HC Deb 08 March 1993 vol 220 c662
37. Mrs Gillan

To ask the Chancellor of the Duchy of Lancaster what representations he has received from industry concerning the availability of venture capital for the funding of science-based businesses.

Mr. Robert Jackson

Several of the submissions received during the White Paper consultation highlighted the importance of venture capital for innovation.

Mrs. Gillan

I thank my right hon. Friend for his reply. Will he accept that, recently, many science-based businesses, particularly small and medium-sized firms, have had difficulty raising finance, chiefly because of short-termism and the short-term view taken by City institutions and venture capitalists? Can he give sorne assurances and perhaps encourage the City to look more carefully at the small and medium-sized businesses whose activities are based on science, as it is from such businesses that the recovery in this country will come?

Mr. Jackson

There is interesting evidence from the British Venture Capital Association and its constituent companies, showing an increase in the level of support to science-based businesses from 14–3 per cent. of the business of its members in 1989 to 18 per cent. in 1991.

I appreciate the spirit of my hon. Friend's question, but the allegation about short-termism in capital markets is one which is often made but has never been demonstrated. The key point that is often overlooked is the importance of interest rates. In this country, we have tended to have relatively higher interest rates than elsewhere, particularly the United States and Japan. The achievement in reducing interest rates will help the situation. Meanwhile, the Government have acted to promote proper reporting by companies of their research and development efforts.