Getting credit flowing will be one of the coalition’s toughest challenges

In interview with the Sunday Telegraph today, George Osborne stresses that the banks have got to start lending again – and he’s right to do so. The easy availability of cheap credit may have done much to get us into this mess, but now we face a converse problem. As a recent Bank of England report shows, net lending from the banks to businesses remains negative – or, in other words, more is being paid back than given out – and the situation is getting worse. With small and medium businesses so reliant on credit to get themselves off the ground, this doesn’t augur well for a powerful recovery.

But what can the government do to rectify the situation? As the FT’s Kiran Stacey pointed out in a snappy post last week, their recent Green Paper on the matter was a little uncertain.