Banks: Funding for Lending Scheme

Lord Sharkey Excerpts

Tuesday 4th December 2012 Lords Chamber

Asked by

[Lord Sharkey]

To ask Her Majesty’s Government what is their assessment of the performance to date of the Funding for Lending scheme.

[Lord Newby]

My Lords, we are still in the very early days of the scheme. However, initial indications have been positive. Bank funding costs have declined, mortgage availability has improved and quoted rates on fixed-rate mortgages have decreased since the scheme was announced. Participating banks have also introduced discounted loans for small and medium-sized companies.

[Lord Sharkey]

My Lords, there is a lot riding on the Funding for Lending scheme, but its current performance is far from clear. For example, in quarter 3, Barclays increased net lending by nearly £4 billion and the taxpayer banks—RBS and Lloyds—decreased lending by over £3 billion the same period. Overall, net lending to businesses continues to decline. Does the Minister agree that the Funding for Lending scheme can be judged a success only if it helps to produce an increase in lending to business, especially small businesses? Will he persuade the Bank to disaggregate the figures it publishes so that we can see exactly how much lending is going on to small businesses when we see the quarterly Funding for Lending scheme report?

[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.