Jeffrey Morris, a Leeds businessman, was given a loan of £1.3million by Barclays in 2006. Now, it appears that £200,000 of that may have come from a taxpayer-backed scheme intended to be used for loans to small businesses. Mr. Morris was estimated by the bank to be worth over £20m at the time the loan was given.
The Small Firms Loan Guarantee, the scheme which Barclays is believed to have used, allows banks to lend out money to small businesses that meet certain requirements and have the government back 75% of the loan. The idea is that if a business can not get finance through the regular channels, because the banks see their plan as too risky, they may be able to get a SFLG loan instead. That way, the banks are only liable for 25% of the total amount should the business go bust.
Obviously, using this to back a loan for a multi-millionaire businessman seems to go against the spirit the scheme was created in. The MP for for the constituency this took place, Alec Shelbrooke, told parliament that “evidence has been passed to me suggesting that Barclays used the scheme to underwrite their own bad loans for a company which did not meet the criteria.” He intends to bring the matter to the attention of the Treasury Select Committee.
Not only did Barclays use this loan in the first place, but they may have then reclaimed £70,000 of taxpayer money after the business did go bad.
In a way, this story was long overdue. There have been numerous scandals involving the big high street banks earlier in the year, but they seemed to be managing to avoid appearing in the newspapers too often recently. This latest development will only serve to remind people why they distrust the banks.