PMQs: Clegg calls for state bank to lend direct to businesses (Bolsover Liberal Democrats)

Bolsover Liberal Democrats <gloworme21@ntlworld.com>

PMQs: Clegg calls for state bank to lend direct to businesses

January 14, 2009 5:31 PM
Originally published by UK Liberal Democrats

Liberal Democrat Leader says the Government should get tough on taxpayer-backed banks refusing to lend

Speaking at Prime Minister's Questions, Nick Clegg said the Government should be "playing hardball" with banks refusing to lend. He urged the Prime Minister not to risk adding a further £10 billion of taxpayers' funds to the previous £37 billion stimulus. Suggesting that telling the banks to hold on to capital and lend was counter-productive, Nick repeated his call for a state bank to lend directly to British businesses.

Read the full exchange below:

Mr. Nick Clegg (Sheffield, Hallam) (LD): I should like to add my own expressions of sympathy and condolence to the families and friends of Corporal Robert Deering, Lance Corporal Ben Whatley, Corporal Liam Elms, Serjeant Christopher Reed and Marine Travis Mackin, all of whom tragically lost their lives serving this country and the people of Afghanistan in Helmand province.

Taxpayers have already had to sink £37 billion into our banks to get them lending again, so today they will be wondering why on earth they should risk a further £10 billion, just to get the banks to do what they promised to do in the first place. Why is the Prime Minister playing copycat with the leader of the Conservatives when he should be playing hardball with the banks?

The Prime Minister: I have just explained that the Conservative scheme is completely unfunded, and the right hon. Gentleman had better look at what he would put up to help people in this difficult situation. As far as the banks are concerned, the £10 billion is working capital that will go to firms over the course of the next year. The business guarantee scheme is to help firms that want to convert their overdrafts into loans, or that need investment capital. We will buy shares in high-technology companies that have a viable future, so that they can transfer their debt into equity. These are the things that we can do practically. Since November, 20,000 firms have already benefited from the cash-flow promises that we made in the Budget that we would give deferral of taxation to people who were facing a need for working capital or for cash flow. So, far from not taking action, 20,000 firms have already benefited.

Mr. Clegg: Here is what he should do - [Interruption.] He should stop telling the banks to hoard cash and to lend it out at the same time, and he should use one of the part-nationalised banks as a state bank to lend money directly to viable British businesses. I put that to him, right here, two months ago, and he did not listen. Is it not time that he did?

The Prime Minister: I admire the right hon. Gentleman's certainty, but let me just say this: we have asked the two banks in which we have shares to maintain the lending of 2007, which was a high level of lending both to businesses and to mortgage lenders. I believe that that is what they are doing at the moment, and we are monitoring what they are doing every week. As for placing further conditions on the banks, so that we can get more lending into the economy, we are making available the money that we have announced today, which will go to small businesses themselves. That is an important element of helping small businesses through these difficulties, but we will not hesitate to look at other measures that are necessary to get the financial system moving. All around the world, people have recapitalised the banks. All around the world, getting the funding moving is the important question. I believe that the measures we have taken today will make a difference, but we will not hesitate to take further measures when they are necessary.