7. What steps he plans to ensure that small and medium-sized enterprises are able to gain access to finance. (33233)

8. What steps he plans to take to ensure that small and medium-sized enterprises are able to gain access to finance. (33234)

The Chancellor and I are currently in discussions with the banks and are seeking an agreement for them to lend verifiably more than they were planning to viable businesses, especially SMEs. We want more competition in business banking, which is why we have set up the Independent Commission on Banking and we are supporting alternatives to bank lending, such as the equity-based enterprise capital funds.

I thank my right hon. Friend for his reply. My constituent Neil Carden recently visited a Department for Business, Innovation and Skills summit. When giving me feedback, he said that despite my right hon. Friend’s efforts to improve SME access to finance through the enterprise finance guarantee scheme, the more important issue of the continuing risk-averse culture among banks remains unchecked. Given my right hon. Friend’s recent comments about the armoury of weapons he has at his disposal, could he set out which ones he is going to use to tackle that culture and get banks to lend more to small businesses?

My hon. Friend successfully ran a family business for some years, I believe, so he understands risk management. Clearly, in the banking sector, in many cases banks took extraordinary risks in commercial and domestic property and derivatives. It is right that they should be conscious of risk, but to some extent they have lurched to the other extreme. That is one of the reasons why the Chancellor and I are discussing how to maintain a steady flow of credit to viable enterprises.

May I continue the theme begun by my hon. Friend the Member for Salisbury (John Glen) and tell my right hon. Friend about an SME in Tamworth called Summit Systems? Although that company has never been in debt it is finding it very difficult to access a normal bank loan, and it does not qualify for the £1 million-worth of regional growth fund funding because it does not need that sort of capital. What can my right hon. Friend do to ensure that smaller amounts of funding are made more readily available to organisations such as Summit, and will he encourage the new Greater Birmingham LEP to take these issues very seriously?

I hope that the LEP will take this matter seriously. My hon. Friend is right to say that the regional growth fund has a limit of £1 million, which precludes small businesses from applying directly. None the less, the company he mentioned and others do have access to, for example, the enterprise finance guarantee scheme. I think that 37 companies in his constituency have already drawn £4 million from that source.

In September the Secretary of State said:

“If banks are saying to us they have got lots of money to spread out on bonuses…at a time when they are constricting credit to small and medium enterprises, then the government may have to use some form of taxation to change their behaviour”.

The whole House knows, and has already heard this morning, that small businesses are still finding credit too hard to get and too expensive when they do get it. The Government have given up on bonuses. The chief executive of Lloyds is purported to be getting £2 million after he has left his job, so why is taxation on the banks being cut?

The right hon. Gentleman was present on Tuesday when the Chancellor gave a very clear statement of our current position in dealing with the banks, and made it very clear that nothing was off the table. However, the right hon. Gentleman is quite right: there is an issue for small-scale business in relation to credit supply as well as lack of demand. We are trying to remedy that through the discussions that we are having.

The truth is that, for all his hollow rhetoric, the Secretary of State has failed small businesses. He promised that the banks would be taxed more if they did not lend. They are not lending, yet taxes are being cut. He has damaged small businesses with the chaotic abolition of regional development agencies, he has excluded small businesses from the regional growth fund, and he promised to publish a growth plan, but could not do so because his civil servants said there was nothing to put in it. The Minister of State, Department for Business, Innovation and Skills, the hon. Member for Hertford and Stortford (Mr Prisk) is reduced to telling Members of Parliament that they will have to write to the banks to help their small businesses, and now the Secretary of State has lost the part of his Department that supports small businesses in the digital economy for no other reason than that he is not a fit and proper person to take the biggest competition policy decision we will see for years. Everyone knows that he is hanging on to his job by a thread, waiting for the Prime Minister to cut it.

The right hon. Gentleman has obviously been trying to polish that intervention for the past three weeks; it is getting a bit stale. The simple truth is that if he had read the latest small business survey, he would have seen that rapid growth is taking place and more jobs are being undertaken—300,000 in the past six months, almost all of which are in the small business sector. That is the sector that will drive the British economy forward and achieve the recovery that this Government have achieved.

Next week I will meet a small business man in my constituency who runs a plumbing business employing 10 people, and whose current finance is under threat of being removed by a bank. If we do not succeed—as I hope we will—in negotiating continued finance, what remedies are there to allow small businesses to get support in their battle, given that the Government are very clear about this, and that we need the banks to deliver?

My right hon. Friend is absolutely right; many companies are in that position. He will be aware that the banking taskforce recently produced a whole set of remedies for companies such as the one that he described, which have had bad experiences with banks and wish to pursue an appeal.

The Secretary of State will realise that we now have a good opportunity to strengthen the supply chain in the automotive sector. However, unless he comes out with a clearer policy position on longer-term finance for medium-sized businesses, that will not happen. What is he going to do to strengthen the supply of finance?

I am aware of the importance of the automobile industry in the hon. Gentleman’s constituency, where I have seen the excellent Vauxhall operation. Specifically, we are working through the Automotive Council, of which I think he is aware, and with which all the leading manufacturers in the UK are associated. One of its earliest decisions was on deepening the British supply chain, and several companies have already reported that that process is happening in a positive way.

I thank the Secretary of State for his answers so far on bank lending. A lot of risky start-up businesses still rely on business angels and friends and family to invest equity. What are the Government doing to plug that equity gap so that people can start up new businesses, employ people and get the economy growing?

The hon. Gentleman is an authority on this; I think that he was entrepreneur of the future several years ago. We do have the growth funds that provide equity. He may also have noticed that as a result of our discussions with the banks, they have established an equity fund in order to achieve precisely the aims that he describes.