Industry and Exports (Financial Support) Act

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Ministers moved to give themselves greater powers to increase taxpayer-backed support for failing industries as the economic crisis deepens.

Introducing the Industry and Exports (Financial Support) Bill for its second reading debate in the Commons, junior business minister, Ian Pearson, said raising the ceiling for help allowed to business outside “assisted areas” to £16 bn would provide greater flexibility.

Britain was facing “unprecedented” economic difficulties and it was vital to emerge from the global downturn “rapidly and strongly”.

The Bill amends previous legislation to allow for the limit on financial support permitted without requiring new laws from £6.1 bn up to a maximum of £16 bn.

It will also widen the support allowed by the Export Credits Guarantee Department under the Export and Investment Guarantees Act 1991.

Pearson, opening second reading debate on the Bill, said: “It is important that the UK emerges from this global downturn rapidly and strongly.

“The government has responded and will do whatever it takes to ensure the stability of the financial system and to provide real help to people and business.

“This Bill gives the government the necessary flexibility to provide further support to industry.”

He said increasing the ceiling would provide greater “legal headroom” and provide for the ongoing delivery of existing support programmes and the latest package of measures announced to help business.

He told MPs: “Given the unprecedented global economic conditions that we are facing it is important that we maintain sufficient flexibility to bring forward further support if that is required.”

For the Conservatives, Mark Prisk, said: “These are substantial provisions and they reflect the severe economic climate.

“We agree that business urgently needs practical help but our concern is that these good intentions will not become the practical aid that business is seeking.

He criticised the government’s record on financial support, Prisk told MPs it had “largely been one of talk not action. It has been a story of half-baked ideas, badly implemented and it has resulted in confusion and anger”.

Pearson declared that the nature of business support had changed in recent years and there was a shift towards loans and guarantees away from grants.

This would provide “good value for money” for the taxpayer in the long-term given that loans would be repaid and only a “proportion” of guarantees would need to be met.

He was also pressed by Labour former minister Geoffrey Robinson (Coventry NW) over support for vanmaker LDV, whose problems were “particularly acute”.

The minister told him that the government had recently announced £2.3 billion of loan guarantees and loans under the Automotive Assistance Programme to support the car industry.

He said: “We understand through discussions LDV have had with officials ... they are continuing to proceed with a management buy-out.”

It was down to the current parent company, Russian firm GAZ, to provide “significant support” to the firm to ensure it was viable in the future.

Prisk said the Conservatives national loan guarantee scheme would help all businesses and all sectors rather than the “half-baked” programmes recently rushed out by ministers.

Calling on the government to adopt the scheme, he said: “Clear, easy to access and simple to understand, it could underpin conventional bank lending.”

He added that the current range of support schemes were either not up and running or were failing to help properly, despite being announced often months ago.

For the Liberal Democrats, Lorely Burt said that although there were measures that would help industry in the Bill, it was overall a “wasted opportunity”.

She asked why government had fixed on £16 bn. “It's a nice round figure. But what justification is there for this amount of money to be advanced - £26,000 for every man woman and child in this country.”

While the government was “applying a poultice to the sick body of the economy, the banks had applied a tourniquet - preventing the flow of cash through the economy to nourish and enrich it”, she added.

Progress

House of Commons

First reading: March 4 2009 [HC Bill 70]

Second reading: March 16 2009

Committee stage: April 21 2009

Report stage: April 21 2009

Third reading: April 21 2009

House of Lords

First reading: April 22 2009 [HL Bill 39]

Second reading: May 19 2009

Third reading: May 20 2009

Royal Assent

May 22 2009: Industry and Exports (Financial Support) Act