“The weakness in our banking system is one of the biggest problems we’ve got,” The Chancellor said.
This latest proposal, for a state-sponsored small business bank is inspired by similar models in Germany, the US and Ireland and it was immediately welcomed by the corporate sector.
John Walker, national chairman of the Federation of Small Businesses, said: “With a third of businesses missing their growth opportunities as a result of not getting all the credit they need, we believe this bank will help firms grow and invest and get the recovery back on track.”
The government’s early attempt to set lending targets for banks – Project Merlin – proved ineffective and was quickly dropped, to be replaced by a national loan guarantee scheme and most recently a “funding for lending” scheme to provide cheap finance to banks offering business or home loans.
Details will be released later in the autumn, but Osborne’s team denies that the creation of a state-backed bank to support small business is a recognition of the failure of past schemes. Rather, it is an “evolution” of policy to ensure everything is being done to help companies, it says. However they are very clear about what the new bank is not: “It’s not about challenging existing banks – it’s nothing to do with Lloyds or RBS.”
In the first instance it will be about pulling together in a single bank the plethora of small business assistance provided by government through various departments. The bank would operate at arm’s length from ministers, with a private-sector focus.
“It would feel more like a bank from the point of view of business,” said a Treasury official. However it would operate online and would not – at least initially – have any high street branches.
The proposal, developed by the Treasury working with Vince Cable’s business department, appears initially as the kind of “one stop shop” beloved of ministers, but it could develop into something more ambitious.
Treasury officials say the bank could potentially in future enter into partnerships with the private sector or use the markets by securitising loans, although such moves would be controversial.
John Walker, national chairman of the Federation of Small Businesses, said: “With a third of businesses missing their growth opportunities as a result of not getting all the credit they need, we believe this bank will help firms grow and invest and get the recovery back on track.”
