EEF slams Osborne's deal to boost bank lending to SMEs

The 15% increase revealed by the chancellor today was hugely disappointing, the manufacturers association said. Terry Scuoler, EEF chief executive, said: "Industry will feel today's statement on bank lending did not go nearly far enough. The new targets may lead to some increase in lending to SMEs, but the track record of previous agreements is not a good one." Osborne had earlier claimed a "massive" increase in proposed lending to SMEs in his statement on bank lending to the Commons. Under the deal, major banks including Barclays, HSBC, Lloyds, RBS and Santander have pledged to increase SME lending from £66 billion last year to £76 billion in 2011. The increase was "higher than anyone" could have expected Osborne added. He said: "Absent this accord, the banks were actually expecting lending to fall this year." However, the EEF hit out at Osborne's failure to address fundamental flaws in the banking sector. Scuoler added: "Today's statement left untouched the key issues of lack of competition amongst the banks, insufficient transparency in lending decisions and the lack of understanding of its customers." The EEF urged the government to encourage new entrants to the banking market to boost lending. Ministers must also improve the knowledge of how to access risks and returns in real businesses in the City, the EEF added. Banks will have to deliver greater transparency in the pay packages of senior staff under Osborne's plans. Total bonuses will also be lower than last year at RBS and Lloyds under the deal. Business secretary, Vince Cable said: "This is part of an ongoing process of reform of the banking sector. We are in no way pre-judging the big structural questions being addressed by the Independent Commission on Banking, including competition and the structure of banks."