The government should use its stake in Lloyds Banking Group and the Royal Bank of Scotland to force them to lend more to firms, coalition adviser and multimillionaire businessman Lawrence Tomlinson has urged.

Speaking to the Huffington Post UK, care home mogul Tomlinson, who was drafted into the Department for Business as an “entrepreneur-in-residence”, said the two banks were “numb” to identifying what makes a business worth supporting.

“I think the two banks are too large to understand the difference between good and bad businesses, growth and non-growth businesses in any sector. They’re numb.”

‘We’ve got two banks that we’ve got big chunks of completely dominating the space, probably lending to 60% of all businesses. There is so little competition in the market place, they can do what they want and set the rules.”

The government has avoided taking direct action to force Lloyds and RBS, which are 39% and 81% state-owned, to lend more. The lack of support has been controversial after it emerged that RBS’ business lending fell by £1.6bn in the first quarter of 2013.

A Business Department spokeswoman told the Huffington Post UK: “We’re doing what we can to encourage them to lend.”

However, Tomlinson warned that the state-owned banks should be given an ultimatum to force them to boost lending.

“We’ve asked the banks to lend. They haven’t done what we’ve asked, so something else should happen, like breaking the banks up into smaller units so there is competition in the banking market place.

“If you break up the banks and sell their investment banks and sell their private equity divisions and some individual parts, the bits that we’re really interested in that are creating growth are left and broken up into seven pieces and you end up with seven banks all competing for your business rather than businesses having to beg for your money.”

“We don’t want to end up in a few years with another banking crisis and say: ‘We could have done something!’”

Tomlinson’s comments will come as welcome news to Labour and Business Secretary Vince Cable, who have both called for the banks to be broken up if they don’t increase their scale of lending to businesses.

Tomlinson previously caused controversy in May when he launched a savage attack against bankers for leaving small businesses feeling financially “raped”.

The LNT Group chairman was speaking to the Huffington Post UK at the launch of the StartUp Britain tour of the UK, with a bus travelling around the country. He is offering his £10,000 salary as a government adviser to anyone who has “the best ideas for UK growth”.

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