Oral Answers to Questions

Debate between Neil Parish and Mark Hoban

Tuesday 24th January 2012 Commons Chamber

[Neil Parish (Tiverton and Honiton) (Con)]

7. What steps he is taking to encourage banks to charge competitive rates for loans to small and medium-sized businesses.

[The Financial Secretary to the Treasury (Mr Mark Hoban)]

At the autumn statement the Government announced the launch of the national loan guarantee scheme. The scheme will provide up to £20 billion of Government guarantees for bank funding, which will lead to a reduction in loan interest rates to smaller businesses of up to 1%.

[Neil Parish]

I thank the Minister very much for that statement, but businesses in my constituency of Tiverton and Honiton are being held back by the banking sector, which is charging interest rates of up to 20% to financially sound businesses. When and how are we going to get much more competition into the banking sector?

[Mr Hoban]

My hon. Friend makes an important point. We need to see a more competitive banking system. At the moment we are seeing, for example, the acquisition by Santander of businesses from RBS, which will create a challenger. We have also seen the outline decision by the Co-op to buy branches from Lloyds bank. Those measures, together with the sale of Northern Rock to Virgin Money, point towards a more competitive landscape for banking and will lead to better outcomes for consumers and businesses.