Credit: Just what is going on?

So just who is telling the truth on credit availability?

The FICO/EFMA European Credit Risk Outlook report, released yesterday, shows that a “credit gap” looms for small European businesses in 2012.

Looking over the next six months, 31 per cent of respondents in the FICO/EFMA report forecast that the aggregate amount of credit requested by small businesses will increase, while just 13 per cent say the amount of credit extended will increase.

That is the widest credit gap for small businesses in the past 12 months.

In most European countries, it seems that the economic climate is going to shrink consumers’ and small businesses’ demand for credit.

But according to FICO, supply of credit will continue to fall faster than demand.

Contrast the findings of that report with the party line from the British Bankers Association.

"SMEs are paying back more than the new borrowing they are taking. Deposits held on accounts are also higher than loans outstanding. All of this means that, while banks have funds to lend, demand for business credit is low."

So there you have it. Banks claim that demand for credit is low so that they may not meet their Merlin lending targets; small firms say they are struggling to access finance.

The chances are that both supply and demand of credit are both in decline. But crucially, the supply of credit is shrinking faster than the demand for loans. We all know what will mean for any chance of economic growth. As for any prospect of a fall in unemployment if things remain as they are: forget it.

Photograph: Getty Images

Douglas Blakey is the editor of Retail Banker International

Photo: Getty Images
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Autumn Statement 2015: George Osborne abandons his target

How will George Osborne close the deficit after his U-Turns? Answer: he won't, of course. 

“Good governments U-Turn, and U-Turn frequently.” That’s Andrew Adonis’ maxim, and George Osborne borrowed heavily from him today, delivering two big U-Turns, on tax credits and on police funding. There will be no cuts to tax credits or to the police.

The Office for Budget Responsibility estimates that, in total, the government gave away £6.2 billion next year, more than half of which is the reverse to tax credits.

Osborne claims that he will still deliver his planned £12bn reduction in welfare. But, as I’ve written before, without cutting tax credits, it’s difficult to see how you can get £12bn out of the welfare bill. Here’s the OBR’s chart of welfare spending:

The government has already promised to protect child benefit and pension spending – in fact, it actually increased pensioner spending today. So all that’s left is tax credits. If the government is not going to cut them, where’s the £12bn come from?

A bit of clever accounting today got Osborne out of his hole. The Universal Credit, once it comes in in full, will replace tax credits anyway, allowing him to describe his U-Turn as a delay, not a full retreat. But the reality – as the Treasury has admitted privately for some time – is that the Universal Credit will never be wholly implemented. The pilot schemes – one of which, in Hammersmith, I have visited myself – are little more than Potemkin set-ups. Iain Duncan Smith’s Universal Credit will never be rolled out in full. The savings from switching from tax credits to Universal Credit will never materialise.

The £12bn is smaller, too, than it was this time last week. Instead of cutting £12bn from the welfare budget by 2017-8, the government will instead cut £12bn by the end of the parliament – a much smaller task.

That’s not to say that the cuts to departmental spending and welfare will be painless – far from it. Employment Support Allowance – what used to be called incapacity benefit and severe disablement benefit – will be cut down to the level of Jobseekers’ Allowance, while the government will erect further hurdles to claimants. Cuts to departmental spending will mean a further reduction in the numbers of public sector workers.  But it will be some way short of the reductions in welfare spending required to hit Osborne’s deficit reduction timetable.

So, where’s the money coming from? The answer is nowhere. What we'll instead get is five more years of the same: increasing household debt, austerity largely concentrated on the poorest, and yet more borrowing. As the last five years proved, the Conservatives don’t need to close the deficit to be re-elected. In fact, it may be that having the need to “finish the job” as a stick to beat Labour with actually helped the Tories in May. They have neither an economic imperative nor a political one to close the deficit. 

Stephen Bush is editor of the Staggers, the New Statesman’s political blog.