Oral Answers to Questions — Treasury – in the House of Commons at 10:30 am on 26 March 2009.
What assessment he has made of the effect of the availability of credit insurance for industry on the prospects for economic recovery.
About 20 per cent. of lending between businesses is generally covered by trade credit insurance. There is evidence that credit insurers are withdrawing insurance as part of the credit crunch, which is increasing the risks for those companies that use it, and the Government are in discussion with trade credit insurance companies about ways to give business more support.
Welcome as it is to learn from the Chief Secretary that the Government are in dialogue about this subject, I ask her to consider the situation of a small company in my constituency. The premium for its trade credit insurance has risen from £7,000 to £21,000 a year, and that is unaffordable. It had hoped that in the light of the announcement by the Under-Secretary of State for Business, Enterprise and Regulatory Reform, Ian Pearson, that the Government were working on a scheme to underpin trade credit insurance, something would have been announced by now. When will the Government formally address this problem and provide these companies with the help they need?
We are looking at this issue, and the right hon. Gentleman is right to raise it. Much of the market is not covered by trade credit insurance, but this is a real pressure for those businesses that are, which includes many small businesses. He will be aware, however, that there is a private trade credit insurance market, and it is also important to ensure that we protect the taxpayers' interests. He is calling for more action, and I respect that position and think it right that we try to do more, but he should also be prepared to put money behind that, and that is something that his party has persistently refused to do.
May I remind the Chief Secretary that in November I wrote a letter to the Chancellor and Lord Mandelson after discussions with Marsh insurers about credit insurance, and the situation is still precarious, so I think further negotiations need to take place in that area? Dare I also mention the remarks of the Governor of the Bank of England to the Treasury Committee the other day? He said that he would not rule out targeted measures, whether in terms of the labour market or corporate credit. I think targeted measures are still necessary in terms of corporate credit.
My right hon. Friend is correct to say it is right to support the economy at this difficult time. That means providing support for businesses to deal with the pressures they are facing as a result of the global credit crunch, and particularly also support for those who are losing their jobs. That is why we are putting more than £1 billion of additional funding into, for example, helping those who are losing their jobs—investment that, sadly, is continuously opposed by the Conservative party.
For many world-class textile businesses in my constituency, the lack of credit insurance is now a very serious issue. In addition to the monitoring that the Chief Secretary is doing, will she look at the increasing amount of information that we are getting to the effect that the banks are restricting their own facilities and their lending to these companies because there is no credit insurance, which means these businesses are now feeling a double whammy from which they are getting no relief at all?
The hon. Gentleman makes an important point, and that is exactly why we are in detailed discussions with the trade credit insurance companies, and also why we have been setting out a range of measures with the banks to support increased lending. The global credit crunch means there has been a big drop in foreign bank lending, for example, in the UK. Nevertheless, it is right to do everything we can to increase lending and support, which is why we now have legally binding commitments with the banks that have signed up to the asset protection scheme, in order to increase lending this year by tangible amounts.
Does my right hon. Friend agree that dialogue is not enough? There are good firms in our region that will be going out of business if we do not get help to them soon. The textile industry in Yorkshire particularly needs help, and it needs it now—if these businesses are supported for six to nine months, they will survive and flourish. We must do something quickly.
My hon. Friend will be aware of the range of additional support that we have already provided for businesses, because it is right to do so to get them through the credit crunch. For example, 90,000 businesses are now benefiting from being able to defer their tax payments to the tune of more than £1.7 billion. That has been opposed by the Conservatives, but also £350 million of loans—
Order. The right hon. Lady has made mention of what the Conservatives are doing in every one of her replies. I do not want that; what I am looking for is a ministerial reply.
Opposition Members are obviously pleased not to hear reminders about their policies, but—