Small and Medium-Sized Enterprises

Debate between Lord Flight and Lord Marland

Thursday 22nd November 2012 Lords Chamber

[Lord Marland]

The noble Lord is absolutely right, but getting access to factoring is much more difficult. Obviously, it smoothes the cash flow that is so critical for businesses. The noble Lord shows a great deal of knowledge in that area.

[Lord Flight]

My Lords, the EIS has raised some £10 billion of risk equity capital for small business and been a great success. I declare an interest as chairman of the EIS Association. Is the Minister aware that a combination of the RDR reforms, which will greatly reduce the number of intermediary financial advisers, and the new FSA initiative to limit the marketing of most forms of EIS funds to professional investors only, is likely to considerably reduce the flow of risk capital for small businesses under the EIS scheme?

[Lord Marland]

There are elements of give and take in that particular area. The EIS scheme is extremely beneficial. We have raised the limits of tax relief for that scheme—which is the “give”. The “take” is that the Government are concerned that it does not attract unsophisticated investors. It is important that investors are clear about the risk that EIS-registered companies have. After all, most are start-up and new businesses, which have an element of risk. So there is an element of give and take.