Lending to small businesses is a real concern at a time of stress in the financial markets. That is why the Government acted last month by launching the £20 billion national loan guarantee scheme. It is still in its first few weeks, but the signs are that businesses are getting cheaper loans, which will help support recovery.
I can certainly give my hon. Friend that assurance and say to businesses in her constituency and others that the national loan guarantee scheme is now available through most of the high street banks. We are also investing through something called the business finance partnership in non-bank financing of businesses. Some of that money will be for very small businesses, too, through peer-to-peer lending. As everyone accepts, I think, financial markets across the world, particularly in Europe, are stressed. That is why the Government have to step in and help, and that is what the £20 billion of guarantees that we are offering under the scheme will do.
The Chancellor of the Exchequer must be aware of the pressures being exerted by banks on small and medium-sized businesses. What more can he and his Government do to get the banks to assist by making credit available rather than undermining many of those very good businesses?
The hon. Gentleman is right that small businesses face difficult financing conditions because of the stress in the financial markets and the fact that banks are not able to access funding in the way that they were four or five years ago. That is why we have taken the step of credit easing, which is not something that a Government would do in more normal economic times, and it is why we have the finance partnership and are expanding the enterprise finance guarantee. Those are all designed as Government interventions, using the good credit worthiness that we have earned for this country, to ensure that those lower interest rates can be passed on to small businesses.
Does my right hon. Friend agree with me that in a banking sector where only up to about 2% of bank balance sheets is invested in the real economy, what we really need is a revolution in competition in that sector? What is he doing to ensure that there will be more new entrants into the banking industry in future?
My hon. Friend makes an extremely good point, which is that the banking industry has become very consolidated in recent years, because of the various mergers and failures during the financial crisis. Our ambition as a Government is to increase competition on the high street, and we took an important step towards that with our decision to sell Northern Rock back into the private sector and to support Virgin Money as a new lender on the high street, but of course other divestments are due to take place, and the ambition in the Vickers report, which we are implementing, is to increase competition.
With 50 businesses going bust every day, but still getting battered by the banks with high interest rates and charges, when is the Chancellor going to get a hold of the banks and get them to put some money into the country and into British business? After all, we are the ones who bailed them out.
I am glad the hon. Gentleman reminds us that the previous Government bailed out the banks with no conditions attached, and we are having to pick up the mess. We want to help small business lending by using the Government’s balance sheet and the low interest rates we have earned with a credible deficit plan. We intend to increase competition in the high street: we sent Northern Rock back into the private sector with Virgin Money, a decision that was welcomed in the north-east of England, but opposed by the shadow Chancellor. We are taking the steps necessary, but yes, we are dealing with one enormous mess left to us by Labour.