Small and Medium-sized Businesses (Witham)

Debate between Alan Meale and Mark Prisk

Wednesday 4th May 2011 Westminster Hall

[Mr Prisk]

If my hon. Friend does not mind, I want to answer the questions asked by my hon. Friend the Member for Witham.

We are taking various steps to help SMEs. First, we have secured an effective lending code and an appeal process, so that, for the first time for a dozen years or more, businesses can tackle the unreasonable behaviour that they sometimes encounter. I have encouraged hon. Members—I suspect that I do not need to encourage my hon. Friend—to back up their businesses, because that is the sort of direct action that has an impact on the chief executive of a major bank.

Secondly, we are extending the enterprise finance guarantee—it is not directly relevant to Amelia Rope’s business—so that a further £2 billion of lending can be unlocked. For example, in Essex we have seen 397 businesses secure EFG funding to the value of around £34.5 million. I recognise that that is not the only answer, and my hon. Friend rightly has raised the issue of capital. Debt funding is important, but for many SMEs the capital side—the equity side—is also crucial. That is why we have sought to provide an additional £200 million through enterprise capital funds, which have been designed deliberately to unlock a total of £300 million—£200 million plus £100 million—in equity funding for capital investment for businesses.

Alongside that—this is specifically relevant to the regional growth fund—we recognise the value of business angels. I am a great believer that business angels sitting alongside a business often bring not only funding, but a little grey hair—I declare an interest in that aspect—in terms of experience. We must ensure that small businesses have someone to bring experience of funding. That is why the regional growth fund has been able to extend the way in which we invest through a business angel co-investment fund. The Government should be careful not to invest public money in the wild belief that we have great wisdom in what to invest in, but if we invest alongside those who are experienced, and have a little skin in the game, we can make a sensible investment and grow that market.

That leads me to a broader point about access to credit. I strongly believe that although we need to take short-term measures with banks, we must deal with the long-term issue of competition in the banking system. If we get more entrants—I believe that we will—we will have a golden opportunity to enable people to choose. Every market works when there is a choice of providers. The problem with our banking system at the moment is that most SMEs have a choice between three or four players who have similar terms.

My hon. Friend has raised some excellent points about tax, regulation and credit, as well as about how the agency workers directive will work. She has rightly pointed out that we must enable not only the CBI and larger businesses to have the ear of the Government, but also smaller businesses, which sometimes struggle. In the first 12 months, the Government have started to take effective action by cutting red tape, simplifying the tax system, ensuring that the tax system rewards endeavour through the capital gains tax changes, making it easier to start, fund and grow a business and, in particular, by ensuring that we send a message that the Government include people who have run businesses and who understand them and, just as importantly, that we are on the side of small businesses in Witham and throughout the country.

[Mr Alan Meale (in the Chair)]

That concludes the debate. I place on record my thanks to the Commons staff, who have worked vigorously throughout the day.

Question put and agreed to.