HL Deb 08 December 1981 vol 425 cc1259-60

2.48 p.m.

Lord Gridley

My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.

The Question was as follows:

To ask Her Majesty's Government what has been the response from small businesses to their Loan Guarantee Scheme.

The Parliamentary Under-Secretary of State, Department of the Environment (Lord Bellwin)

My Lords, the Loan Guarantee Scheme has been warmly received by the small business sector, and substantial use of the scheme has already been made. In the first six months since the scheme came into operation, 1,512 guarantees have been issued in respect of £52.6 million of bank lending. This includes £28.3 million of lending to new businesses.

Lord Gridley

My Lords, I thank my noble friend the Minister for that Answer and congratulate the Government on their achievement. However, may I ask him whether, with regard to the financial arrangements necessary for the approval of this scheme, the banks are carrying out their part in this connection with expedition?

Lord Bellwin

My Lords, I have no reason to think otherwise. The attitude adopted by the banks has been encouraging. A good deal of the early success of the scheme must be as a result of their efforts. However, there is still work to do in ensuring that the banks at all levels, especially local branches, appreciate what the scheme can offer.

Lord Davies of Leek

My Lords, does the Minister appreciate that, while we welcome his excellent Answer, we should like to know, without being facetious, what the definition of a "small business" is?

Lord Bellwin

My Lords, as the comedian said, "I am glad you asked me that"! I asked the same question. Noble Lords might like to know that regarding a small business my brief says: In the interests of simplicity, we have not attempted to so define it". But there is better to come! The next line reads: The scheme is designed so as not to attract the larger business". In all seriousness, the answer is that one must keep this flexible, bearing in mind that there is a maximum amount of money. One could give a definition. There are those who say that a small business is one which employs below a certain number of people, but it would not be helpful to mention that number because we want to keep it especially flexible.

Baroness Sharples

My Lords, can my noble friend tell me whether it is true that in this first year the Government are allowing more than the original £50 million? And do the Government anticipate that in future years they will be increasing the amount of money available under this scheme?

Lord Bellwin

My Lords, I am very pleased to advise my noble friend that, because of the success of the scheme, an additional amount of £50 million has already been made available, making £100 million in all. Clearly, this is one of those very encouraging features of a new development which we are all very happy to see.

Lord Seebohm

My Lords, may I ask the Minister whether he is aware that a number of people, including myself, are very sceptical about this scheme, believing that to overload small businesses with ever increasing debt at exorbitant rates of interest can be quite dangerous when they really need more equity; and that the success of this scheme cannot be judged for quite a long time yet? There have already been failures even in the first six months.

Lord Bellwin

My Lords, there would always be failures, in any case. If we were to stop and not do this because of that consideration, then we would do nothing and that can hardly be the right answer. There are other facilities available for equity finance. The business start-up scheme is where people have to go for that. Secondly, the rates being charged are not exorbitant; they are coming out at very much the equivalent to what borrowers of that kind would normally pay. I think the fact that there is such an encouraging take-up is something we should welcome rather than regret.