Small Business, Enterprise and Employment Bill
Debate between Lord Mitchell and Lord Cope of Berkeley(9 years, 7 months ago)
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Lord Mitchell
My Lords, I have addressed your Lordships’ House many times to take the Government to task for the slow take-up of new schemes designed to provide finance to small and medium-sized businesses. My theme has been constant. There have been so many initiatives over the period of this Government that even I, who really ought to know about these things, am confused. If I do not get it, how can small businesses understand the options when they seldom have to deal with them?
I have cited Funding for Lending as an example. I know that the Government think that it has been a resounding success, but that is not what I hear at the coalface. One banker said to me, “What am I to do? The Government throw money at us, and I have a choice: whether to deploy these funds on small businesses, which are risky and difficult and costly to analyse and administer, or else use the cheap funding to build my mortgage business where I can assess the risk, and it is easy to run”. It is also not what the figures show. More often than not, one quarter followed by the next quarter, the amount of funding extended by Funding for Lending has gone down.
While all these government initiatives have been sputtering along, there has been a very acceptable growth in non-government schemes. The market for alternative finance has exploded, largely as a result of the paralysis of the high street banks, and we on these Benches think that that is to be encouraged. Challenger banks have made a very big impression. Metro Bank, Aldermore and others, such as Santander, are changing the landscape. Peer-to-peer lending has taken off and is becoming a major force. We, as I say, welcome these changes. The traditional banks have let down small business, and it is perfect that alternative sources are stepping into their shoes.
We need, however, to know what is happening in the marketplace. So many questions are asked in your Lordships’ House on this issue, and the truth is that no one seems to know the answer. This amendment will place a duty on the Secretary of State to conduct a review of alternative forms of finance available to small business. This review will examine how the banking sector is catering to the finance needs of SMEs and how SMEs are being encouraged to use alternative forms of finance.
We need the facts, and only an obligation on the Secretary of State will give us the information we require. I beg to move.
Lord Cope of Berkeley
My Lords, as the noble Lord, Lord Mitchell, has said, we have debated access to finance and all the various schemes, both government and private sector, on a number of occasions. I agree with him that there is an awful lot going on in this field. A lot of improvements have been made, by the Government’s efforts, these new forms of alternative finance and so on. I go along with the noble Lord, Lord Mitchell, on all that and on the difficulties of assessing quite what is happening and where the best developments are.
Where I get into trouble with Amendment 6 is the last little bit—proposed new subsection (4)—which says that, at the end of this review, when it is laid before Parliament:
“The Secretary of State may, by regulations, act on the findings of the review”.
That is an incredibly sweeping power, which I would be wholly reluctant to give the Government. I heard what the noble Lord, Lord Stevenson, said at the end of the debate on the previous amendment, but this is a very sweeping power indeed, about which I am very cautious.
Small Business, Enterprise and Employment Bill
Debate between Lord Mitchell and Lord Cope of Berkeley
Lord Cope of Berkeley (Con)
My Lords, I am in sympathy with my noble friend Lord Flight’s amendment, but maybe not with the details, for the reason that the noble Lord, Lord Phillips, indicated. I declare an interest in that I am the director of a small company. This is the company that manages the house in which I live, which is divided into four flats. We have four shareholders, who are those who live in the four flats, and it is convenient for us to organise the cleaning of the common parts and that sort of thing through a company. It is controlled by the four of us. It has very small sums of money, but we would still have to have a register saying that nobody else controlled the company —at least I suppose we would. There are numerous companies, both trading companies and those like the one that I refer to, which would be caught by this legislation and in my view should not be. It may be that my noble friend’s amendment requires refinement and elaboration, but he has a good point in principle.
Lord Mitchell (Lab)
My Lords, as a champion of small companies half of me has a lot of sympathy with this amendment but the other half is worried. We define a small company as one that has a turnover of less than £6.5 million, a balance sheet of less than £3.26 million and fewer than 50 employees. The questions that have been raised today are: what is to prevent such companies from getting up to the activities we are seeking to prevent, and is size really the sole determinant of illegal activities? Maybe we should have a definition of a micro-company—a small, start-up company that has criteria much below the numbers I have given. We need to keep bureaucracy and red tape out of it, but it is quite clear that in the right hands a coach and horses can be driven through this and we need to have some degree of protection.