The Bank of England launches £80bn bank lending scheme
An £80 billion initiative to encourage bank lending has opened for business today. The Funding for Lending Scheme (FLS) is open to banks for the next 18 months.
The Bank of England and the Treasury have launched the FLS with the aim of providing cheaper loans and mortgages to businesses and households. .
The latest initiative comes as the UK is mired in the longest double-dip recession in more than fifty years. Recent weeks have seen the Chancellor facing criticism, from home and abroad, that his austerity measures are damaging the economy.
Access to the Scheme will be directly linked to how much each bank and building society lends to the real economy. For every pound of additional lending an institution advances, an additional pound of access to the scheme will be permitted for that institution.
Chancellor George Osborne confirmed that the FLS will replace the £20 billion National Loan Guarantee Scheme (NLGS). The NLGS was unveiled in March as one of the Treasury’s flagship policies.
Mr Osborne said: “The National Loan Guarantee Scheme has made a real difference, with over 16,000 cheaper loans worth over £2.5bn already offered to businesses across the UK.
“The more generous FLS has officially opened for business and will in time effectively take over from the NLGS, delivering credit easing to the whole economy.”
Labour claimed that the wind down of the NLGS represents another failure on the part of the Chancellor. Shadow Treasury Minister Chris Leslie said: “If the National Loan Guarantee Scheme was always supposed to be replaced by the new Funding for Lending Scheme, then why, two weeks after that new scheme was announced, did George Osborne say that the NLGS would be extended?”
Mr Leslie also raised doubts in regards to the potential success of the FLS. Mr Leslie said: “Despite promises from ministers, net lending to businesses has fallen in every month of this Government. And there are serious questions about whether the new Funding for Lending Scheme will really see lending to businesses become cheaper and easier to access.”