Businesses (Financial Support)

Part of Oral Answers to Questions — Prime Minister – in the House of Commons at 12:32 pm on 14th January 2009.

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Photo of Ian Pearson Ian Pearson Parliamentary Under-Secretary (Economic and Business), Department for Business, Enterprise & Regulatory Reform, Economic Secretary (Economic and Business), HM Treasury 12:32 pm, 14th January 2009

As a Government, we are always prepared to see proper parliamentary scrutiny of Government decisions and I have no doubt that, subject to issues of commercial confidentiality, we shall want to make full information available.

We believe that today's announcement is important. We have an effective package of measures that build on the work we have done so far—the recapitalising of the banks, the fiscal stimulus that has been announced and the discussions and negotiations we have had with the banks to make sure that those involved in the recapitalisation process continue to make lending available at 2007 levels, which the hon. Gentleman mentioned. All that is important. If he looks at the recent lending report produced by the Bank of England, he will see that the estimated net flow of lending to businesses for the whole of December actually picked up significantly compared with the previous month, but there are still issues, which is why the measures we have announced today are important.

The hon. Gentleman raised the issue of whether the working capital scheme would be additional. What we are doing, on a portfolio of companies basis, is seeking to agree with the banks a package of existing and new working capital credit lines, which we will guarantee as a Government. In turn, that will free up bank capital, and we have said that as a stipulation of participating in the scheme banks must use that freed-up capital to provide additional lending to businesses. That is something that will not be proposed in the Opposition scheme and is major additionality in the programme, which will, I am sure, be welcomed by the House.

The enterprise finance guarantee is targeted on creditworthy companies and because it is operated by the banks the process is that an individual company will apply for the scheme through its bank. Companies can get guidance from the Business Link website on how to go about the process but it will be up to the banks to apply due diligence in determining access to the scheme. I have already indicated the eligibility criteria in broad terms and more details are available.

Lastly, the hon. Gentleman mentioned capital for enterprise and I appreciate his cautious welcome for the scheme. It is targeted on smaller companies that need an equity injection that they cannot get through other means. It will be up to professional fund managers to determine the internal rates of return they might target and that is obviously a matter to which we shall return.

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