Loan Guarantee Scheme (Hansard, 10 February 1992)

§ Mr. Colvin
To ask the Secretary of State for Employment if he will make a statement on the workings of the loan guarantee scheme; and what amendments have been made in its operation since it was introduced.

§ Mr. Forth
The loan guarantee scheme was introduced to assist viable small firms which are unable to raise conventional finance due to lack of security or track record. By providing a 70 per cent. guarantee—85 per cent. in inner-city task force areas—the scheme encourages banks and other financial institutions to lend where they would normally be unable to do so.
In return for the guarantee the Department charges the borrower an annual premium of 2.5 per cent.—2 per cent. in inner-city task force areas—of the guaranteed portion of the outstanding loan.
Since the scheme began in June 1981 the major changes affecting the scheme have been:
1984 Premium charge increased from an initial 3 per cent. to 5 per cent. per year on the guaranteed portion of the loan.
1985 Administrative responsibility for the scheme moved from Department of Trade and Industry to Department of Employment.
1986 Premium charge reduced from 5 per cent. to 2.5 per cent. per year on the guaranteed portion of the loan.
1988 Simplified arrangements introduced for loans of £15,000 or less. 85 per cent. guarantee for businesses in Inner City Task Force areas introduced.
1990 Premium percentage reduced to 2 per cent. for those businesses in Inner City Task Force Areas. Agriculture and horticulture became business activities eligible for Scheme assistance.

§ Mr. Colvin
To ask the Secretary of State for Employment how many applications there have been under the loan guarantee scheme in each year since its introduction.
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§ Mr. Forth
The number of applications under the loan guarantee scheme in each year since its introduction in June 1981 has been:

Number

1981–82 3,351

1982–83 6,045

1983–84 4,889

1984–85 2,081

1985–86 543

1986–87 1,042

1987–88 1,222

1988–89 2,266

1989–90 3,214

1990–91 3,394

¹ 1991–92 2,155

¹ To 31 December 1991.

§ Mr. Colvin
To ask the Secretary of State for Employment what has been the cost to the Government of underwriting the loan guarantee scheme in each year since its introduction.

§ Mr. Forth
Information on scheme expenditure prior to the Department of Employment becoming responsible for the scheme is not available. For subsequent years the net cost to the Government was:

£ million

1985–86 27.1

1986–87 11.2

1987–88 3.6

1988–89 3.8

1989–90 5.6

1990–91 16.5

¹ 1991–92 20.6

¹ To 31 December 1992.

§ Mr. Colvin
To ask the Secretary of State for Employment how many failures there have been in the loan guaranteee scheme in each year since its inception.

§ Mr. Forth
Figures prior to June 1987 are not available by individual financial year. The numbers of failures by financial year since July 1987 were:

Numbers

Total up to June 1987 6,164

1987–88 (from July 1987) 248

1988–89 402

1989–90 656

1990–91 1,310

1991–92 (to December 1991) 1,348

Overall total 10,128

	Number
1981–82	3,351
1982–83	6,045
1983–84	4,889
1984–85	2,081
1985–86	543
1986–87	1,042
1987–88	1,222
1988–89	2,266
1989–90	3,214
1990–91	3,394
¹ 1991–92	2,155
¹ To 31 December 1991.

	£ million
1985–86	27.1
1986–87	11.2
1987–88	3.6
1988–89	3.8
1989–90	5.6
1990–91	16.5
¹ 1991–92	20.6
¹ To 31 December 1992.

	Numbers
Total up to June 1987	6,164
1987–88 (from July 1987)	248
1988–89	402
1989–90	656
1990–91	1,310
1991–92 (to December 1991)	1,348
Overall total	10,128