Oral Answers to Questions

Mark Hoban Excerpts

Tuesday 21st June 2011 Commons Chamber

[Chris Evans (Islwyn) (Lab/Co-op)]

7. What assessment he has made of trends in bank lending to small businesses in the first quarter of 2011.

[The Financial Secretary to the Treasury (Mr Mark Hoban)]

Under Project Merlin, the banks loaned a total of £47.3 billion to UK businesses in the first quarter of 2011, including £16.8 billion to small and medium-sized enterprises. The Government are encouraged that banks are broadly on target to meet their overall commitments. However, it is disappointing that banks are behind schedule on SME loans, and they clearly need to do much more work to deliver on their commitments.

[Chris Evans]

A number of small businesses in Islwyn tell me they have experienced an increase in the overall interest rate charged by banks, despite the base rate being at an all-time low. What are the Government doing to address that?

[Mr Hoban]

We must ensure that banks signal to businesses that they are open for business and that they have the capacity to lend to businesses. That is why we work with the banks to deliver Project Merlin, but, as I have said, there is more work for the banks to do to ensure they lend to small businesses, and we will continue to hold them to account on that.

[Laura Sandys (South Thanet) (Con)]

Did Project Merlin also cover transparency in respect of the covenants banks require small businesses to put forward, and has that increased over the last three or four years? I ask because this seems to be one of the big barriers to small businesses taking out loans.

[Mr Hoban]

My hon. Friend makes an important point about the relationship between banks and their customers and the transparency of that relationship. That is why the British Bankers Association business taskforce has introduced a range of measures to look at the relationship between banks and their customers and we will continue to monitor that work. It is important that banks are transparent with their customers about the terms on which loans are offered.

[Dame Anne Begg (Aberdeen South) (Lab)]

My constituent Ashlea Hassan came to see me last week with her idea for setting up a small business. Despite having been told by every bank she has visited that she has an excellent business plan, a brilliant concept and enough equity in her house, not one of them is prepared to lend her the £40,000 she needs to set up her business. What advice does the Minister have for my constituent?

[Mr Hoban]

I would encourage the hon. Lady to suggest to her constituent that she pursue the appeal route that each bank has to enable businesses to appeal against lending decisions. That is a very transparent process that would, one hopes, reach the outcome that her constituent wants. The hon. Lady could also encourage her constituent to approach business angels for investment. We announced in the Budget a review of venture capital trusts and enterprise investment scheme reliefs to encourage more investors to commit more money to small and medium-sized enterprises.

[Tony Baldry (Banbury) (Con)]

9. What fiscal measures he is taking to encourage bequests to charities.

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[Paul Blomfield (Sheffield Central) (Lab)]

10. What assessment he has made of the level of taxation of banks.

[The Financial Secretary to the Treasury (Mr Mark Hoban)]

Banks operating in the UK make a significant contribution to the economy and public finances. However, as the financial crisis demonstrated, the sector also posed a potential risk to the wider economy and it is only fair for the banks to make an additional contribution to reflect that. That is why we have implemented a permanent levy on the balance sheet of banks, which will raise more than £2.5 billion each year.

[Paul Blomfield]

I thank the Minister for that reply, but will he recognise the enormous feeling throughout the country that the banks need to fulfil their responsibility for the challenges we face? Will he therefore explain the stubborn refusal of the Government to repeat last year’s bonus tax, on top of the bank levy, which would generate the revenue to build 25,000 affordable homes and create 100,000 new jobs?

[Mr Hoban]

Perhaps the hon. Gentleman should speak to the right hon. Member for Edinburgh South West (Mr Darling), who said that imposing the bank levy again simply would not work.

[Mr Peter Bone (Wellingborough) (Con)]

Are the losses on banks that accumulated because of their bad judgment being allowed to be set against future profits? In other words, are they avoiding future tax on future profits?

[Mr Hoban]

The corporation tax arrangements for banks are similar to those for other businesses. That is one reason why we have imposed the additional bank levy, which will raise more each year over this Parliament than the previous Government’s bank payroll tax did. It is important that the banks make a contribution to reflect the risk that they pose to the wider economy.

[Bill Esterson (Sefton Central) (Lab)]

11. What recent assessment he has made of the effect on the economy of trends in the rate of unemployment.

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[Eric Ollerenshaw (Lancaster and Fleetwood) (Con)]

12. What recent assessment he has made of the rate of job creation in the private sector.

[The Financial Secretary to the Treasury (Mr Mark Hoban)]

Last week, the Office for National Statistics published private sector employment numbers for the first quarter of 2011. They showed that private sector employment has risen for five consecutive quarters by 560,000 in total. That is the largest increase recorded over five consecutive quarters since the ONS started to publish the quarterly series of private sector employment in 1999.

[Eric Ollerenshaw]

I welcome those figures, but—like other Members—I constantly meet in Lancaster and Fleetwood small and medium-sized enterprises that have orders and could take on new staff and deal with the unemployment situation, but are being frustrated by the banks. What further support can the Minister offer to those much-needed engines of private sector growth?

[Mr Hoban]

That is why we introduced Project Merlin. We have also taken other measures to encourage funding for small businesses. The banks have set up the business growth fund, which can invest capital in medium-sized businesses to help them grow. We have approved arrangements for business angels to invest more in small and medium-sized businesses. These are the measures we need to take to introduce a range of available finance so that small businesses and private sector employment can continue to grow.

[Mr Brian H. Donohoe (Central Ayrshire) (Lab)]

When a constituent comes to my constituency surgery or writes to me, and I write to the Treasury because that is where their question should be answered, why, after a long process, is the Treasury now saying that I will not get a letter in reply because a circular was sent some months ago? The Minister now answering is the one who is responsible. Why is that practice happening in the Treasury?

[Mr Hoban]

rose—

[Mr Speaker]

Order. The hon. Gentleman refers to letters but the question is about the rate of job creation in the private sector; I think the hon. Gentleman meant to say that.

[Mr Hoban]

Indeed. If the hon. Gentleman will let me have details, I will look into the matter for him.

[Mr Donohoe]

On a point of order, Mr Speaker. In view of the unsatisfactory nature of the reply I have just received, I will seek a debate on the Adjournment.

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[Glyn Davies (Montgomeryshire) (Con)]

19. What steps he is taking to reform the regulation of banks and financial institutions.

[The Financial Secretary to the Treasury (Mr Mark Hoban)]

Last Thursday we published “A new approach to financial regulation: the blueprint for reform”, which sets out the Government’s proposals to reform financial regulation in the UK.

[Glyn Davies]

With a permanent annual levy worth £2.5 billion, tough rules on bonuses, a new deal on lending and regulatory responsibility returned to the Bank of England and handed to a new Financial Conduct Authority, is not the coalition making good progress in creating a sustainable banking system?

[Mr Hoban]

My hon. Friend is absolutely right that we have made significant progress over the past year in getting the financial regulatory system back in good shape. Of course, the Opposition should remember that it was the shadow Chancellor who spent his time in office trumpeting the value of light-touch regulation across the world.

[Mark Durkan (Foyle) (SDLP)]

Will the Minister assure us that, in the context of his current work on regulation, the anomalous position of credit unions in Northern Ireland, which have much bigger memberships and funds than those in the rest of the UK but cannot offer the same range of services, will be addressed, along with industrial and provident societies in Northern Ireland, which are also in something of a regulatory black hole?

[Mr Hoban]

The hon. Gentleman makes an important point. Work is under way to look at the regulatory position of Northern Ireland credit unions.

[Mr Gareth Thomas (Harrow West) (Lab/Co-op)]

T1. If he will make a statement on his departmental responsibilities.

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[Mr Russell Brown (Dumfries and Galloway) (Lab)]

T9. About 20,000 UK citizens, including some of my constituents, have lost their savings by investing in the fund management company, Arch Cru. Will the Chancellor step in and investigate the role of the Financial Services Authority in the failure of that company?

[The Financial Secretary to the Treasury (Mr Mark Hoban)]

The hon. Gentleman may well be aware that today an announcement was made of a voluntary scheme that we have put together to make available £54 million of compensation to Arch Cru investors. That, together with a previous payment to consumers, means that they will have recovered about 70% of the value of their holdings in Arch Cru funds as of the date when the funds’ trading was suspended. That is a welcome move for Arch Cru investors, the FSA is continuing to look at the matter, and it would be inappropriate to make any further comment on it.

[Andrew Jones (Harrogate and Knaresborough) (Con)]

T6. Has the Chancellor had cause to regret a decision, made by one of his predecessors, to sell the UK gold reserves a decade ago at the bottom of the market, a decision that has cost this country just under £10 billion?

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[Alison Seabeck (Plymouth, Moor View) (Lab)]

Repossessions are rising and are up by 17% on the last quarter. That is very reminiscent, sadly, of the conditions under the Conservative Government in the 1990s and the cost and misery caused to families. Will the Chancellor, and perhaps the housing Minister, tell us what direct action he is going to take to support those affected and to restore confidence to the housing market?

[Mr Hoban]

The hon. Lady is right to highlight the increased number of repossessions. We want to see a strong and stable housing market. The Government have taken action to support those who wish to stay in their homes through an extension of the scheme for mortgage interest support. We are continuing to make sure that advice is available to people who are facing difficulties in meeting their mortgage payments. The important thing, however, is to keep interest rates as low as possible for as long as possible so that families are not faced with an increase in their mortgage payments.

[Mr John Redwood (Wokingham) (Con)]

Given the lack of growth in money and credit, is there anything else that the Government can do to promote the growth in the economy that is so crucial to their plans?