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Money Down the Back of the Sofa

At last, UK consumers and businesses can look forward to borrowing more from their banks, according to a new survey from the Bank of England. And Royal Bank of Scotland opened the bidding in July with the announcement that it had discovered an unexpected £20 billion that could be made available to its customers.

The Bank of England’s Quarterly Credit Conditions report declared that the banks had approved more loan applications from households during the second quarter of 2013 than in the year-earlier period. And declines in the cost of mortgage borrowing had prompted a rise in housing loans. The survey expressed the conviction that the trend would improve “significantly” in the third quarter, as consumers started to feel generally more secure.

That might come as a bit of a surprise to small and medium-sized enterprises, which have not been feeling particularly expansionary in recent months – and which have most definitely not been allocated anything approaching the loan targets which the Chancellor stipulated back in 2011? when he agreed not to lean too heavily on bank bonus payments.

As recently as June, the Bank of England had revealed that net lending fell by £300 million in the first quarter of 2013 – and, by inference, that the government’s Funding for Lending Scheme had simply failed to deliver the promised goods to small businesses. The BoE had fingered RBS, Santander and Lloyds as the laggards, with Barclays and Nationwide increasing their loan books.

By an amazing coincidence – or perhaps not – RBS’s discovery of the extra £20 billion down the back of the sofa came hot on the heels of a dressing-down by George Osborne, who was thought to have pushed ex-boss Stephen Hester out of the door and who had delivered a blunt order to RBS to stop thinking of itself as a rescue case and focus its attentions instead on “being a UK bank that provides greater support to the British economy, helping businesses and job creation here.”

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