Business aid package 'unveiled in days'

By Andy Woodcock,Press Association
Tuesday 13 January 2009 15:45

Ministers are about to announce measures to help small and medium sized businesses that are having difficulty getting access to credit, Downing Street said today.

Reports have suggested ministers are considering a loan guarantee scheme worth as much as £20 billion, but Prime Minister Gordon Brown's spokesman told reporters this morning that the Government was also looking at wider issues affecting businesses.

In a regular daily briefing at Westminster, the spokesman said: "Our scheme will be targeted, it will be thought through, it will be funded and it will be focused on those businesses that we want to support most of all.

"That in particular is small and medium sized businesses which are viable but are having difficulty accessing working capital at this time."

The spokesman added that the Government was not proposing to offer "irresponsible blanket guarantees" for all business lending.

The package of proposed measures to help businesses formed part of a discussion on the global economic crisis which dominated this morning's regular Cabinet meeting at 10 Downing Street.

It is thought an announcement could be made as soon as tomorrow, with widespread expectations that the state will effectively offer to "insure" banks against firms defaulting in return for a fee.

If confirmed, the plan would be similar to one endorsed by the Tories - although they have called for a £50 billion commitment.

Mr Brown's spokesman today declined to give specific details of the scheme under consideration, but said it would build on support for smaller businesses announced in Chancellor Alistair Darling's Pre-Budget Report (PBR) in November.

The spokesman said: "We are examining specific remedies, not just a blanket subsidy.

"We want to build on the PBR package and this is why we do hope to be able to say more in the next few days.

"In the PBR, we did announce our intention to bring forward further proposals specifically to help small and medium-sized enterprises that are viable but have difficulty accessing working capital."

Asked if the package would involve a loan guarantee scheme, the spokesman said: "There are a range of issues we need to look at. One is in relation to guaranteed loans.

"There is another set of issues in relation to what more we can do to help with working capital. There are a set of issues around credit insurance. There are issues around equity for small firms. This is a complex issue."

Any measures would be funded in such a way as to avoid "imposing further unreasonable costs on businesses at this time", said the spokesman.

He said ministers hoped to be able to bring forward more comprehensive measures to assist businesses and households over the coming weeks and months.

"We have always made clear that we would consider all options and do whatever it takes to help businesses and households get through the global financial recession," he said.

"We are considering a wide range of options to look at the next steps in relation to what more we can do to make sure businesses and households get access to the finance they need. We will look at this in a comprehensive way and bring forward further proposals in the next few weeks and months."

Business Secretary Lord Mandelson confirmed that he would be making an announcement this week.

"I want to make sure that when we intervene, we intervene in a way that is really effective, really targets genuine business needs in a way that gives value for money from the Government and the taxpayers' point of view, and is genuinely going to help businesses in what is a very difficult credit situation," he told reporters following this morning's Cabinet meeting in Downing Street.

"I'm going to deliver real help which targets real need which is going to make a real difference. I'm going to announce that during the course of this week."

He dismissed rival proposals put forward by the Tories for a £50 billion national loan guarantee scheme.

"I could alternatively pluck any large figure out of the air, produce a slogan, roll out some fine words and then walk away. That's the Opposition's job. That is not the Government's job and that's not what I'm going to do," he said.

The director general of the British Chambers of Commerce, David Frost, said: "Businesses are critically in need of cash flow. Any move to get banks lending again will be seen as good news at this bleak time.

"A Government promise to guarantee individual loans to businesses is not only sensible, it's crucial."

Shadow chancellor George Osborne said the Government appeared to be offering a belated version of a £50 billion loans guarantee scheme floated by the Tories several weeks ago.

"With Conservative policies to help get unemployed people back into work and guarantee business lending now being adopted by the Government, it is clear that the Conservatives are setting the serious policy agenda for the recession," Mr Osborne said.

"We have been calling on Gordon Brown to introduce a national loan guarantee scheme for two months and while the Prime Minister has dithered dozens of businesses and thousands of jobs have been lost.

"Let us hope that they will properly implement this Conservative policy rather than a pale imitation, or else they run the risk of repeating the mistakes of their expensive temporary VAT cut and achieving nothing."

But Liberal Democrat Treasury spokesman Vince Cable said: "The Government should stop messing around with stunts and wheezes and ensure that the banks owned or part-owned by taxpayers operate as state banks maintaining lending for the economy.

"Despite their protestations, the Conservatives' proposal is identical to that of the Government and will involve large potential liabilities for the taxpayer. It is striking that the Conservatives are now calling for additional subsidies for the banks by demanding better terms for recapitalisation.

"The Government and the Conservatives have got this badly wrong and are not giving proper priority to taxpayers' interests."

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