UK government will force banks to lend

Chancellor Alistair Darling is planning to escalate the battle that he is heading into with the nation’s high street banks regarding the fact that they are not lending regularly to small businesses and first-time buyers who continue to struggle as a result of the credit crunch.

A labour lawmaker has described the banks as sitting on their hands as they have used the government bailout to simply fluff their balance sheet. However, Darling has been looking at ways around the stalemate by introducing caps on the loan rates for small businesses.

Darling has indicated that he will implement this measure of introducing the underwritten loans if the banks do not release their stranglehold on mortgages and small business loans.

Ahead of his delivery of the Pre-Budget report next week, Darling will also include the measures which he may pass in order to help stimulate the domestic market and revive the economy.

John McFall, the head of parliament’s influential Treasury select committee, said major banks must start lending as both the US and UK government has criticised them with the threat that full scale nationalisation of high street banks may follow.

This extreme measure did prove successful in Norway, Sweden and Finland in the early 1990s.

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