Industry and Exports (Financial Support) Bill

I can confirm that guarantees offered by the Government under the automotive assistance programme would have as their legislative authority the increase in spending proposed in this Bill. I hope that things will become clearer to the hon. Lady after I have explained the situation in a little more detail. The 1982 Act set the cumulative ceiling for support that could be provided under section 8 at £1.9 billion, increasable by up to four affirmative orders not exceeding £200 million each. The overall ceiling in the original Act was therefore £2.7 billion. That was subsequently revised by the Industrial Development (Financial Assistance) Act 2003, which raised the initial limit to £3.7 billion, increasable by up to four affirmative orders not exceeding £600 million each, to an overall limit of £6.1 billion. We have already debated the second order under the 2003 Act, and will shortly be introducing the third and fourth orders. By doing so, we will ensure the necessary legal headroom is in place to ensure the ongoing delivery of existing programmes and the package of new initiatives that we have recently announced to provide real help for businesses in the current economic climate. I can therefore confirm that all existing and recently established schemes can be delivered under the limits established by the 2003 Act. However, scope to introduce any future support for business will be severely restricted, as we estimate that current schemes covered under section 8 will take us close to the £6.1 billion ceiling. Given the unprecedented global economic conditions we are facing, it is important that we maintain sufficient flexibility to bring forward further support if that is required. The first clause of the Bill therefore seeks to amend the limits in the Act, raising the initial ceiling to £12 billion, increasable by four orders of up to £1 billion each to an overall limit of £16 billion. We recognise that this is a significant increase, so I would like to make three points in relation to it. First, the nature of business support has changed over the past few years. There has been a shift away from programmes based on grant funding, with greater emphasis now placed on support in the form of loans or guarantees. We believe that that form of support provides good value for money for the taxpayer in the long term, given that the loans will be repaid over time and that only a proportion of the guarantees will ultimately need to be met. However, the full amount secured against public finances counts towards the section 8 limit. As a result, headroom is consumed at a higher rate than under grant-based interventions. As loans are paid back and guarantees lapse, pressure on headroom will reduce. None the less, in the current economic climate we need to maintain sufficient flexibility to respond to the challenges ahead and we believe that the £12 billion ceiling represents a sensible limit at this time. Secondly, I can reassure the House that although we are raising the ceiling to £12 billion, that is broadly equivalent as a percentage of GDP to the figure in 1982. My final point in this regard concerns parliamentary oversight and scrutiny of support provided under section 8. Although we are proposing an increase to the ceiling, we are not proposing any changes to the threshold at which individual offers of assistance under section 8 are subject to the approval of the House. That threshold, fixed by section 8(8), remains at £10 million. The aim of the new subsection is to ensure that Parliament has the opportunity to consider larger cases of assistance to industry. I can also confirm that any future orders to increase the limit would need to be agreed through an affirmative order, as is currently the case. We will also continue to publish the annual report setting out our expenditure under section 8 of the 1982 Act. Aside from the financial limits, all other aspects of section 8 and the wider Act remain the same. I can also confirm that the Bill has no regulatory impact on business and that a copy of the regulatory impact assessment was placed in the Library.