A multi-billion pound package, including loan guarantees and a new enterprise fund to help companies struggling to access finance, has been unveiled by the government against the background of another day of job losses.
TORCUIL CRICHTON and MARIANNE TAYLOR
A multi-billion pound package, including loan guarantees and a new enterprise fund to help companies struggling to access finance, has been unveiled by the government against the background of another day of job losses.
The announcement, which the Tories condemned as too little too late, was coupled with the appointment of Mervyn Davies, the chairman of Standard Chartered Bank, as the new Trade Minister. Mr Davies, who has taken the Labour whip and will become a life peer in the Lords, replaces Digby Jones, the former chairman of the CBI, who stood down in the last re-shuffle.
Lord Mandelson, the Business Secretary, welcomed Mr Davies's experience and expertise to government but was criticised for now running a major department in the maw of a recession with four ministers - himself, Davies, Baroness Vedera and Lord Carter - in the Lords and only one full-time minister, Pat McFadden MP, answerable to the Commons.
Two other ministers at Business Enterprise and Regulatory Reform share responsibilities with other departments.
That lack of political adroitness was on display later when Baroness Vadera was caught out in a TV interview when asked if she could see the "green shoots of recovery".
After a slight hesitation, she claimed she could, unaware that the phrase has a political resonance with former Tory Chancellor Lord Lamont's premature boast that he detected the "green shoots of an economic spring" during the 1991 recession.
Tory complaints of "insensitivity" threatened to overshadow the announcement by Lord Mandelson of a £10bn working capital scheme, securing up to £20bn of short-term bank lending to companies with a turnover of up to £500m.
The measure in effect insures banks against part of the risk of companies defaulting on loans.
The plans also include guarantees for another £1.3bn of loans to small companies and a £75m enterprise fund for small firms which need equity investment.
The move will put taxpayers' money at risk, but the government has set aside a £225m provision against possible losses, although the government would also receive fees for its guarantees.
The guarantee, available through high street banks, will apply to loans and can also be used to convert existing overdrafts into loans to enable businesses to free up their current overdraft facilities to meet working capital demands.
Lord Mandelson said it was "crucial" that the government acted now to provide help amid warnings that scores of smaller businesses were going bust every day.
He said the loan guarantee would free up capital that the banks must use for new lending as a condition of this scheme. This is lending that would otherwise not have been provided.
Colin Borland, spokesman for the Federation of Small Businesses in Scotland, said banks now had "no excuse" for not lending money.
"The guarantee is great news for small businesses and we will be encouraging our members to take advantage of it," he added.
Garry Clark, head of policy at the Scottish Chambers of Commerce, welcomed the package of measures as "a move in the right direction", but said it was vital that funds were distributed in the right way.
"The most important thing now is to look at the detail and ensure this money is targeted at the right businesses, and we would be more than happy to help the government and the banks do this," he said.
In the Commons, Conservative leader David Cameron said the announcement was a "copied policy" that his party had proposed months ago.
Shadow business secretary Alan Duncan, who tabled an emergency question on the ministerial statement, said that the measures were "too little, too late" and were nothing more than a "small bandage on a massive wound".
Mr Duncan expressed anger over the "contempt" Lord Mandelson had shown the Commons by leaking the news, briefing the press but only issuing a written statement to the Commons.
Answering Mr Duncan's complaints about the lack of an oral statement on the measures, Business Minister Ian Pearson said the government had released a written statement and he was "very happy indeed" to answer his urgent question.
The government's financial assistance measures were "measured and well thought-out" he said, compared with the Tories' proposals which were "untargeted and uncosted".
