Cable set to renew efforts to force banks to lend to small businesses

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The Business Secretary, Vince Cable, is set to renew his efforts to force banks to lend to small and medium-sized firms by reviving a lending forum set up by his Labour predecessor, Lord Mandelson.

Established in late 2008, when concerns over the supply of credit to business were at their height, the Small Business Finance Forum has not met since before the election. Senior figures from HSBC, Santander, Lloyds, Barclays and Royal Bank of Scotland who sat on the forum feared that it might be abolished as the Government sought to distance itself from Labour policies.

However, Mr Cable, a critic of the banks' failures when in opposition, shows every sign that he is not about to let the banks off the hook.

Last month, in his first speech since being in Government, Mr Cable declared: "I will redouble our efforts to ensure that bank lending agreements from banks that have benefited from taxpayer subsidy are being honoured – especially for small and medium enterprises.

"We do not expect to see viable businesses deprived of credit or working capital by banks that are largely owned by the taxpayer, or the general beneficiaries of wider public support."

He added: "The banks claim that there is no demand. That is not right. If the bar is set too high, of course no one is willing to jump.

"The current risk aversion by banks in the small and medium enterprise sector will stifle recovery and, if it does, will actually rebound on the banks through bad debt."

What lending the banks have been able to do has been substantially aided by the £185bn lent to them by the Bank of England under the Special Liquidity Scheme, and the £125bn in explicit Treasury backing under the Credit Guarantee Scheme.

Representatives from the Institute of Directors, the Federation of Small Businesses (FSB), the Bank of England and the CBI were also regular attendees at the Forum.

An FSB spokesman said: "We want the forum to carry on. The banks were there, and they were open to criticism and liked the praise when we thought things were working. It needs to carry on for the Enterprise Finance Guarantee to prosper."