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

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  • 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
    +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...

  • 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
    +10

    Comment number 35.

    28.Just_the_Fax

    So HSBC are basically another bank whos accounts arent worth the paper.

    We are being taken for a ride by all of our major banks they are doing whatever they please with no retribution from government.

    "you missed your target " oh well better luck with the next one carry on...... would you like some more money ? would that help ?

  • rate this
    +9

    Comment number 36.

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

    Ah the genius of spin

    That's because its BILLIONS folks, doh!

 

Comments 5 of 178

 

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