HC Deb 22 June 1981 vol 7 cc5-7
7. Mr. Michael Morris

asked the Secretary of State for Industry whether he will review the types of activity eligible for the small business incentive package as announced in the Budget speech.

Mr. MacGregor

Both the loan guarantee scheme and the business start-up scheme are new schemes covering a wide range of business activities, and both will be kept under review in the light of experience.

Mr. Morris

Is my hon. Friend aware that the concept of the business start-up scheme has been widely praised, but that there has been enormous criticism of the detailed provisions, not least because there is help for manufacturing, but no help for the distribution of the manufactures produced?

Mr. MacGregor

The business start-up scheme is a matter for my right hon. and learned Friend the Chancellor of the Exchequer. My hon. Friend is right that there was a wide welcome for the scheme. The Government have responded constructively to a number of the comments made since the publication of the Finance Bill, and, as my hon. Friend will know, the Minister of State, Treasury, announced several significant changes to the scheme which have met nearly all the criticisms. The difficulty of retail distribution is to devise a definition in the Finance Bill that will avoid substantial tax abuse.

Mr. Gwilym Roberts

Does the Minister agree that the increased interest in the Government's help for small businesses is purely a reflection of the number of people who have been made redundant and who have nowhere else to go? Does he agree that the help that the Government are giving to small businesses has been more than offset by the general running down of the economy which has been generated by the Government's policies? Does he accept that in the end the future of many small businesses depends on the survival of big business?

Mr. MacGregor

Obviously, the general economy does have an effect. There is no doubt that the reaction of the small business community to a number of measures that have been taken by this Government shows that it goes much further than the hon. Gentleman suggests. A number of the financial and tax measures brought in by this Government have been particularly welcomed.

Mr. Richard Page

I congratulate my hon. Friend on the improvements made to the start-up scheme. However, may I ask him about the loan guarantee scheme? A percentage of it is being supplied by the banks but is being guaranteed by the Government. Could the percentage surcharge that the banks have been making on people taking out loans be reduced? It seems to me that the banks are making a percentage charge on a guaranteed percentage behind which the Government are standing?

Mr. MacGregor

I am grateful to my hon. Friend for giving me the opportunity to clarify this matter. There is a great deal of misunderstanding about it. The Government's guarantee is absorbed in the total average interest rate which the banks are charging and which is roughly at the present rate for marginal lending. But the reactions so far to the loan guarantee scheme have been very favourable, with nearly £700,000 already guaranteed, divided equally between start-ups and existing businesses. Therefore, I think that we can see a constructive interest and that the rate of interest is not a significant barrier.