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Vince Cable has hinted that the government will force banks to lend more money to small businesses.
Appearing before the Commons business, innovation and skills committee this morning Cable said that if the banks had not increased lending by the end of the year the government would be free to show less "restraint" towards the taxation of the sector.
He added: "The chancellor and the prime minister also have made it very clear if we don’t get satisfactory results from Merlin lending process we should be prepared to take further action."
Under the so-called project Merlin agreement the banks agreed with the government to increase lending to business.
But Cable admitted that another requirement that banks hold more capital meant they are more cautious in their lending.
The business secretary also acknowledged it would difficult to penalise individual banks as some, such as Lloyds, were lending more than others.
Cable told the committee that while the banks argued there was a "weakness in demand" this was also possibly down to "discouraged demand" as small businesses did not even bother to apply for loans as they expected the bank would tell them, in the business secretary's words, "computer says no".
Article Comments
Vince Cable - along with the rest of this government - has done nothing but make grand statements on banking reform, action is what is needed not more banking rhetoric.
The interim report by the Independent Commission on Banking, Project Merlin and today's comments by the business secretary reflect the total failure of this government to increase lending or improve competition in the banking sector.
David Fleming, national officer, Unite
8th Jun 2011 at 3:58 pm
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