 1991. Section 8 of the 1982 Act seems to be the Heineken of industrial financial help, reaching parts that other industrial financial assistance cannot reach. Such assistance has to benefit the UK economy, or any other part or area of the United Kingdom, which is a pretty wide definition. It has to be “in the national interest”—well, obviously—and it has to help when assistance cannot be appropriately provided in any other way.

The Bill raises the ceiling under which financial assistance can be given from the current maximum of £6.1 billion to a potential total of £16 billion. That is a lot of money, and I look forward to hearing from the Minister why that amount of taxpayers’ money was deemed appropriate. Another £10 billion has been added; it is a nice round figure, but what justification is there for it? The figure of £16 billion represents £26,000 for every man, woman and child in this country. The Independent today has done its sums and calculated that, due to the recession, the personal cost of the downturn for every single British citizen is now £40,000, which is a lot of dosh. We must be sure that money is spent wisely where it really will make a difference.

The amendment of the Export and Investment Guarantees Act 1991 will widen the definition under which assistance can be given to exporters under the export credit guarantee scheme. The CBI welcomed that measure because it will support transactions where goods have already been exported, such as where early shipment was required before an export guarantee department decision on cover was made. The CBI says that

“enactment on this amendment will assist exporters in a clear and practical way and should assist in retaining jobs in the UK.”

If it is good enough for the CBI and for the British Bankers Association and other groups, as the hon. Member for Hertford and Stortford (Mr. Prisk) mentioned, it is good enough for me.

How effective has the plethora of Government announcements been so far? The Forum for Private Business says that the Government should not just assume that under the enterprise finance guarantee scheme, the problems of smaller business have been sorted, and that they must consider the looming problems of the cost of finance, business rates and late payment. Can the Minister say just how many companies have benefited from the enterprise finance guarantee scheme, the working capital scheme and the capital enterprise fund? We heard from the hon. Member for Hertford and Stortford that no money has yet come through for the latter two schemes. Will the Minister be able to demonstrate that any of these funds are making a material difference, or with regard to the vast majority of companies are the Government just tantalising and teasing business with promises while little or no real money is flowing through?

The Government have ignored simple, effective and relatively inexpensive Opposition proposals, such as the Small Business Rate Relief (Automatic Payment) Bill, a private Member’s Bill introduced by the hon. Member for Mid-Worcestershire (Peter Luff) only two weeks ago. I will not rehearse the arguments about that, but the Government have ignored that open-goal opportunity to help the smallest businesses that are least well informed about the help that they are already entitled to.

Some lenders, such as lease financiers, are simply not covered by the enterprise finance guarantee scheme, although 750,000 small businesses rely on lease financing. There is no safety net for those smallest of lenders, which nevertheless play a vital role in helping the smallest businesses as well as larger ones. Will the Government consider providing assistance for lease financing, along the lines of the enterprise finance guarantee scheme?

The opportunity to deal with the nefarious activities of serial liquidators has also been missed. Such parties trade, run up debt and then liquidate a company, leaving suppliers in the lurch, only to set up again the next day under a similar name. Those people cynically drag down good companies, and their activities are downright theft. If any director were required to register in a simple register of administrations, that would enable a quick search to determine how many times an individual had bumped their company. That would protect good companies against directors bent on a course of exploitation of the trust and good will of others. Will the Minister consider the possibility of creating such a register?

In conclusion, I should say that the Bill is a missed opportunity. Industry needs an environment in which it can not only compete, but continue to operate. It needs cash, but despite all the announcements that have been made thick and fast in the past few months in committing billions of pounds of taxpayers’ money to prop up a banking system so sick that it is haemorrhaging the blood transfusions that we are administering, vital support is still not making its way to the real wealth creator—industry itself. Taxpayers’ money is flowing all right; it is flowing into the coffers of the banks and into an interminable black hole.

My hon. Friend the Member for Twickenham (Dr. Cable), the Liberal Democrat shadow Chancellor, has been like a seer; he was sending out warnings to the Government years before the crisis that we now face finally arrived. He predicted that the grand edifice of the banking economy would turn out to have been built on sand, and that we would need to nationalise Northern Rock. He has watched the Government pandering to the banks like an over-indulgent auntie to spoilt and uncontrollable nephews and nieces, asking them please to share out nicely the pile of sweeties that they have been given and becoming mystified when they are not good children who do as they are told.

We now have a majority shareholding in Lloyds HBOS and the Royal Bank of Scotland. My hon. Friend the Member for Twickenham is saying to the Government that it is time to take firm action and make the children share out the sweeties. It is time to nationalise the failing banks and ensure that cash goes not into the greedy mouths of the banking industry, but right to where it is needed—the hard-working companies that are struggling to survive.

I am grateful for having been called to speak on the Bill, which is important; it adds a significant amount to public expenditure. It is disappointing that there are so few Members on the Government Benches to speak in support of what the Government are doing.

I tried to listen intently to the Minister’s explanation of what the Bill was all about. I recognise that the Minister, who serves in both the Treasury and the Department for Business, Enterprise and Regulatory Reform, must be very overworked at the moment. However, I feel that what the Bill is actually doing—in contrast to the warm and good intentions about which we often hear from the Government Dispatch Box—is very limited.

Exactly what will this extra tranche of money be used for, where can it be spent and who will be the beneficiaries? Given the Government’s progress on the schemes that they have already announced to a bewildered public, will the money go into the real economy? There is something of a question mark about those issues. Although the help contained in the Bill is desirable, we clearly need to do more to support our manufacturing and industrial sectors. Conservative Members wish the Bill well, but we wish we knew more about exactly what it was going to do. I hope that the Minister who sums up after the contributions of other Members will be able to give the House more of the detail that we would like to hear.

It is horribly true that we face an extremely difficult situation. My hon. Friend the Member for Hertford and Stortford (Mr. Prisk) observed that our trade deficit last year was some £40 billion—an eye-watering figure that is very serious bearing in mind that we started 2008 thinking that we were still in the good old boom years. It is an even more frightening figure when we consider that we are in very depressed economic times. It makes the Government’s failure to do something about the gross imbalance that has been developing in our balance of trade figures over the 12 years during which they have been in power all the more remiss and worrying. After all, it is the future that counts, and we have to do something to put these matters right. We all know that it will not be too long before unemployment officially reaches the 2 million level, and there are dire predictions in almost any paper that we care to read that that figure may go up to 3 million within the next year.

At the moment, our inflation is clearly under control, except for the fact that it is going in the wrong direction and we might be facing deflation, which is as worrying as high inflation. One can only hope that we avoid the situation described in The Daily Telegraph this morning, whereby we have a deflationary economy in recession in which the position of people who owe money is made even worse by their debts becoming ever more real in purchasing power terms and they get into a very difficult state, as opposed to the position in an inflationary situation, where their debts tend to be wiped out by inflationary price rises. That would be a very difficult situation. None of us, except for the very elderly in our society, can remember the last time that it happened, in the 1930s.

In the last quarter that was measured, there was a 1.5 per cent. drop in the UK’s economic growth and a 3.3 per cent. drop in manufacturing. The service sector was holding up at that point and helped to make the figure look a little better than it might have been. I suspect that none of us thinks that we will see any better growth figures in the quarter for which growth figures will be announced shortly, which will put us officially into recession. If that were to continue for the whole year, it would put us officially into a depression.

We face an extremely serious state of affairs, and the Government need to do what they can to help the business, industrial and manufacturing sectors of the British economy. That is why the Bill is important and why Conservative Members will support it. We have heard about the high-profile cases of bankruptcies such as Woolworths, whose demise has left a big scar on Bromsgrove high street. Wedgwood is also in my area, albeit not in my constituency. We have heard about the big companies that have sadly gone to the wall in this economic environment. Every day the same thing happens to lots of small and medium-sized enterprises, yet none of those is ever heard of.

A steady stream of business men have come to my surgery truly at their wits’ end because of the state of economic activity. They have well run family businesses that have existed for the past 10 or 20 years, and in the good times they were not dazzled by the amount of money that the banks were trying to lend them. Banks were throwing money at them, saying, “You’d really like new office premises or industrial premises. You’d really like a new car, because you’ve worked very hard as the managing director. Come on, borrow some money from us. We’ll give it to you at these really good rates.” They were not tempted by the devil in such ways. They have run a tight balance sheet and done all the right things. However, the general economic environment means that nowadays, they are scraping money together to keep their companies going.

I came across a company the other day that sells its products to a very well known DIY store. It is now in the terrible position of not knowing how much to produce, because that store is operating on a sale or return basis. The company has to decide whether to produce a lot of lovely things that would normally fly off the shelves in the good times but stick on the shelves in the bad times. It has employed the people who produce those goods and paid their wages, and it has paid for the raw materials that the goods are made of. It has paid its tax, national insurance, heating and lighting bills and the costs of its building, but its goods will be returned because they have not been sold. The banks are getting edgy about the overdraft limits, because they cannot be sure that the DIY store will pay the bill for the goods that have been sent to it. The situation has therefore become extremely difficult and worrying for all concerned.

Sadly, many people in such a situation have been in tears. They run family businesses, and the people who work for them have done so for a very long time and been completely loyal. The workers are prepared to accept a reduction in their salary or employment conditions to help the company survive and to help the boss make things work. Yet the boss does not know what he can offer, because the situation is so desperate that he has no certainty about the future. Measures are therefore needed to bolster the economic environment and people’s confidence. We all know that confidence is part of what is needed, but when bad news keeps coming it is hard for anybody to pick themselves up, dust themselves off and hope that things will be any better.

I understand from reading the little information that we have been given about what the Bill will do that it will not support the banks—that is something separate—except, I assume, when they offer insurance guarantees using credit that is available to them through the Government scheme. It will not help the banks’ balance sheets by helping with their capital requirements, which are an entirely separate matter and involve a good deal more than the £12 billion that is at stake in the Bill. However, I think that I am right in saying that when they provide credit insurance for firms’ activities, the Bill will offer them financial support. No one is looking at me at the moment, so I assume that I must be right, because there are people in the Chamber who know a great deal more about the Bill than I do. It is therefore partly about the banks, inasmuch as that provision will form part of the financial assistance package.

I make an appeal to the Minister to understand what is happening in the banking sector with regard to support for small firms.

I am following my hon. Friend’s argument with considerable interest. Is she aware that a constituent of mine has been told that even when the Bill becomes law, as I am sure it will, the banks will still be asking for 100 per cent. guarantees from their clients? There will effectively be a double guarantee, one from the Government and one from the company. Sometimes, particularly given the economy’s current condition, companies are unable to give such a guarantee, in which case the Bill will be worthless. The Minister is looking even more blank that he usually does, if I may say so, but I hope that he will be able to correct me and say that some imposition will be made on banks, particularly state-owned banks, to prevent them from asking for such a guarantee.

My hon. Friend makes a good point, which I hope that the Minister has heard. When his colleague responds to the debate—

When the Minister responds to the debate, it would be helpful to know whether matters are as my hon. Friend described.

I was looking blank because the hon. Member for Lichfield (Michael Fabricant) clearly has a limited understanding of business if he does not realise that banks often require guarantees as a result of lending decisions. He should understand how business operates instead of making cheap political points.

I will happily give way so that my hon. Friend can defend himself. Otherwise, I will have to do it for him.

My hon. Friend knows that I was in business long before I became a Member of Parliament and I am therefore well aware that banks require guarantees for lending. However, they do not require double guarantees—double indemnity. I am disappointed that the Minister did not correct me—I hoped that he would—and say that there would be an imposition on the banks, so that they would not ask for a guarantee from companies as well as from the Government. They should have some guarantee, but not 100 per cent.—

Thank you, Madam Deputy Speaker. I am glad that my hon. Friend was allowed to make his point, which I think I would have made. The double guarantee is clearly unacceptable because taxpayers’ money is being provided for a purpose—to share the risk so that we might help the flow of business credit in a difficult environment for businesses.

Several cases about banks’ activities have come through my postbag. I take each one up with the relevant banks in the hope that they realise that politicians in the House get to learn how badly they are behaving, and that they might bear that in mind before shaking the tin for more money for their greed and extravagance, which got them into the current position. In one case, a gentleman who runs a small business had an overdraft of £10,000 and was forced to take out a loan to pay it off when he had no difficulties with his credit record. He had an order book that would have sufficed to make the payments. I am told that the bank has a policy of acting in such a way and I am pursuing the matter.

We have got ourselves into an intolerable position whereby the banks, having accepted considerable sums of public money, do not do the decent thing and share the burden of the risk with the taxpayer and with companies in difficult times. If they did that, it would ideally get us over the hump of our current difficulties and into a more normal world, in which companies can make money without taxpayers’ help and the taxpayer can be repaid the huge sums of money that have been disbursed to keep the system alive and to prevent even more catastrophic circumstances. Matters need to be righted swiftly so that taxpayers are not as exposed as they are in the current environment.

The banks still have a long way to go. I hope that the Minister will take issue with them, as part of the exercise under the Bill, inasmuch as it affects the banking industry, over some of their schemes and their treatment of businesses.

The automotive sector has been mentioned. The car sector needs clarity of vision and leadership from the Government about exactly what they want. We understand that there were difficulties with the European Union about getting permission for various guarantees. However, before the crisis arose, there was over-supply in the car sector, and many people said that too many people produced cars. I am worried that, in such difficult times, those who get in first to protect their car industry will be those who survive with a car industry. We do not want to find that other countries have been able to protect their viable car industries in such a way that companies that have not received help and will find trading difficult because of the general economic environment, are left more vulnerable in the wider shake-out through over-supply in the international market for car production.

We know that the American car companies—the GMs and the Fords—have been trying to divest themselves of their European operations. There are lots of car companies in need of a friend at the moment. I worry that those Governments who are bigger friends to their car industries will find that they actually have a car industry left when this is all over and that those who are not as proactive in ensuring the best deal for their car operations might find that they do not have one. I ask the Government vigorously to pursue their policy on the automotive sector—whatever it is going to be—because the sector is in such a vulnerable position. We do quite well in cars and we would like to keep it that way. I therefore look forward to hearing more about what the Government plan for the sector.

The way my hon. Friend the Member for Hertford and Stortford described the various schemes that are now available to businesses to help them take advantage of Government support through the present economic environment could have been part of a comedy sketch. For a company that has so many other problems on its hands, the idea of wading its way through Government bureaucracy and all the different Government schemes to find which one might help it is not realistic in the times in which we live. I sit on the Select Committee on Business and Enterprise, but unless I write them all down, I cannot remember all the schemes that my hon. Friend mentioned that the Government have come out with in the past few months to help businesses. If we in this House cannot do that, how can we expect people in the real world to know any better?

For example, a constituent came to my surgery a month ago who was really keen on the capital for enterprise fund, which used to be the equity swap fund, as it could help his business. He approached the banks, which knew nothing about the initiative, but were happy to fill in the paperwork and see whether they could find something out. He made an inquiry to DBERR and was given a number. Obviously he was pleased to have the number, because it made him feel that someone had registered him on the system. I immediately wrote to the Department to ask, “When can he hear more news? Is he being assessed for the scheme? When might it start?” and so on. The response: radio silence. I have not heard a thing. I know that the Department is busy, but if those schemes are to make any difference to our industrial sector, we ought to have some answers. My constituent should know whether he is being assessed under the scheme.

We had a statement before this debate, and it was interesting that when my hon. Friend the Member for Sevenoaks (Mr. Fallon), who sits on the Select Committee on Treasury, asked the Chancellor whether he could identify one scheme, from among all the things that the Treasury has announced of late, that was operational and was benefiting companies in the real world in the UK, the Chancellor could identify only one. The deferral of VAT was the only scheme that he could identify as offering any help to any business in the UK today. That has to be a terribly sad indictment of a Government who have known that the economy is falling apart since last October.

Lord Mandelson came to the Business and Enterprise Committee in early January to set out the steps that the Government were going to take. I challenged him on how speedily the measures would be operational, but I got the usual tardy response from the noble Lord about how everything would be all right. The general tenor of his response to me was: “How dare you ask such an impertinent question?” Yet here we are, on 16 March, and none of the schemes that we were told would be activated so speedily has happened.

Just on the subject of VAT, is my hon. Friend aware that, like so many firms, John Lewis recently said that the reduction in VAT from 17.5 to 15 per cent., which was so costly to the taxpayer, has made no difference whatever to overall sales? In any case, on 1 January, it is going to go back up again, although we also have to ask, back up to what: will it go back to 17.5 per cent. or will it go up still higher?

My hon. Friend is exactly right. The Government have struggled to find anybody, certainly in the retail sector, prepared to say that the 2.5 per cent. VAT cut has been successful. It has, in fact, been a burden to businesses as they struggle to try to deliver it to their customers—in the case of a restaurant, for example, without having to change the entire menu at lavish cost. All sorts of companies are affected; a car park in Bromsgrove has to run free days in order to recompense the public for their 2.5 per cent. VAT cut. As I say, it has been yet another burden to most businesses and it is certainly not obvious how it has encouraged consumer sales.

When I went shopping at Marks and Spencer before Christmas, the store had 20 per cent. off; I have not returned since, despite the Government’s provision of 2.5 per cent. off. We all know how customers behave and we all know that sales in shops have been much bigger than anything provided by the VAT cut. As my hon. Friend the Member for Lichfield (Michael Fabricant) rightly said, we will also have to pay £12 billion back in the end.

Actually, £12 billion is the cost of the measures in this Bill, and the money is much better spent on those measures than on a VAT cut, which barely anyone has noticed and even fewer feel was worth while. I thus genuinely wish the Minister well in executing Government policy to help UK plc, because it needs that help.

I was struck over the weekend by the applicability to today’s debate of comments made in the Health Committee. Let me remind the House of the conclusions of the Health Committee. Its report was

“highly critical of policy design and implementation, which… has made meaningful evaluation of initiatives impossible.”

It went on to say that

“governments have rushed in with insufficient thought, a lack of clear objectives, have failed to collect adequate baseline data, made numerous changes and not allowed time for policies to bed in.”

It went on to recommend that policies be introduced

“with clearly defined goals and robust measurements for success.”

Before we roll this Bill forward, relevant questions need to be asked about some of those issues and how they apply to the entirety of the Government’s approach to the industrial and business sector.

We need to know what the Government are trying to achieve with this money. I have read the descriptions in section 8 of the Industrial Development Act 1982 and they are obviously necessary to release the money, but they should not be sufficient to release it. We need to understand the Government’s strategy; it must not be hidden behind words in continuing discussions that lead to no action being taken.

It is particularly relevant for us to ask about the context of the disbursement funds, about how the Government view the business and industrial landscape and what it will be like post-recession. It is pretty clear from numerous Government statements that they think that the landscape post-recession will be very similar to what it was pre-recession. I do not believe that that will be the case at all. There will be fundamental changes in the way people deal with credit, for example, yet we see no initiative or great thinking to take that forward.

A number of hon. Members have picked up on the issue of the car industry. Money has been thrown at it, but what has it actually achieved? The Minister may recall that in a debate on a statement of 27 January, I put it to him:

“I have listened to the statement twice and I am none the wiser as to how many new cars the money will help to sell. Would the Minister like to tell us?”—[Official Report, 27 January 2009; Vol. 487, c. 179.]

It is, perhaps, not surprising that the Minister did not like to tell us. He merely said that it was all in the form of guarantees, and that therefore everything was all right. I do not think that answers of that kind take us much further towards being able to judge whether the money is appropriate and whether it is being well spent.

I should like the Minister to confirm that the car makers are yet to receive any of the money, and to set out the framework in which its use will be evaluated: the conditions, the success criteria, how value for money will be judged, and the method and speed of implementation. If the Minister thinks that he has answered the value-for-money question simply by saying that guarantees are better than grants, he has failed to appreciate that the House deserves to see below the top level, and to know how value for money is to be established as individual amounts are disbursed.

All this bears the signs of pure, blind panic. We have seen a bank recapitalisation which is failing to get money moving and to establish the necessary conditions. Other Members have already spoken of the confusion and difficulty facing, in particular, small and medium-sized enterprises. That was brought home to me on Thursday evening when, in my constituency, I hosted a recession networking event. I brought together businesses and local providers of services, in both the public and private sectors, to help companies in recession. Making sense of the help being offered by the 20 or so representatives had been an impossible task for many businesses—and why should they have to do it themselves anyway? Why should things not be in clear English and easy to understand?

I must tell the Minister that the event was a great success. I believe that it was attended by just under 150 people, and I think that they all benefited from talking to the providers as well as to each other. But is it not an indictment of the situation we are in, which the Government have made no real effort to improve, that 150 people felt the need to attend such an event because they could not work out what to do by themselves?

This has been a short debate. That may be simply because this is a relatively uncontroversial Bill, but I am saddened to note that the Minister has sat in pretty much solitary splendour on the Labour Benches. No Labour Back Benchers have spoken, although one or two are present and their presence has been much appreciated. It strikes me as incredible that at a time of some of the worst economic conditions that we have experienced for not just one generation but probably several, not a single, solitary Labour Back Bencher thought it important enough and could care enough to turn up and add his or her tuppence-worth. Labour Members apparently did not think it important not only to support their Minister in what he is trying to do, but to try to ensure that their constituents and people around the country understood that they really care about the parlous economic conditions in which businesses are trying to operate.

However, a number of Members did speak—most, but not all, were Conservative Members, although there were contributions from Liberal Democrats as well—and a number of common themes featured in their speeches. My hon. Friend the Member for Bromsgrove (Miss Kirkbride) in particular, but others as well, asked for more details about the schemes that the Bill is supposed to support. The Minister did his level best. He is a decent man, and he tried to ensure that we all understood the various Government-announced schemes for which the funds would be used. I am sure that that was deeply appreciated, but it is clear from what was said by others today that he needs to say a bit more, if possible, in his response to the debate.

Let me pick up a couple of the points made by my hon. Friend the Member for Bromsgrove. It seems that neither the 1982 Act nor the Bill provides for assistance to either banks or insurance companies, but a number of the loan guarantee schemes that we have discussed today involve banks in one way or another. If they do not involve banks, they involve finance arms of car companies and others which—if not outright banks and holders of banking licences—are near-banks, and are certainly the subject of much thought on the part of the Financial Services Authority at present. Will they be excluded from the Bill’s provisions, in which case will the Government need to come up with funding through some other route, or will it be possible to use the financing under the Bill to support such various different schemes?

I understand that the provisions of the Bill are not allowed to apply to areas that have been granted assisted area status. The principal areas with such status at present are Cornwall, the west coast of Wales, the north-west coast of Scotland and the whole of Northern Ireland. If the measures under discussion cannot apply to firms that are based in, or operate in, those areas, how will the Minister be able to make sure that the money raised is directed towards, for example, a car company that has dealerships in districts with assisted area status? Will he offer clarification on that, so that it is put on the record not only for Members of this House, but for the many rather confused members of the business community? This afternoon, we have heard many examples of the incredibly complicated plethora of schemes.

It is not just the number of schemes that is the problem, large and numerous though they are—and they were read out with careful diction by my hon. Friend the Member for Hertford and Stortford (Mr. Prisk). As he also pointed out, each one of them has not only its own scheme, but its own application forms and terms and conditions. Therefore, if anybody trying to make an honest living by running a business wants to apply for one of these schemes, they almost have to hold a PhD in Government finance before they can hope to access it. That inevitably means that they are being distracted from the vital day-to-day business of adding value and creating wealth, and making and preserving jobs, and instead are having to focus on the best way to navigate their way through labyrinthine Government bureaucracy, which is clearly not an intelligent or productive use of anybody’s time.

It is also worth while surveying the history behind the Bill. The Minister correctly pointed out in his opening remarks that this all started back in 1982 with a relatively modest amount of money: £1.9 billion. That was still a significant amount of money, however, particularly in those days; it was far from small potatoes. It is instructive to note how that cumulative total limit has grown. In the first 20 or so years, it grew very slowly—from £1.9 billion to just under £4 billion. However, since then—from shortly after the turn of the millennium—we have experienced, as a result of this Government’s hyperactivity and the debt-fuelled boom in the country’s economy, what is described in business terms as a hockey-stick increase. If we were to graph the rise in the cumulative limit, we would see that it increased very slowly for a long time, and in the past five or six years shot up. As a result, whereas the sum was £1.9 billion in 1982, we are now asked to agree an increase from about £6.1 billion to, in theory, a maximum total of £16 billion. I am afraid that if we ever needed an illustration of the speed with which the wheels have fallen off the Government’s economic carriage, that is it.

The most frequently made and most damning point has been about the problem of implementation and delivery. That point has been made in various parts of the House—I was going to say in “all parts” of the House, but I am afraid there have not been any contributions from the Labour Back Benches. Many people would agree with the principles that the Government are trying to pursue, particularly in their various different loan guarantee schemes, but they have been woefully inadequate in turning their fine words into action—into something practical that business people can get their teeth into and their hands on—by making sure that the banks are starting to lend and that the various different loan guarantee schemes actually function.

As my hon. Friend the Member for Hertford and Stortford pointed out, the working capital scheme was supposed to be the Government’s flagship scheme for getting credit moving in the economy. It was announced way back in January, but as of last week it had not guaranteed a single loan. The enterprise finance guarantee scheme was supposed to help small firms. It was announced in January, but the Federation of Small Businesses says that only 8 per cent. of its members can find a bank that is actually offering it. The loan guarantee scheme for car manufacturers—much discussed this afternoon—was announced in January, but the Government have only just asked for applications from firms needing help, and they have not disbursed a single penny so far. To be fair, Lord Mandelson realised that the scheme was not moving fast enough. He saw it was in trouble and he said that he would “investigate” why it was not getting under way. But as far as anyone can see, the investigation involved sending a junior Minister round to No. 11 Downing street to knock timidly on the Chancellor’s door and ask him—“Please, if he wouldn’t mind awfully and it wasn’t too much trouble”—to pull his finger out.

That serves to illustrate the problem. We did not need an investigation into the difficulties. The problem was plain for everyone to see: dithering and spin instead of decisive, practical action. We did not need investigations or inquiries; we needed action—we needed Lord Mandelson to sit down with the Chancellor and have what is known in the Foreign Office as a full and frank exchange of views. We need the two of them to put the needs of the country ahead of party rivalries and personal wrangling over who is supporting whom in the running to become the next leader of the Labour party.

That, however, was not what happened. Britain’s businesses did not get the prompt action they needed. Instead, what we got was weeks and months of bureaucratic constipation where nothing happened at all, and then, last week, Lord Mandelson lost his temper and started blaming people. He blamed the Treasury. He blamed the Bank of England. He blamed pretty much anyone he could think of. But the people of Great Britain knew exactly who was really to blame: him, and this Government.

The tragedy is that this is not just an internal Whitehall squabble where the only winners and losers are a few politicians and bureaucrats. This is deadly serious, because for every day of ministerial indecision, inaction and incompetence, more people lose their jobs, more companies go bust, and more investors lose faith in Great Britain. Rather than losing his temper and lashing out at his colleagues in Government, the Secretary of State needs to buckle down, as should his Ministers. They need to realise that they may have announced something and got a few headlines, but it will not happen unless they roll up their sleeves and get personally involved. They need to forget about the press releases and glossy announcements and get stuck in to the grubby, messy business of implementation.

The trouble is that that is not likely to happen with this Secretary of State and this Government. They are creatures of PR and spin. They have spent the past 15 years doing it, and it is too late to expect them to change now. Leopards cannot change their spots. That is the tragedy of this recession. If they had moved faster and more effectively, they could have made it shorter and easier for all of us, but they did not, and now the whole country is paying for their dithering and delay. Every community in every part of Britain is feeling it: lost jobs, ruined companies, broken hopes. That is why people are increasingly coming to the same conclusion: it is time for a change.

Let me say at the outset that I am glad that the official Opposition recognise the need for these additional powers. They are necessary, as they cover expenditure that may need to be incurred in the future to provide support for industry, and we all want that support to be provided.

The key points made in the debate fall into several categories. The first point I want to reply to is whether there are too many Government schemes and programmes. I recognise that there has been significant growth in the number of schemes over the years, which is why the Government, with the support of the CBI and others, introduced the business support simplification programme. That is also why we now have a programme of support called Solutions for Business, which works alongside the real help for business initiatives we have announced.

I reject entirely the over-exaggerations that are sometimes made by Opposition Members. I do not believe that one needs a PhD in Government finance to understand the programmes of support out there. I suggest that the hon. Member for Weston-super-Mare (John Penrose) and others who find the schemes confusing should visit the Directgov website or the real help section of the Business Link website, where they will be able to see the wide range of assistance that is available.

Secondly, may I say something about the enterprise finance guarantee scheme, which links to the points made by a number of hon. Members, before I move on to discuss the issues to do with delivery? The scheme covers more than 95 per cent. of all businesses in the UK. It is available to businesses with a turnover of up to £25 million and can provide Government loan guarantees at a rate of 75 per cent. for loans from £1,000 to £1 million. It has been welcomed by industry and, in terms of delivery, it is making progress. I recognise that when companies are facing financial difficulties in a world of 24-hour news, expectations are rightly high. More than 1,100 businesses have now been registered by lenders as eligible for support with potential lending values of more than £110 million. In the past week alone, potential lending of more than £30 million has been registered. That shows that real progress has been made.

I would say to hon. Members who might be interested in examining the facts that when one is in effect launching a new product, it takes some time to be established in the marketplace. That is the case with the enterprise finance guarantee and it probably explains some of the survey findings from the Federation of Small Businesses. All the major banks that have been participating in the scheme—I think there are 19 active lenders now, so those banks participating in the scheme include more than just the major lenders—have been training their staff at a variety of levels on the enterprise finance guarantee and how it operates. Banks are reporting approval rates in line with commercial lending approval rates of about 70 per cent. As the product becomes more established in the marketplace, we will see it continuing to spend. The fact that more than 1,100 businesses have to date shown themselves to be eligible and the fact that they are being considered by banks show that there is some significant take-up.

In some cases, having considered an application from a company, banks will decide even under the terms of the enterprise finance guarantee that they do not want to make the loan. Typically, that would be because a bank believed that the business could not service the loan. Clearly, we cannot support banks providing irresponsible lending. The enterprise finance guarantee has to be there for viable businesses, but it is right that the banks have to make the final decisions based on the lending criteria. We are making progress with the enterprise finance guarantee scheme and I hope that I have shown that.

My argument was that Business Link and Ministers advised that the ability to convert an overdraft was specifically included in the scheme, yet the bank in question excluded the business on that very point, and not on a wider issue. I am not trying to ask the Minister to investigate an individual business but, whatever he may have been told, all the advice that we are getting from businesses suggests that the training on the ground in the high street banks simply is not there. When the Minister says that we are making progress, that rather contradicts what the noble Lord Mandelson loves to do, which is to go on ITN, as he did on 14 January, and say, “The scheme is open for business.” Of course, the scheme he mentioned has not even started.

As I have just explained to the hon. Gentleman, the major lending banks have all been training their staff. There is no doubt that as the scheme is a new product, some people will not have received the training that they might need in the future, but it is important to recognise that the scheme has only been up and running relatively recently.

With lots of these programmes, one cannot suddenly say, “Rustle me up a spending programme that will get £1 billion of taxpayers’ money out of the door within a week.” I do not think that our taxpayers would expect the Government to do that. We need to ensure that we are effective in what we do by ensuring that the taxpayer gets value for money and that our programmes are properly monitored and evaluated. I can assure the hon. Gentleman that that is the case with the enterprise finance guarantee.

I also want to cover the points made about the working capital scheme. The scheme is not open to businesses to apply to, and I think that there has been some confusion about that on the Opposition Benches. We are in advanced negotiations with the banks on guaranteeing some extensive loan portfolios under the working capital scheme, which will help to secure the working capital that is available to many companies in the country. It will also free up additional capital in the process. When we make announcements on the scheme, as we will, hon. Members will be able to see the scale of the activity, but the scheme is not available to businesses.

Let me explain the automotive assistance programme. Whereas businesses with a turnover of up to £25 million, regardless of their sector, can be eligible under the enterprise finance guarantee, we have introduced a scheme through the automotive assistance programme for businesses with a turnover of more than £25 million whereby they can access up to £2.3 billion in loan guarantees and, exceptionally, loans. A number of hon. Members talked about Government support for the car sector, and the programme is a key initiative. The hon. Members for Bromsgrove (Miss Kirkbride) and for Henley (John Howell) mentioned it, and I want to tell the hon. Member for Henley that the criteria for the scheme have been made publicly available. As it is relevant to companies in the automotive sector with a turnover of more than £25 million, we are talking about a relatively small number of companies—probably fewer than 200. I have written to most of them to explain the details of the scheme. That scheme is open for business.

As I mentioned, we had a seminar last Wednesday when we went through some of the nuts and bolts of the scheme with the banks and with companies in the automotive supply chain, as well as with the major manufacturers. We want to see early applications and there is no reason why companies should not apply to us right now. We will endeavour to assess the applications as quickly as possible, because I recognise the need to support the automotive sector at this crucial time.

The working capital scheme was announced in January and we were told that it would be open on 1 March, if not before. When will it be operational?

As I said to the hon. Gentleman, it is operational now, in the sense that we are at the stage of advanced discussions with the banks on the packages that will be made available. I remind him that we are providing £10 billion in guarantees to support £20 billion in working capital lines continuing to be made available, freeing up additional working capital, as well. That is on top of the additional lending being made available to the economy as a result of the commitments we have secured from the banks participating in the asset protection scheme. RBS is committed to providing an additional £16 billion in lending to the business sector this year and, potentially, next; as for Lloyds Banking Group, the figure is £11 billion this year and next. That is significant additional lending, which we all recognise as important.

Frankly, the points made by the Opposition would have a lot more credibility if they did not try to rewrite history every few months. At first they were in favour of recapitalising the banks; now they say they are going through a major lesson in humility, which seems to be born of an attempt to criticise the Government, when in fact they have no credible alternative plans whatsoever. I have sat on the Front Bench over the past months waiting to hear from the Conservatives a credible alternative policy or a suggestion about what should be done. It is one thing being in opposition and wanting to oppose the Government and, rightly, scrutinise what we do; but sometimes, it would be nice to have some constructive opposition and to hear a proposal.

Let me deal with some of the other Government programmes that have been available. The hon. Member for Hertford and Stortford (Mr. Prisk) mentioned the capital for enterprise fund. It is important to note that, as he well knows, this is an investment fund—it is about equity and businesses seeking long-term investment, so it is not a quick fix. Some 231 businesses have already registered their interest in the scheme and, as with any other investment fund, we will need to undertake due diligence before making investments. It is a relatively small fund, but the provision of equity capital at this point in the economic cycle is needed by many businesses. The hon. Gentleman ought to be welcoming what we are doing. If he has different proposals and suggestions that he wants to make about what we should be doing to address the equity gap, let us hear them and hear how he is going to fund them. The Government are very clear and transparent about what we are doing and why.

Last November, we set out a national loan guarantee scheme—£50 billion, clear and simple. Have it, take it—why will the Government not act?

I notice that the hon. Gentleman said absolutely nothing about equity, which we were just discussing. His party has not costed his proposal for a national loan guarantee scheme. It looks very similar to the working capital scheme that we have introduced, but I do not want to play party politics with who thought the idea up first. However, it is clear that the working capital scheme will provide support for existing credit lines of companies. It is providing real help for business, and the hon. Gentleman ought to welcome it.

The hon. Gentleman also asked about the scheme announced in the pre-Budget report on support for credit. As I hoped he would recognise, given that we have made this clear on a number of occasions, the £1 billion scheme that we announced then was turned into the £10 billion working capital scheme support programme that we have now announced, so we are getting on with delivering on that commitment.

The hon. Member for Solihull (Lorely Burt) made a number of points. Let me pick up on what she had to say about trade credit insurance. I appreciate the financial problems that a number of companies have as a result of the withdrawal of that insurance. As she knows, we are looking into these issues, because we are determined to do all we can to ensure that healthy and viable businesses survive. It is a complex area and it is essential that any intervention that might be designed is able to make a real difference. We should not be opening the taxpayer up to unacceptable risk, so there are some important issues there.

The hon. Lady also mentioned regulation on business more generally. As she knows, we look very carefully at any plans for further regulations. We have a small business impact test, and common commencement dates for any regulations that need to be introduced, but she is right to say that we should be looking at regulation on business particularly closely during these difficult economic times.

I appreciate that trade credit insurance is a complex matter. However, Members from all parts of the House have been asking about this for a number of months. Can the Minister give any indication of when the Government might produce some proposals on that?

The best that I can say to the hon. Lady is that we continue to examine these issues very closely. It would not be appropriate to make announcements, and I would only be criticised by the Conservative party for making them and then—well, it is just not the right thing to do at the moment.

The hon. Member for Bromsgrove talked about what she felt was a double guarantee. On the enterprise finance guarantee, we have a specific provision whereby it will not be appropriate for lenders to take any form of direct charge against the principal residence of someone who is being loaned to. She also mentioned the capital for enterprise fund. As I said, fund managers have been appointed and we are looking to explore with the fund how it can help businesses. I hope that they will be making investments shortly.

Before I finish, I want to make two points, the first of which is on value for money. I think it important to recognise that, in a Bill such as this, which provides cover for the provision of future expenditure, we are not actually incurring that expenditure. The normal parliamentary accountability processes still have to be gone through. There are also the normal processes of Government, and I want to assure the House that all expenditure is subject to Treasury Green Book approval requirements, which involve clear objective setting, monitoring and evaluation of programmes. Through all the programmes that we are introducing, we are looking to make sure that we introduce these measures in a thorough way that protects the taxpayer’s interests.

Lastly, I want to re-emphasise that, in doing all this, the Government believe that it is right to act. We need to provide real help to businesses now. We should not be protecting industry from international competition; we should not be propping up failed companies, nor seeking to run them from Whitehall. However, we can and must act in a strategic way to provide support where necessary to our businesses and where it can be used well, and in a way that will help us to get through this recession in the best possible shape and to come out the other side fighting for Britain’s interests, ensuring that we have a strong business base for the future. We want to maximise the benefits for UK society of the investment that we make in UK companies. We want to do so in a way that delivers for the taxpayer, but that also delivers our companies in a healthy state, so that they can continue to weather this recession and come out the other side fighting, prosperous and successful.

Question put and agreed to.

Bill accordingly read a Second time.

Industry and Exports (Financial Support) Bill (Programme)

Motion made, and Question put forthwith (Standing Order No. 83A(7)),

That the following provisions shall apply to the Industry and Exports (Financial Support) Bill:


1. The Bill shall be committed to a Committee of the whole House.


2. Proceedings in Committee, any proceedings on consideration and proceedings on Third Reading shall be completed at one day’s sitting.

3. Proceedings in Committee and any proceedings on consideration shall (so far as not previously concluded) be brought to a conclusion one hour before the moment of interruption on the day on which those proceedings are commenced.

4. Proceedings on Third Reading shall (so far as not previously concluded) be brought to a conclusion at the moment of interruption on that day.

Programming Committee

5. Standing Order No. 83B (Programming committees) shall not apply to proceedings in Committee, any proceedings on consideration or proceedings on Third Reading.

Programming other proceedings

6. Any other proceedings on the Bill (including proceedings on consideration of Lords Amendments or any further messages from the Lords) may be programmed.—(Steve McCabe.)

Question agreed to.

Industry and Exports (Financial Support) Bill (Money)

Queen’s recommendation signified.

Motion made, and Question put forthwith (Standing Order No. 52(1)(a)),

That, for the purposes of any Act resulting from the Industry and Exports (Financial Support) Bill, it is expedient to authorise—

(1) any increase in sums paid out of money provided by Parliament attributable to provisions of the Act—

(a) increasing the sum of £3,700 million specified in section 8(5) of the Industrial Development Act 1982 to £12,000 million, and

(b) increasing the sum of £600 million so specified to £1,000 million,

(2) any other increase attributable to the Act in the sums paid under any other Act out of money provided by Parliament,

(3) any increase attributable to the Act in the sums charged on and paid out of the Consolidated Fund, and

(4) the payment of sums into the Consolidated Fund.—(Steve McCabe.)

Question agreed to.