Will there be a British Business Bank?

 
RBS Vince Cable was over-ruled over a break-up of RBS

So what is the state of play on the government's ambition to correct the perceived lack of credit for small and medium-sized businesses?

Well, the Treasury and the Business Department concede that Vince Cable has been over-ruled on the break-up of Royal Bank of Scotland, which he argued for in the letter I disclosed yesterday.

A Treasury source said: "We have already changed the strategy to radically shrink and de-risk the investment bank (belonging to RBS) and focus on the UK commercial bank. So not very different in practice to Vince's proposal, but we are doing it in a way that doesn't destroy millions of pounds for taxpayers".

Ouch.

As for Mr Cable's colleagues, they insist his proposal for the government to create a new British Business Bank, that would concentrate on lending to smaller businesses, is not dead - although he concedes such a bank will not be created by dismantling RBS.

In that sense, Mr Cable seems to be closer to Labour's leader, Ed Miliband, who is also pushing for such a bank - he calls it a British Investment Bank- than to George Osborne.

Will we ever see such a new state-owned lender?

Well much will depend on whether the Treasury's preferred policy, of getting the current big banks to provide subsidised loans to smaller businesses - through its "credit-easing" policy - is showing that it will have impact.

And we should know more about that in the next few days - when we will learn whether all the banks have signed up for credit easing and whether they do so with great enthusiam for its likely efficacy.

As luck would have it, I am about to board a plane to Germany - whose fearsomely effective Mittelstand manufacturers have the perceived advantage of access to a very supportive banking sector, that takes the long term view of their prospects.

For as long as I can remember, British politicians have bemoaned that the City does not take a Germanic long-term approach to supporting smaller businesses. Will they now despair of the private sector and do it themselves?

 
Robert Peston Article written by Robert Peston Robert Peston Economics editor

Richer at last?

How significant is today's confirmation that earnings are at last rising faster than inflation?

Read full article

More on This Story

More from Robert

Comments

This entry is now closed for comments

Jump to comments pagination
 
  • rate this
    0

    Comment number 18.

    Such a Bank would be clearly in the interests of us all but would reduce opportunities for those who hold capital now and who make a turn on financial transactions at levels which often destroy their utility: as those people control government it is not likely to happen until the financial system implodes as a result of its own greed.

  • rate this
    +2

    Comment number 17.

    Mr Cable needs to remember that given the election result he is very fortunate anyone actually pays any attention to his pontifications and the underhand way in which he lets them be known. Banks can only lend to borrowers who are likely to repay, if businesses cannot show this capability they cannot expect support. Mr Cable would be the first in line for another 'bash' if write off figures soared

  • rate this
    -1

    Comment number 16.

    The best way to encourage small businesses is to allow the permitted development of loft dormers up to two feet above ridge height providing that the frontal slope is extrapolated into said dormer and unsubsidised solar pannels are fitted as a precondition of said development

    Money would then cycle within local communities as ancilliary services related to multi generational housing cotton on

  • rate this
    +4

    Comment number 15.

    11.WN

    Supply chain economics. Yet another reason the deck is stacked against SMEs and favours the large corporation.

    A good point, and one Vinnie seems disinclined to tackle (quite the opposite in fact).

  • rate this
    0

    Comment number 14.

    It is time Vince Cable took responsibility for his own actions.

    One of his earliest initiatives was to raise Capital Gains Tax from 10% to 28%.

    Did this encourage business?

  • rate this
    +3

    Comment number 13.

    The millions of pounds of taxpayers' money has already been destroyed. We are never going to get our money back from a sale of RBS. The Treasury as usual are fantasists. We are where we are so we must move on.

    Yes, we do need a bank to fund industrial investment. Yes, we do need a corporate tax structure that encourages industrial investment rather than the lining of pockets.

  • rate this
    -3

    Comment number 12.

    BBB: bring back Brown?

  • rate this
    +13

    Comment number 11.

    Subsidised loans to small businesses - this is something small businesses know about well as they are normally the ones providing subsidised loans to larger businesses in the form of credit.
    Small firms are typically paying huge interest rates whilst the firms they are lending to in the form of credit can borrow much cheaper from banks or capital markets.

  • rate this
    +2

    Comment number 10.

    Government wants banks to take a long view. The 'deal' culture runs contrary to this. People who run banks are there because of their ability to do great deals. They do not have long term instincts. Institutions want large immediate profits too - again not always good for the long term.
    Change must be lead from the centre - that is its purpose. Free markets do not always go in the right direction

  • rate this
    +6

    Comment number 9.

    in germany many middle sized companies are family owned, they do not have to answer to shareholders, they take a long term view of their business prospects. german banks are encouraged to lend to them, our state owned banks are looking only for short term returns. U.K. government needs to pull their finger out.

  • rate this
    +3

    Comment number 8.

    Cable has been catching up on 4 years reading of Stephanomics/RP by the looks of things; but, the problem with Cable is that we need more than just identifying things that are wrong with UK plc - we had some of that with the last Labour wastrel govt - We need a Bus Sec that can DO IT - CUT IT
    UK plc needs massive strategic reforms & until then, UK economy will stay depressed for Mr & Mrs Average

  • rate this
    +6

    Comment number 7.

    So the RBS changes are being made "in a way that doesn't destroy millions of pounds for taxpayer."

    Are we supposed to just accept that bull?

    I'm pretty certain the idea was to shrink the bank, if you ask those defending the losses being made.

    So which is it?

  • rate this
    0

    Comment number 6.

    Why the focus on banks and borrowing to fund SMEs - the government can help SMEs particularly in the supply chains of large businesses with one very simple law.
    Limit the credit terms large companies are able to leverage from small companies to maximum 45 days. It is extremely unusual to obtain more than 45 days in the powerhouse economies - quite normal to obtain 120 days in the basket cases.

  • rate this
    +4

    Comment number 5.

    What there is in our economy is a shortage of equity which is actually what many of the companies need. To funnel savings and other debt instruments through banks into long term loans to companies isn't going to solve anything. Instead we need to focus on making access to equity finance from business angels and other investment vehicles.

  • rate this
    +10

    Comment number 4.

    It sounds a good idea. BofE acts as lender of last resort to banks but who acts as lender of alst resort to small/medium companies? If they offer non-sexy interest rates, they'll be able to get round EU competition rules. We should also have a national infrastructure bank, to pay for things like crossrail, toll bridges, etc. I'll be waiting a long time me thinks....

  • rate this
    +1

    Comment number 3.

    This role would naturally be performed if RBS were properly nationalised as a strategic policy to provide more competition and to act in the national interest and at the same time provide an exemplar of governance for the whole market including SME's and ordinary customers.

  • rate this
    +3

    Comment number 2.

    If banks aren't going to be the ones who will lend to SMEs, then the technologists will. This is the only salvation for anyone in small business; the provision of credit through by disruptive new hybrid tech-finance companies. The banks are dead; long live the bank.

  • rate this
    +10

    Comment number 1.

    It is an anathema to Tory dogma to have a state run bank, they closed Girobank as it was too successful (it was). More of the same ideology that caused the mess, privately run financial services have done so so well, obviously it is far better to maintain the status quo and continue to pump billions of pounds of public money into private hands.

    What a charade! A disgrace. UK for sale...

 

Page 9 of 9

 

Features

BBC © 2014 The BBC is not responsible for the content of external sites. Read more.

This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.