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Brown tells banks: Give small firms loan deals
Paul Waugh, Deputy Political Editor29.10.08
GORDON BROWN warned banks today that he would force them to increase lending to small businesses to combat the recession.
In a clear shot across the bows of the "big five" high street banks RBS, HBOS, LloydsTSB, HSBC and Barclays, the Prime Minister said the Government had a range of "other instruments" lined up if they failed to help firms struggling in the downturn.
Mr Brown issued the warning after London MP Karen Buck revealed that local companies have been told that their existing loans will have to be renewed with harsher terms.
He said banks should not change the terms and charges for existing lending. "This is the central issue that has got to be dealt with in the next few days. We have given liquidity to the banks, we have recapitalised the banks, now we must have the resumption of lending by the banks. If the resumption of lending can take place by making new decisions to do so, that is exactly what we will do," Mr Brown said.
"At the same time, we will look at other instruments by which banks or financial institutions can give money to small businesses to increase their cashflow." The threat of "other instruments" and "new decisions" on lending centre on tightening the strings attached to the Government's £35 billion bail-out of RBS, HBOS and LloydsTSB, insiders suggest.
The Treasury and Department for Business are trying to broker a deal worth £1 billion to UK firms by accessing cheap money from the European Investment Bank.
But to date, the British banks have dragged their feet on the issue and No 10 is determined to get a deal in talks with bankers tomorrow.
Meanwhile, shadow chancellor George Osborne warned that Labour's plans for a "spending splurge" could damage Britain for more than a decade. Mr Osborne hit out as Alistair Darling prepared to make a City speech that is expected to confirm that the Treasury will try to spend and borrow its way out of recession. The Chancellor was set to sound the death knell for Mr Brown's own fiscal rules in which he attempted to keep debt down and balance the public finances. Mr Osborne said this would destroy "the final remaining pillar" of Labour's economic record.
The Tory shadow chancellor also broke with his practice of not commenting on Bank of England decisions on interest rates by instead calling for swift cuts to boost demand.
Reader views (4)
The banks can't pull a rabbit out of a hat, for Gordon Brown or anyone else. They can't resume lending as if the bull market was still running because they know that at least 25% of businesses will not be able to keep up payments on new loans due to the downturn. At least. So of course they are being cautious. You can't have it both ways. You can't leave the bankers to be bankers and also tell them how to run their own banks. Bankers are reverting to type. They have put their bowler hats back on and are practising in front of a mirror saying no to everyone. The days of the hip, action man banker are over. For better or worse. The chance to pretend nothing has really happened is over. The horse is out of the stable.
- Blackstone Coke, London
Our great leader is now an expert banker. In a recession lending has to be reined in to avoid bad debts. We are seeing a global deleveraging as the asset bubble bursts which even the great one cna not stop.
- David B, eastbourne
Why would they listen?! Nobody else takes Bean Brown seriously
- Jacqueline, Hampstead, London
Why doesn't he just get on with it and do it? He obviously hasn't learnt anything from his recent chat with Sarkozy.
- John Problem, Hackney Wick, London, UK
