Minister banking on competition

High street banks will be encouraged to compete with the Big Society Bank, the Government has said.

The Government-backed bank, due to be launched with £300 million of cash raised from dormant bank accounts in the UK, will step in where established banks fail to lend.

But Cabinet Office Minister Francis Maude is hoping the big banks will start lending to voluntary organisations as a rival – and increase competition.

“We want to see much more money being available including, over time, mainstream finance from the mainstream banks into this market,” he said.

Mr Maude told MPs the Big Society Bank would not provide grants but would lend at competitive rates – and it did not remove the need for high street banks to help such groups.

He added: “It certainly does not obviate the need, in the interests of local residents, to support the voluntary and social enterprises.”

The minister was speaking at Cabinet Office Questions, where he stressed the Big Society Bank’s obligation to lend to social enterprises and charities would be “built into its mission”.

Mr Maude criticised Labour for talking about establishing a social investment bank, but failing to deliver during its 13 years in power.

“Frankly, I expected on taking office last May to find plans well prepared; I opened the file to find it pretty much empty,” he said.

But Labour MP for Middlesbrough South and East Cleveland Tom Blenkinsop said it was still unclear how the Big Society Bank would work.