The government is being called on to introduce legislation forcing UK banks to expand affordable lending to small businesses and low-income neighbourhoods.
The former minister Gareth Thomas has tabled a 10-minute rule bill echoing the US Community Reinvestment Act (CRA).
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.”
Co-sponsors of the legislation include the Labour select committee chairs Meg Hillier, Liam Byrne and Sarah Owen, and the former shadow chancellors Anneliese Dodds and John McDonnell.
Thomas’s bill, a longstanding campaigning aim of the Co-operative party, of which 41 Labour MPs are members, would establish a reporting requirements for the UK.
Banks would have to “measure and disclose their performance in reducing financial exclusion, including exclusion from affordable credit, and in improving access to finance for small and medium-sized businesses”, and regulators would “establish a system for rating banks according to that performance”.
The legislation would also oblige the banks to back credit unions and community development finance institutions (CDFIs) that specialise in small-scale, face-to-face banking in underserved communities.
Michelle Ovens, the founder of campaign group 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 by increasing transparency and accountability across the banking sector.”