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Business: Government Assistance

Volume 508: debated on Monday 22 March 2010

To ask the Chancellor of the Exchequer (1) what recent assessment he has made of the effects on small businesses of the recent downturn in the economy; what assistance he plans to give during the next six months to small businesses; what representations he has received on this issue; and if he will make a statement; (321831)

(2) what steps his Department (a) has taken since June 2007 and (b) plans to take in the next 12 months to improve the flow of credit from financial institutions to (i) small and (ii) medium-sized businesses; what recent discussions (A) he, (B) other Ministers in his Department and (C) officials in his Department have had with the Confederation of British Industry on this issue; and if he will make a statement.

The Government recognise the importance of small businesses to the UK economy. The lending commitments agreed with RBS and Lloyds over the 12 months from March 2009 have made significant amounts of lending available to creditworthy businesses. To help provide continued confidence to the business sector, these commitments will remain in place until March 2011.

The Government are also exploring the development of non-bank lending channels, as outlined in their 2009 discussion paper. Officials have engaged with key stakeholders on this topic, including the CBI which supports the idea of non-bank lending for diversifying sources of business finance. As indicated at pre-Budget report, the Government will provide an update on non-bank lending in the upcoming Budget.

More generally, the UK’s small businesses proved resilient during the downturn: company liquidations were lower than in the 1990s recession and there were on average a total of 47,366 new start-ups each month in 2009—higher than both 2007 and 2008.

Ministers and Government officials have continued to engage with trade bodies and the major banks throughout the crisis and will continue to do so in order to monitor the flow of credit to businesses. Ongoing work with banks and business groups through the Small Business Finance Forum aims to improve the transparency of banks’ lending practices and help to restore confidence to the business sector.

Government have also put in place a range of wider support for small businesses. This has included:

targeted, temporary access to finance support through the ‘Real Help’ for business package, which included the Working Capital Scheme, Capital for Enterprise Fund and Enterprise Finance Guarantee (now extended to April 2011);

a mix of permanent and targeted, temporary tax support to ease cash flow difficulties through Time to Pay (which will extend payment times for business tax on a permanent basis), extended loss carry-back arrangements (until November 2010) and a deferral in the planned increase of the small companies taxation rate (with the rate remaining at 21 per cent. during 2010-11);

further progress in cutting the costs of regulation through a planned reduction of 25 per cent. in administrative burdens of regulation by May 2010; and

increased funding for SME employers to invest in the training of their staff through Train to Gain.