As the Guardian notes this morning:
George Osborne will announce an expansion of the Bank of England's £80bn funding for lending scheme (FLS) ahead of a visit to Britain by the International Monetary Fund next month, as he seeks to head off calls for a softening of government austerity plans.
High-street banks are to be given added incentives to extend credit to small and medium-sized businesses in an expansion to the scheme, due in the next fortnight.
Osborne really is clutching at straws. When will he realise it is not loans that are missing (although they have been hard to get for SMEs)? It is demand that is missing. The reality is that the vast majority of large companies have no credit issue at all as they are sitting on cash but they won't spend it because there is no demand in the economy to justify doing so.
But Osborne splutters on with the wrong policy at the wrong time. No wonder the IMF aren't impressed.
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What can we expect from somebody, who has gone from having a privileged education, straight into politics with virtually no experience of the real world of employment that most of us live in.
He only represents the viewpoint and interests of the 1% that he is one of. Witness his announcement yesterday that the UK government is going to take legal action against the imposition of a Financial Transaction Tax.
IMO Osborne know exactly what he’s doing and why… smoke and mirror’s distraction.
The interesting thing is the IMFs attitude. Are they actually scared that Osborne has gone too far in creating the economic disaster which ‘justifies’ his dismantling of the welfare state? Or is their new criticism to provide the blind for Osborne changing tack?
Now that’s an interesting angle
Lagarde is his friend and owes him one – he supported her for the IMF job
If you look at what SMEs say are their major problems (e.g. http://www.open.ac.uk/business-school/files/business-school/file/publications/download/2012%20Q4%20Report.pdf, see esp. p. 11), then finance is low down the list. The major problem is, as you say, the down-turn. And why would you want credit in a recession if you could avoid it?
Peter.