Question time briefing: Business and enterprise

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ePolitix.com reports on Thursday's questions to business and enterprise ministers.

Ministers have confirmed that the government would assume £6bn of Royal Mail's funding deficit if the Postal Services Bill is passed by Parliament.

During business and enterprise questions in the Commons, postal minister Patrick McFadden also revealed that the 2008 estimate of the deficit could subsequently have "worsened".

He told MPs that the government's intention, through part-privatisation of the Royal Mail and taking on the pensions deficit, was to "bring forward new investment".

He warned that if the government did not get that external investment and experience, the "harsh decline" in mail volumes would continue.

And he suggested that for every one per cent decline in mail volume, the Royal Mail loses £70m.

McFadden was answering questions from James Duddridge (Con, Rochford & Southend East) on ministers' estimates of the cost to the public purse of assuming liability for the Royal Mail pension scheme.

And the minister also warned of "very poor relations" on key issues with the Communication Workers Union, suggesting that a fresh start on industrial relations with the Royal Mail is needed.

And the CWU should see a potential new partner as "a fresh start", he added.

David Chaytor (Lab, Bury North) also inquired whether the Royal Mail's pension deficit had been swelled by contributions holidays.

But McFadden suggested that by bringing Royal Mail pensions under the government, they would have "far greater security" and would be dealt with in the same way as civil service pensions.

David Burrowes (Con, Enfield Southgate) asked ministers to update the House on recent progress made in the provision of financial assistance and loan guarantees to businesses. He also called for an increase in the flow of credit from banks.

Business minister Ian Pearson repeated the government's pledge to get "real help" to businesses. He said that the asset protection scheme introduced in response to the recession would provide £27bn for businesses.

But Brian Binley (Con, Northampton South) maintained that money is not getting through to businesses. And he suggested that the government "doesn't seem to be listening".

Pearson responded that about 12 months ago, 50 per cent of lending came from foreign banks. But he said that the foreign banks have now "gone home" so banks in this country have to work "even harder".

Clive Efford (Lab, Eltham) said that banks were "stubbornly resistant" to what the government had put in place and called for an independent ombudsman to ensure that they are lending to businesses.

But Pearson replied that MP cannot "stand in the shoes of the banks that have to make commercial lending positions". He maintained that government would continue to "rigorously" monitor the situation.

And he rejected calls by David Taylor (Lab, North West Leicestershire) for emergency legislation on the Industrial Development Act to help free up more lending.

But Lib Dem business spokesman John Thurso suggested small and medium firms were "holding on by their fingertips". He called on the government to "get a grip" and to "stop monitoring and start managing" the scheme.

The minister said that it was a new scheme that was "growing", with £30m in eligible cases last week.

Turning back to the postal service, Geraldine Smith (Lab, Morecambe & Lunesdale) suggested that the Hooper report had failed to identify the source of the pensions deficit.

McFadden said that the report covers all issues of pricing, pensions and regulations. He added that European liberalisation of postal services will shortly be implemented in 15 member states, allowing the Royal Mail to become a "major player" in the EU market.

The Postal Services Bill is "the future for the Royal Mail", he stated.

Mark Pritchard (Con, The Wrekin) asked the government to discuss with Ofcom measures to increase the number of providers of broadband to the wholesale telecommunications market. Broadband telecoms should be open to "true competition" to drive prices down, he told ministers.

Business minister Gareth Thomas told the Commons that Ofcom regularly reviews the market, which has over 400 suppliers of broadband services. He said that universal access and uptake of broadband services are both important. And Lord Carter would publish his review of broadband services in the summer, he added.

Thomas explained: "Competition is a good thing. There is a strong role for regulation as well. Where there is real competition, we have been able to relax price controls. Where there isn't, we have kept those controls in place."

Tony Baldry (Con, Banbury) asked ministers what recent assessments have been made of the future prospects of the automotive industry.

Pearson admitted that car sales have fallen, but suggested that this was a global occurrence. He added that the automotive assistance programme should help the industry.

But Kenneth Clarke, shadow business secretary, accused Pearson of being "all talk and spin".

Topical Questions

David Chaytor (Lab, Bury North) inquired about support for the launch of a 'Post Bank'.

McFadden responded favourably, suggesting that to survive the Post Office must "look at new areas of business". "I absolutely agree that expansion is an important part of the bank's future," McFadden said. "It cannot survive on nostalgia."

Nigel Dodds (DUP, Belfast North) asked for European Investment Bank support to be made available to Northern Ireland.

Pearson confirmed that EIB loans would be made available to Northern Ireland.

John Heppell (Lab, Nottingham East) inquired what was being done to prevent vulnerable workers from being exploited in the recession.

McFadden agreed that the recession must not be an excuse to deny vulnerable workers proper employment rights.

Kenneth Clarke (Con, Rushcliffe) asked how many applications had been made for EIB loans.

Pearson said that the Department for Business, Enterprise and Regulatory Reform had been supporting applications and that "a number of companies" are at an advanced stage.

Jim Cunningham (Lab, Coventry South) urged the government to act on the exploitation of young models.

In response, McFadden confirmed that the department was publishing a consultation today and would consider banning modelling agencies from taking upfront fees.

Sharron Hodgson (Lab, Gateshead East and Washington West) asked whether ministers were aware of problems with mobile phone companies and cashback offers.

Thomas confirmed that the department was aware and that Consumer Focus was working with Ofcom to examine the issue. He said that he was expecting the results of that work shortly.