Business Secretary Vince Cable has announced a new business
bank as part of the coalition's latest plank of its industrial strategy but APA
feels it is another desperate attempt to bypass the broken British banking
system which it believes remains one of the major obstacles to economic
recovery.
The plan is meant to result in a surge of new loans to small
businesses; yet net lending continued to fall, and it remains the lender of
last resort just like the long standing Loan Guarantee Scheme – which has
failed miserably. Past experience suggests the new institution will be hemmed
in by tight financial restrictions imposed by a nervous Treasury and many
believe government should definitely not get involved in banking at all. But
Cable and his Ministerial team recognise something must be done to stimulate
growth in the financial sector and APA applauds its commitment to be brave..
A new report by the Institute of Public Policy Research
(IPPR) suggests that £40bn would be the minimum size worth bothering with if
the new bank is to make a serious difference to the economy, and urges the
Treasury to allow it to raise funds on capital markets to boost its lending
power to £100bn.
APA’s Gareth Osborne sees the new bank as a positive solution
to some of Britain's
long-term economic problems but not a rapid cure for the immediate slump. “It
could help to boost investment levels which remain far too low in the UK; when
compared to international rivals. And a state-backed bank could take a more long-sighted
approach than small firms are accustomed to seeing from risk-averse high street
lenders, with their uncompromising computerised loan models and centralised decision
making and poor local management.”
So Mr. Cable is to be encouraged for floating the idea, and
we wish him luck as he tries to persuade the Treasury to be bold; but it also
serves to underline the unfortunate truth that Britain's banking system is failing
and it must be brought into line if real growth is to return.
APA