New Business Bank – Lib Dem Policy

All this week the Lib Dems have been at their Autumn conference in Brighton and as they say a week is a long time in politics what withe Cleggs “I’m sorry, ” becoming a YouTube smash and “PlebGate” rumbling on it is easy to forget the opening day of a conference.

On the opening day Vince Cable made the headlines by announcing that the ‘business bank’ idea that he had been promoting was to be a reality – a £1bn reality. However the detail of that reality still has to be set up.

It is not clear how the idea will operate but it has been suggested that: “Run professionally and at arms-length from Whitehall, it will not lend directly to businesses but act as a wholesale institution funding entrepreneurs and other business ventures via small new banks and “non-bank” bodies.” (Source: Evening Standard)

There are of course those from the banking sector who would argue that currently all lending is based on businesses meeting the security criteria – so any business that has to go to the governments business bank would be higher risk. This has been countered by spokesmen for the project by emphasising that the bank will offer longer term loans and it is the short term nature of the lending to small and medium size businesses that is putting an extra burden on them.

However we will have to wait until the Autumn when the details will be revealed, on the face of it this approach to breaking the log jam in the capital markets for business, previous schemes seem to have done little other than improve the banks liquidity – but little has been passed on to the economy.

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