MPs’ warning over business loans scheme

Jun 30 2009 by Jonathan Walker, Birmingham Post

A national loans scheme created to help businesses cope with the effects of the credit crunch might need to be extended, MPs have warned.

The West Midlands Select Committee, which includes backbenchers from across the region, warned that firms may still be struggling to obtain credit once the scheme closes, next March.

Giving evidence to the Committee, Ian Austin (Lab Dudley North), the Minister for the West Midlands, said he would campaign for the scheme to be extended if needed.

The Government’s £1.3 billion Enterprise Finance Guarantee allows businesses with a turnover of up to £25 million to secure loans of between £1,000 and £1 million.

It was designed to compensate for the refusal of banks to extend credit without guarantees, as a result of the banking crisis. But MPs asked how the Government could be certain the crisis would be ended by March next year, when the scheme is due to end.

Mr Austin told them: “If people in the region tell me that the scheme is being wound up when they still need it, I will go and bang the drum for the region. But I can’t make promises about the decision. I will do what I can.”

He said he had already lobbied Cabinet ministers including Business Secretary Lord Mandelson and Liam Byrne, the Chief Secretary to the Treasury, to call for more credit to be made available.

Mr Austin said: “It was the credit crunch and lack of availability of credit, that caused the crisis in the first place.”

The select committee, chaired by Birmingham MP Richard Burden (Lab Northfield) involves five Labour MPs. Conservatives and Liberal Democrats have been boycotting the committee.

Tories object in principle to a regional committee, while Liberal Democrats say their political make-up should reflect that of the regions they cover.

Under Commons rules, committee seats are shared out in the same proportion as seats in the Commons, ignoring regional voting trends.