Oral Answers to Questions

Vince Cable Excerpts

Thursday 9th June 2011 Commons Chamber

[Gordon Birtwistle (Burnley) (LD)]

8. What steps he plans to take to encourage young people to take up careers in engineering and manufacturing.

[The Secretary of State for Business, Innovation and Skills (Vince Cable)]

We are funding STEMNET, a programme that encourages young people to look at the possibilities offered by science, technology, engineering and mathematics—STEM—study and employment; we are providing a £180 million package that will see 50,000 new higher apprenticeships in sectors including STEM-related industries; and, of course, the main incentive is good manufacturing jobs, which is why I welcome the announcements yesterday and today from Nissan and BMW of large new investments in British manufacturing industry.

[Simon Hughes]

I obviously welcome my right hon. Friend’s interest in both areas and the interest of organisations such as Engineering UK, which has a fantastic route map on its website, showing exactly what one has to do to get from school into engineering. May I encourage Ministers, however, to work with the Department for Education to ensure that, as part of the engagement between employers and schools, we also have one-to-one and face-to-face careers advice for school leavers, so that they receive personalised support in the choices that they make?

[Vince Cable]

Yes, my colleague is absolutely right. Indeed, I was at the Royal Academy of Engineering during the week, talking about how we strengthen that interface between education and the engineering industry, and as regards the careers service my colleague the Minister for Further Education, Skills and Lifelong Learning has already written to schools, reminding them of their statutory responsibilities under the new careers service as it develops.

[Gordon Birtwistle]

Does the Secretary of State agree that careers advice should start at age 12, be delivered by experienced professional and independent advisers, and be available throughout every year of education?

[Vince Cable]

Again, my colleague is absolutely right. The careers service is fundamentally important. My Department and, in particular, my colleague the Minister for Further Education, Skills and Lifelong Learning are talking to careers professionals about how to roll out a properly accredited system of careers advice and, indeed, about co-locating careers advice with the Department for Work and Pensions and Jobcentre Plus in order to ensure that the service is properly integrated.

[Mr Barry Sheerman (Huddersfield) (Lab/Co-op)]

Does the Secretary of State agree that Members should set an example to young people with an interest in manufacturing, and will he encourage all Members from all parts to join the campaign Made by Britain, whereby we find innovative, imaginative and new products in every constituency in the country and put them in a virtual Crystal Palace to show that we can still do manufacturing in this country?

[Vince Cable]

The hon. Gentleman has already described his scheme to me, and it sounds an exciting project. I have identified several potential candidates in my constituency, and it sits alongside many other very good initiatives that are taking place, including for example the engineering prize, which is being launched with the support of leading UK companies.

[Ian Lucas (Wrexham) (Lab)]

I join the Secretary of State in welcoming the tremendous news this week of the excellent investment from BMW Mini and Nissan. That of course builds on the initiatives of the Automotive Council, which has been so successful and was set up by the previous Labour Government. Also set up by the previous Labour Government was Manufacturing Insight, an organisation dedicated to bringing young people into engineering and manufacturing, which this Government have scrapped unfortunately. Why did the Secretary of State make that decision?

[Vince Cable]

I am not sure I should take lectures on manufacturing industry from a representative of the party that presided over the biggest decline in manufacturing of any major country, but none the less the hon. Gentleman is right that there are some good legacies. One of them is the Automotive Council, which works extremely well and contributes very positively to the supply chain. I welcome that.

[David T. C. Davies (Monmouth) (Con)]

2. What steps he is taking to reduce the burden of administration on employers offering to take on apprentices.

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[Simon Kirby (Brighton, Kemptown) (Con)]

3. How many jobs in low-carbon industries he expects to be created by the actions of the green investment bank.

[The Secretary of State for Business, Innovation and Skills (Vince Cable)]

The green investment bank will be a key element in financing investment in the green economy. It is not possible to estimate the number of green jobs it will help to create, but this sector in the UK is already substantial and employed around 910,000 people in 2008-09. A total of £3 billion of funding has been made available to the green investment bank from 2012 and could mobilise an additional £15 billion in private sector investment.

[Simon Kirby]

I thank my right hon. Friend for his answer. Will he consider locating the green investment bank in the most excellent city of Brighton and Hove?

[Vince Cable]

I thank my hon. Friend for his question. I know from other interventions of his deep and genuine interest in environmental issues. We already have quite a long bidding list for cities that wish to attract the green investment bank, and I am very happy to add Brighton to it.

[Mark Lazarowicz (Edinburgh North and Leith) (Lab/Co-op)]

The answer to the last question is no.

The potential for low-carbon industries comes not only from the green investment bank, important though that is, but from the skills base and getting businesses ready to take this opportunity. What are the Government doing to ensure that throughout the UK the skills base will be there and business will be able to take advantage of the potential of the green investment bank—particularly, of course, when it is situated in Edinburgh?

[Vince Cable]

I know that the hon. Gentleman too has a long-standing and active involvement in environmental issues. He is right to say that it is not simply a question of investment but of skills. That is why, as part of the expanded apprenticeship programme, we have specifically set aside resources for those working in the green economy, particularly regarding the skills that are required to implement the green deal.

[Alun Cairns (Vale of Glamorgan) (Con)]

4. What steps he is taking to ensure that employment law supports business competitiveness, job creation and sustainable economic growth.

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[Nigel Mills (Amber Valley) (Con)]

5. What recent assessment he has made of the level of lending by banks to small businesses.

[The Secretary of State for Business, Innovation and Skills (Vince Cable)]

Figures published in May by the Bank of England show that the UK’s five largest banks lent £16.8 billion to UK small and medium-sized enterprises in the first quarter. That fails to meet the targets in the Merlin agreement and is obviously disappointing. We will continue to monitor lending closely over the year. We reserve the right to revisit the agreement if banks continue to miss the targets.

[Nigel Mills]

Many small businesses in my constituency complain that when they ask banks about funding, they are told not to bother applying because it would only attract interest in their existing facilities and that those may well be withdrawn instead. What can the Government do to stop banks doing that and then claiming that they cannot meet the targets they have agreed to because of a lack of applications?

[Vince Cable]

There is a lot of evidence that some banks are genuinely trying to change their culture of lending. I referred to that point in a productive exchange in the Business, Innovation and Skills Committee yesterday. The banks have come forward with a new code of practice to be operated through the British Bankers Association, which allows, for example, for a banking ombudsman to deal with complaints of the kind to which the hon. Gentleman rightly referred.

[Mr Pat McFadden (Wolverhampton South East) (Lab)]

There is a genuinely difficult problem of trying to get highly over-extended banks to lend to small and medium-sized businesses. The Secretary of State was very critical of the previous Government’s performance on this issue. He said that the banks ran rings around that Government. Given that the first indications on Project Merlin show a £2.2 billion shortfall between what the banks are doing and what the Government agreed they would do, how would he describe the performance of his Government on bank lending?

[Vince Cable]

Of the leading Merlin banks, two have met their targets, which demonstrates that the demand is there for banks that are able and willing to change their culture of lending. Of course, we have taken the previous Government’s arrangements further by bringing private banks that are not owned wholly or partly by the taxpayer into the agreement. They are undoubtedly taking it seriously, and we are making it absolutely clear that we expect the agreement to be delivered and that the volume of lending to SMEs will increase.

[Michael Fallon (Sevenoaks) (Con)]

Will my right hon. Friend reassure us that he is ready to do a little more than just monitor this situation? In particular, he should not allow banks to get away with the excuse that the demand is not there, when it is the price of the loan and the terms attached to it that are so often too difficult for struggling small businesses who need the credit.

[Vince Cable]

My hon. Friend is right that there is a problem of discouraged demand. We have just launched a major survey to drill down a little further into the complex facts of bank lending and to find out how serious the problem of discouraged demand actually is. However, this is not just a question of monitoring the situation. A key element of the Merlin agreement is that senior executives in the banks will have their remuneration linked to their performance on small business lending. I am currently insisting that they provide more information about how those incentives work.

[Mr Geoffrey Robinson (Coventry North West) (Lab)]

The Secretary of State must realise that the Merlin agreement is a busted flush and that no good is coming from it. The continuing failure of the banking sector to meet the minimum targets, meaning that there continues to be no new net lending, is really not acceptable. As the hon. Member for Sevenoaks (Michael Fallon) has just said, the terms and conditions for the loans that are being made are often very penal. Can the Secretary of State get into that? There is no point in monitoring it; we want him to examine what is going on and to come forward with concrete proposals to improve the situation.

[Vince Cable]

That is exactly what I am doing, as I explained to the right hon. Member for Wolverhampton South East (Mr McFadden). Before the hon. Member for Coventry North West (Mr Robinson) writes off what we are doing, he should consider the undoubted benefits that have already flowed from it. The banks have put £2.5 billion into the business growth fund to provide equity, which is the kind of issue that he was exercised about when he was a Treasury Minister. That problem has now been dealt with.

[Lorely Burt (Solihull) (LD)]

The Forum of Private Business is calling for a return to the traditional bank manager model, and some banks are in fact now doing that. What can we do to encourage banks to give small businesses individual attention, increase the autonomy of bank managers to make decisions and get rid of the culture of “computer says no”?

[Vince Cable]

My colleague puts the point extremely well. What we are dealing with is not a short-term problem but the long-term issue of how to change the culture of banks. One bank in particular, Lloyds, which I think I mentioned yesterday, already has SME lending on its monthly board meeting agendas, and the system of incentives is being changed to create more of that type of relationship management. Crucially, there are new banks entering the market that have exactly the focus that she describes. Competition, ultimately, will help to solve the problem in a major way.

[Mr Chuka Umunna (Streatham) (Lab)]

We were told that monitoring would be carried out with the assistance of the Bank of England, yet the Governor himself said in March:

“We’re not monitoring. What we are doing is putting up on our website the data that banks submit after a fairly cursory plausibility check.”

The Secretary of State also mentioned CEO pay, which we were told would be linked to the lending targets, yet he failed to check how that would be delivered before he finalised Merlin. Is it any wonder that the banks are already failing to meet their obligations, when the Secretary of State waved through an agreement without teeth?

[Vince Cable]

First, I congratulate the hon. Gentleman on his new role on the Front Bench. He is a very articulate commentator on economic matters, and I look forward to exchanging views with him.

The Bank of England plays an important role in the monitoring process. Of course the banks’ data are aggregated, but the Bank provides an independent assessment of progress under the agreement, which is important to the credibility of that agreement. Of course, it has pointed out that there has been a failure of lending in the first quarter.

On the wider question of meeting lending objectives, we were assured when the Merlin agreement was signed that senior executives’ incentives would mean that their remuneration was significantly greater than the share of small business lending on their balance sheets. We are now trying to establish in detail exactly what that means for individuals, and we have insisted that more lending be forthcoming.

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[John Mann (Bassetlaw) (Lab)]

7. What discussions he has had with representatives of banks on the performance of banks in lending to businesses (a) in Retford and (b) nationally.

[The Secretary of State for Business, Innovation and Skills (Vince Cable)]

I regularly have discussions with senior representatives from all the major banks, as well as smaller and specialised lenders, at which we discuss their lending to small businesses, but sadly, not yet in Retford.

[John Mann]

As the Secretary of State knows, Retford is the barometer of his Government’s success or failure with the economy and the news is not good, because small businesses are being bled dry by the banks, which are failing to lend. When they do lend, they do so at excessive costs, including the excessive use of invoice financing. It will be too late for small businesses if the Secretary of State does not wake up and do something about that as they will go out of business. What will he do?

[Vince Cable]

The hon. Gentleman’s constituency may well be a barometer of Government performance, but he has obviously overlooked the fact that in it, 19 businesses were offered loans, backed by the enterprise finance guarantee, totalling almost £2 million. That is help in a purely practical sense.

The hon. Gentleman makes a specific point on types of financing. Because of the difficulties of lending against property, the emergence of forms of lending against assets or future transactions is actually a positive diversification of finance.

[Tom Greatrex (Rutherglen and Hamilton West) (Lab/Co-op)]

9. What assessment he has made of the potential effect on economic growth of green investment; and if he will make a statement.

[The Secretary of State for Business, Innovation and Skills (Vince Cable)]

The green economy will make a major contribution in the longer term to economic growth, because of the stimulus it provides to demand in green activities. However, energy-intensive industries are also an important part of our economy.

[Tom Greatrex]

The Secretary of State referred in his answer to the contribution that traditional heavy industries such as the Clydebridge steelworks in my constituency, which manufactures significant components of offshore wind turbines, can make to green investment. However, given his comments, what reassurances can he give to the House that the introduction of measures such as the carbon floor price will not disadvantage energy-intensive industries, which could have a significant effect on green growth in the economy?

[Vince Cable]

The hon. Gentleman is absolutely right to draw attention to that problem. I have had extensive discussions with the steel industry, and also with the ceramics and chemicals industries, which can be affected by precisely that problem. My colleague the Secretary of State for Energy and Climate Change made it clear in his recent statement that we are looking at a package of measures, in consultation with industry, that will hopefully help it to deal with the higher costs of electricity.

[Miss Anne McIntosh (Thirsk and Malton) (Con)]

The Secretary of State recently announced the green investment bank, but obviously the capitalisation amounts are very small. Will he assure the House that small companies in Thirsk, Malton and elsewhere will qualify for capital loans from the green investment bank?

[Vince Cable]

I would not regard £3 billion as a small capitalisation—it is very substantial, and hopefully it will mobilise an additional £15 billion in this Parliament from the private sector. There is a question over how we develop the capacity of that bank, but the hon. Lady is right that we must take account of the ability of small companies to participate in the supply chains of the big bids that will undoubtedly be made under the GIB proposals.

[Mr Adrian Bailey (West Bromwich West) (Lab/Co-op)]

Our embryonic solar power industry has huge concerns about the Government’s current policy on feed-in tariffs. If the Minister cannot assure me that he has consulted industry representatives, will he consult them?

[Vince Cable]

I have had consultations with the industry, although of course the primary responsibility rests with my colleagues in the Department of Energy and Climate Change. There is a particular problem with the large-scale solar power suppliers because of the subsidy element and the ability of Government to continue to support it, but certainly small-scale solar providers are helped under the feed-in tariff arrangements and we are looking at the wider implications for the industry.

[Ian Swales (Redcar) (LD)]

Does the Secretary of State share my concern that the large-scale bioethanol plant in my constituency has been taken offline for a number of months, and will he do everything that he can to support the anti-dumping action being taken by the bioethanol industry? Will he also ensure that the Department for Transport does not repeat the mistakes of the previous Government in dragging its feet on implementing renewable fuel obligations?

[Vince Cable]

My colleague has been assiduous in supporting this important activity in his constituency. I am well aware of the problem, which is low-cost ethanol coming from the United States and apparent dumping practices—although that remains to be established. I have made representations to the European Union, which of course deals with trade policy matters, to ensure that this is properly dealt with under our trade policy instruments.

[Emma Reynolds (Wolverhampton North East) (Lab)]

10. What progress has been made on the second round of allocations from the regional growth fund; and if he will make a statement.

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[Jack Dromey (Birmingham, Erdington) (Lab)]

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

[The Secretary of State for Business, Innovation and Skills (Vince Cable)]

My Department has a key role in supporting the rebalancing of the economy and business to deliver growth while increasing skills and learning.

[Jack Dromey]

The Government are forcing Advantage West Midlands to engage in a fire sale of £108 million-worth of assets. They are blocking councils from gaining those assets and barring local enterprise partnerships from retaining them, yet they have seen fit to gift Boris Johnson with London Development Agency assets. Why can they not do the same for high-need, high-unemployment Birmingham?

[Vince Cable]

There is no fire sale of regional development agency assets. There was always a process of disposal of those assets by the RDAs themselves, and roughly 20% of their assets are likely to be sold. The others are being passed on through the different channels, which the hon. Gentleman knows about.

[Sarah Newton (Truro and Falmouth) (Con)]

T2. The Minister will be aware of the outstanding Truro and Penwith college, which is based in my constituency. In recognising the new opportunities to expand its provision of higher education, he will also be aware of the constraints on the ability of further education colleges to award degrees. At the moment, they need a university partner. What support can he offer to excellent FE colleges to enable them to award high-quality degrees?

[Mr John Denham (Southampton, Itchen) (Lab)]

I welcome the good news from Nissan and BMW, which, despite the Secretary of State’s curmudgeonly response, built on Labour’s support for those companies’ investment in the UK. In 2006, he was very clear when he said:

“The DTI, and its army of Sir Humphreys, should be scrapped.”

Then he was offered the job of running it, and said that it would be the Department for growth. How is the Department for growth getting on?

[Vince Cable]

The Department for growth is getting on extremely well. The right hon. Gentleman seems to have forgotten that a change took place after 2006, and that my Department was amalgamated with the one that he used to run. He might want to speculate as to why we took it under our wing. Certainly, growth is taking place. There is rapid growth now beginning to take place in manufacturing and exports. That is a consequence of this Government’s determination simultaneously to get on top of the fiscal deficit and to rebalance the economy, and that is happening.

[Mr Denham]

Actually, the old DTI was merged with my Department. The truth is that in the past year the Office for Budget Responsibility has lowered its growth forecast three times, long-term unemployment has been at its highest since 1997, retail sales are down, construction is in the doldrums and consumer confidence has been at record lows. Is it not the truth that the Business Secretary has wrecked support for the regions, cut consumer protection when prices are rising ahead of wages, talked tough and delivered nothing on bank lending, bungled higher education and produced a growth plan so unconvincing that it is being rewritten as we speak? The Business Secretary is wrong, is he not, to think that his Department cannot make a difference. It could. It is not just the Chancellor who needs a plan B, is it?

[Vince Cable]

The right hon. Gentleman has a short memory. He does not seem to appreciate that the failed model of growth that we inherited was not simply a question of the budget deficit, as we had a massive problem with consumer debt, which inhibits consumption; we had a massive property bubble, which collapsed; and we had a banking system, the largest in the developed world, that collapsed on us—and we are having to dig our way out. A major rebalancing of the economy is having to take place. It is difficult, it is painful, but as I said in response to the earlier question, that rebalancing is now occurring through the growth of manufacturing and exports and through business investment, which is where it needs to be.

[Andrew Selous (South West Bedfordshire) (Con)]

T4. Small businesses are the engine of growth and jobs for our economy, and all the time that owners and managers spend dealing with red tape is time taken away from expanding their businesses, so what have the Government done to reduce regulation on small businesses?

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[Nick Smith (Blaenau Gwent) (Lab)]

T6. Given the public outrage at the “quick buck” strategy at Southern Cross, the Financial Times says that the future of 31,000 elderly people is in jeopardy. Will the Secretary of State investigate the conduct of the directors and consider whether regulation should be extended to ensure the financial stability of companies that care for our parents and our relatives?

[Vince Cable]

My colleague the Secretary of State for Health has made it absolutely clear that no resident, whether publicly funded or self-funding, will be left homeless or without care. In other words, the residents will be given priority and the Government have taken the responsibility to ensure that they are protected. As to the company itself, it had a long-standing failed business model. The Minister of State, my hon. Friend the Member for South Holland and The Deepings (Mr Hayes) has been in touch with the banks to ensure that the credit is properly managed in this critical period so that it happens in an orderly way. There is no way in which we can bail out the company, but I have asked my officials to look carefully at the business models of companies that provide public services to ensure that they are stable and that the responsible sector regulators are able to act appropriately.

[Mr David Evennett (Bexleyheath and Crayford) (Con)]

T10. Can my hon. Friend update the House on the agreement reached about Institute for Learning membership fees?

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[Gordon Banks (Ochil and South Perthshire) (Lab)]

We have heard from the Secretary of State’s own mouth that Project Merlin has fallen at the first hurdle. We also now know that one of the promoters of the business growth fund, Santander, has withdrawn from the fund. What impact will that have on Project Merlin, on the business growth fund, and on growth and investment in the United Kingdom?

[Vince Cable]

The business growth fund is an extremely promising initiative, filling a gap in capital markets that has been left empty pretty much since the 1920s: the provision of equity for rapid growth mid-cap funds. The £2.5 billion fund is committed to by the main banks, and Santander wishes to pursue its own initiative, which is additional to the fund. The business growth fund is a great success. It was launched in Birmingham—I was there a few weeks ago—and it will achieve a lot for British industry.

[Duncan Hames (Chippenham) (LD)]

I noted the Business Secretary’s earlier answer citing the STEMNET project. I hope he is also aware of the work of I’mascientist.org.uk, whose events reach over 10,000 students, with funding of less than £9 per student drawn from charitable and business sponsors. Will he learn from the success of this initiative as a model for the online engagement of students with the futures they could realise through science, technology, engineering and maths?