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Posts Tagged ‘British investment bank’

Labour is the party for small businesses

01/05/2015, 05:58:41 PM

by Michael Taylor

Given I’ve got a business background and that I’ve campaigned with lots of businesses on regional infrastructure issues, it’s been really emboldening in his general election campaign to take Labour’s message that we are on the side of small business and that our entrepreneurs deserve better.

My dad was a milkman who became self-employed in 1979 and voted Thatcher. Once. That idea that you take control of a part of your life, take on the new challenges of running a business and therefore become part of the ruling class business elite is so outdated and plays counter to the experience of so many small business owners and self-employed contractors. That’s why the shambolic Tory letter in the Telegraph seemed such an outdated and hollow stunt.

As a parliamentary candidate in a Greater Manchester seat the conversation is increasingly about a system that’s stacked in favour of the powerful. Nowhere has this been as apparent in how small companies have been shafted under this government. Especially when it comes to the important commitment to protect small companies against exploitation from bullying behavior from big corporates.

This idea of a monolithic “business community” which only cares about what’s good for business with dog whistle demands for the cutting of red tape bears no relation to how people live their lives.

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If Ed is serious about banking reform, its a British investment bank that is needed

22/01/2014, 02:18:11 PM

by David Butler

The case for banking reform is one that, on the centre-left, does not require extensive repeating. The banks were central to the crash and have not been seen to have redeemed themselves. In particular, lending to small and medium enterprises has fallen substantially in the post-crash environment and was not particularly healthy pre-crash. It is into this sea which the good ship One Nation Labour (formerly known as Responsible Capitalism), under her captain Ed Miliband, sailed.

Small and medium-sized enterprises suffer from an inadequate supply of finance. The impact of this was captured in IPPR’s Investing for the Future report. SMEs are usually reliant on loan-funding and are unable to sell bonds or access other sources of capital available to bigger businesses. The report contends that banks have gradually been switching their activities towards loans and investment that offer bigger yields and more immediate profits, which has squeezed loan-funding to SMEs. Due to information asymmetry, banks have used a ‘tick box’ approach for making decisions on loan funding, which has result in a further structural shortage as many potentially good SMEs are shut up of the one-size-fits-all criteria.

Current government schemes to encourage SME lending do not appear to be successful. In the footnotes of the IPPR report, the authors quote an article in the Financial Times which claims that of the £100 billion in low-cost capital created by the government, banks plan to use up to £80 billion to replace existing loans backed by market-price capital. It is clear that simply giving cheap capital to private sector banks will not help. This has been matched by the continue fall in lending to SMEs captured by recent Bank of England figures. This lending problem is a constraint on future prosperity and do nothing to relieve the cost of living crisis. A new approach is needed. Ed Miliband believes that more competition will provide the answer.

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Vince Cable’s plans for a British investment bank are a joke but Chuka’s aren’t much better

12/09/2012, 02:00:29 PM

by Paul Crowe

Oh dear. Yesterday was Vince Cable’s big day: the launch of his industrial strategy with a new state backed business investment bank at its heart. This bank is meant to plug the lending gap for small businesses and help drive economic growth. Pretty important stuff. News of the bank was the mainstay of the briefing to the media and had top billing in his speech.

Except that Vince didn’t actually announce the establishment of a new bank.

Instead he talked about how he would quite like one. Much as my four year old son tells me how he would quite like a light sabre.

The nearest we got to a commitment was Cable’s explanation that he was working with George Osborne on “how big it should be, how it should operate, and what the sectors it services should be.”

Over two years in government as secretary of state for business and Vince Cable has managed to confirm not a single detail of his flagship policy. Well done.

Chuka Umunna was justifiably scathing.

“Ministers need to come clean on whether they are proposing a proper British Investment Bank, which Ed Miliband has led calls for since last year, or merely a rebranding exercise of schemes which already exist and are not doing enough to help business.”

It is almost beyond belief that after so long in office there is no clear plan to deliver what is meant to be the centre-piece of the government’s industrial strategy.

But Labour cannot afford to be smug. If Vince Cable’s plans are a joke, then Labour’s alternative raises a smile in anyone who has worked in finance.

A few weeks ago Labour published, “The Case for a British Investment Bank”. It was written by Nicholas Tott, a former partner in corporate law firm, Herbert Smith.

Tott is a PFI expert and understands banking. He is a serious man, but his report is part of a political process and reads as such.

The critical passage is in the conclusion,

“The key principle for any British Investment Bank is that it must operate in a commercial manner to ensure that investments and interventions are made on a rational basis, only to support viable businesses with a proper analysis and pricing of risk.”

At the moment we have a banking sector that is palpably failing to provide small business with the finance it needs. It is a sector that is working in a commercial manner, making judgements on the riskiness of investments and viability of proposals in line with market norms.

Yet Labour’s report is calling for a British investment bank to operate exactly in the commercial manner that has consistently failed business.

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