George Osborne’s planned expansion of the Funding for Lending Scheme (FLS) has met with criticism from shadow business secretary, Chuka Umunna.
Osborne and the Bank of England are expected to announce an extension of the scheme within the next two weeks amid mounting pressure on policymakers to boost growth and soften government austerity.
Chuka Umunna, member of parliament for Streatham, said: “As the Bank of England’s Trends in Lending survey found last week, the Funding for Lending Scheme is not helping those businesses, in particular smaller firms.
“The scheme has repeated the failings of the government’s abandoned credit easing and Project Merlin schemes by relying on the high street banks without any consideration of the longstanding difficulties which many businesses have faced when approaching banks for finance.”
The FLS was launched in April 2012 to offer subsidised credit to banks and building societies in order to boost lending to UK households and non-financial companies. It had originally been due to expire in January 2014.
Plans drawn up by officials from the Bank of England and Treasury involve the extension of the FLS scheme to 2015, as well as expanding it beyond the major high street banks.
Those who could become eligible under the proposed expansion include invoice finance houses, leasing firms and asset finance groups – a major source of credit to smaller companies.
The FLS announcement is due to come ahead of May’s visit from the International Monetary Fund (IMF), which last week suggested Britain should consider imposing less austerity in the face of weak private sector demand.
The FLS has also come under criticism from banks, with Bank of England figures suggesting participating banks were lending less money overall in the second half of 2012 than in the previous six months.