HC Deb 06 June 1984 vol 61 cc297-9
6. Mr. Sackville

asked the Secretary of State for Trade and Industry what steps he is taking to ensure co-operation between the small firms service and other sources of advice for small firms.

The Parliamentary Under-Secretary of State for Trade and Industry (Mr. David Trippier)

The small firms service works closely with local enterprise agencies and other organisations to provide a full service to small firms.

Mr. Sackville

Given my hon. Friend's special interest in local enterprise agencies, how does he see their relationship with the small firms service?

Mr. Trippier

I see the local enterprise agencies as being at the sharp end and actively involved in the local community, and the small firms service as providing backup. To use a medical analogy, the directors of the local enterprise agencies are the general practitioners, and the small firms the counsellors, the specialists or consultants. That is the relationship enjoyed in my hon. Friend's constituency. There is an excellent local enterprise agency called the Bolton Business Venture, which has the support of the small firms centre in Manchester.

Mr. Grylls

What advice would my hon. Friend give to the small firms advisory service in reply to small businesses which say that the recent changes in the loan guarantee scheme, introduced by the Government two weeks ago, make it the least attractive and most expensive scheme of any developed country?

Mr. Trippier

The local enterprise agencies' directors should draw the attention of their potential clients to the second Robson Rhodes review, which made it clear that there was a lack of appraisal and monitoring procedures in the loan guarantee scheme. Too many companies were going under because they had not been correctly appraised and monitored. The Government's changes have led to a continuation of the scheme, and increases have not been horrific.

Mr. Williams

Is the hon. Gentleman aware that that advice is of no help to the 1,200 firms a year which he forecast would be deterred from using the loan guarantee scheme as a result of the changes? Is he aware that there has been not only a 50 per cent. increase in the premium that the Government charge over and above the banks' interest, but, more important, that the reduction in the proportion of the loan now to be covered by guarantee means that the banks will increase the rate of interest they charge? Is he aware that the small firms will face a double increase in interest rates?

Mr. Trippier

The hon. Gentleman should remember that the Department of Trade and Industry is receiving on average 400 applications a month. I predicted that they would fall to 300 a month—that was my guesstimate. The 100 applications a month that fall away may be from the companies which should not have been covered by the loan guarantee scheme in the first place. The Labour party's policy cannot be to support indiscriminate lending to small businesses. If some of those businesses go down, they may drag other small firms down with them. That would not be our policy. My advice to local enterprise agencies' directors, which I gave in reply to the former question, is sensible. We have increased the exposure for banks, which means that they will increase their appraisal procedures.