Banks: Funding for Lending Scheme

Lord Barnett Excerpts

Tuesday 4th December 2012 Lords Chamber

[Lord Newby]

My Lords, one of the core principles and purposes behind the scheme is to increase lending to small and medium-sized businesses. We are confident that as the scheme gathers pace, it will be clearer that it has been effective. On figures on lending to small and medium-sized businesses, the Bank already publishes the quarterly Trends in Lending report, which covers SME lending. The most recent report was published in October. This report gives a very good time series about what is happening to lending to SMEs, and we are not convinced that having a second, broadly equivalent, series produced on a slightly different date would help to explain what is happening any more clearly than is already the case.

[Lord Barnett]

My Lords, the press to some extent has supported the Minister. The Financial Times said:

“The government’s flagship scheme to encourage banks to lend more to businesses and consumers is showing some signs of working—for banks, at least, if not yet for their customers”.

That is what most of the press have been saying: the banks have been taking the money and not lending it. If, in the process, the Bank of England loses money on the swaps it is doing on mortgages, will those losses be transferred to the Treasury in the same way as its profits were?

[Lord Newby]

My Lords, I think that the noble Lord is missing the fact that, over the period, the banks that are signed up to this scheme have made an additional £500,000 of loans to businesses and individuals. This is exactly what the scheme was intended to do. All the evidence is that the participating banks intend to use it to a greater extent in the future than they have up to now—it is very early days—and therefore I am sure that the question that the noble Lord has in his mind will not arise.