Oral Answers to Questions

Lord Stunell Excerpts

Monday 27th October 2014 Commons Chamber

The Secretary of State was asked—

[Sir Andrew Stunell (Hazel Grove) (LD)]

1. What recent progress her Department has made on increasing the number and quality of apprenticeships.

[The Minister for Skills and Equalities (Nick Boles)]

We have already delivered over 1.9 million apprenticeships during this Parliament, and are on track to achieve our ambition of 2 million apprenticeship starts. We are working with groups of employers to develop new trailblazer standards, and last week we launched the latest set of trailblazers in sectors ranging from the nuclear industry to TV production and fashion.

[Sir Andrew Stunell]

Will the Minister join me in commending Stockport council and employers in Stockport on the record numbers of apprentices that have been recruited? Does he, however, recognise that there is an increasing need for pre-apprenticeship help for 16-year-olds so that they can enter apprenticeships, and will he agree to meet some of my colleges and providers about that subject?

[Nick Boles]

I am certainly happy to congratulate any authority that itself takes on apprentices. We all need to set an example in all parts of Government and indeed in this House, as many Members are doing. Of course I would be happy to meet my right hon. Friend. I hope that he will welcome the traineeships programme, which was introduced by this Government specifically to provide people in that age group with a stepping stone to an apprenticeship or to a job.

Repeal of the Fixed-term Parliaments Act 2011

Lord Stunell Excerpts

Thursday 23rd October 2014 Commons Chamber

[Mr Jenkin]

I am a little mystified by that intervention. If we are to make changes to our constitution, we need a mechanism by which to do it, and that will have to be done by elected representatives—it is called democracy; that is what we believe in—and so it will finish up here. If there was ever to be a codified constitution in this country, it would have to be debated and decided here, if perhaps subject to a referendum. I am mystified by the idea that in the estates, villages, towns and cities, the constitution is going to write itself, like some virtual programme on the internet. I don’t think so.

The Act is a fundamental and dangerous change to our constitution because it threatens the privileges of the House. I do not mean our special, personal privilege; I mean the protection of our freedom of speech from questioning by the courts. Under Article 9 of the Bill of Rights, what is said or done in Parliament cannot be questioned or impeached in any other place. However, the Act could result in the courts adjudicating on what kind of vote has taken place in Parliament, because it provides that the Speaker would have to write a certificate stating there had been a vote of no confidence or a two-thirds majority in favour of a Dissolution before the Prime Minister has the authority to go to the Queen and ask for one. It is possible that those votes could be disputed, and because it proceeds from an Act of Parliament, those disputes about who went through which Lobby and on what basis would end up being argued about in a court. This potentially runs a coach and horses through the very important question of parliamentary privilege.

[Sir Andrew Stunell (Hazel Grove) (LD)]

During the passage of the Act, did my hon. Friend speak or vote against the measure he now so roundly condemns?

[Mr Jenkin]

Yes, I did. On Second Reading, those of us in the other Lobby were staggered at how few we were—this was in the glowy aftermath of the announcement of the new politics—and I said, “You might feel lonely today, but don’t worry. One day, this whole Parliament will rue the day it passed this Act.” It will either be got rid of or we will find ourselves in the midst of the most almighty and intractable political crisis where a majority wants to dissolve Parliament and have a general election but we cannot do so. That is the prospect held out by the Act.

As my hon. Friend the Member for Stone said, we still do not really know what the Act means. It stipulates fixed-term Parliaments, but then it makes provision for shortening Parliaments. We have no idea what uncertainty it will create. The Act, passed to create political certainty, could become a source of the very uncertainty, instability and crisis it was intended to avoid. In that case, I hope Parliament would have the sense to take a Bill through this place and the other place as quickly as possible to clear this off the statute book. I commend the other place for its attempt to respect the wishes of the coalition to fix the term of this Parliament but to include a sunset or renewable clause so that it would have to be renewed at the beginning of each Parliament. At least that would have put the choice in the hands of the new Parliament. As it is, if we have another hung Parliament, we could find ourselves in that crisis sooner than we thought but with no sunset clause to get us out of the crisis.

[Richard Drax (South Dorset) (Con)]

It is a pleasure to follow my hon. Friend the Member for Harwich and North Essex (Mr Jenkin): his was one of the many excellent speeches given in the past two hours.

I am grateful to the Backbench Business Committee for granting this debate and to my co-sponsor, my hon. Friend the Member for Gainsborough (Sir Edward Leigh), for joining me. I am also grateful to those Opposition Members who sponsored the debate, although, sadly, neither of them could be here today. As a humble new Member, I say to the hon. Member for Nottingham North (Mr Allen) that I have views too, and I feel that on this subject many of them are mirrored by those outside this place, although I entirely respect his views.

I believe that democracy is best when it is unleashed and untethered and it rampages around the country like some wild beast. If we chain it, as the Fixed-term Parliaments Act 2011 does, we neuter democracy because we neuter debate. Interestingly, Lord Grocott is doing the same as we have done by bringing in a Bill to repeal the Act. He told me on the telephone yesterday that his views, and those of many Labour Members, mirrored ours on the Government Benches.

Fixed-term Parliaments tend to produce coalition Governments, rather than minority Governments. This being the first, we are in the experimental phase, but we had no pre-legislative scrutiny whatsoever and strong objections were voiced in the other place. I fear that next time we might have three, four or even five parties trying to form a coalition Government for a fixed term. How long would it take to form that Government, if indeed it ever was formed? We have heard today that the electoral period has been extended from 17 to 25 days. If a coalition is formed, and if we mirror what happened in 2010, we will be looking at a period of two months without a Government.

I add one further possibility. What if either coalition party leader is challenged, which is possible? The parties will have to choose a new leader and the Government discontinue in the meantime—in effect, we do not have a Government. Yet here we are saying that Parliament is important.

In forming a coalition as a consequence of a fixed term, principles are sold. Our Conservative principles or those of the Labour party or the Liberal Democrats are sold in the name of compromise, which is necessary for a coalition to be formed. As I said in a speech on Tuesday, this is why I believe this place has been so devalued. No longer do we have clear blue or red water—I will not use the other colour, which I pointed on Tuesday would be rather inappropriate—so the electorate are not so sure what each party stands for. This is where the weakness in the current coalition system lies and it is where I think a fixed-term Parliament would lead us to. I do not necessarily want to pick holes in the Liberal Democrats, which would be ungracious of me.

[Sir Andrew Stunell]

Will my hon. Friend explain how the scenario he outlines would be improved by the possibility of an immediate second general election, which is the logical consequence of the case he puts?

[Richard Drax]

I refer to the quote of Lord Waddington, mentioned by my hon. Friend the Member for Stone (Sir William Cash):

“Is it better for a government unable to govern to go to the country to try to obtain a new mandate or for the same government to spend their time fixing up deals in which the unfortunate electorate”—

the voters out there—

has no say whatsoever?...The people not the parties should decide who governs”.—[Official Report, House of Lords, 22 May 1991; Vol. 529, c. 260.]

I hope that answers the hon. Gentleman’s question.

--- Later in debate ---

[Sir Andrew Stunell]

I am trying to understand the logic of the argument, in which the electorate decides that no party should have overall control. If there were a second election within a few weeks, as my hon. Friend suggests, and that one produced a very similar result, would he continue to hold general elections until one party had an overall majority. What is the logic of his argument?

[Richard Drax]

That is not the argument I am putting forward. There would be a period of a year or 18 months of a minority Government before that Government would go back to the country.

A fixed-term Parliament gives the junior partner in a coalition more power than it is due. If we had a Conservative Government, much more legislation would be going through Parliament. The junior party, to be fair, has its own views and principles, and it will force compromise on the senior party, potentially leading to lame-duck Governments. I believe that we have reached that point to some extent now, as other hon. Members have argued. A Government naturally run out of steam; they cannot do what they want to do, because the two parties can no longer agree.

Why, then, after the election in 2010 did we not have a gentleman’s agreement? In 2010 my hon. Friend the Member for Christchurch (Mr Chope) said:

“The Prime Minister is giving up his constitutional right to request a Dissolution, and I can understand that that is very important—a matter of honour between himself and the Deputy Prime Minister. It means that the Prime Minister cannot pull the rug from under the coalition, but why do we need legislation or, indeed, a motion to achieve that? Surely the Prime Minister's word is sufficient.”—[Official Report, 25 May 2010; Vol. 510, c. 141.]

Would that not have been a wiser path to choose, with the two parties making a gentleman’s agreement? We see from the history of coalitions that they never last more than two or three years, because of the very nature of coalitions. At some point, two, three or four years in, the two parties could have agreed to disagree, and the Prime Minister would have gone to the country.

I believe that a fixed-term Parliament with a coalition Government as a consequence leads to a complacent Opposition—one of the most dangerous aspects of all. What have we heard from the Opposition about their policies, what they are going to do to sort out the economy and their approach to all the major issues and problems our country faces? They are happy, rightly, to sit on the sidelines and snipe at a fixed-term Parliament. They maintain a poll lead of 1% or 2%, so why should they stand up and say, “This is what we are going to do to sort out the deficit”? It leads, as I say, to a complacent Opposition, who can wait until the very last minute because they know the election date.

As my hon. Friend the Member for Harwich and North Essex said, it is the Prime Minister’s right to call a general election when he or she chooses. This must keep Parliament, the voters and all of us on our toes, and it keeps the Opposition on their toes. The Opposition do not know what is coming, although they can make a guess. They have to tell the British people what they stand for and what their policies are, perhaps two or three years into a Parliament. If, for example, the polls indicate that the Conservative party is well ahead, the Opposition have to tell the British public what they would do in the event of an election. If the Prime Minister and the Government are doing well and are ahead in the polls, why cannot they go to the people? The people are saying, “We are pleased with what you are doing; we like what you are doing; you are doing what you said you would do.” If we then went to the country and won, the people would be pleased; they have had a choice, without having to wait for five long years. Otherwise, a Government who are not achieving what the electorate want can remain in power, which is surely not in the electorate’s interests.

[Sir Andrew Stunell]

I appreciate my hon. Friend’s generosity in giving way, but I am afraid that the logic of his argument escapes me again. If a party is very unpopular in power, that is precisely when it will not call a general election. Equally, it could be said that if a party were popular, perhaps by accident and not so much because of its policies as because of the vagaries of the economic climate, it might try to take advantage of that situation—quite inappropriately.

[Richard Drax]

As my hon. Friend the Member for Harwich and North Essex so wisely said, perish the thought that parties are partisan or non-partisan in these events. Of course they are. If the economic climate warrants the Prime Minister going to the country in the belief that he or she will win, I find that perfectly pertinent. I see no problem with that whatever. As I said, it keeps everybody on their toes.

This tinkering with the constitution, which is what we did, was not thought through and not much debated. The electorate certainly did not have a choice on fixed-term Parliaments. I believe that we tinker with the constitution at our peril. I admit that I voted for the measure at the time, but I was green and naive in those days, and I would not vote for it now. We are, as a consequence of this Act, stuck in a situation that does not satisfy Parliament or the parties and certainly not the electorate.

Over the last two or three days of debate, we have heard many Members saying how awful they think the public think we all are. I disagree. My view is that we should stop self-flagellating and get on with our jobs. We should stand up for what we believe in and tell the country exactly where we stand on issues. Sadly, in a coalition partnership, it is difficult to do that.

Finally, I would have liked the Fixed-term Parliaments Act to contain a sunset clause, but sadly it did not. As Members have said, it is to be reviewed in 2020. When the Minister makes his winding-up speech, I would be grateful if informed us where exactly the Government stand on this issue. I am sure that the shadow Minister will do exactly the same.

--- Later in debate ---

[Stephen Twigg]

The fact is that we fought an election in 2010 on a manifesto commitment to move to a fixed-term Parliament. That was a long overdue reform and I am delighted that my party committed to that in 2010.

[Sir Andrew Stunell]

Will the hon. Gentleman also acknowledge that the commitment was in the Liberal Democrat manifesto, which is why it was in the coalition agreement?

[Stephen Twigg]

Absolutely. I wonder whether the motion should have been worded, “That this House supports the repeal of the coalition agreement”, because most of the speeches from Conservative Members seem to be more about rehearsing debates about the coalition than the issue before us.

Fundamentally, this debate is about the power of the Executive in Parliament. I believe that the Act enhances the role of the House by removing the ability to dissolve Parliament whenever a Prime Minister saw fit. That seems to be the absolutely central argument in favour of a fixed-term Parliament. The hon. Member for Stone (Sir William Cash) talked about voter choice, but the system prior to fixed-term Parliaments did not give voters more choice; it gave choice to the Prime Minister and the leader of the party in government. That is not a democratic argument at all. In a modern democracy we should not accept that form of unaccountable power. The Act imposes constraints that give more power to this House versus the Executive.

Oral Answers to Questions

Lord Stunell Excerpts

Monday 21st July 2014 Commons Chamber

The Secretary of State was asked—

[Sir Andrew Stunell (Hazel Grove) (LD)]

1. What steps she has taken to raise attainment among less affluent children at school.

[The Minister for Schools (Mr David Laws)]

We have introduced the pupil premium, which supplies significant additional funding to schools for each disadvantaged pupil.

Let me take this opportunity to pay tribute to the work of my right hon. Friend the Member for Surrey Heath (Michael Gove), who has been a passionate advocate of higher standards in education for every single child in the country. Our reforms of the curriculum, of qualifications and of accountability, along with the drive to establish more good and outstanding schools, will continue.

[Sir Andrew Stunell]

I can report to the Minister that schools in my constituency are delighted with the pupil premium, and are particularly delighted that they have complete flexibility in relation to how they can best use it to improve the outcomes for children. May I urge the Minister not to be seduced or tempted by those who want more central prescription of how the pupil premium might be allocated in future?

[Mr Laws]

I will not be tempted or seduced. I agree entirely with my right hon. Friend that it is vital for us to continue to give schools the flexibility that will enable them to spend the money in the best evidence-based way. As my right hon. Friend will know, the Ofsted reports that were published last week show that schools are beginning to use it very effectively to narrow the gap.

Business Loans Appeals System

Lord Stunell Excerpts

Tuesday 17th June 2014 Westminster Hall

[Sir Andrew Stunell (Hazel Grove) (LD)]

It is a pleasure to serve under your chairmanship, Ms Dorries, although it is probably a pleasure that neither of us would have expected in an earlier existence. It is good to be here, and it is good that the Minister is also here. I hope that he gets his breath back and will be ready to listen.

This subject has come up at an appropriate time, because Professor Russel Griggs’s third annual report on the performance of the banks’ appeals system for businesses refused finance by them was published yesterday. It is also only three weeks since the British Chambers of Commerce commissioned its Business Banking Insight website, which provides bank customer feedback and gives a clear picture of the performance of some 74 banks, as set out and decided by some 5,000 businesses across the country. Plenty is going on, and I will certainly acknowledge the Government’s good work. However, I am driven to bring the matter back to the House, having first done so some 15 months ago, by the needs of small and medium-sized enterprises in Hazel Grove. The Government have done a lot, but there is more to do. I will set out why that is and some things that should be done.

The most obvious problem is the huge gap between what the banks tell the Government and Members of Parliament about what they are doing and about their performance on the one hand, and what they tell small and medium-sized enterprises when they knock on the door and say, “Please can we have some help” on the other. Every Member of Parliament—it is certainly true for me—is approached by small and medium-sized enterprises in their constituency who say that they have been treated badly by the banks and do not believe that they are in a friendly environment.

The figures for the number of small enterprises are astonishing. There are 4.8 million companies with fewer than 50 employees, employing 11 million people, so they form a significant part of the industrial and commercial ecology of this country. There are another 30,000 SMEs with between 50 and 250 employees that employ 3 million staff, so there are many enterprises out there.

I received a letter in January from HSBC, one of the principal banks, that stated:

“SME demand for finance is low…. In Q3 2013, 78% of SMEs were ‘happy non-seekers of finance’. These businesses have neither sought loan or overdraft facilities in the 12 months prior to interview, nor felt that anything had stopped them from applying for credit.”

That quote was in the context of HSBC saying that everything was fine, as banks often do. I took a ruler to that: 78% were happy, which means that 12% were not happy, and 12% of the total number of SMEs is 585,000 companies. According to the survey quoted by HSBC, therefore, 585,000 companies were discontented. If that was evenly distributed, it would be 900 enterprises per constituency across the whole country. I want to put that in the context of the briefing sent to me by the British Chambers of Commerce when it heard that I was speaking today. On accessing finance, the BCC said:

“In 2013, 60% of first-time applicants ended the process with no facility in 2013, compared to 51% of applicants in 2012”.

In other words, the number of first-time SME applicants getting banking facilities had dropped, with the refusal rate increasing from 51% in 2012 to 60% in 2013.

As a consequence of all this and of my previous discussions, I wrote to the big five banks at the beginning of this year, asking them, “How much has your bank loaned out to SMEs in the last three years? How much was repaid by SMEs to your bank? What proportion of all loan applications for SMEs that you received was approved, and what proportion was refused? Of those who were refused applications, how many appealed? How many of those appeals were successful?” I did that because I was less and less happy that the bank review process overseen by Professor Griggs was really giving us the kind of information that would be useful in deciding whether the system was working.

I should perhaps say that the system is internal to each bank, but it is closely supervised and monitored by Professor Griggs and his team. Each year, he produces a report, the third of which was produced yesterday, and I am happy to have had a conversation with Professor Griggs yesterday, in which we discussed some of the report’s findings. He has published how many appeals were made to banks and how many were successful. The figures are used quite widely, including by the Government, to illustrate that the system works. Just over 11 months ago, I received a letter from the then Financial Secretary to the Treasury, my right hon. Friend the Member for Tunbridge Wells (Greg Clark), in which he said:

“Results out recently showed that for the second year running, 40% of decisions to refuse lending were overturned on appeal. This shows that the process works.”

If 40% of appeals were overturned in another system, it would seem that something was wrong with the first round of decision making. I discussed that with Professor Griggs and his report comments on it quite extensively. It is worth noting that that figure has been reduced to 31.7% in the latest report, so the overturn rate is lower and the number of appellants is higher, which has to be good news. However, that does not provide a good indication of anything at all when one thinks about it.

The responses that I received from the banks were somewhat disappointing. I will deal only with the response from what I will call bank A. Bank A told me that in 2013 it received 265,000 loan applications, of which it granted 80%, resulting in loans of £2.7 billion. That sounds pretty impressive, but the 20% equates to 50,000 refused loan applications. Of the 50,000 refused, 2% decided to appeal, which is just over 1,000. Bank A gave me a precise figure of 1,063. It tells me that 11% of the appeals were overturned, meaning that 117 appellants had success.

In his report, Professor Griggs says that last year he paid particular attention to the people who did not appeal, but who were refused, to see whether any of them could or should have appealed, and if they had, whether they would have been successful. I must say that he did that in a thorough way. He sampled the different banks, and he reports that between 2% and 5% of the refusals where there was no appeal could have had a case for being reconsidered. He does not say that they would have been successful, but that they could have had an opportunity, had they appealed.

I do not know whether bank A has a 2% rate or a 5% rate, but a 2% rate would mean that 10,000 SMEs were refused, but did not appeal, and yet had a chance, Professor Russel Griggs believes, of having their decision overturned if they had appealed. If the rate was 5% in that particular bank’s case—we do not know which bank has which figure attached to it—then 25,000 applicants were potentially in that position. Quite a large number of companies are not being drawn into the appeals system, but should at least have considered an appeal, according to Professor Griggs’s study of their cases. The appeals system is therefore delivering fairly well, but as the figures from bank A show, appeals are not yet running at a level that can give us real confidence that that system is doing its job fully.

The British Chambers of Commerce refers to many businesses being discouraged from applying in the first place. I certainly have a case in point in my constituency—a company that came to me in the most recent quarter to say that it needed some short-term bridging finance from its bank. The company applied and was refused, but decided not to appeal simply because the appeal would have taken so long that the short-term bridging finance would have been irrelevant to its circumstances. The company made do with other arrangements. The BCC also made the point about there being no effective transparency or open competition between the banks on business by SMEs. The five banks that I wrote to cover 90% of all business accounts and lending in this country. There is a widespread call for the Government’s new business bank to be more active and, in particular, to be in direct contact with businesses, rather than using the banks as its proxy.

The Minister might say that all that can be explained away if the banks were in fact lending more to businesses, weeding out the bad guys—the defaulters and the no-hopers—and giving money to everyone who might possibly deserve it. In fact, however, lending by banks to small business has gone down in each year; in the two years since the Government’s funding for lending scheme was introduced—in which time the Government have provided £41.9 billion to the banks to lend to businesses—the amount of outstanding loans to businesses has gone down, not up, by £25.9 billion. In other words, the banks have fattened themselves up to the tune of £67.7 billion. SMEs around the country are not accessing the appeals system as much as they could—and, in Professor Griggs’s view, should, because it would benefit them.

Please will the Minister promote greater transparency of data? I should not have to say “bank A”, “bank B” or “bank C” to the House; we should know the performance of each bank. If there is to be open competition that is meaningful for small businesses seeking finance, we certainly need such transparency. I had the information provided by bank A, and I got some information from bank B, but the other three banks simply said, “We conform with the process established by Professor Griggs.” In other words, they were not prepared to tell me whether they were 40%, 11% or 20%. They had no information that they were prepared to disclose about how good their systems, including their appeals system, were.

I want the Minister to say that he wants to work with the British Bankers Association and with the banks—I had in mind the word “push”, rather than “work with”—to get more of those who are refused applications into the appeals system. Some money is being spent, and there is a campaign, but it still strikes me as odd that a refusal letter is not automatically required to have information about the appeals system set out at the bottom of it. Some banks do that, but not all.

I also want the Minister to respond to what the British Chambers of Commerce is saying about the British business bank. The BCC has welcomed the £1 billion that the Government have put into the bank, as I do, but the BCC is also saying that it needs to be bigger—the bank needs to be sufficiently big to lever in external finance. It also needs to be organised in such a way that businesses can approach it directly, rather than having to go cap in hand to the banks, with their miserable performance. The banks are of course taking all the credit for the loans that they give and, on the whole, are not saying, “We’re giving you this money because of the Government’s finance for lending programme”, yet they are sheltering behind that programme to fatten themselves up to the tune of £67 billion and counting.

I look forward to hearing what the Minister has to say about that. I hope that he and I can work together to loosen the grip of the banks on the Government’s money, in order to ensure that small businesses in my constituency become the beneficiaries.

[The Minister for Skills and Enterprise (Matthew Hancock)]

It is a great pleasure to serve under your chairmanship, Ms Dorries, I think for the first time. I am grateful for the opportunity to reply to the debate of my right hon. Friend the Member for Hazel Grove (Sir Andrew Stunell) and to answer his questions about bank finance.

The context is of course that the economy is recovering from the biggest financial crisis in generations and, while bank finance is important—most of my response will be on bank finance and the specific points made—sometimes too much focus in the UK is put on it, as opposed to other sources of finance. As we recover from the financial crash, the use of new technology to allow peer-to-peer lending, the growth of crowdsourced finance, the increased private placements market and the development of challenger banks increasingly offer a positive and long-term solution to some of the problems that my right hon. Friend outlined. Alongside the strategy for deficit reduction, of course, turning around the banks is a mission-critical part of the economic recovery, to ensure that small businesses can obtain the finance necessary for investment and growth.

The business lending appeals process is an important part of the answer. In 2011, the banks agreed to give businesses with a turnover of less than £25 million the right to appeal if turned down for credit. As my right hon. Friend said, appeals are to the same bank, but they have to be handled fairly, promptly and transparently—I will come on to that point in more detail later—and the whole process is subject to external audit by Russel Griggs. I want to pay tribute to his work over three annual reports, with the latest one published recently. It is important that that process takes place internally to the banks, because an external appeals process would leave an external decision-maker de facto in charge of a bank’s decision-making. People may ask questions about whether that is a good thing when bank loans are good, but when loans are bad, the question of who takes the hit would be a real one.

The report from Russel Griggs shows an improving picture. Over the past year, there have been more than 3,500 appeals and in 32% of cases the original decision has been overturned. It shows that the process is robust, but, as my right hon. Friend says, that means that since 2011 more than 9,000 small businesses have appealed a bank’s decision and, of those cases, 36% on average have been overturned, so nearly £42 million in additional lending to small businesses has occurred that would not have occurred otherwise.

Equally important has been the increased attention that the appeals process has given to lending processes and improving dialogue between banks and their business customers. The decline in the overturn rate is an indicator that things are moving in the right direction.

As my right hon. Friend said, there is a concern that some businesses do not or might not appeal when they could have secured finance if they had decided to do so. The fact that only between 2% and 5% of declined borrowers would have succeeded in obtaining finance if they had chosen to use the appeals process suggests that that is not a significant problem. It affects some borrowers, but those figures are relatively low.

[Sir Andrew Stunell]

I appreciate that 2% does not sound very large, but in the case of bank A, which I quoted, it would double the number of people who came into the appeals system and more than double the number of people who would have succeeded.

[Matthew Hancock]

If 2% of the total proportion of those applying for finance are in a position where they could have succeeded had they chosen to appeal, that will be relatively small in terms of the process’s macro impact. Of course the situation has an impact on the companies affected, but out of the 100% applying for finance only between 2% and 5% chose not to appeal but would have been able to obtain finance had they done so. There may be other reasons for their choosing not to appeal that we do not know of.

Awareness of the appeals process among the small business population at large is still too low. The latest SME Finance Monitor figures, for the first quarter of this year, show that awareness is at only 12%, a decline of 2% on the previous quarter’s results. There has been discussion about whether the right population to measure is the small business population that is actively seeking finance or a broader set of businesses that may not be seeking finance because they suspect that they will be turned down. Clearly we need to make inroads into the broader small business community. The banks have started to take steps to raise awareness of the appeals process, and launched an industry-wide campaign in January. But those efforts need to be sustained and picked up by individual banks.

Introducing a lending appeals process and raising awareness of it is just one part of our broader efforts to improve access to finance for small businesses. Recently we published research showing that 37% of businesses appear to give up their search for finance and cancel their spending plans after their first rejection, without looking elsewhere—a problem that my right hon. Friend mentioned. That figure of 37% is far too high for us to be comfortable with it, so we have recently launched a consultation on whether to mandate banks to refer businesses that are declined finance to alternative providers. That would be good for the businesses concerned, which would be able to explore a wider range of alternative financing options, and good for the development of a more diverse sector with challenger banks and a competitive market for business finance, as well as augmenting the current appeals process. The consultation closed at the end of April and the Government will respond shortly. Although I cannot possibly prejudge that consultation, my right hon. Friend may have noticed my enthusiastic tone.

The Government are also committed to legislating through the small business, enterprise and employment Bill that was announced in the Queen’s Speech to require banks to share credit data on their small and medium sized business customers with other lenders through credit reference agencies, a measure that I think will have a big impact. Again, it is designed to help challenger banks and alternative providers by helping them to conduct accurate risk assessments on borrowers, so making the market for access to finance more competitive.

Another measure to improve the situation, announced by the Chancellor of the Exchequer on 28 May, is the decision to commission a survey of banks to measure how more than 5,000 businesses rate their banks against factors such as value, appetite for lending and how well they keep their customers informed. The survey is being taken forward by the Federation of Small Businesses and the British Chambers of Commerce. The first results were published in May, and the survey will be repeated every six months. The idea is to develop a tool that over time will help businesses choose the best lender for them, based on the opinions of their peers. It is similar to a ratings system that small business borrowers can use to rate their bank.

A further area allied to the problem of access to finance is late payment, which continues to have a serious effect on the cash flow of some small businesses. Professor Griggs’s report yesterday pointed to 48% of declined loans over £25,000 being declined on grounds of affordability. Late payment squeezes cash flow and has a direct effect on the ability to repay loans. Through measures in the small business Bill, we will require large businesses to report on their payment practices and performance. We consulted broadly on the options for those measures, which will give small businesses the opportunity to judge better which companies they should trade with and to plan for external finance.

We will also introduce legislation that will override contractual bans on the assignment of receivables. That sounds rather technical, but it will allow companies to make effective use of their trade debt as an asset in access to external finance. If a company is engaged in international trade, that will give it more assets that it can use to access finance.

Finally, the British business bank has been established to make finance markets work better for smaller businesses. One of its key objectives is to help create a more diverse market for small business finance, with greater choice. That is reflected in its combined investment programme, which has a current portfolio of 10 commitments to nine finance providers totalling £172 million. It will support lending capacity of over £800 million through leveraging in other finance. That will support a whole range of alternative finance providers. Those include direct lending funds, peer-to-peer lenders, to make sure they can get up to scale, and supply chain finance providers.

To date, over £280 million of lending to smaller businesses has been supported as a result. We hope that the bank will also help to accelerate the development of competitors and alternative providers in this space. There is clearly further to go on that, and the British business bank is working hard to seek options to continue to expand competition in this market.

In conclusion, overall credit conditions are starting to ease. Gross lending to small businesses is ticking up, but repayments by small businesses are also increasing. There was £12 billion of new lending in the last quarter, up 18% on the same period a year before. New financial technologies such as crowdsourcing, the support of the business bank and Government policy changes mean that the position is more encouraging than it has been for some time, but I have no doubt that vigilance is required. We stand ready to take action as necessary to make sure that small businesses get appropriate access to finance. That is necessary to ensure that we can continue to finance the recovery, so that small businesses can create prosperity and jobs and ultimately work to strengthen the financial security of families around the country, which of course is central to the successful pursuit of our long-term economic plan.

Question put and agreed to.

Small Businesses

Lord Stunell Excerpts

Thursday 28th November 2013 Commons Chamber

[Sir Andrew Stunell (Hazel Grove) (LD)]

Thank you, Madam Deputy Speaker, for finding time to fit me in. I congratulate the hon. Member for Newton Abbot (Anne Marie Morris) on securing the debate. We have heard some very good contributions indeed. In the short time available, I want to focus on the part of the motion that refers to encouraging the Government to improve access to finance. The Government have certainly done some very good things in the past three years. They have worked nationally and locally, and I refer in particular to the work UK Trade & Investment has done in my constituency, the work of GrowthAccelerator and the success of the apprenticeship scheme.

I will focus briefly on access to finance from banks for my local businesses. Twelve months ago I secured an Adjournment debate on that topic, bringing to the House the cases of four businesses in my constituency and the difficulty they have had in gaining access to finance from four different banks. As a consequence, I took a deputation of local businesses to see the banking Minister. We met the British Bankers Association and had a representative of the Federation of Small Businesses with us. That discussion produced an assurance from the BBA that it would increase its publicity on access to the appeals system, because if a business is refused a loan there is an appeals system.

The BBA announced with some pride that in the first two years of the appeals process run by the banks, a satisfactory lending agreement was found in 40% of cases where the decline of a loan to a business was appealed against. This was said to be a cause for congratulations. Let me point out that in any appeals system, an approval rating of 40% suggests that there is a problem with that system. Will Treasury Ministers inform me of the distribution of that 40% appeal rate between different banks? Which banks succeeded in getting it right and which failed to do so? Will the Chancellor of the Exchequer consider requiring banks to notify in writing all small businesses whose loan application is declined that they have a right of appeal, because this was not known to many of the businesses in my constituency that had had such a refusal?

I have to say to the Minister that the answer I received on 30 October was rather bland and unhelpful. It was, in essence, a reprint of the BBA’s press release, and it added no further information. I want to see whether he can improve on that, either in what he says today or by reference to his Treasury colleagues as to what they might supply to the House subsequently. The answer did not explain or offer any view on whether a 40% overturning rate for the appeals system was a sign of success or failure. It was also entirely silent about whether there was to be any requirement on banks to follow through refusals of loans with better information for companies on how to appeal.

In the past three years, we have done excellent work that has paid real dividends, but local businesses in my constituency still have a fundamental problem in getting the access to finance to which they are entitled. One of the ironies is that one of those companies, which was refused a loan of £12,000 for business development, was subsequently offered—by the same bank—an unsecured loan of £16,000 to purchase a car. That emphasises the problems that the system still faces.

Oral Answers to Questions

Lord Stunell Excerpts

Monday 22nd April 2013 Commons Chamber

[Elizabeth Truss]

I absolutely agree that it is very important that the practical and the academic line up to create a truly rigorous curriculum. We are also looking at the role of practicals in science to make sure that people get proper experience when they study chemistry and physics, as well as in the design and technology curriculum.

[Andrew Stunell (Hazel Grove) (LD)]

12. What steps he plans to take to ensure that all children receive a broad and balanced education that includes the creative subjects.

[The Secretary of State for Education (Michael Gove)]

All publicly funded schools must teach a broad and balanced curriculum, and Ofsted has a duty to inspect this. We have announced that maintained schools will continue to have a statutory requirement to teach music and art and design from the ages of five to 14. Curriculum entitlements are also in place at key stage 4. Funding agreements with academies and free schools also require them to teach a broad and balanced curriculum.

[Andrew Stunell]

I thank the Secretary of State for his answer. Bearing in mind how important the creative industries are as far as our exports are concerned—just to be pragmatic about this—will he give some assurance that music in particular will continue to play a part, and how will composition and other musical skills be developed at key stages 1 and 2?

[Michael Gove]

My right hon. Friend makes a very good point. First, I thank Darren Henley for his report on music education, which we have had a chance to implement and which has helped influence our own approach to the national curriculum in music. We want children to learn to appreciate, but also to create, which, of course, involves learning composition skills. We also want to make sure that that is done in harness with the new music hubs that are being created. “Hubs” is not a pretty word, but they are a beautiful thing, because they are bringing instrumental tuition to many more young people.

School Governors

Lord Stunell Excerpts

Wednesday 24th October 2012 Westminster Hall

[Andrew Stunell (Hazel Grove) (LD)]

It is a pleasure to serve under your chairmanship, Mrs Main. I thank the hon. Member for Stroud (Neil Carmichael) for securing this debate and also for the work that he has done through the all-party group in providing information and reports. His 20 questions for governors to ask themselves is a minor classic. I hope that that is recognised.

I should declare an interest—of a sort, at least—which is that until earlier this year my wife served on the executive of the National Governors Association, and so to some extent I get these matters in stereo from my personal experience and also from her background. I want to emphasise the point that our 300,000 school governors are the biggest individual group of volunteers that we have. They are all unpaid, or virtually all unpaid. They work in every constituency and every school across the country, with significant responsibilities that have been increased with the education changes not only in the past two and a half years, but perhaps in the past 10 years, as the various Education Acts have come to fruition.

The governing bodies are responsible for children’s welfare and education and, of course, for the quality control of the teaching and the curriculum that is delivered to them. I think there is a general rule in systems of democracy and accountability that a power cannot be created or destroyed; it can only be redistributed. In a situation in which local education authorities are losing power and in which the Government have a professed wish to localise power, that inevitably means that power and responsibility are increasingly transferred to governing bodies and to governors.

I do not necessarily agree with all the direction of travel here, but local education authorities have a reduced role in supporting and challenging their schools and in monitoring the standards and outcomes of their schools. To a much greater extent, schools are beholden to Ofsted. It is to a considerable extent now an option for schools not to participate in the services provided by local education authorities, and that increases the responsibility that comes to governing bodies. I would say, in parenthesis, it has not taken away the duty of local authorities to have regard to the well-being of all the children in their area, which of course can lead to some tensions.

The Government have what I regard as an excellent localist policy of taking power away from Whitehall and Westminster and bringing it back to local communities. That is being done in some slightly wobbly ways in the educational sphere. I put it to my hon. Friend the Minister that some of the measures do not produce extra localism, but the crucial point is accountability. If power and responsibility are taken away from elected Governments, on the one hand, and elected local authorities, on the other, that accountability has to be held firmly and solidly by school governing bodies.

[Kevin Brennan]

Now that the right hon. Gentleman is more free to speak candidly than he might have been when he was in government, will he explain his remarks about those aspects of Government policy in the sphere of education that he feels do not contribute to localism?

[Andrew Stunell]

I suspect, Mrs Main, that you would rule me out of order if I answered that question, because it is important to focus on the issues before the Chamber.

Clearly—this is where I challenge my hon. Friend the Member for Stroud—any Government, if they see the need for change and reform, would be strongly tempted. He talked about changing the balance between stakeholders and skills, and I want to challenge that proposition because it is not a dichotomy. It is not a choice between stakeholders or skilled governors, but a question of ensuring that stakeholders are skilled to retain local community accountability. We jump from the frying pan into the fire if, instead of democratic local education authorities and a democratically accountable Secretary of State, we have professionalised experts with special skills running our schools with no special links to the pupils or staff and no democratic accountability. I want to pull back on what he said, and I remind my hon. Friend the Minister that we do believe in localism and accountability to the local community—both to the local community of parents and the broader community—that every school serves.

The net effect of the changes that have been made in the past few years is that governors have more power and responsibility, which means they need more skills and focus. I agree with my hon. Friend the Member for Stroud that we need to boost and build that.

There is a significant difference in scale and professional need between a secondary school and a primary school. Here, again, I want to make a localism point. Governments have a strong tendency—I experienced this myself, both in government and out of government—to imagine that there is a solution that addresses all the problems. I urge a flexible approach. We should understand that schools come in different sizes and shapes. A secondary school may have a turnover each year of more than £1 million, while a primary school might have a turnover of just a small fraction of that. We need to ensure that we do not over-engineer what we are asking.

Several references have been made to Ofsted. Schools are, of course, required to meet the standards of Ofsted. Whether, in a democratic structure, schools should be accountable to Ofsted is a moot point, but one of the things that is happening now and will happen more in the next year or so is that, even when a school’s results and teaching standards meet Ofsted’s criteria, it may now fail because it does not meet the governance criteria. It is right that there should be such tests of governance and that those tests should be done by Ofsted, but I suspect that quite a number of school governing bodies across the country are in for a bit of a surprise when they realise that they cannot bumble on in their traditional relationship with their head teachers and school bodies and excel as far as Ofsted is concerned.

I believe hon. Members and the Government need to recognise and support the role and development of governors. They are a crucial link in the delivery of good education to our children, and they are at a crucial point in challenging the professionals on what they are doing in the classroom and how they are doing it. Governors are often hard-stretched volunteers, strong on commitment and enthusiasm, but without the range of skills they need to be fully effective. Increasingly, they are the people who not only pass judgment but are themselves being judged on the quality and effectiveness of the education that their school delivers.

What do I think should be done? We have been strong on what might be called “brave words,” but what ought to be done? We should pick up on the Government’s report of two years ago, in which the Government asserted that school governors are a vital part of the education system who are traditionally undervalued and do not have the respect and support that they deserve. We now need to turn that absolutely correct statement of intent into real action. The plea made by the right hon. Member for Exeter (Mr Bradshaw) for mandatory induction training for governors is something the Government could take on board. Additionally, imposing a training duty without considering the cost would be a mistake when schools are under pressure. Obviously, the degree to which schools are under pressure is different in different places, but all schools face real budgetary challenges over the next few years and, desirable and essential as training is, imposing that through any system without the matching resources would be a betrayal of what the Government are attempting to do to improve educational standards.

[Mr Robin Walker (Worcester) (Con)]

I am grateful to my right hon. Friend for giving way and to my hon. Friend the Member for Stroud (Neil Carmichael) for securing the debate. I apologise for missing some of the opening remarks.

My right hon. Friend points out the financial challenges that a number of authorities and schools are facing and with which governors are grappling, but does he agree that, for governors to be able to do their jobs well and to do their best for their school, transparency and clarity in education funding is absolutely vital so they know where they are heading? Will he join me, therefore, in calling on the Government to provide greater transparency on the new funding formula as soon as possible, certainly before the next general election?

[Mrs Anne Main (in the Chair)]

I am sure the right hon. Member for Hazel Grove (Andrew Stunell) will stay within the remit of the debate.

[Andrew Stunell]

Within the scope of the debate, I entirely agree with my hon. Friend the Member for Worcester (Mr Walker).

My hon. Friend the Member for Stroud mentioned the role of school clerks. School clerks, like parliamentary Clerks, are a vital link, and just as parliamentary Clerks ensure that we stay on track by giving us wise and sound advice, so it should be for school governors. I draw the attention of hon. Members to an extremely good programme run by the National Governors’ Association to find the school clerk of the year. There are regional rounds, a national round and, ultimately, a national school clerk of the year. I ask my hon. Friend the Minister whether the Department for Education will consider giving more encouragement to that process so that there are higher levels of participation, and using that to raise standards and improve the spread of best practice across the country. The Department might achieve through promoting excellence what may be much harder to achieve through a strong regulatory framework. I offer that suggestion in the spirit of helpfulness for which I am famous.

We need also to make sure that governors take a strategic view of their role. I entirely agree with my hon. Friend the Member for Stroud about them not getting too hooked up on the size of the chairs or the colour the toilet is painted, or even what days off the school should have. Instead they should be considering the important strategic issues of staffing, training, the delivery of education, and the relationship of the school to the community. There is a huge job to be done in that respect.

I urge the Government and Members of the House to work with governors, and not to impose things on them as we develop the support that they undoubtedly need for their more responsible and challenging role under our new arrangements. I want to add to the thanks that have been given for all the volunteer work that school governors do, and for the effectiveness of so many school governing bodies in raising standards and playing an active and effective part in providing good education. The debate is an opportunity to celebrate those things. I hope that the Minister will tell us that in the years ahead we shall go beyond celebration to support—and results.

--- Later in debate ---

[Kevin Brennan (Cardiff West) (Lab)]

I shall give the Minister a bit more thinking time. It is not her first outing in Westminster Hall, but I welcome her as Parliamentary Under-Secretary of State for Education. She is obviously a woman of many talents: in addition to what might be regarded as the first part of her ministerial job, she does curriculum, exams and—we have found out today—school governance. It makes us wonder what the Minister for Schools is doing with his time. Perhaps he is over in the Cabinet Office, planning on behalf of the Liberal Democrats. I congratulate her; she is obviously doing a job and a half in the Department.

I also congratulate the hon. Member for Stroud (Neil Carmichael) on securing the debate and on his thoughtful remarks on governance. I thank him, too, for his work on the issue with the all-party group on education governance and leadership. He set out his view that skills should predominate over stakeholders in how governing bodies are set up—he had some interesting thoughts on that—and quoted Lord Hill a lot, as well as in the context of governor training. Lord Hill might benefit from some assertiveness training for the next time he tries to speak to the Prime Minister and resign, so that he is more successful than on the previous occasion.

My right hon. Friend the Member for Exeter (Mr Bradshaw) made a good point about mandatory training for governors, outlining brilliantly one of the big issues facing us: the unexploded ordnance that must be out there when accountability has been drawn out of the system. There is a worrying vacuum, as some Members have pointed out, in the pell-mell pace of reform set by the Secretary of State in his desire to be seen as a great reformer. My right hon. Friend is not the first to say that, but he said it effectively. I have no doubt that there is unexploded ordnance out there, and that the lack of accountability will result in scandals in the near future.

We have already seen such incidents, whereby powerful head teachers, without mechanisms in place to hold them to account, have been able to misuse public money. In some cases, criminal charges are involved, so we cannot talk much about them here, but I worry, as does my right hon. Friend, about the vacuum of accountability that is developing rapidly as the academies programme proceeds without sufficient thought having been given to the issue of governance.

I welcome the right hon. Member for Hazel Grove (Andrew Stunell) to the Back Benches following his stint in the Government. Clearly, he was a little unhappy for some of that time. He hinted to us, while rightly staying in order and not going into too much detail, about some of his unhappiness with Government policy in this area, particularly on local accountability and education. I look forward to hearing more from him in the House on that subject in the weeks and months ahead as we debate education policy more widely.

[Andrew Stunell]

I assure the hon. Gentleman that he will hear more, but it will not be in any way to undermine this Government’s bold moves on localism, including in education. I was pointing out to him—I regret that I did not convey it more accurately—that if we take power away from one institution and give it to another, we must ensure that that institution has responsibility and the skills to bear that responsibility.

[Kevin Brennan]

I interpreted the right hon. Gentleman’s remarks as meaning that he was worried that, in some cases, for “localism” read “centralisation”, but perhaps I was reading too much between the lines. Nevertheless, I look forward to hearing what he has to say on the subject in the weeks and months to come.

My hon. Friend the Member for Stoke-on-Trent Central (Tristram Hunt) spoke about the need to build capacity within the system, given that a vacuum has been created by what he described as a slapdash approach to reform and its impact on governors and local accountability. I urge the Minister to reflect on hon. Members’ contributions about their concerns over the vacuum that is emerging.

I join others in praising the 300,000 volunteers—probably the country’s largest volunteer force of any kind—who give up their time freely to serve on governing bodies across the country. I suspect that almost everybody participating in the debate has served at one time or another on a school governing body, and that everybody therefore brings a degree of expertise to the debate, having seen how governing bodies work.

In government, we continued a process of giving more responsibility to governing bodies, tried to reduce local authority interference in how governing bodies operate and made changes relating to the composition of governing bodies. We also started the academy programme—a targeted intervention to try to lift the worst-performing schools in the country’s most deprived areas, which successfully raised standards. I say in passing to the Minister that that is different from simply re-badging a school as an academy and expecting school improvement to happen automatically. It will not happen without a genuine intervention to try to improve standards. However, I will not stray too far from governance while making that point.

I praise governors. We tried to enhance their role. Hon. Members have referred to some of the work done latterly by the previous Government, particularly by the former Schools Minister, Lord Knight, who is now in another place. Unfortunately, some of his initiatives ran out of time as we reached the general election. The discussions held at that time outline the difficulties of reaching consensus—I sympathise with the Minister on this—on the right balance between governing bodies’ ability to perform their strategic role in improving performance in schools and, as other hon. Members have mentioned, the need for governing bodies to have their feet on the ground and their roots in the community, and to use local information and intelligence to do a good job. This is not an easy issue to tackle, and it is appropriate that we try to build consensus on reforming governance in our schools, rather than making the issue a big divide between Government and Opposition.

However, it is important that that debate is held in a tone that shows respect for the work done by governors across the country. That is why I mentioned, in an intervention on the hon. Member for Stroud, the Secretary of State’s speech on governors earlier this year. I suspect that he was trying to make the same reasonable point that the hon. Member for Stroud made: standards vary, and governors are a mixed-ability group like any other. However, in his temptation to use figurative and colourful language, the Secretary of State deeply offended many governors across the country by using the phrase “local worthies” to describe the people who give up their time to serve on governing bodies. The full quote is:

“Local worthies who see being a governor as a badge of status, not a job of work.”

That remark deeply offended large numbers of people, whether it was intended to do so or not. When the Secretary of State wants to offend, he is usually quite deliberate about it, but I am not sure whether he did on this occasion. Libby Purves, who has sympathy with the Secretary of State’s approach to some things, wrote on 9 July in The Times:

“The expression ‘local worthies’ has no place under any government, let alone a Conservative one that claims to want a Big Society and less central nannying.”

I make a plea to the Minister at least to tell us that she will not use such derogatory language when talking about our country’s largest volunteer force, who give up their time to do the difficult and challenging job of helping our schools be the best that they can be. That would greatly help to raise the tone of the debate, so that we can get on with discussing the important, central issues.

On another recent occasion, the Government tried to recruit governors effectively as spin doctors for their policies by putting out a plea via e-mail. The Guardian reported in August that the Department for Education, having created a database of sympathetic head teachers, was trying to enlist governors. An e-mail was sent from the National College for School Leadership to approximately 40 school governors saying that the DFE’s school governance unit is planning “communication activities” around new regulations coming into force next week regarding the size of governing bodies.

School governors are volunteers who give up their time to serve their local schools. They are not there to be recruited as spin doctors for the Secretary of State and his reforms. I hope that the Minister will distance herself from that approach by the Department.

There are real challenges to be faced to get the balance right between the strategic job that governors have to do and the local input required for them to represent the local community effectively. Views differ widely. Some colleagues believe that in this new world in which most secondary schools are now academies, and where they are no longer in the orbit of the local education authority, there is a case for the professionalisation of governing bodies and for executive governing bodies to be in charge of a chain of schools, with, perhaps, more local advisory bodies for local schools. That is one end of the spectrum. At the other, there are others who think it essential to maintain that aspect of localism and ensure that every school, whatever its size, has its own governing body and chair of governors.

I want to probe the Minister on the Government’s current thinking on the governance of schools. Is it her view, and the Government’s, that governors should remain as a voluntary force in support of our schools, or that they should be professionalised and become a strategic board, with at least the chair of governors, and perhaps others, being paid for their work? What is her current position on the payment of governors? Is it Government policy to pay more governors?

Does the Minister believe that there should be fewer governing bodies? In other words, rather than having governing bodies for each school, should there be governing bodies that look after a chain of schools? Does she agree with the Secretary of State that governors are glory-seeking “local worthies”, or is she prepared to recognise the work of local governors? I look forward to hearing her answers.