Coalition revives Labour's bank lending forum

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Vince Cable, the coalition's Business Secretary, will resurrect the last government's flagship committee to encourage high street banks to lend to small businesses in the credit crunch.

Set up by Lord Mandelson, Mr Cable's predecessor, in late 2008, the Small Business Finance Forum has not met since before the election. Senior figures from high street banks HSBC, Santander, Lloyds, Barclays and The Royal Bank of Scotland (RBS) who sat on the forum feared that it might be dropped as the Lib-Con government sought to distance itself from Labour policies.

However, a Whitehall source said that the forum would continue, though coalition ministers would "obviously want to put their own stamp on it". Department officials are understood to have told the banks that the fate of the forum will be decided ahead of Parliamentary recess later this month.

Business groups considered the forum to be vital in encouraging the banks to help small and medium-sized enterprises (SMEs), which have been badly hurt by the credit crunch, and that it helped stimulate the economy. A regular attendee said: "It was a good forum for sharing information and views. We've been told that what is under consideration is the format of how we will interact."

As well as the banks, representatives from the Institute of Directors, the Federation of Small Businesses (FSB), the Bank of England and the CBI were regular attendees.

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."

This guarantee was set up last year. It supports lending to strong SMEs with few assets by guaranteeing loans of up to £1m. The Chancellor, George Osborne, extended it by £200m to £700m in last month's emergency Budget and it will be available until March 2011.

Lord Mandelson set up the forum following complaints that the banks were not lending to businesses, despite a stipulation as part of the £37bn bailout demanding that they continue to provide debt at 2007 levels.

Representing the banks were Lloyds' head of external affairs, Stephen Pegg; Barclays local business managing director, Steve Cooper; and RBS small business chairman, Peter Ibbetson. The FSB's then chairman, John Wright, was also on the forum.

It is thought that Mr Cable will chair the forum, which met roughly every six weeks, for the first few meetings. Mark Prisk, the Small Business minister, is expected to lead the forum after Mr Cable has set out the main issues.