HC Deb 12 November 1979 vol 973 cc894-5
17. Mr. Bright

asked the Secretary of State for Industry whether he is considering a loan guarantee system, involving the support of the clearing banks, to encourage and aid the creation and expansion of small businesses.

Sir Keith Joseph

The Government are studying possibilities.

Mr. Bright

Does my right hon. Friend agree that small businesses have a vital role to play in our economic recovery, and that the successful loan guarantee scheme which is operated by both the Government and clearing banks in the United States shows how this can be achieved?

Sir K. Joseph

An unsubsidised loan guarantee scheme would be for the banks themselves to organise.

Mr. Cryer

Does the Secretary of State accept that one of the key ways in which to assist small businesses would be to lower interest rates and restore public expenditure cuts, including those in manufacturing industry? Does he not accept that when the Government cut back on expenditure to organisations such as British Leyland that affects thousands of small firms, which then face bankruptcy?

Sir K. Joseph

Of course it would be desirable, for all sorts of reasons, to have lower interest rates and a more flourishing manufacturing sector. However, we cannot achieve that quickly in the light of the momentum towards excess spending left by the previous Government.

Mr. William Clark

Does my right hon. Friend agree that if public expenditure increases the public sector borrowing requirement automatically increases, with the result that interest rates must rise?

Sir K. Joseph

That may be entirely so, but the hon. Member for Keighley (Mr. Cryer) does not seem to understand that these matters are interrelated. Public spending, if it gets excessive, as it did under the previous Government, has desperate consequences and destroys as many jobs as it seeks to create.

Dr. John Cunningham

Will the Secretary of State say how he expects the widespread forecast of an increase in MLR to assist small businesses?

Sir K. Joseph

What matters is that the Government should succeed in abating the level of inflation, and that matters more for small businesses than the temporary level of interest rate, even at its present level.