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Enterprise Finance Guarantee Scheme

Volume 716: debated on Thursday 21 January 2010

Question

Asked By

To ask the Secretary of State for Business, Innovation and Skills how many businesses have accessed loans under the Enterprise Finance Guarantee scheme.

My Lords, 6,200 businesses have accessed loans totalling more than £620 million under the enterprise finance guarantee over the past year. The scheme has been a real success, which is why the Chancellor announced an extension in the Pre-Budget Report to allow a further £500 million of loans to be made available to small and medium-sized enterprises.

I thank my noble friend for that Answer. First, given the good news this week of the fall in unemployment, has he made any estimate of how many jobs are attributable to the introduction of the enterprise finance guarantee scheme? Secondly, as with Professor David Blanchflower, is he concerned that any precipitate withdrawal of this scheme or, indeed, of other schemes designed to stimulate the economy would undermine the progress that has already been made by the schemes?

My noble friend is right to draw attention to the very real risk of wrecking what is a fragile economic recovery if the Government’s stimulus measures were to be withdrawn prematurely. On employment, the enterprise finance guarantee has in fact made a significant impact. Before Christmas, we published an early-stage assessment of its impact on 385 small and medium-sized enterprises. The findings showed that, as a result of the finance guarantee, approximately 60 per cent of firms reported the creation of new jobs and 57 per cent reported that they had saved jobs. Estimates suggest that the guarantee could have been responsible already for saving and creating around 31,600 jobs, with a further 8,000 expected to be saved or created in the future. Government measures of this kind have led directly to the fall in unemployment that we were able to announce yesterday which I would hope would be welcomed by everyone in this House.

My Lords, can the Minister confirm that, as in a Written Answer which he provided for me last year, only 3.7 per cent of those loans that had been offered were to firms in the north-east of England? Is he aware that in the figures that were announced yesterday, to which he referred, unemployment in the north-east of England is now the highest in the country, with one in 10 people out of work and youth unemployment having risen 122 per cent year on year? That is before the devastating impact of the Corus Teesside plant closure and its 3,000 job losses. What efforts will his department take to make sure that scarce resources are targeted where the need is greatest?

My Lords, on the subject of scarce resources, I hope that the noble Lord will direct his advice to those sitting in front of him. What we have seen in the north-east of England is indeed a reduction of unemployment—as has occurred across the country—but not on the same scale and not at the same rate as in other regions in the country. That is precisely why we have to maintain our targeted measures of support for industry, of support for science and skills and support for universities and other educational sectors in the north-east of England—including the excellent regional development agency, whose future of course would be severely threatened and put at risk were there to be a change of government after the election.

My Lords, I recognise the success of the enterprise finance guarantee scheme, but do Her Majesty’s Government and the Secretary of State accept that there is now significant evidence that a number of other government initiatives are being blocked and frustrated by bureaucracy in the banks? What do the Government propose to do about it?

My Lords, I am permanently concerned about the rate of lending by our banks to the corporate sector. Evidence on the availability of bank loans suggests that the vast majority of businesses are able to obtain credit and at a price which is actually below that of two years ago. However, we are aware that demand remains subdued and is possibly masking issues in supply. As demand for lending rises, as it will do as the economy and growth pick up, the banks’ responsiveness to SMEs in the corporate sector as a whole must also pick up and the supply of lending and its price must respond more to market needs.