Banks lend £300million LESS to businesses despite taking billions from government which was supposed to increase loans Businesses find it harder to get credit despite George Osborne's flagship scheme to increase lending Taxpayer-backed Lloyds Bank and RBS see some of the biggest falls Banks have cut the amount of money they have made available for loans despite taking billions from the government which was supposed to trigger a boom in lending. Total lending by banks and building societies fell by £300million in the first three months of 2013, leaving struggling small businesses "out in the cold." However some of the biggest names on the high street have received billions of pounds from George Osborne's Funding for Lending scheme, including the banks owned by the taxpayer. Net lending from some of Britain's biggest banks fell in the first three months of 2013, new figures show New figures from the Bank of England reveal the slump in lending, renewing fears that the economy will struggle to grow if businesses are unable to access cheap and easy credit. Lloyds Banking Group - 39 per cent owned by the British taxpayer - lent almost £1 billion less from January to March, despite taking £3 billion from the Bank of England and Treasury scheme. A spokesman for Llyods said: 'The acid test for the Funding for Lending Scheme's success is whether we are lending to SMEs and First Time Buyers. We have been growing our SME lending by 4% a year, on a net basis, and we have also pledged to increase our new lending to first time buyers to £6.5bn in 2013 compared to £6bn last year. But as part of our effort to focus on these fundamental parts of the economy we are running down certain "non-core" parts of our business. The decline in our overall lending in the first three months of 2013 as reported in the latest Bank of England figures, is entirely the result of this shift in focus and the figures show a reducing rate of decline, which demonstrates the progress we are making towards achieving overall growth in our lending this year. Taxpayer-backed Royal Bank of Scotland also shrunk its net lending by £1.6 billion in the quarter, but has borrowed £750 million from the Funding for Lending scheme. The Bank of England said lending to homeowners has been positive but continues to fall to business. It added it will "take time" for the scheme to feed through to bigger lending volumes. The Funding for Lending scheme has so far given £16.5billion to 40 participating lenders. But their lending has shrunk by a net £1.8 billion since the scheme was launched in August. Write caption here Paul Fisher, executive director for markets at the Bank, said the net lending fall was "broadly as expected." He added: "The plans of the FLS participants suggest that net lending volumes will pick up gradually through the remainder of 2013." There had been an increase in mortgage lending homebuyers but credit to businesses has "mostly been negative." Spanish-owned bank Santander cut its net lending by £2.3 billion as it continued its retreat from riskier parts of the mortgage market. The FLS was recently beefed up to extend more loans to credit-starved small businesses after criticism over its impact. The scheme offers lenders discounted loans in return for boosting the flow of credit to the economy. The pace of lending decline slowed from a net £2.4 billion decrease in the final three months of 2012, and the Bank said net lending should pick up and turn "modestly positive" over the rest of the year. Since last August banks have received billions of pounds from George Osborne's Funding for Lending scheme Barclays, which has borrowed £6 billion from the FLS, increased its lending by £1.1 billion during the quarter. Nationwide Building Society also hiked its lending by £1.2 billion after drawing £2.5 billion from the scheme. There were also major credit injections from firms including Tesco Bank, Virgin Money and Coventry Building Society. But the scheme was criticised for failing to boost credit to businesses. John Longworth, director general of the British Chambers of Commerce (BCC), said: "The real test for Funding for Lending is whether it is able to get credit flowing to young and fast-growing businesses. Unfortunately many of these growth firms are still being left out in the cold when it comes to accessing finance, which prevents them from expanding, creating jobs and helping to drive a business-led recovery. TUC general secretary Frances O'Grady said: "The Funding for Lending scheme is not providing the support small businesses need in these tough economic times. It seems that some banks are just using the Funding for Lending to improve their capital position. This is why we need a properly resourced state investment bank that can provide the assistance firms need to grow and create jobs.