Senior Labour politicians are demanding new laws to compel major UK banks to significantly increase affordable lending to small businesses and communities with low incomes.
US-Style Legislation Proposed
The former minister, Gareth Thomas, has tabled a private member's bill, known as a 10-minute rule bill, which draws direct inspiration from the American Community Reinvestment Act (CRA) passed in the 1970s. Thomas argues that with the ongoing cost of living crisis, better access to affordable credit is crucial for both individuals and entrepreneurs.
"We need to unlock far better access to cheap loans for the millions of people on low and middle incomes," Thomas stated. He added that the move would also help "talented entrepreneurs" find the finance required to launch and grow their companies.
Key Demands and Cross-Party Support
The proposed legislation has garnered support from several senior Labour figures. Co-sponsors include select committee chairs Meg Hillier, Liam Byrne, and Sarah Owen, alongside former shadow chancellors Anneliese Dodds and John McDonnell.
The bill, a long-term goal of the Co-operative Party, would establish a new framework for the UK. It would force banks to measure and disclose their performance in tackling financial exclusion and in improving finance access for small and medium-sized enterprises (SMEs).
Financial regulators would then be required to rate banks based on that performance. Furthermore, banks would be obliged to support credit unions and Community Development Finance Institutions (CDFIs), which provide vital local banking services in underserved areas.
Industry Reaction and Government Stance
Campaigners have welcomed the proposal. Michelle Ovens, founder of Small Business Britain, said the bill would be "an important step towards tackling financial exclusion by increasing transparency and accountability."
However, the bill is seen as having little chance of becoming law. A Treasury source pointed to existing regulations, like the Consumer Duty overseen by the Financial Conduct Authority, suggesting the new bill risked duplication. The government published its own financial inclusion strategy last year, focusing on supporting credit unions.
Despite this, the move highlights growing backbench pressure for alternative economic policies. It follows a series of policy shifts by Chancellor Rachel Reeves, who recently announced extra support for pubs facing business rate hikes.
