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Spend & Save

Julian Knight: Small business is bleeding, but guess who still denies it?

Some 120 businesses a day folded in the first quarter. How many could have been saved by their banks?

It may only be May but we already have a winner for The Independent on Sunday's "statement of the bleeding obvious" award. It has to go to John McFall MP and his band of merry men and women on the perennially crusading Treasury Select Committee who released the second report last Friday into the UK banking crisis. It states that top bankers had made a "mess" of things by behaving in a "reckless" manner.

Now that's what you call insightful. Where the report got more interesting, though, and has created a spat was its annoyance at the treatment of small businesses by the banks. To paraphrase the committee, it said that banks were applying the squeeze to their small business customers.

I'm fortunate to know a fair few small business people and they all report the same thing; up until a few weeks ago they were having their borrowing cut arbitrarily and are being charged arrangement fees and rates you'd associate with corrupt government officials in banana republic not supposedly respectable banks.

What's the British Bankers' Association (BBA) response? It says that the few small businesses having a hard time in a recession are not giving an accurate picture to MPs, and that lending is actually up on a year ago. All fine then. Until you remember that this is from the same association that blamed journalists for partly creating the financial crisis by daring to report it.

The BBA has proven itself to be nothing more than a dissembling apologist for the completely inexcusable. As bankrupt as the institutions it represents. As for the plight of small business, there has been a trickle-down of cash of late, but for too long the missives from head office that lending must re-commence were ignored at a local level. The Federation of Small Businesses tells me that in the first quarter, some 120 businesses a day were folding. How many of those crucial wealth-creating firms could have been saved with a little flexibility and understanding from their banks? As for the Select Committee assertion that it will take a generation for banking to get back to normal, I ask – what is normal? If the MPs mean the past decade, let's hope we never go back to normal. Not to another speculative property bubble, which makes people wealthy for doing little and excludes a vast swathe of our society until it all goes pop and the under-30s can afford to join the merry-go-round and we start again.

Do as I say...

When it comes to my own personal finances I have a shameful confession to make. I opened a letter from my building society yesterday informing me that my savings account will be paying a whopping 0.05 per cent interest until further notice. That means that on £1,000 saved – taking into account compound interest – I will have earned a grand total of £10 in interest sometime around the summer of 2024.

Despite my exhortations in this column to shop around, I have committed the classic sin of not reviewing my interest rate. I sort of presumed that if not a best buy, it was hovering somewhere just below. It wasn't: my account has been the subject of savage cuts by an institution that got into trouble through bad investments. It reminds me of the Nationwide advert where a bank salesman character tells the saver that the big juicy rate initially on offer was there just to get them to bite, and has since been cut and they have been thrown into the "keep net".

Research by Investec Private Bank shows that only one of the best buy accounts from early 2007 is still near the top of the table. The others are now paying next to nothing or, in Icesave's case, has gone bust. Like millions of savers I have been thrashing around in the keep net for some time without even realising it. Do as I say, not as I do.