Trade and Investment

Lord Razzall Excerpts

Wednesday 9th February 2011 Lords Chamber

[Lord Razzall]

My Lords, I thank the Minister for repeating the Statement made in another place and congratulate him on what I suspect is his first Statement in your Lordships' House. I count eight Ministers who are present. I do not think that they are here to monitor the noble Lord’s performance; I suspect that they are here for other reasons.

I wish to ask the Minister two questions. First, having listened to the banking Statement by the noble Lord, Lord Sassoon, and this Statement—both of which I welcome—I am concerned about the practicalities of what is being suggested. This Statement indicated that there would be a significant increase in grant to the SME sector and the banking Statement indicated that the Project Merlin agreement would produce an increase in lending to SMEs of £66 billion to £76 billion. However, given the present culture of the banks, I worry that they will not be able to deliver that increase in lending, however much the Government aspire to that in the agreement. Those of us who have dealt with the clearing banks as SMEs know what actually happens. You go to your relationship manager—it does not matter whether it is Barclays, RBS or who owns the bank—and he or she says, “Yes, that is fine. I think we’ll recommend that loan”. Then the matter is passed to a credit committee, the members of which you have never met, and they often turn it down or come back and say, “It’s got to be 7 per cent over LIBOR”. How will the Government deal with the change in culture that will be necessary on the part of all the clearers if they are to deliver the loans and the business for the SMEs that are necessary to achieve the growth that the Minister, and indeed all of us, wish for?

My second point relates to UKTI, which is definitely within the Government’s control. In practical terms, if an SME wants to use UKTI to generate sales overseas, it gets in touch with it and someone at UKTI says, “Fine, I’ll let you know what sales expertise we can provide you with and what possibilities there are so long as you pay us £3,000”. Will the Government ensure that UKTI does not charge people for that element of expertise? That is an important point as that matter is under the Government’s control.

[Lord Green of Hurstpierpoint]

I thank my noble friend Lord Razzall for his comments. I absolutely agree with his first point about the practicalities. As I said, this is a marathon, not a sprint. One of the reasons why that is true is that the production of a White Paper is not the culmination of a process but the beginning. The next step is to translate the White Paper into a large number of action steps, assign responsibilities, time lines and all the rest of it, and drive it through. One of the most important aspects of what we have announced today in the White Paper—this may seem a rather bureaucratic point but I absolutely underscore its importance—is the creation of a new interministerial committee. It is, in fact, a sub-committee of the Cabinet Economic Affairs Committee and the Prime Minister has asked me to chair it. The committee will bring the Ministers in different departments involved in this whole project together on a monthly basis to drive these actions forward. It is in that context that we will review how well it is all going and make any adjustments as we go along.

My noble friend raised some particular issues about banks. For reasons that the House will understand, I am slightly nervous about commenting on banks, but I think there will be considerable recognition in the banking community engaged in commercial banking in this country of the force of a good deal of what my noble friend said. For example, he spoke of the need to ensure that in the context of businesses where there are credit committees and so forth—and rightfully so—nevertheless there is a real relationship that we need to keep alive with individual firms, even small ones, so that there can be a real understanding of the needs of the business.

I do not think anyone in this House would want to go back to some of the culture of lending prevalent in the go-go years in the early part of the previous decade, when lending was carried on as if it was going out of style. There is a need to introduce some prudence and credit control into banks’ business if we want to ensure that banks themselves are stable and profitable. But that must be balanced with an appropriate understanding of the real needs of businesses. We need to monitor that. The Merlin agreement that was announced by the Chancellor of the Exchequer in another place this afternoon includes agreements by the banks on this front, and the Government will hold the banks to account on it.

I have had the opportunity in recent weeks of meeting a number of UKTI people both here and overseas and my experience is that on the whole it is a good institution. There is always scope for improvement, certainly, and in any institution employing some 2,500 people you will find those who are average in quality and those who are very good. But coming at this from the outside, I am impressed by the dedication, hard work, commitment and enthusiasm of UKTI people in the many offices that I have had the opportunity of visiting.

On the specific question of whether to charge for its services, the Government believe that it is appropriate to charge for some UKTI services, but there are plenty of services that are not charged for. OMIS—I am afraid that I cannot remember what that stands for—is a service that is charged for, but generally the feedback is that it is widely welcomed.