A man walked into a bank …
It sounds like the start of a joke, a man walked into a bank …
Of course the punch line should be … “and got a loan”.
Sadly that does not seem to be the case these days. In regard to how the Inclusive Economic Growth KLOE can stimulate economic growth in the West Midlands one would think encouraging banks to lend would be a good initiative to push. Helping SME’s to get money seems an admirable activity and we should rejoice to hear that Vince Cable, the coalition government’s business secretary has announced the creation of a new “business bank”. Full details won’t be known until December’s Autumn Statement, but it is believed that it will focus on supporting long-term lending to small firms. This is of course tax-payer’s money, some £10bn of it! But hold on, don’t we already own some existing banks (82 percent of RBS for example)?
Now, if the public sector is being encouraged (a euphemism?) to make cuts why use public money to create yet another institution to lend money. Surely we just need to tell RBS to lend our money to our struggling businesses. By law if you own 82 per cent of a company you own it, and should be able to dictate what it does instead of wasting hard earned tax money duplicating effort.
So yes, despite its somewhat bureaucratic leanings, the idea should be applauded, but hang on, are there not already schemes out there which are available to small firms. Less than two months ago the government launch a new initiative called Funding for Lending which is meant to replace the National Loan Guarantee Scheme, which was only unveiled in March. And before that there was an initiative called Enterprise Finance Guarantee Scheme. Duh! No wonder small businesses are confused. There is also the argument being made that bank loans remain difficult to secure, because the banks are demanding large deposits, to which the banks reply saying they are meeting their lending targets, and that they would lend more if there was an increase in demand for loans from small firms. So it’s all very clear, what we really need is yet another impotent organisation.
The other down-side is that the Bank will not come into being for another 18 months. So those who do succeed in getting funds from the new bank will probably not get their schemes off the ground for a further 6 months after that. If a week is a long time in politics then 2 years in the current economic climate is possibly far too long.