The efforts by the City's financial institutions to fill the lending gap left by banks have at times seemed rather like the picture from a hundred westerns where the US Cavalry rides to the rescue. They look heroic, they sound keen and some of them look moderately respectable. But they are so slow that they arrive on the scene too late to save the wagon train.
But this is changing and the City is beginning to come up with serious money for an ever-wider range of interesting projects which previously would have been the province of bankers. Hence, one of the most interesting events this week was the successful launch by the University of Cambridge of a bond issue under which it will borrow £350m for 30 years at an interest rate of just 3.75 per cent. Given that the UK inflation rate even on the consumer price index is around 2.5 per cent that is astonishingly cheap money which the university is going to use to upgrade its facilities and infrastructure.
It is great news for the academic world that the City is prepared to open its coffers for something besides student housing, though it must be said that Cambridge is a better credit risk than most, so the rest of the country's academic institutions should not get over excited. London Metropolitan University – where I am a visiting professor – would find it a lot harder to persuade investing institutions to cough up the money. That, unfortunately, would also be the case with many other of Britain's cash-strapped educational institutions.
This fund-raising success does highlight an issue raised by the former leader of Birmingham council, Mike Whitby, at a fringe meeting I chaired at the Tory party conference last Sunday. This is that if Cambridge University can raise money in the markets to fund the upgrading of its infrastructure, why can't our big provincial cities – Manchester, Leeds, Birmingham and Newcastle – do likewise? Why, when the council wants to modernise New Street station in Birmingham, for example, does it have to spend years trying to line up private capital to help pay for it? Why can they not follow the example of US cities – and now Cambridge University – and borrow money on the open market?
The answer, of course, is that Whitehall and our national politicians want to control everything from the centre, and are terrified that they would lose their grip on the cities if they had access to their own funds. But at the same time they profess to support localism and devolution, and even if there is a financial risk that some cities would borrow too much there are surely offsetting benefits.
For instance, local politicians know far better than Whitehall what their cities need. Also, voters would engage more with local politics if they thought it could make a difference to the infrastructure in the region, be it the quality of the local train service or the availability of high-speed broadband. And if the Government is serious about rebalancing the economy, then it ought to be doing all it can to encourage the regions, not keep them under its thumb.