Banks: Lending

Lord Empey Excerpts

Wednesday 5th February 2014 Lords Chamber

Asked by

[Lord Empey]

To ask Her Majesty’s Government what assessment they have made of the success of the steps they have taken to encourage banks to lend to small and medium-sized enterprises.

[Lord Popat (Con)]

My Lords, the Funding for Lending scheme is incentivising banks to increase lending to businesses. In addition, the Enterprise Finance Guarantee scheme has underpinned £1.4 billion of lending since 2010, and the Government are supporting the development of alternatives to bank finance. In the last quarter of 2013, the banks lent an average of £4 billion a month; in the same period in 2012, the average was £3.1 billion. That trend is positive and encouraging.

[Lord Empey (UUP)]

My Lords, I of course welcome the establishment of the business bank and the additional funds earmarked for it. However, as the Minister knows, the vast bulk of business lending in the UK comes from commercial banks. With a recovery under way at last, does the Minister not fear that the banks could take the easy way out and divert funds needed for SMEs into a heating and unproductive housing market, thus ensuring that the real wealth creators of this country are unable to help our economy grow?

[Lord Popat]

My Lords, we launched the Funding for Lending scheme to kick-start the housing market and to help our SMEs. Now that the housing market is picking up, the Government accept that the Funding for Lending scheme no longer needs to support lending to households. That is why the scheme’s fire-power has now been refocused to underpin the supply of credit to small businesses, where it is most needed.