BUSINESS SECRETARY Dr Vince Cable has taken to task the five banks that signed up to the Project Merlin deal with the government in February after they fell short by £2.2bn of the agreed target for lending to small businesses in the first quarter of 2011. Under the Merlin agreement the banks undertook to lend £76 billion a year to small and medium-sized businesses, around £19bn per quarter, but in the first three months of this year they only lent £16.8bn. Dr Cable is reported as saying that if the banks continued not to meet their targets the Government would have to “examine options for further action”.
At the time the Merlin deal was signed some commentators pointed out the lack of sanctions that could be taken against the banks if they failed to fulfil their part of the deal. In an editorial in The Observer of 13 February 2011, the Project Merlin deal was described thus: “It won’t work, partly because the sums aren’t big enough but mostly because the whole deal looks like a stunt. Mr Osborne wants to appear as an iron Chancellor, laying down the law to errant financiers. But it is easy to see where power really lies. The exchequer sorely misses the revenue from a booming City. There is a modest revival in manufacturing, but nothing on a scale to claim the economy is being “rebalanced”. So, in the absence of new champions, the government is gradually resigning itself to the idea that the banks must be allowed to get back to business as usual”.
It is not just small business that are being let down by the banks, their own staff are being cut at an alarming rate. In just one week alone in May 1,560 were lost in the sector. Barclays shed 500 posts, Lloyds Banking Group 360 and Royal Bank of Scotland 700. Since the start of the financial crisis Royal Bank of Scotland has shed more than 20,000 posts. Any job losses are a cause for concern but it is especially galling news for the tax payer when some of the banks putting people onto the dole are ones that were rescued with and continue to be propped-up with public money.