Lending to Small Businesses

Loans of less than £25,000 to the smallest businesses are already regulated under the Financial Services and Markets Act 2000. The Government are committed to regulating only where there is a clear case for doing so, to avoid putting additional costs on lenders and businesses, and the Government welcome the recent expansion of the Financial Ombudsman Service and the establishment of a voluntary dispute resolution service.

A succession of small business lending scandals has come to light in recent months, including from Clydesdale, the Global Restructuring Group and HBOS. This has highlighted that small businesses are still struggling to get fair access to finance. Last week, Labour set out our proposals to fix this, including plans to set up a post bank that would offer relationship banking for small businesses to improve their access to finance. Will the Minister support Labour’s proposition for a publically owned postal bank that will provide trustworthy finance for small businesses?

I am sorry, but I cannot give the hon. Lady that undertaking. I really passionately believe that we need to resist additional Financial Conduct Authority fees, product reviews, increased compliance and monitoring costs for businesses, stifled product innovation and narrower product choice for small and medium-sized enterprises, which would be the consequences if we followed Labour’s advice on this policy area.

Order. Question 22 will probably not be reached. If the hon. Member for Witney (Robert Courts) were standing, I would call him, but he is not, so I will not—

But he does, so I shall—Mr Robert Courts.

My hon. Friend makes a very fair point. That is why the Chancellor announced at the spring statement that we will require company audit committees to review payment practices and report on them in their annual accounts. This is part of a range of measures that the Government will be setting out shortly when we make a full response after the call for evidence.

The Government know full well that some deep-rooted corruption is taking place within major banking institutions when it comes to commercial lending. At the moment, there is nowhere near the type of protection needed to help cover our small businesses in such an eventuality. Will the Government take action now—eventually—to give small businesses that support?

We have taken direct action so that small businesses can get a direct and quick response by expanding the authority of the Financial Ombudsman Service and having a retrospective review through the dispute resolution mechanism. What businesses up and down the country want is quick action to deal with disputes that are unresolved.

High street banks are regulated, but the loans they provide to SMEs are not. There is not even a requirement to treat such a customer fairly and reasonably. In the absence of regulation, should there be a clearer warning about the lack of protection if things go wrong?

As my hon. Friend knows through his excellent work with the dispute resolution service, there are some avenues for businesses to go down. Many—virtually all—lenders have now signed up to the standards of lending practice, and that, alongside the expansion of the Financial Ombudsman Service’s jurisdiction, gives businesses the assurance they need.