HC Deb 22 June 1981 vol 7 cc12-3
14. Mr. Cadbury

asked the Secretary of State for Industry whether he is satisfied with the progress that is being made in his programme to increase the rate of formation of new businesses and to encourage the expansion of existing small firms.

Sir Keith Joseph

The formation and expansion of small businesses are manifestations of the enterprise of individuals responding to market opportunities and to economic and financial conditions and prospects. Our substantial efforts to improve these conditions and prospects will take time to have a noticeable effect.

Mr. Cadbury

While I welcome the many measures to help small businesses, may I return to the earlier criticism of the loan guarantee scheme? Is my right hon. Friend aware that the premium charge for using the scheme in Britain is 3 per cent. whereas the American scheme costs 1 per cent. and the Canadian scheme nothing?

Sir Keith Joseph

Our scheme has three features which might not be common to all other schemes. First, we are determined not to subsidise from the taxpayer. Secondly, we are determined that those who benefit from the scheme do not have an advantage over competitors who do not. Thirdly, the combined effect of the premium and the bank rate is to produce rates of interest roughly equivalent to the rate at which banks lend now to their marginal customers.

Mr. Ioan Evans

Have not Government policies led to closures, liquidations and bankruptcies? Will the Secretary of State examine the change of policy in France, with the election of the new President, and the interventionist policies which are to be pursued there? Will he abandon his dogmatic attitude and help British industry?

Sir Keith Joseph

We must wait for the outcome of the change of direction in France. The first evidence of that is a higher bank rate. There is a greatly increased demand, demonstrated by interest among potential starters of new businesses at the Department's offices throughout the country, running in some parts to more than four times the rate of a year ago. Bankruptcy increases seem to have peaked and the number of bankruptcies at the last count was below the level of the previous quarter.

Mr. Grylls

As there appears to be no other way to collect information about the birth rate of new companies and businesses than by checking new VAT registrations, will my right hon. Friend undertake to consult industry, especially the small firm organisations, to determine how he can improve that statistical information?

Sir Keith Joseph

My hon. Friend would rightly be quick to criticise if his suggestion, led to any more officials or information returns. While it would be nice to have that knowledge, it is not sufficiently important to generate an increase of forms or officials.

Mr. John Garrett

Does the Secretary of State agree that the rate of collapse of small businesses into insolvency is especially high because of the basic feature of monetarism that must restrict demand in such a way that it hits small businesses hardest?

Sir Keith Joseph

The hon. Gentleman does not appear to realise that the Government are allowing an increase of money in the economy, although admittedly at a less fast rate than before. How much of the additional money in the economy goes into pay as opposed to new jobs rests entirely with wage demands.