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Bank Lending

Volume 523: debated on Thursday 17 February 2011

4. What recent progress he has made in his discussions with representatives of the banking industry on increasing levels of lending to small and medium-sized enterprises. (41345)

16. What recent progress he has made in his discussions with representatives of the banking industry on increasing levels of lending to small and medium-sized enterprises. (41357)

As announced last week in the House by the Chancellor, the UK’s five major banks have stated a capacity and willingness to lend £190 billion of new credit to business in 2011. That includes £76 billion of new lending to SMEs, which is a 15% increase on the amount lent in 2010. If demand exceeds that, the banks will lend more.

I warmly welcome my right hon. Friend’s work and the Government’s announcement. To have maximum transparency, will Ministers negotiate with the banks for the figures on lending to small and medium-sized businesses to be published by principal local authority area on a regular basis, so that we can see exactly what is happening throughout the country?

The figures will be independently monitored by the Bank of England and published quarterly. My right hon. Friend makes a helpful suggestion, and I will examine whether the figures can be disaggregated in that way.

Will the Secretary of State assure me that he will take no lessons on the banking system from the shadow Chancellor, who designed the system that failed us so badly, and who did nothing to encourage transparency and control bonuses? Will he ensure that banks start to lend to small businesses?

Indeed. In not only the agreement but our wider policy, we have advanced considerably on the position a year ago. We inherited a banking system that had collapsed, in part because of failures of regulation. We have introduced much more effective and higher levels of tax on the banks, because of the profits on their balance sheets. We have introduced greater transparency, which will add to legislation. Through the banking commission, we have set up a process of fundamental structural reform.

On Government action to encourage lending, we see this week that, thanks to a lack of regulation, Dollar Financial intends to open another 800 money shops in this country this year alone. Will the Secretary of State clarify whether such legal loan sharking is the lending that he wants to encourage?

There is a consultation process going on at the moment led by my colleague, the Under-Secretary, my hon. Friend the Member for Kingston and Surbiton (Mr Davey), and we shall respond to it shortly. Clearly, it is essential that we have lending in deprived communities, with social enterprise and credit unions, and we are working to expand those areas.

Last week, the man chosen by the Secretary of State to lead his business advisory group and to be his very own sounding board resigned because of the Government’s deal with the banks. Does he agree with his noble Friend Lord Oakeshott that the Government have gone soft on the banks, that the Merlin lending deal does not live up to the coalition agreement and that the Government negotiators were arrogant, incompetent and

“couldn’t negotiate their way out of a paper bag.”?

Does the right hon. Gentleman agree that Lord Oakeshott has taken over his former mantle as the Lib Dem voice of decency on the banks and, as The Independent says:

“Is Lord Oakeshott the new Vince Cable?”

I do indeed agree with my friend Lord Oakeshott on many issues, including what he says about banking, but on this issue I think he is wrong. May I suggest that a more authoritative view comes from the business organisations whose members will benefit from lending? For example, the CBI—often quoted these days from the Opposition Benches:

“It’s good news that banks have agreed to lend more to businesses, and there will be more transparency in this area.”

The FSB says that

“we welcome the intention to lend more to small businesses.”

They are the people who are benefiting.