Senior Labour politicians are mounting pressure on the government to introduce new legislation that would compel British banks to significantly increase affordable lending to small businesses and communities with low incomes.
A Bill Modelled on US Law
The former minister, Gareth Thomas, has tabled a 10-minute rule bill, a type of private member's 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, there is an urgent need to improve access to cheap loans for millions on low and middle incomes, as well as for aspiring entrepreneurs.
The proposed legislation has garnered support from several high-profile Labour figures. Co-sponsors include select committee chairs Meg Hillier, Liam Byrne, and Sarah Owen, alongside former shadow chancellors Anneliese Dodds and John McDonnell.
Transparency and Accountability for Banks
The core of the bill would establish new reporting requirements for UK banks, mirroring the US system. Financial institutions would be forced to measure and disclose their performance in reducing financial exclusion and improving access to finance for small and medium-sized enterprises (SMEs).
Regulators would then be tasked with creating a system to rate banks based on this performance. Furthermore, banks would be obliged to support credit unions and community development finance institutions (CDFIs), which often provide vital, face-to-face banking services in underserved areas.
Mixed Reactions and Political Context
Campaigners have welcomed the move. Michelle Ovens, founder of Small Business Britain, stated the bill would be "an important step towards tackling financial exclusion by increasing transparency and accountability." Meg Hillier, Chair of the Treasury Select Committee, emphasised that financial inclusion must be treated as a core societal responsibility, not an abstract exercise.
However, the bill is seen as having little chance of progressing into law. It is viewed by many as part of a broader effort by Labour backbenchers to float alternative economic policies, reflecting some dissatisfaction with the party leadership's current approach. A Treasury source suggested the bill risked duplicating existing rules, such as the Consumer Duty overseen by the Financial Conduct Authority, which already places responsibilities on banks regarding inclusion.
The push comes against a backdrop of recent government policy shifts. Chancellor Rachel Reeves, who has praised the financial sector as the "crown jewel" of the economy, has overseen several policy retreats, including U-turns on business rates for pubs and inheritance tax on farmland.
