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Small Businesses

Volume 704: debated on Thursday 23 October 2008

asked Her Majesty’s Government:

What plans they have to assist small businesses in the current financial situation.

My Lords, banks have committed to the recent recapitalisation scheme to maintain over the next three years the availability and active marketing of competitively priced lending to small businesses at 2007 levels. Central government departments aim to pay 100 per cent of invoices within 10 days, and we are providing advice and support services, including health checks for small businesses through Business Link and the “solutions for business” package announced earlier today.

My Lords, I thank the Minister for that reply. I understand that Ministers are meeting the banks today. Will they agree with the banks a memorandum of understanding to ensure availability of finance, competitive interest rates and no increases in fees for small businesses? May I also point out that the issue of small shops has not been addressed? I presented to this House the Retail Development Bill, which the House has passed, and which calls for an assessment of business rates for small shops. Perhaps the Minister will also respond to that point.

My Lords, on the memorandum of understanding, an agreement has already been reached with the banks to maintain the availability and active marketing of lending at competitive prices. I do not think that we have got to the sort of economy in which we can set the fees and interest rates for each loan. We also agreed with the banks this morning that they and the Small Business Forum would meet to iron out problems that come through in the next few months.

My Lords, given the importance of the single European market, will my noble friend re-examine the directive that governs that market on late payment and indeed the 1998 UK legislation which governs the same, especially with respect to the failure of big businesses to pay small businesses on time?

My Lords, we have had a long discussion with small businesses about the Act and the need for legislation. The view which has been reached is that this area would not easily lend itself to legislation and that the 1998 legislation is perfectly adequate in allowing interest to be charged in particular for late payments. We will be encouraging all businesses as well as government and the wider public sector to pay as soon as possible. That is why the Government have set the example by saying that we will pay within 10 days.

My Lords, in the Secretary of State’s Statement to your Lordships' House yesterday on the subject of this Question, he said that more than a million new businesses have been created since 1997. Was that a gross or a net figure?

My Lords, the noble Baroness will be aware that the Federation of Small Businesses is today calling for the replacement of the small firms loan guarantee scheme by a £1 billion survival fund to be funded by the Government and the European Investment Bank. Is she yet in a position to give the Government’s response to that proposal?

My Lords, we have studied the proposal and have been discussing it with the Federation of Small Businesses for some time. We are currently in discussions with the EIB. Next week there will be a meeting between the Chancellor, my Secretary of State and the president of the EIB to discuss our application to the EIB for funding specifically for small businesses.

My Lords, in respect of the soon-to-be nationalised banks, what safeguards will be in place to ensure that the Government do not interfere for political reasons in the day-to-day running of those banks?

My Lords, we are required by law to protect the remaining shareholders. We will put our shareholding into an arm’s-length entity and have given our assurance that it will be run entirely commercially.

My Lords, can the Minister confirm that the Government intend to encourage an extension of flexible working with the cost saving that that brings to families and, indeed, to small businesses? Will she also do her best to see that flexible working requests from men with family responsibilities are treated as seriously as those from women?

My Lords, our views and our policies on flexible working are very clear on this subject. I understand that they were also clarified by the Secretary of State yesterday.

My Lords, in response to repeated questioning yesterday on whether the £350 million allocated to training is new money, the Secretary of State said that it,

“is additional training money for small businesses. It is existing money, but it was not previously available to small companies”.—[Official Report, 22/10/08; col. 1155.]

To which projects had that money previously been allocated, which will now, therefore, not receive it?

My Lords, that funding was allocated by DIUS for Train to Gain, but not specially allocated for small businesses. John Denham’s announcement stated that we would create some flexibility in the way that small businesses can access Train to Gain as well as allocate this funding especially for them.

My Lords, the noble Baroness said that government departments will now be instructed to pay within 10 days. What was the average time before?

My Lords, 85 per cent of government procurement contracts were paid within 10 days while the remaining 15 per cent were paid on time but not within 10 days. We are attempting to move that 15 per cent into the 10-day timeframe.

My Lords, yesterday I asked the noble Lord, Lord Mandelson, whether the Government intend to support the European Commission proposal to allow VAT to be reduced on repairs to houses, listed buildings and so on, which comes up at ECOFIN in a few days’ time. Presumably the Government know how they intend to act on this proposal, but the noble Lord, Lord Mandelson, did not seem to know when he responded yesterday. Can the noble Baroness help?

My Lords, VAT is a matter for the Treasury and it would be inappropriate for us to comment before its position is made public.

My Lords, can the Minister answer the question asked previously about which department or where this money is coming from? She did not answer it.

My Lords, I said that the money is coming from DIUS, the department responsible for Train to Gain. That is the answer that I gave previously and the one that I am giving now.

My Lords, in her answer to my noble friend Lord Cope the noble Baroness said that she could not respond because it was a matter for the Treasury. Is she aware that she answers for the whole Government?

My Lords, I am perfectly aware that I answer for the whole Government. Nevertheless, matters on tax are for the Treasury. It makes these issues public in a certain process and procedure that we must all respect.

My Lords, while many small businesses would welcome a reduction in interest rates, I am sure that the noble Baroness is well aware that the pound is falling in value against the dollar and other currencies, and that there is a relationship between interest rates and the value of the pound. What protective measures are available to the Government in the event of a run on the pound?

My Lords, I do not believe that we are currently anticipating a run on the pound, but I am sure that the tripartite authorities have made provisions for all circumstances, and have done for years.

My Lords, we have now had six or seven questions in a row from the Conservative Benches. Will the Minister acknowledge that on this side of the House we believe that she has answered all of them not only effectively but quickly, and we are grateful to her?

My Lords, if the noble Baroness’s answer to that question is one of silence, perhaps I may ask her quickly and effectively to answer this question. To what extent have the individual components of the recently announced bank rescue package now been implemented, so that the banks may be expected to respond accordingly?

My Lords, liquidity is already available and is being utilised. The first issuance under the medium-term guarantee scheme, a central part of the package, has already been undertaken by Barclays and had a positive impact on the market. Recapitalisation will obviously be subject to shareholder votes and to the marketing of the shares, which will be taking place over the next two or three months for closure towards the end of the year.