Industry and Exports (Financial Support) Bill

My Lords, I will take the questions that have been put in turn. The first question was about how much funding has been utilised. Since 1982, nearly £3.8 billion has been spent under Section 8 on a range of industry support schemes. As I explained, over recent months, a significant increase in expenditure under Section 8 will have occurred as a result of the package of measures that is currently being implemented, including the trade credit insurance scheme for £5 billion. I start by refuting the claims about the VAT measures. They have now been supported by a wide number of institutions, such as the IFS and the CIER, which recently stated that the VAT cut led to a £9 billion increase in retail sales. I strongly refute the suggestion that it has been unsuccessful. I am also pleased to say that the scrappage scheme, to which the noble Lord, Lord De Mauley, referred, including the press speculation about VAT yesterday, has been settled. The scheme is now fully on track. Obviously, we are not responsible for the fact that certain companies may choose to negotiate in public. That does not suggest anything about the success or otherwise of the scheme. I would also like to discuss the £50 billion guarantee scheme proposed by the Opposition and take this opportunity to explain the Government's approach—which, if I may say so, has been somewhat misrepresented by the noble Lord, Lord De Mauley. We do not believe that it is possible, desirable or feasible for the Government to substitute for private sector lending and private bank lending. I would have thought that the Opposition could agree with that. That lending to businesses is worth £590 billion. An untargeted scheme of £50 billion would be neither here nor there. It would cost significant funding because of the provisions that would have to be made for defaults if it was given to very risky businesses. It would be in no sense additional if it was not given to risky businesses. The Government’s approach has, instead, been very straightforward. It is to make sure that the banking system works and that it has not, in the first instance, collapsed; and that it has sufficient capital funding in liquidity to ensure that lending is resumed, because you cannot substitute for the £590 billion. We have already done that through the recapitalisation plan, the asset protection scheme, the working capital scheme and the liquidity funding schemes provided by the Bank of England and the Treasury. As a result, we have lending agreements with two of the banks with which we have an asset protection scheme arrangement. There is £25 billion of additional net lending from the RBS and £11 billion of additional net lending to businesses from Lloyds. Even those banks that do not have an asset protection scheme with us have made commitments. For example, Barclays has committed £11 billion. This shows that we are working towards a resumption of credit from the banking system to the real economy. We monitor that very closely. Having said that, it is not always possible to fix all the market failures that occur. That is why we have specific targeted schemes. The enterprise finance guarantee scheme, for example, is targeted only at about 2 per cent of the borrowers who would otherwise be viable but, in the current climate, may not be able to access this level of funding. We assist the banks by providing a guarantee of 75 per cent. These are the companies in the grey zone, if I may call it that, which now receive funding as a result of the Government’s scheme. We also have schemes in the auto sector for the same reasons. There are specific market failures where the overarching approach of fixing the banking system does not work. We are fixing the overall systemic problem, and providing targeted assistance where it is needed and where market failures exist. This is effective, targeted and protects the taxpayer. While a £50 billion scheme may, overall, sound very nice and is a good, simple slogan, it does not protect taxpayers and provide assistance where it is needed. I am happy to provide noble Lords with details of the schemes as they work. The enterprise finance guarantee scheme, for example, has already disbursed over £200 million. It is on track to disburse the full £1.3 billion before the year end. The trade credit insurance scheme started a week ago and has already started to disburse. There are around 16 companies in detailed discussions on the auto scheme, where the risks are much higher and it is completely correct that the Government should ensure that the taxpayer is adequately protected. There are delivery mechanisms and they are monitored. Indeed, those that are my personal responsibility are monitored weekly by me. There are independent assessments that have already been named. The scheme goes through the Treasury’s Green Book procedures. All spending is reported to Parliament under the Industrial Development Act in the annual report. It may be something that noble Lords do not want to hear, but we have an overarching framework and targeted policies, which are now working, underneath it. The noble Lord asked about EU consent. I am pleased to say that all the schemes that we are talking about have EU consent and are disbursing on that basis. The noble Lord asked about the letters of credit consultation. It is occurring now. All the appropriate authorities have been consulted on the matter. It is a specific scheme—again, in line with the overarching policy—that is available because we believe that there is a specific market failure around the confirmation of letters of credit, particularly because of foreign banks withdrawing and being unable to provide trade finance. The noble Lords, Lord De Mauley and Lord Lee, made a very important point about an issue that is very close to our heart: ensuring that the ECGD in no way, shape or form betrays any of the current business principles relating to the environment, corruption and efficacy. They are all included. I am pleased to assure noble Lords, as I was asked to, that the WWF’s concerns are unfounded, and I repeat the assurance made by my honourable friend the Economic Secretary during the Bill’s passage in another place that the ECGD’s role, and the application of its business principles, will not be changed by this amendment. On capital goods exports, the ECGD will continue to apply international OECD agreements on bribery and corruption, environmental impacts and sustainable lending to these exports. If the application of the business principles is to be changed, the business principles themselves state that the ECGD must consult. The ECGD is carrying out such a consultation on the new letters of credit scheme, which I have already discussed. I hope that I have answered most of the questions asked by noble Lords, but if I have omitted to answer any I will be happy to write to them.