Finance (No. 2) Bill

David Simpson Excerpts

Monday 11th October 2010 Commons Chamber

[Mr Binley]

How I wish I knew the answer—but I am sure that one of the answers is to get the banks’ heads together, and perhaps do a light amount of knocking.

I recognise that the banks run businesses, but let me draw attention to what the FSB has said, which I think is very relevant. It estimated that if banks limited bonuses and dividends to pre-crisis levels, they could produce approximately £10 billion of additional capital, which would finance £50 billion of new loans. Is that not a lesson for the banks? We are not saying, “Do not pay your people”, but we are saying, “In a time of difficulty, use restraint. Transfer that money to your lending coffers, and get it out to small businesses.”

Perhaps the Economic Secretary will be kind enough to pursue that challenge, remembering also that capital reserves in banks, if lent to Government, continue to be classified as such. I think that that is a pretty important point. If lent to Government, those reserves are not considered to be risk capital, and are consequently considered to be part of their capital assets.

I shall try to wind up my speech quickly, because I always try to do what the Whips tell me. However, I want to make a few more important points. I welcome the Government’s efforts to increase the availability of the guaranteed loan scheme, but I ask the Economic Secretary to consider ways of unlocking capital reserves to increase the flow of capital available for distribution in that way.

The situation for many small and medium-sized businesses is dire. The Government know that, because we are told about it every day. Figures produced by the Bank of England give the impression that bank lending rose by 0.9% in August, but if we dig a little deeper, we find that a large proportion of those loans were issued in foreign currency, and that actual lending in pounds sterling decreased by £400 million. The truth of the matter is that bank lending this August was less than it was 12 months ago.

I wanted to talk about a couple of clauses in the Bill, but because my Whip has kindly asked me to curtail my remarks, I will do as he asks. I am an ambitious chap, and I hope that he will consider that I am being kind to him.

I welcome Clause 13, which removes the requirement for SMEs to own intellectual property in order to qualify for research and development grants. Sadly, too few small businesses are made aware of how research and development relief can benefit them—I think that the hon. Member for Wirral South (Alison McGovern) made that point earlier—and I urge the Minister to make more effort to increase awareness in the sector. I also welcome the announcement by a consortium of city financiers of their plan to create a British enterprise bank, which I understand will lend exclusively to the SME sector. That is one example of bankers facing up to their responsibilities, and we should congratulate them.

[David Simpson (Upper Bann) (DUP)]

As the hon. Gentleman said, we understand that banks are running a business, but small businesses today are finding it very difficult to provide the security that banks currently seek. The hon. Gentleman used the word “draconian”. Surely something must be done in that regard.

[Mr Binley]

Of course it must. Clauses and conditions for small businesses are now one of the major off-putting factors. Such businesses must be allowed to borrow to create the growth that we need. There is massive pressure to change overdraft to loan. Most small businesses do not want a loan. That is too much of a burden around their necks. They want an overdraft facility, but the trouble is that banks are pricing overdraft facilities out of their reach and that should be taken up, too.

May I conclude therefore—although my Whip has left? Good things are happening, but much more needs to be done if the level of growth required to assure the success of the Budget strategy is to be achieved. We are debating a Bill that facilitates that strategy, but does not do much to ensure that SMEs get the working capital that they need to provide the growth on which the strategy depends. Action is urgently needed and the House will expect to hear from the Economic Secretary what the good lady and the Chancellor will do to ensure that small and medium-sized businesses are properly resourced to play their part in restoring the country's wealth and in growing the jobs to reduce the budget deficit. Once we have balanced the budget, we can get on to dealing with the national debt, bequeathed by a Labour party that seems to think that it is morally acceptable to expect our children and grandchildren to pay for its profligacy. I find that reprehensible. I therefore look forward to being reassured in that respect, and so, I suspect, does the nation.