Extension to Funding for Lending Scheme highly likely

12th March 2013 | News

The government’s Funding for Lending Scheme is expected to be extended in a glaring admission from the Coalition that it is failing small businesses in providing adequate credit to aid growth.
 
Chancellor George Osborne and senior Liberal Democrat MPs are keen to extend the scheme beyond 2013 and engineer the scheme’s primary focus towards business lending rather than mortgages.
 
Deputy Prime Minister, Nick Clegg, insists it is vital that the scheme is pumped up and ‘put on steroids’ in a reaction to the slump in lending in the final quarter of 2012.
 
A senior Lib Dem said yesterday: "We are pushing for FLS to be extended and there is general agreement between both sides of the coalition.
 
"Can we extend it, can we increase it, can we direct it to SMEs? These are the things on the table."
 
Business Secretary, Vince Cable, who has previously pursued the banks to provide more access to finance for small businesses, has ordered officials to consider what practical measures can be taken to breathe new life into the scheme.
 
The premise of the Funding for Lending Scheme is that it provides banks with cheap funds in return for commitments to lending to businesses and households; but as yet the scheme has not given the SME sector the boost it sorely needs.
 
One senior government source said that there was increasing pressure on the Chancellor to be viewed as the champion of small business in an effort to appease his own Tory backbenchers demanding business growth.
 
"If the Funding for Lending Scheme drives down mortgages from 5 to 4 per cent then that does more for the macro economy than the SME sector, but the SMEs are a politically important constituency," the source said.