Opinion

New £80bn scheme puts money in the wrong hands

3 min read

18 June 2012

The Chancellor's new £80bn scheme is us taking a step back and placing money back in the banks' hands again - a big mistake?

Not for the first time, we are in the hands of the banks to drag us all out of the mess they created in the first place. 

When George Osborne gave his Mansion House speech on Thursday he had in the pocket of his tuxedo a new £80bn ‘credit for lending’ scheme, that will enable small and medium sized businesses and consumers to access funds to boost the economy.

There’s one problem: this £80bn is being put in the hands of the banks under the proviso they pass it onto borrowers.

These ‘crooks in suits’ have mishandled the cash at their disposal for too long and now, as we continue the ride through a double dip recession and the majority of Europe teeters on the brink of collapse, we’re throwing even more money at them. 

I thought this situation was dealt with when the Chancellor introduced credit easing last year, which was supposed to help business access more much-needed funding.

I had the impression that credit easing would cut out the middle man by transferring money directly from the Treasury to the high street. However, anecdotal evidence from business owners up and down the country is that funding is still scarce.

I was all in favour of this scheme. It made sure the banks couldn’t get their hands on the funds and I praised the Chancellor for making such a bold move.

But now it appears that he has returned to the bosom of the banks to rescue the economy – and it fills me with dread. 

I agree with the Governor of the Bank of England, Sir Mervyn King, who believes that providing banks with cheap funding leads to a dangerous dependency on the state and exposes the tax payer to potential losses.

By standing shoulder to shoulder with the Chancellor last week Sir Mervyn has relented his position, announcing a scheme to provide funding at below market rates to banks to provide increased lending to non-financial companies.

The £80bn pound , the common sense answer is ‘no’. The banks’ black holes need filling and the government is ready with a shovel loaded with cash.

We need to take the money from this scheme and the good intentions behind the credit easing programme to create an independent body that is solely charged with providing funds for business. There are enough experienced business people out there, like former Tesco CEO Sir Terry Leahy, who could sit on a board that understands what business needs and make sure the cash gets to them to drive investment, expansion and job creation.

I welcome the Chancellor taking decisive action, but I urge him to think twice before feeding the habit of the pinstriped parasites. Otherwise there’s a good chance he’ll never see his cash again.

Charlie Mullins is the CEO and founder of Pimlico Plumbers.

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