UK Trade and Investment

Lord Mitchell Excerpts

Tuesday 9th October 2012 Grand Committee

[Lord Mitchell]

My Lords, my noble friend Lady Liddell has done us a great service in securing this debate. We must thank her for that as well as the very impressive speech that she has just made. The contribution made by speakers from all parties is tribute to the importance of SMEs in the national economy.

It is no surprise that my party fundamentally disagrees with this Government’s economic policy, most particularly their refusal to moderate austerity and revert to a growth-based strategy. Yesterday, George Osborne said that there is no alternative. Today, David Cameron says that the economy is slowly healing. However, this morning, the IMF says that our economy is contracting and today’s trade figures are appalling. I wonder what planet these people live on.

In the SME world which I inhabit, the effect of austerity has been devastating. Without credit, businessmen simply cannot expand their businesses and cannot employ more people. I had guessed that by this stage of the debate every aspect of what UKTI does would have been covered, so I am going to stay away from it, at least directly, and talk about other agencies which the Government have to promote SMEs. The Government have been almost manic in introducing new programmes supposedly to help SMEs, but the results have been somewhat anaemic. The fact is that announcing a programme is one thing, making it work is something else. Not surprisingly, the Government have chosen the high street banks to deliver many of their programmes. The suspicion is strong, however, that instead of befitting small and medium-sized business as intended, the banks are directing these funds either to the more highly profitable consumer sector or else towards bolstering their own balance sheets.

The business growth fund owes its genesis to Project Merlin, which as the Minister will know was an undertaking written in blood by the banks to benefit British industry. But what do we see? We see the fund in many instances investing in companies not by funding investment or cash flow but, perversely, by cashing out managers and shareholders. The word on the street is that the business growth fund is a total failure. I would like to hear the Minister’s view on this.

I come to the business finance partnership. This is a £1.2 billion pot, of which £700 million is supposedly committed to mid-sized companies. It aims to promote alternative and non-traditional channels of finance. I am told by people who are in the know that little has happened. There is also the regional growth fund. Out of £1.4 billion earmarked for this project, only £60 million has been received by business. “Glacial” is a word I used to describe the fund. The enterprise guarantee scheme is also a flagship project. Again, I would like to know how it is progressing. There is also the export enterprise finance guarantee scheme that was launched to fund exports and is directed at SMEs. It is all good stuff, but by June of this year it had allocated only £3 million—or so I am told.

One government initiative that I fully support is the seed enterprise investment scheme introduced by the Chancellor this time last year. I am contemplating investing in various start-up companies, using this structure. It is very tax efficient. However, it seems almost like a state secret. No one I know, and perhaps very few of your Lordships, has ever heard of it. Why has it not been marketed and why does it last for only one year? Schemes of this nature need time to bear fruit. Pulling up the project by its roots after one year to examine whether it is growing is hardly the way to develop a policy geared to providing new investment in new companies. We need business angels to help fund exciting businesses, particularly in my area, which is technology. Using the tax system to help angel investment is an excellent idea. I will make a plea to the Minister that may sound strange coming from a shadow Minister. The SEIS is a very good scheme. Please leave it in place, and please market the programme seriously so that more potential angels are attracted to invest.

The programmes introduced by the Government have been woeful in their level of success. For the most part they have been ill thought through and incompetently implemented. My advice to the Government is to think deeper about projects to help SMEs, to put much more effort into marketing them and, most of all, to give them time to develop.