Sunday, 20 October 2013

British Business Bank - Policy Made Reality

Is it a dismal reflection on the party member's lack of grasp of matters financial that one of the (potentially) most significant initiatives made by one of our ministers should have received so little airplay or comment? The policy in question is Vince Cable's British Business Bank initiative. 

At the Autumn conference in 2012, Vince Cable telegraphed the initiative to LibDem delegates:

He announced that the government had resolved to put £1bn into setting up a bank designed to increase the amount of lending to businesses to help many small and medium-sized companies who have struggled for credit since the financial crisis.

He promised to fight short-termism and "get behind" good firms. He signalled that the bank would operate via existing lenders, and would start within 18 months.

It was envisaged that the government kickstart capital would be matched by private sector investment. Certainly private equity funds are flush with cash at the moment and there is no reason to think that funds would not be forthcoming either from that source or maybe through the stockmarket. He said he was working with the chancellor to develop a state-backed institution that will combine up to a billion pounds of new government capital with a larger private sector contribution.

"This will then apply further leverage through guarantees to support up to £10bn of finance to SMEs [small and medium enterprises] and mid-sized business - a significant portion of all the lending available."

Government support would be in the form of both guarantees and equity, and will go on to the balance sheet of the new institution and not be reclaimed by the Treasury. 

Interestingly, at the time, both the Confederation of British Industry and the TUC threw their support behind the measure. This was definitely a miracle of sorts to find two such rare bedfellows. 


Fast forward, to way less than the 18 months projected back in Vince Cable's first announcement and the bank is already on the road (though little do the public and LibDems know it). We stumbled upon some important developments in a rather minuscule article in the business section of the Daily Telegraph on Friday the 18th of October. 

The gist of it was that Vince Cable had appointed Ron Emerson, a former executive at Standard Chartered, as the first chairman of the British Business Bank. He had also appointed Christina McComb, director of Standard Life European Private Equity, as senior non-executive director of the Bank. 

At the same time Vince Cable rather doggedly (and prematurely) insisted the Bank would not have a high street presence, despite demands from business lobby groups. “You are not going to see branches popping up with the Business Bank logo next to branches of Metro,” he said. “This is a catalyst for lending not a high street competitor.” With the travails of the Co-op Bank at the moment the thought did strike me that they could be "helped out" by being relieved of the Britannia Building Society's branches, providing the new British Business Bank with a ready-made network for deposit gathering. 

Thus far the nascent bank has a staff of 60 and, according to Vince Cable, will become “fully functioning” once it has clearance from European authorities next year. An interesting issue for me (and the party) should be where this entity is headquartered. Much as I love the City, and logical and inevitable as it is for it to have some sort of City presence, the minister should be sending a signal on regionalism by locating the new bank's head office in the provinces. I personally think that it would be a feather in the LD cap to have it placed somewhere like Hull. It would be something we could make mileage, and votes, upon.  

This would make space between us and the wet blanket of Chuka Umunna who has described the Bank as “few desks in the Business Department”. I have to agree that Whitehall is the last place we would want this bank to based.  

The Telegraph went on to report that John Longworth, Director General of the British Chambers of Commerce (BCC), welcomed the new appointments, but warned that without more funding, the bank could become an “irrelevance”. He said: “Under the current plans the Bank will lack the scale necessary to play a full role in providing access to finance to viable businesses. We continue to call for the Bank to be better capitalised and have the ability to lend directly to businesses, so that they can access the same level of financial support that companies in other countries take for granted. Otherwise we run the risk of a Business Bank that is irrelevant before it starts.” 

The new chairman, Mr Emerson, said the Bank was “an idea of its time”. He said: “The UK has long needed a more effective set of financing options for smaller businesses, and the British Business Bank will be a key catalyst in this process.”

I could not agree more. This is our policy and we should "own" it. As we have seen in recent times, the Tories are conspiring to steal our policy clothes yet again. First they resist initiatives, then grudgingly accept them, then claim them as their own. Has this not been ever the way since 1910? 

By choosing the location of the new bank to suit our ideological needs would be a key means of making the policy our own and showing the seriousness of the LibDems in prioritising development north of the M25. 

As an afterthought... why not get Jeremy Browne involved in furthering this initiative...    

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