UK chancellor Alistair Darling is piling pressure on high street banks to accept the terms of a £4bn small business boosting loan package.
The facts:Alistair Darling
Speaking in the House of Commons today, Darling hinted that the government would take action against banks that refused the terms of the deal, which involves finance from the European Investment Bank (EIB).
Banks including Barclays and HSBC have protested about being 'strong-armed' into agreeing terms. Barclays claimed it could borrow the money under the same terms in normal money markets, while HSBC claimed it didn't need the money at all.
Darling is meeting with bank chiefs and the head of the EIB to thrash out the final terms of the deal.
The move follows fears that small businesses at the sharp end of the credit crunch are being refused loans and overdrafts they would normally have approved under normal conditions.
Also speaking in the Commons today, shadow chancellor George Osborne called for government to do more to influence the Bank of England to cut interest rates by a significant margin.
He also suggested that the chancellor was planning an increase in small business taxes next year, an allegation Darling side-stepped and did not deny.
They said:
Speaking in the Commons, Darling said: Darling said: "It doesn't mean that everyone who comes through the front door of a bank gets what they want on the terms they want.
"But I really do think it is important that British banks play their part. We, on behalf of the taxpayer, have put a lot of money into the banking system because we recognise its importance.”
"They, in turn, have to recognise the importance, not just to the country but to banks themselves, in ensuring that small and medium sized enterprises get the support they need."
Osborne responded: "The banks, of course, should act responsibly to help small businesses as the economy deteriorates. But the Government should act responsibly as well.
"Can you confirm you are still planning to increase the small companies tax rate next April. Even if this was a good idea two years ago - which I didn't agree it was - it's certainly not a good idea as we are in recession.”
We say:
Credit lines must stay open if small businesses are to survive, but it’s puzzling that the banks say they don’t need cash to supply business customers. Perhaps Darling would be better off looking to sources of government finance (ie tax) instead of relying on credit to bail out the economy.
A tax cut and further interest rate reductions are what businesses want more than ever, especially when banks are signalling that they are not refusing loans to firms with strong business plans.
Source:http://www.launchlab.co.uk/article/Start-up-News