HL Deb 17 June 1991 vol 530 cc4-7

2.45 p.m.

Lord Ezra asked Her Majesty's Government:

Whether they propose to set up a credit institution to provide low-cost loans to small and medium-sized enterprises.

The Minister of State, Department of Transport (Lord Brabazon of Tara)

My Lords, Her Majesty's Government have no plans to establish an institution to provide finance to small and medium-sized businesses. Her Majesty's Government already do a great deal for small and medium-sized businesses.

Lord Ezra

My Lords, is the noble Lord aware that on 31st May the Financial Times contained a fairly detailed expose of what such a proposition may be and that Mr. Eric Forth, the Minister responsible for small businesses, stated that the Government were considering that proposition, among other possibilities? Is he further aware that in France and Germany organisations of that sort have existed for many years and have been of great help to small and medium-sized businesses? In the present situation in which small businesses find themselves in great difficulties in raising money at reasonable rates, does not the Minister consider that an imaginative move of that sort could be of enormous help to industrial recovery?

Lord Brabazon of Tara

My Lords, the Government already do a great deal for small and medium-sized enterprises. The business expansion scheme has helped many individuals to invest in small, unquoted companies. By the end of April this year the loan guarantee scheme had made 28,000 loans worth almost £900 million. Moreover, the measures announced in the Budget brought major benefits to small businesses; for example, the cut in the frequency of PAYE payments, the increased VAT registration threshold, and so on.

Lord Molloy

My Lords, is not the Minister aware that the points made by the noble Lord, Lord Ezra, have been outlined in many influential newspapers? People believe that that useful idea will now become a reality. Further, does he not agree that many large firms began because they were able to obtain finance in the form of loans? This is a wonderful opportunity for the Government to show that they back 100 per cent. the spirit of free enterprise.

Lord Brabazon of Tara

My Lords, we do not need the noble Lord, Lord Molloy, to tell us to back the spirit or free enterprise; we certainly do. Presumably all large firms began as small firms and many have become successful. I have already outlined the measures which the Government have taken to help small companies. I am aware of the measures taken in France and Germany, but we have our ways and they have theirs.

Baroness Oppenheim-Barnes

My Lords, while acknowledging the importance which the Government attach to the health of small businesses, does not the Minister agree that it would be a good idea to have a small businesses' ombudsman since small businesses are not able to avail themselves of the services of, for example the banking ombudsman and many other ombudsman services?

Lord Brabazon of Tara

My Lords, my noble friend makes a very important point, which I shall pass on.

Lord Williams of Elvel

My Lords, perhaps I may begin by reminding the House that the clock is not working and that therefore we may take longer on Questions than we otherwise would. I hope that the noble Lord the Leader of the House understands what I am saying.

Will it not be proper for the Government to build on the experience of the Welsh Development Agency, the Scottish Development Agency and the Development Board for Rural Wales which provide serious and substantial services for small and medium-sized businesses? Is that not the right way to go about it?

Lord Brabazon of Tara

My Lords, I am certain that the fact that the clock is not working will enable the House to realise that the replies given from the Dispatch Box this afternoon are very good and, therefore, perhaps we need not take 30 minutes on Questions.

The noble Lord gives examples of three government organisations which, although they may have been set up in previous times, have been carried forward within the past 12 years. They give just the sort of assistance to small businesses which the House welcomes.

Lord Stoddart of Swindon

My Lords, is the noble Lord aware that many people in small businesses will be very surprised to hear that the Government still believe in private enterprise for small businesses, especially those people in the 40,000 businesses which will go bankrupt this year?

Is the noble Lord further aware that small businesses find great difficulty in obtaining capital to keep them going? They are also having great difficulty because the Government will not reduce interest rates to below 10 per cent. That is the only action that will resuscitate business in this country. Are the Government convinced that the only way to deal with the economic problems and the slump that they have brought about is to produce and administer the same failed medicine as before?

Lord Brabazon of Tara

My Lords, the noble Lord states that we have not reduced interest rates. We have reduced interest rates by 3.5 per cent. since last October when we joined the exchange rate mechanism. Interest rates are now lower than they have been for some considerable time.

The noble Lord further asserts that the credit crunch is seriously hampering small firms. The April CBI survey indicated that only 3 per cent. of firms cited the inability to raise external finance as a significant constraint on investment.

Lord Stoddart of Swindon

My Lords, does not the Minister understand that small businesses are in dire trouble because the interest rate cut of 3.5 per cent. is insufficient? Has he heard the news that the May retail figures are lower than for April, and are 2.3 per cent. lower than in May last year? That is a tragedy for small businesses.

Lord Brabazon of Tara

My Lords, I also heard the news last Friday that inflation has fallen to 5.8 per cent. That is extremely good news, which means that we shall be able to reduce interest rates when it is prudent to do so. I am sure that we shall continue to adopt that policy.

Lord Peyton of Yeovil

My Lords, does my noble friend agree that it would be as unreasonable to blame the clock for a long Question Time as it would be difficult to give special treatment to what are described as small or medium-sized businesses?

Lord Brabazon of Tara

My Lords, my noble friend makes a very important point. If one gives special treatment to one sector of the economy it is inevitably at the expense of another.

Baroness Blackstone

My Lords, is the Minister aware that despite what he says about the lowering of interest rates many small and medium-sized firms are suffering greatly from the extremely high interest rates? Is he also aware of the allegations made against the major banks about the interest rates that they have applied, particularly to small and medium sized firms? Can the Minister say what progress the Government have made in investigating those allegations? When shall we hear the findings and the recommendations that the Government will make?

Lord Brabazon of Tara

My Lords, the Government recognise that there is great anxiety about the issue raised by the noble Baroness. However, most of the evidence is anecdotal. Inevitably, in most cases letters and press reports cover only one side of the story. We shall consider whether any government action is appropriate when we have more information. We shall not prejudge the issue on anecdotal evidence.