Swinney attacked on loan fund plan as calls come for OFT to probe banks

MINISTERS have been accused of "messing businesses around" over delays to launching a bank offering credit to small firms, writes Andrew Whitaker.

MSPs also backed calls yesterday for a formal investigation into business banking competition in Scotland.

Finance minister John Swinney told Holyrood's economy, energy and tourism committee that companies could apply for loans from a 50 million fund from the Scottish Investment Bank (SIB), which the government said was needed because banks would not give firms credit.

Swinney has now revealed in a letter to the committee that the cash will not be available until the end of 2010.

Yesterday Lothians Conservative MSP Gavin Brown accused the government of making a "monumental error" by saying that the funds were in place only to backtrack later: "It's messing businesses around to say that the money is there for them to apply for, but to then say that they will have to wait until the end of 2010."

Brown raised the issue in the Scottish Parliament yesterday during a debate following the publication of a report on Holyrood's banking and financial services inquiry.

The report on the future of banking was critical of the fact that the Office of Fair Trading (OFT) had not investigated competition in the Scottish banking market.

The committee inquiry heard that more than three quarters of the small business banking market in Scotland is in the hands of Royal Bank of Scotland and the Lloyds Banking Group, which took over HBOS at the height of the banking crisis.

Enterprise minister Jim Mather backed calls for an OFT investigation and said the lack of lending to businesses is "deeply concerning" .

Mather's statements marked a turnaround for the government after SNP members of the committee had dissented on the need for calling in the watchdog.

Mather told parliament the OFT had issued a call for evidence last week for a review of retail banking which would include the Scottish sector, adding: "We very much appreciate and welcome the OFT's decision to look specifically at the sector here in Scotland.

"We are determined to assist that process and, to that end, the Scottish Government will continue to make data in relation to the workings of the market in Scotland available to the OFT."

But the Federation of Small Businesses in Scotland pressed for an official OFT investigation into the business banking sector in Scotland. Although the competition watchdog has ruled out an investigation, Brown argued it would treat a request for investigation from the Scottish Government "extremely seriously".

"I think it's very important that the Scottish Government requests a formal review in relation to Scottish business banking," he added.