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Small Businesses

Volume 547: debated on Tuesday 26 June 2012

The Government have launched a package of credit easing measures to improve credit availability for smaller businesses. This includes the £20 billion national loan guarantee scheme and the business finance partnership, which will provide £1.2 billion of additional finance through non-banking channels. The Government and the Bank of England are working together on the new funding for lending scheme, which will provide funding to banks linked to their lending to the real economy.

There are a significant number of small businesses in my constituency that want to expand and create jobs but cannot get sensible bank financing. I therefore welcome the recently announced funding for lending scheme, but I understand that in exchange for this funding, banks will have to provide collateral to the Bank of England. Will my hon. Friend confirm, given that the precise details of the scheme are not available yet, whether small loans will be acceptable to the Bank of England as collateral? Otherwise, the desired lending to smaller businesses will not get off the ground.

My hon. Friend makes a very important point. He is right to point out that the details of the scheme have yet to be finalised, but I take on board his comments. We will discuss this with the Bank of England. It is important that the scheme works and that it helps funding and lending to households and businesses.

In view of the banks’ disgraceful behaviour on delivering the Merlin agreement, will the Minister assure the House that this new scheme will be transparent and will be published and monitored independently each month? Above all, will he assure us that every pound of additional money that goes to the banks through this scheme will mean additional lending to small businesses and households?

The scheme is designed to encourage lending not just to small businesses and households but across the board to all businesses. We want to make sure that when banks put collateral to the Bank of England, it is in response to their having lent more. That is absolutely vital for a scheme that encourages lending and we will make sure that we design the scheme to do so.