Loan Guarantee Scheme (Hansard, 14 March 1989)

§ 14. Mr. Batiste
To ask the Secretary of State for Employment if he will make a further statement on the loan guarantee scheme.

§ Mr. Cope
Over 21,000 guarantees to a value in excess of £690 million have been issued since the loan guarantee scheme was introduced in 1981. Applications are currently running at nearly 200 a month.

§ Mr. Batiste
Does my hon. Friend agree that the loan guarantee scheme has been an essential ingredient in the spectacular job creation success among small businesses of the Yorkshire and Humberside region? Will he confirm that it is one of the most cost-effective job creation schemes that the Government have introduced and that it has a secure future?

§ Mr. Cope
Yes, I confirm all that. The scheme has an estimated net job cost of about £450 per job. It contributes much to the creation of small businesses and successful businesses that have grown much, such as the Sock Shop.

§ Mr. Fatchett
Will the Minister have a further look at the regional imbalance in the loan guarantee scheme and tell us what justice there is in the fact that the south-east receives considerably more than Yorkshire and Humberside?

§ Mr. Cope
Obviously, we respond to requests from individuals, from companies and from the banks. To a certain extent, the take-up achieved by the guarantee scheme in the different regions is a result of demand from interested parties, rather than action on our part to steer the scheme in a particular direction. The only thing that we do in that regard is to offer better terms for those in the inner cities.

§ Mr. Tim Smith
Is not the loan guarantee scheme just a rather expensive way in which to train bank managers? My hon. Friend should try to persuade bank managers to put less emphasis on the security on offer and more on the viability of the business plans.

§ Mr. Cope
I certainly do my best to try to persuade them of that important aspect of banking science. It is an important scheme because of its educational effect on some bank managers. At the same time, banks use it quite a lot and that is greatly to be desired.