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The Liberal Democrats have attacked the Government bailout of the UK high street banks, which they say “isn’t working” for small businesses.

The party says that despite billions being pumped into the banking sector, “viable businesses are continuing to go under as banks pull lending from them”.

The Lib Dems say: “Although the bail out has ensured that no further British banks have collapsed, the banks are reneging on the deal that was struck with the Government. If they continue to hoard capital, refusing to lend to viable business and individuals, we are doomed to head into an ever deeper recession.”

It says despite the bailout, secured lending by banks to individuals and housing associations fell by £22.6bn over the last three months. Also, just under half of small businesses say it has been harder to gain access to finance in the last year.

The Liberal Democrats say a ‘plan B’ is needed to help small businesses, which includes millions of self employed Brits: “it would also ensure that the banks realise that they cannot hold the Government to ransom and if they fail to perform the job of lending themselves, this will be done for them”.

It says removing bad assets from banks' balance sheets to help restore confidence to the markets and creating a system of direct lending, with small businesses, and in turn the self employed, being made a priority.

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