Small Businesses: Finance — Question

– in the House of Lords at 3:07 pm on 25th February 2015.

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Photo of Lord Harrison Lord Harrison Chair, EU Sub Committee A - Economic and Financial Affairs 3:07 pm, 25th February 2015

To ask Her Majesty’s Government what steps they have taken in the past year to increase access to finance for small businesses.

Photo of Lord Newby Lord Newby Lords Spokesperson (HM Treasury) (Whip), Captain of the Queen's Bodyguard of the Yeomen of the Guard (HM Household) (Deputy Chief Whip, House of Lords)

My Lords, it was announced in the Autumn Statement that the Government are providing further funding to two British Business Bank schemes, the enterprise capital funds and enterprise finance guarantee schemes. Additionally, the Funding for Lending scheme will be extended and focused on lending to SMEs, and furthermore, the Small Business, Enterprise and Employment Bill ensures that SMEs which are rejected for finance by banks are referred to alternative finance providers and that those providers have access to the credit data they need.

Photo of Lord Harrison Lord Harrison Chair, EU Sub Committee A - Economic and Financial Affairs

My Lords, according to the Federation of Small Businesses, credit availability and affordability has declined in the past quarter and indeed the Government’s own Funding for Lending scheme has sputtered and spluttered into reverse over the past two years. Will the Government take heed of Keith Morgan, the leader of the British Business Bank, who has said that there are market failures which need to be addressed if our small businesses are to grow and to provide jobs for the future?

Photo of Lord Newby Lord Newby Lords Spokesperson (HM Treasury) (Whip), Captain of the Queen's Bodyguard of the Yeomen of the Guard (HM Household) (Deputy Chief Whip, House of Lords)

That is why we have created the British Business Bank specifically to deal with these market failures. The bank aims to unlock £10 billion of new finance by 2017-18. On lending to small businesses, the noble Lord should be aware that gross lending has grown by 25% in the past year and by 41% over the past two years.

Photo of Lord Cotter Lord Cotter Liberal Democrat

My Lords, recently the Business Minister wrote to the FTSE companies which are not signed up to the Prompt Payment Code. More than £39 billion is owed in overdue payments to SMEs, so this is a very important issue. Can the Minister tell us what progress has been made on encouraging the many FTSE companies which are not signed up to the code to do so and on ensuring that we carry on pursuing this matter? SMEs are saying that late payment of bills is the main bar to their growth.

Photo of Lord Newby Lord Newby Lords Spokesperson (HM Treasury) (Whip), Captain of the Queen's Bodyguard of the Yeomen of the Guard (HM Household) (Deputy Chief Whip, House of Lords)

My Lords, I agree absolutely with my noble friend. We are looking at this in the context of the Small Business, Enterprise and Employment Bill and tightening up the speed with which the Government pay their bills. We will keep bearing down on businesses to make sure that they improve their performance in this area.

Photo of Baroness Sharples Baroness Sharples Conservative

Can my noble friend say whether government ministries are paying their bills on time as that would surely help small businesses?

Photo of Lord Newby Lord Newby Lords Spokesperson (HM Treasury) (Whip), Captain of the Queen's Bodyguard of the Yeomen of the Guard (HM Household) (Deputy Chief Whip, House of Lords)

My Lords, I think that the track record of government departments on paying bills is significantly better than that of the private sector, but we are always keen to improve performance.

Photo of Lord Lea of Crondall Lord Lea of Crondall Labour

What steps have the Government taken since the Insurance Bill Special Public Bill Committee to make sure that the insurance industry signs up to its own scheme to deal with the late payment of bills? This is a cause of great concern to many of the people who otherwise would use the British insurance industry.

Photo of Lord Newby Lord Newby Lords Spokesperson (HM Treasury) (Whip), Captain of the Queen's Bodyguard of the Yeomen of the Guard (HM Household) (Deputy Chief Whip, House of Lords)

My Lords, as the noble Lord knows, the insurance industry has a payment code and we are encouraging all firms in the industry to abide by it.

Photo of Lord Scriven Lord Scriven Liberal Democrat

What action will the Government take on non-traditional funding for small and medium-sized businesses such as crowdfunding, which is becoming a far more important route to gaining funds for small and medium-sized businesses?

Photo of Lord Newby Lord Newby Lords Spokesperson (HM Treasury) (Whip), Captain of the Queen's Bodyguard of the Yeomen of the Guard (HM Household) (Deputy Chief Whip, House of Lords)

My Lords, the Government have been supportive of the peer-to-peer and crowdfunding lending sectors and have removed barriers to ordinary people making investments while limiting their exposure to risk. So far this support has included allowing peer-to-peer lending to be included in ISAs and to be eligible for bad debt relief, channelling investment from the British Business Bank towards peer-to-peer, and helping investment crowdfunding take off through the enterprise investment scheme.

Photo of Lord Davies of Oldham Lord Davies of Oldham Shadow Spokesperson (Transport), Shadow Spokesperson (Treasury)

The Minister’s initial Answer suggests that he is utterly oblivious to the fact that we have a productivity crisis in this country, a massive balance of payments issue, and that small businesses are constantly emphasising that their access to finance is very limited and difficult for them. Does the Minister not agree that Labour’s commitment to a British investment bank is the next Government’s solution to this Government’s failure?

Photo of Lord Newby Lord Newby Lords Spokesperson (HM Treasury) (Whip), Captain of the Queen's Bodyguard of the Yeomen of the Guard (HM Household) (Deputy Chief Whip, House of Lords)

The noble Lord will be amazed to discover that I do not agree with him at all. He has failed to point out that since this Government came into office private sector employment is up by well over 2 million and the majority of that is likely to be in small and medium-sized businesses.

Photo of Lord Brooke of Sutton Mandeville Lord Brooke of Sutton Mandeville Conservative

May I commend to my noble friend my experience in running a small business where I found that our bills got paid significantly faster if we asked our auditors to call up the company that owed us money?

Photo of Lord McFall of Alcluith Lord McFall of Alcluith Labour

Can the Minister explain why the British Chambers of Commerce has stated that small and medium enterprises are being increasingly left out in the cold by lenders?

Photo of Lord Newby Lord Newby Lords Spokesperson (HM Treasury) (Whip), Captain of the Queen's Bodyguard of the Yeomen of the Guard (HM Household) (Deputy Chief Whip, House of Lords)

As I explained, gross lending to small businesses was up by 25% last year. That is the figure, my Lords. The noble Lord shakes his head, but that is the figure. Banks have not been as open-handed to small businesses as they were before the crash, partly because at that stage in some cases they were lending irresponsibly and partly because they have had to strengthen their balance sheets—something which the noble Lord has been very keen to encourage.

Photo of Lord Foulkes of Cumnock Lord Foulkes of Cumnock Labour

Was finance for small businesses discussed at any of the 56 meetings Ministers had with HSBC over the past five years?