Buried deep inside the most recent voluminous Bank of England Quarterly Review lies a carefully concealed confession. The Old Lady of Threadneedle Street has finally come clean about bank lending to business. It’s not been happening. You will recall that banks have repeatedly maintained that they were not lending to business because there was no demand. It wasn’t a supply problem. To us mere mortals this was difficult to square with politicians saying that they were pressuring banks to support the recovery and lend to business and banks saying that they were doing just that and playing their part to the full. Who were we to believe?
Since the crash in October 2008, a crash caused by the banks, they have been reducing overdraft facilities, amending existing loan agreements and increasing their charges to businesses. Far from supporting the recovery, they have been actively working against it.
This week, at long last the Bank of England has fessed up. In their latest quarterly review they admit that banks are not lending to businesses. It’s not happening because “tighter credit supply has been the dominant influence”: bank speak for keeping the lending book closed. Bank lending to business has not been happening – it’s official.
Yet again the banks have lied to us and let us down. Yet again politicians have been proved to totally useless and allowed the wool to be pulled over their eyes.
Organisations such as the CBI and the Chambers of Commerce have also been spectacularly ineffective in representing their members’ interests. They have failed miserably to inform government of what is actually going on. This is understandable up to a point because the banks have a malign presence in these organisations which has the effect of intimidating both the organisations and their members into a reluctant if not fearful silence.
The real fault lies with MPs. They should have stepped down from their pedestals, got into their cars and visited all the businesses in their constituencies and found out the truth for themselves. Instead they preferred to stay huddled in their cosy Westminster cocoon and consume the disingenuous twaddle that was fed to them by the banks. Their idleness and lack of proper attention is inexcusable. They could have made a real difference to people’s lives and helped to strengthen the recovery if they had taken their heads out of the clouds and gotten off their butts.