A lending scheme set up by the government is to be extended so that some 99.9% of UK businesses will be able benefit.
The National Loan Guarantee Scheme (NLGS) was launched in March this year in order to help UK businesses access cheaper finance by reducing the cost of bank loans by one percentage point. The government said on the release of the scheme that up to £20bn would be made available to businesses with a turnover less than £50m over a two-year period through participating banks.
However the Chancellor George Osborne has now confirmed that scheme will now be extended to businesses with a turnover of up to £250m. He added that more than £1.5bn has been offered to businesses in the first three months of the NLGS and with the increase in scope of the scheme that almost every business in the UK can now access it.
But the extension follows a report published by independent finance provider Syscap which found that the NLGS has not led to any significant reductions in the overall cost of loans for small businesses.
It said interest rates on these loans are actually higher than the 3.62 per cent a year ago? Oh dear George, it looks like the government is as effective as a chocolate fire guard in ensuring the banks don’t take all the benefit for themselves and leave the customers (and taxpayer owners in many cases) footing the bill.
If spending is key to the economy then all this capital being injected into the banks to sure up their capital reserves and balance sheets isn’t actually injecting any money in the real sense is it? No more than hiding money under the mattress.
If funding doesn’t reach UK small and medium businesses, then they cant spend it on UK goods and services and business to business transactions, they cant also use that ‘extra funding and liquidity’ to invest in their own infrastructure or recruitment and if that money isn’t being used for wages through job creation then it doesn’t reach the hands of consumers.
If you put a £bn into a bank it gets swallowed so that banks can hoard it and swim around in it like Scrooge McDuck, but if you put £bn in the hands of SME’s and consumers/taxpayers it will circulate many times over through financial transactions. Wake up George!