A revolt is brewing on the Labour backbenches. Senior MPs, including former ministers and select committee chairs, are pushing the Starmer government to force UK banks to lend to the poor. The proposed legislation, modeled on the US Community Reinvestment Act (CRA), aims to end "financial apartheid" in Britain’s deprived neighborhoods.

The bill, tabled by Gareth Thomas, would require banks to disclose exactly how much they lend to small businesses and low-income households in specific postcodes. Regulators would then rate banks on their "social performance," potentially penalizing those who hoard capital in the City of London.

The "Credit Desert"

"Talent is everywhere, but opportunity is not," Thomas argued. In many northern towns, bank branches have vanished, and automated algorithms routinely reject loan applications from low-income postcodes. This forces residents into the arms of predatory payday lenders.

• The US Model: The CRA, passed in the 1970s, is credited with channeling billions of dollars into American inner cities. Labour rebels argue that the UK’s voluntary approach has failed.
• The Chancellor's Stance: Rachel Reeves has called the financial sector the "crown jewel" of the economy and is wary of heavy regulation. This bill puts her in a bind: support the banks or support the party's base?

A Test of Values

With the cost of living crisis still biting, the demand for affordable credit is desperate. The backbench push is a signal that while Labour is now the party of business, many MPs insist it must also remain the party of the borrower. The battle lines for the next Finance Bill are being drawn.