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Lord Peston: My Lords, perhaps I may interrupt the Minister. Will he say why so much of British capital is invested in the rest of the EU where they do have the social chapter? The argument should work both ways, but it does not. We invest enormously over there where the social chapter is in operation and will continue. It is more complicated than the Minister suggests.

Earl Ferrers: My Lords, I should not try to make things too complicated. The answer to that question is simple. British firms invest their money where they find it attractive and important to do so. That does not rely only on the social chapter. It may well be that in order to supply what they want to supply in France and Germany they find that they have to have their own firms in those countries. It is not as simple as the noble Lord, Lord Peston, makes out either.

My noble friends Lord Skelmersdale and Lord Oxfuird, and the noble Lords, Lord Haskel and Lord Weatherill, referred to small and medium-sized enterprises. They were right in what they said. My noble friend Lord Skelmersdale said that some businesses stay small and have only one or two employees. The businesses with one or two people do not get bigger because they do not want to or they cannot. Often those who run such firms are the ones producing and selling the goods; keeping the books; going to the bank manager; doing everything. They want advice. That is why we have set up the Business Link system. It will enable people to have business advisers who will be friends and who will ask, "Can we help you over this?". The man may say, "Yes, this is the trouble that I have", and be told, "Yes, I have seen someone else down the road and he has got out of it this way". The business advisers will be able to help such people. Business Link will include advisers on design and export promotion. It is an essential part of what the Government are trying to achieve, referred to by several noble Lords as a partnership between government and industry. I agree with my noble friend that the future depends not on Ministers but on companies themselves.

The noble Lord, Lord Haskel, said that there was inward investment in a weak manufacturing industry. The noble Lord, Lord Preston, made a similar point. The noble Lord, Lord Haskel, said that we have £9.2 billion of inward investment and £17.2 billion of investment outside this country. That is good both ways. Traditionally, Britain has been an investor in the outside world, which is good for this country and good for business. Often companies, for the reason that I gave to the noble Lord, Lord Desai, have to locate themselves in other countries in order to carry out their business. Equally, it is good for other countries to invest in this country. That stimulates work, business and employment and often it stimulates other companies in this country to supply the new companies with products.

The noble Lord, Lord Desai, gave his views on these matters. I agree with his comments on investment from abroad. He said that he was an economist and he did not want to go anywhere near the real world. I understand

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that feeling but say to him that sometimes those who are in the real world say that they do not want to go anywhere near an economist. They certainly do not want to go anywhere near three economists because they will receive four answers, which is not particularly helpful.

We had a lovely speech from the noble Lord, Lord Weatherill. I was intrigued to hear that his father led a strike of tailors. I did not realise that but I am sure that it must have been in a good cause. Whatever the cause, it is good to learn that his small family firm has prospered and that it now exports two-thirds of its product. Perhaps I may say, without being too platitudinous, that the noble Lord's father would have been as proud of his son as he was of his business.

The noble Lord, Lord Weatherill, reminded us that Napoleon did not say that we were a nation of shopkeepers but that we were a nation of merchants and adventurers. He regaled us with a story about his family; perhaps I may say that my family also played a part by being adventurers. One member went abroad and taught the Persians how to use gunpowder. I am not sure whether that was a good form of trading but he was so successful that he returned as the Persian Ambassador to the Court of St. James's. That was a glittering career.

The noble Lord mentioned the Prince's Youth Business Trust. It is an important trust and has undertaken remarkable work, as I have been lucky enough to be told. He was also concerned about the Croydon Business Venture which resulted in his writing to 12 people asking them for £1,000 each and getting it. I am glad that he did not write to me.

A certain amount of money has been available for business start-up. The noble Lord was fearful that that will not be specifically available in the future because it forms a part of the single regeneration budget. I know that the fragmentation of start-up support has been the cause of anxiety in a number of organisations, in particular the local enterprise agency network. I realise too that there may be some short-term difficulties. Real opportunities exist in the longer term for local partners to bid for the funds that will be available through the single regeneration budget. In looking to the future, we consider that local enterprise agencies will be important partners in the Business Link. I hope that the individual enterprise agencies will work closely with their local Business Link partnerships. Businesses are starting up effectively and I hope that that will continue.

A number of noble Lords referred to the financial arrangements. My noble friend Lord Trefgarne referred to finance for industry, as did my noble friends Lord Oxfuird, Lord Caldecote and Lord Cochrane of Cults. The noble Lord, Lord Ezra, said that businesses fail too and the noble Lord, Lord Peston, said that banks have not always been helpful. In some respects, people have found that to be the case. However, a recession scythes through everything. Both banks and small businesses are vulnerable but I agree with the noble Lord, Lord Peston, that within prudent guidelines there should be a relatively long-term commitment. If that can be done by medium-term loans that the banks are prepared to make that would be good.

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Small businesses are reliant on short-term finance and overdrafts. The Government encourage small firms to consider alternative forms of finance. Informal investment by the Business Angels is one of them. There is access to the right kind of finance at the right time. That is vital if businesses are to succeed and prosper. It is true that banks are likely to remain the main providers of finance for small businesses. Currently they are providing approximately £40 billion to small firms, mainly as loans and overdrafts. It is vital that there should be a relationship of trust and mutual understanding between the banks and small businesses. There is also in existence the small firms loan guarantee scheme. That was changed last year; the maximum loan was increased from £100,000 to £250,000 to firms which have been trading for two years or more and for some firms the guarantee level was increased from 75 per cent. to 85 per cent. There has been a reduction in premium for all firms.

The noble Lord, Lord Ezra, referred to the commercial investment bank. In some parts of government there is not too much enthusiasm for that but my department is to undertake a review of the issue in order to establish whether small firms and enterprises in the United Kingdom are disadvantaged and what role the banks should play. I should have liked to have referred to many other issues but time runs out. Perhaps I may write to noble Lords.

The noble Lord, Lord Desai, referred to manufacturing investment. Business investment is estimated to have risen by 1.25 per cent. in the year to the third quarter. The Treasury forecasts this to rise to 2 per cent. for the year as a whole and to 10.75 per cent. for 1995. Manufacturing investment accounts for about one-fifth of the total business investment and is expected to increase strongly next year. The CBI has forecast a growth of more than 11 per cent. Those are encouraging facts.

I return to the point made by my noble friend Lord Trefgarne at the end of his speech. On the whole, government's contribution to industry can best be made by supporting and helping businesses but as far as possible by getting out of their hair. We can help by providing information and advice, by making available specific schemes and special initiatives and by providing all kinds of statistics. But it is not the Government who create wealth; it is individuals and the businesses. That is what we want to encourage.

It is always tempting to think that the past was easier than the present. That is nonsense. Many years ago my noble friend Lord Waldegrave said something that I have never forgotten. He said, "Always remember that there is a better opportunity tomorrow". So there is. We are leading Europe out of recession. There are stacks of opportunities and it is our business, whether as government playing their part or businessmen playing their part, to grab those opportunities and to make the best of them that we can.

6.10 p.m.

Lord Trefgarne: My Lords, at this stage in the evening, with an important debate to follow, it is not for me to do more than thank every noble Lord who has

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taken part in the debate. The speeches were uniformly interesting and informative and I am grateful to each and every noble Lord.

I am particularly grateful to my noble friend Lord Ferrers for replying to the debate today. I know that being here today has caused difficulties for him with regard to commitments in his diary and therefore I am doubly grateful to him. With that, I beg leave to withdraw the Motion.

Motion for Papers, by leave, withdrawn.

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