Banking (Responsibility and Reform)

Derek Twigg Excerpts

Tuesday 7th February 2012 Commons Chamber

[Mr Hoban]

Indeed. My hon. Friend has made an important point which should be noted by the Opposition. Net lending takes into account not just banks’ gross lending but decisions that businesses make to pay down their debt, and that is what we are seeing. We are seeing businesses deleverage in the same way as banks are deleveraging. I do not know whether the Labour party believes that banks should stop businesses paying down their debt in order to force up the net lending figures.

[Derek Twigg (Halton) (Lab)]

rose—

[Mr Hoban]

I have already been generous in giving way, and I will be generous again in a minute.

We will implement a new seed enterprise investment scheme to encourage investment in early-stage companies, with income tax relief and a capital gains tax holiday to kick-start the programme. We will ensure that our adventurous and ambitious small enterprises receive the support that they need to become the next world leaders.

[Derek Twigg]

rose—

[Chris Williamson (Derby North) (Lab)]

rose—

[Mr Hoban]

Will hon. Members calm down for a minute, and allow me to deal with the point about credit easing?

I think that bank credit will remain the principal source of finance for businesses throughout the United Kingdom. That is why in our autumn statement we went further to ensure access to finance. Last year the Chancellor of the Exchequer announced two bold new credit-easing measures to provide up to £21 billion of new lending for UK businesses. Through the national loan guarantee scheme, we are allowing participating banks to raise up to £20 billion of funding with Government guarantees, lowering their cost of funding and enabling them to reduce lending rates to business by as much as 1%.

[Derek Twigg]

An increasing number of subcontractors in my constituency, especially in the construction industry, are having short-term cash problems, either because their contractors have gone out of business or because the contractors are deliberately not paying the subcontractors. However, when the subcontractors go to the banks for help, the banks say “We are not going to help you.” As a result, subcontracting businesses are going bust and people are being thrown out of work, although it would be possible for the banks to provide finance in the short term.

[Mr Hoban]

The hon. Gentleman should tell the businesses in his constituency to use the appeals mechanism that was introduced to enable businesses to challenge decisions by banks and ensure that they are reviewed. Since the introduction of that scheme, 40% of bank managers’ decisions have been overturned through the appeals process.