Chief Secretary to the Treasury Liam Byrne told a Labour conference fringe event that the government is looking at the possibility of US-style Community Reinvestment Act (CRA), which compels banks to invest in deprived neighbourhoods.
Chief Secretary to the Treasury Liam Byrne has revealed that the government is looking at the possibility of US-style Community Reinvestment Act (CRA), which compels banks to invest in deprived neighbourhoods.
The Cabinet minister made the revelation at a Labour Conference fringe event organised by the Social Enterprise Coalition and think-tank Demos.
Asked what he thought about the possibility of introducing something like the CRA for the UK, Byrne said: 'I wouldn't be looking at CRA if I didn't think it was possible.
'I'm extremely interested in the idea which I'm exploring earnestly with the Treasury.'
His comments, which included a succinct history of how and why the US CRA came into being, were in stark contrast to his opposite number in the Conservative party Francis Maude, who admitted at a social investment event recently that he did not know what the CRA was.
Maude later said he would make it his business to find out.
CRA legislation could have a major impact on social business working in deprived communities. Much CRA-related activity in the US sees banks working with, and channeling their money through, community development finance institutions, which in the UK too, lend to social enterprises and small businesses in deprived areas.
Byrne said there were 'two to three issues which mark us out from America' and need to be considered in thinking about the CRA.
'We don't have evidence banks are systematically freezing out communities partly because our evidence is more flaky,' he said. 'And there are strong voices in America which argue that the CRA played a role in the sub-prime crisis.
'There are some serious questions which we are exploring now.'
Development Trusts Association director Steve Wyler, who brought up the issue, said that Byrne's reaction was encouraging - especially given the current mood around banks.
'This is the moment for real movement to take place. If not now, when? This is the moment for political leadership when the public dismay and anger at how banks are operated can and should be translated so that it isn't just business as usual but we create a function for responsible social banking,' said Wyler.
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