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Regional Growth Fund

Volume 730: debated on Tuesday 11 October 2011


Asked By

To ask Her Majesty’s Government what steps they are taking to encourage small businesses by revisiting the qualification threshold for the regional growth fund and by establishing a small business bank created with initial bonds funded by the Monetary Policy Committee.

My Lords, we see no need to revisit the qualification threshold for the regional growth fund. In round 1, a third of funding allocated—some £150 million—was targeted at SMEs. It is not the job of the Monetary Policy Committee to establish a small business bank; there are more efficient ways of supporting small businesses, such as the Merlin commitment and the enterprise finance guarantee scheme. My right honourable friend the Chancellor of the Exchequer has also announced that he is considering credit easing options and will make further announcements on this in November.

My Lords, the Government seem more interested in giving cheap phone access to Ministers for big businesses than getting cheap loans access to small businesses that are starved of funds. I ask the Minister again to look at the regional growth fund, the qualification for which is a £1 million claim by any small business. I ask her to look at some fresh ideas, like those of Professor David Blanchflower, for creating within the Bank of England, through the MPC, a bank which is capable of offering loans to small businesses at low rates of 2 per cent.

If the noble Lord will wait for the Chancellor of the Exchequer to explain what he is going to do about credit easing, the noble Lord might take comfort from that. In the mean time, there is no doubt that the fund is accessible to SMEs; it is available through specific bids from organisations with experience of the SME sector that will be able to help make small grants, below £1 million, available to projects that support the fund’s objectives.

I have a couple of examples which might help. The Plymouth University and Western Morning News growth fund was announced in the summer, which targets that money directly at SMEs in the south-west of England. That will work well. Contracts have recently been finalised on the majority of engineering projects in the RGF-supported SME energy cluster in the north-east, headed by Chirton Engineering Ltd. That will be delivering 140 jobs. Although £1 million sounds too high for a small organisation, it would have been impossible to look at every one of those small applications. If anyone wishes to phone the regional growth fund, they will be helped and guided as to how they can come together with other small businesses to take this money. As your Lordships can see, we have already made available some nice amounts of funding—almost a third—to the SMEs.

My Lords, we certainly look forward to the Chancellor of the Exchequer explaining what he intends by credit easing. Would it not be the case that credit easing would tend to increase the public sector deficit to the extent that Government-backed loans to small and medium-sized enterprises underperformed? What would be the costs to SMEs in professional fees and regulatory burdens of issuing bonds? Is not the proposal to package up, securitise and sell into the marketplace loans to SMEs that banks are not otherwise willing to make all too reminiscent of the US sub-prime disaster?

I have listened carefully to what the noble Lord has said, but, as he well knows, I cannot say anything in response at the moment because the Chancellor of the Exchequer has not expounded on how he is going to bring this forward. No doubt the noble Lord will ask me a question again when the Chancellor has done so.

My Lords, manufacturing accounts for 12 per cent of GDP but 50 per cent of our exports. Can I ask the Minister to give an assurance that the Government will concentrate in the future on financial support for manufacturing, which is very complex—there is a need for seed capital and a need for support for research and development in new technologies in particular? There is also great concern that the private banking sector is not sufficiently delivering on lending, which is a disappointment following the Merlin initiative.

The ECGD covers all of that, of course. Today I am delighted to say that the Government are funding manufacturing research in a drive for future growth: a £170 million package to sharpen the UK’s competitive edge has already been given out; a high-value manufacturing technology and innovations centre is receiving £140 million over a six-year period; and the TSB and the Office for Low Emission Vehicles will be running a £15 million competition for investment into the research and development of low-carbon vehicles. I am delighted to be able to announce that today.

Can the noble Baroness give us any more details on the Government’s intention to support the BAE Systems workers? She will know that it was announced earlier this year that 3,000 workers were to be made redundant and that, in both Yorkshire and north-west England, very highly skilled people are being displaced as a result. The Government promised support. Please can you update us on that?

We have of course created a new enterprise zone in that area especially for this. These are terrible times, and the idea of seeing any jobs go at the moment, certainly in the private sector, goes against everything we wish for growth. That enterprise zone is there and we will put every help we can into that area. The Government’s economic policy objective is to achieve strong, sustainable and balanced growth that is more evenly shared across the country and among industries. We will therefore look very carefully at any other incidence of this happening.

Is my noble friend satisfied that there is sufficient demand for loans on the part of small businesses?

It is quite amazing how much demand there is from small businesses for loans. The great thing about small and medium-sized businesses is that they tend to be very optimistic. I grew up in the world of small and medium-sized enterprises, where, against all the odds, you would very often see someone setting up a business in an area where everybody else said it could not possibly have happened. Yes, we are very encouraged by the amount of requests we are getting.

My Lords, in her answer to my noble friend about what the Government are doing to assist those workers who were so tragically being made redundant from BAE Systems, the Minister mentioned local enterprise zones. Can she tell us exactly what the local enterprise zones are going to do to assist in finding jobs and supporting small and medium-sized enterprises in those areas of the country? Would it not have been better to have retained the RDAs?

The RDAs were enormously expensive and were not value for money. I am very glad that we are finished with the RDAs, although one or two of them were extremely good. I hope that the local enterprise initiatives will enable people to take themselves forward so that they do not always turn round and depend on the Government, which is not a good way to take forward the private sector—the sector that will actually start to bring our country out of this deep depression that we find ourselves in.