Policy for Growth

Brian Binley Excerpts

Thursday 11th November 2010 Commons Chamber

[Mr Brian Binley (Northampton South) (Con)]

I congratulate the hon. Member for Glasgow North East (Mr Bain) on his speech, and I refer him to the same speech that was made in this place in 1990. He can look at the record thereafter, because the Thatcher Government did exactly what he said this Government will not do, so there are some examples of that.

I thank my right hon. Friend the Member for Wokingham (Mr Redwood) for initiating the debate. It was good to work with him on obtaining it. The number of people who are speaking in it are clearly a vital part of the process—[Interruption.] I am sorry that I got the year wrong, but if the hon. Gentleman goes back a further 10 years, it will be about right.

I welcome the Minister to the debate. I am delighted to say that Conservative Members have confidence in the work that he will do, simply because he knows business. The previous Government’s failing was that they did not. That simple difference must be taken into account.

The truth of the matter is that the Budget strategy is dependent on growth, and that small and medium-sized enterprises are vital to the success of that strategy. It is that simple. The Government are saying the right things, and have had some success, but money is not getting through to SMEs, and we must ensure that it does. I urge the Minister to give us some answers on how that might happen.

There is no doubt that the Government’s approach has been successful to date. Our international credit rating is much more secure than it ever was, and that is vital. The third quarter growth in gross domestic product was 0.8%, and in the previous quarter it was 1.2%. Bearing in mind that the average over the past 25 years has been 2.5%, that is pretty startling, and a good start for the Government.

[Owen Smith (Pontypridd) (Lab)]

Does the hon. Gentleman agree that the principal component of that growth figure of 0.8% was in the construction industry, and was entirely driven by the stimulus that the Labour Government put in place? We have already heard that it is drying up.

[Mr Binley]

That is absolutely incorrect. Construction has played its part, but not house building. If the hon. Gentleman looks at the size of growth in the manufacturing sector, he will see that it has been a major element of our growth.

I had intended to talk about manufacturing exports, but time forbids that now. I will say, however, that all of that is good, but the sector is not getting the money it needs, and we must pay attention to that. The banks say that lending to business is increasing, and that it rose by 0.9% this August, compared with the previous August. That sounds pretty good, but when we look beneath the surface, we find that most of that money was lent in foreign currency to foreign businesses outside this country. The truth is that lending to British businesses dropped by £400 million.

[Mr Umunna]

I recognise the hon. Gentleman’s comments about lending and about the struggles of small businesses and businesses in general. Was he disappointed, as I was, to see very little on lending in the comprehensive spending review Green Book? On page 30, we see mention of the £1.5 billion business growth fund, which was put in place by the British Bankers Association, but does he agree that that is woefully inadequate, given the difficulties that businesses are facing in getting access to finance?

[Mr Binley]

I want to see more, but we must also recognise that the mess that the last Government got the banks into is one of the reasons that they are not lending money now. That is why we need to encourage them to find more creative ways of lending.

Small and medium-sized enterprises are concerned about how the banks are dealing with them. Thousands are talking about the breakdown in relations with the banks. The number of complaints to the banking ombudsman is up by 119% this year alone, and 14% of all SMEs are now using credit cards to pay for their business expenses. That is an horrific figure. According to the Federation of Small Businesses survey, 31% of SMEs—that is 1.4 million small businesses in this country—say that bank lending is the most important way of improving growth prospects in the sector. When are we going to get the message? Those figures underline the great importance of this matter.

The reasons that growth is important, and that small businesses will not be able to play their part unless they get the money to finance their growth, are very simple. Most of the money they need to finance growth is short-term money for extra labour, extra materials and extra resources. Those are all short-term requirements, and businesses must have them in place before they can grow. The truth is that the payback time is relatively long term. Businesses often go bust more in an upturn than in a downturn because there is no other way of paying back that cash flow drag than through retained profit. They go bust because they try to over-trade but without having the finances to complete the process. Those businesses need our understanding. What are the Government going to do about this? They need to take action for the short term very soon. I know that my hon. Friend the Minister is sympathetic to that view, so this is not a criticism in every sense.

Basel III allows banks to lend money to the Government while still classifying that money as capital reserve. It is a complicated business and I am sure that it needs quite a lot of thought to decide how we use that opportunity to help to finance SME growth. The Minister is a very clever chap, as is the Chancellor, and they have some very clever people in the Treasury. I am sure that it is not beyond the wit of that group of people to give us answers today on how we might release that money to help the small businesses that are in such great need. I repeat that we need to provide money for small businesses in order to make the strategy work. That is the important factor in this debate.

We also need to look into providing businesses with a greater choice of banks in the high street. That is longer-term work, but it still needs to be done as soon as possible. We need an extension of the enterprise guarantee scheme, and we need to know how the Government are going to implement it. We also need the Government to get tough with the banks, and to point out that there is a real need for them to be more interactive with small and medium-sized businesses, because that is not happening. But fine words butter no parsnips, as my grandmother would have said. I want to hear what action the Minister is going to take to ensure that small businesses get the money they need.