Senior Labour backbenchers have tabled a bill that would compel UK banks to expand affordable lending to small businesses and low-income neighbourhoods. The former minister Gareth Thomas introduced a 10-minute rule bill, modelled on the US Community Reinvestment Act (CRA), which requires banks to report on their lending to poorer communities.
Thomas said: “Given the cost of living crisis, we need to unlock far better access to cheap loans for the millions of people on low and middle incomes to help them through the financial emergencies that everyone faces at some point, while also making it easier for talented entrepreneurs to find the affordable finance they need to get their businesses up and running.”
The bill is co-sponsored by Labour select committee chairs Meg Hillier, Liam Byrne and Sarah Owen, and former shadow chancellors Anneliese Dodds and John McDonnell. It would establish reporting requirements for banks to measure and disclose their performance in reducing financial exclusion and improving access to finance for SMEs. Regulators would rate banks accordingly.
The legislation would also oblige banks to support credit unions and community development finance institutions (CDFIs) that specialise in small-scale banking in underserved communities. Hillier, chair of the Treasury select committee, said: “All too often, improving financial inclusion is treated as an abstract box-ticking exercise rather than a core responsibility of a modern, progressive society.”
Michelle Ovens, founder of Small Business Britain, said: “Many small businesses and individuals continue to face barriers to accessing fair and affordable banking. This bill would be an important step towards tackling financial exclusion.” The bill has little chance of proceeding, but reflects backbench dissatisfaction with the party leadership’s economic approach.
A Treasury source said existing laws, including the consumer duty overseen by the Financial Conduct Authority, already place responsibilities on banks regarding financial inclusion, and suggested Thomas’s bill risked duplicating these.
